Potash may be a key ingredient in fertilizer, but that hasn’t stopped it from suffering one of the steepest declines in pricing since the peak of the global commodities bull market prior to the Great Recession. Of course, this drop was preceded by a parabolic climb from $200 per tonne at the beginning of 2008 to $875 per tonne in early 2009.

That stratospheric rise incentivized producers to boost supply, and the resulting glut has exacerbated the industry’s pricing woes. Since then, potash prices have fallen by more than half, to around $400 per tonne, and the latest news suggests that prices could plunge further, to $300 per tonne or less.

This week, Russian potash producer Uralkali, half of one of the world’s two main potash cartels, announced it was quitting its joint venture with its Belarussian partner Belaruskali. Uralkali boasts a cost of production well below the average of its industry peers, and this move suggests the firm is comfortable initiating a pricing war, even though prices were already down sharply over the past few years. The company hopes higher sales volumes will more than offset lower prices.

Unfortunately, as the world’s leading producer of potash, Canada will also suffer as the result of this shake-up. Canadian firms Potash Corp of Saskatchewan (TSX: POT, NYSE: POT) and Agrium Inc (TSX: AGU, NYSE: AGU) own and operate the world’s other major potash exporting cartel, Canpotex, along with US-domiciled firm The Mosaic Co NYSE: MOS). Since the announcement, shares of the former two firms have fallen by 23.5 percent and 7 percent respectively, while the latter’s stock has dropped 22.4 percent.

Meanwhile, the fallout could also affect the economics of numerous other projects that are currently in the planning stages. For instance, BHP Billiton Ltd’s (NYSE: BHP) proposed CAD14 billion Jansen potash mine will likely be put on hold for now.

In the past, the industry oligopoly usually set prices at similar levels for its biggest buyers, while periodically cutting supply to support prices, similar to the world’s most famous cartel, OPEC. Even though potash prices were well off their all-time high, the industry had recently raised prices to a level that had reduced demand in key markets such as India.

Now, demand is almost certain to rise, though it comes as a result of what one analyst colorfully described as “the end of the potash world as we know it.” With the prospect of the world’s two other major potash players no longer beholden to the clubby arrangement that prevailed between the two cartels previously, Canpotex will likely be forced to lower its own prices to compete.

Although Uralkali cited its partner’s sales outside of the cartel arrangement as the main factor precipitating its decision, at least one analyst believes the firm’s move is simply a negotiating tactic, and that the cartel arrangement will ultimately prevail. As CIBC World Markets analyst Jacob Bout put it, “Breaking apart the ‘oligopoly’ is the worst-case scenario for the potash industry (and we know that Uralkali has a flare for the dramatic). Likely this announcement is a ploy by Uralkali to force Belaruskali to a settlement under Uralkali’s terms.”

Bout also doubts Uralakali’s stated strategy to increase demand by undercutting other potash producers on prices. “When the potash industry is in a 15 percent to 20 percent oversupply situation, it doesn’t make a lot of sense to break up the ‘oligopoly’ for a few more tonnes of market share.”

Still, if Bout turns out to be wrong, the end of the potash industry duopoly will have consequences for the Canadian economy as well. CIBC World Markets economists note that potash production accounts for 0.5 percent of gross domestic product (GDP) and 1.5 percent of Canadian exports.

If sales volumes drop in the near term as buyers await greater clarity on pricing, then that could weigh on third-quarter GDP, which the Bank of Canada had previously forecast would grow at a strong 3.8 percent annualized rate. CIBC says that a drop in sales volume of 25 percent would shave four-tenths of a percentage point from third-quarter GDP.