In late July 2013 news of a potash industry shake-up sent shares of PotashCorp (NYSE:POT) sharply lower. The swift two-day reaction proved to be the right move, as results in the potash market took a big hit.

The potash handlers

Historically, potash sales have been handled through two large selling groups, or consortiums. One of those groups, based in North America, is comprised of PotashCorp, Agrium (NYSE:AGU), and Mosaic (NYSE:MOS). The members of this group generally play well with one another. The other consortium, however, does not. It was based in Europe and had involved two companies: Russia's Uralkali and Belarusian miner Belaruskali.

The reason for all that past tense is because, in a surprise move in late July 2013, Uralkali announced it was exiting its partnership with Belaruskali. The implication of this shift was pretty significant. It meant that the cozy relationship between the world's potash sellers was ending, with the risk of a market share-driven price war a very real threat to the industry's dynamics. Share prices of PotashCorp and the other North American miners reacted quickly and dramatically. PotashCorp was particularly hard hit.

POT Chart

POT data by YCharts.

That makes sense, because potash, the fertilizer, accounted for nearly 60% of PotashCorp's business last year. And PotashCorp has more potash capacity than any other company in the world. Clearly, a long-term price war would hit the company hard and come with the potential for long-lasting effects.

Wait and see

What happened to the potash market after the European breakup, however, was more complex than a price war. William Doyle, the PotashCorp CEO at the time, noted during his company's third-quarter 2013 conference call that the surprise move, "created tremendous market uncertainty and a state of paralysis in most regions." Basically, while prices did fall, that was driven in part by customers choosing to sit on the sidelines to wait and see what happened.

So PotashCorp saw both the volume and price of its largest product decline. However, using fertilizer isn't an art, it's a science. Farmers need to fertilize with a set amount and at set times if they want to ensure a decent crop. There's some wiggle room, but not much.

That's why PotashCorp was already starting to see improvement by the end of the year. Doyle, for example, noted during the company's fourth-quarter 2013 conference call that demand was beginning to return in North America, driven by the planting season. He also noted, "As farmers around the globe look ahead to the upcoming growing season, purchasing activity is strengthened."

Results have only improved since then. During the company's second-quarter 2014 conference call, Jochen Tilk, who took over as CEO on July 1, noted that potash sales outpaced the company's initial expectations for that period. Once again, North America was leading the way, with Tilk noting that the North American order book was "the largest it has ever been heading into the second half."

POT Chart

POT data by YCharts

That said, price is still a big factor. For example, the company's sales price for potash was $263 a tonne in the second quarter, down 26% from $356 a year ago. However, strengthening trends in North America and Brazil led to a $13 per tonne increase sequentially from the first quarter. Although the price isn't where it was, at least it's trending higher.

With demand strengthening and prices improving, if slowly, investors are again eyeing the long-term outlook for the fertilizer market. And that hasn't changed. A growing world population will need more food, which will require more fertilizer. As it rebounds from a steep two-day fall, there's good reason to like the future opportunities at PotashCorp.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool owns shares of PotashCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.