Greetings, and welcome to the Nutrien 2020 fourth quarter earnings call. At this time, all part icipants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to Richard Downey, Vice President of Investor Relations. Please go ahead, sir.
Thank you, operator. Good morning, everyone, and welcome to Nutrien's conference call to discuss our fourth quarter 2020 and year-end results and outlook. On the phone with us today is Mr. Chuck Magro, President and CEO of Nutrien, and Mr. Pedro Farah, our CFO. As we conduct this conference call, various statements that we make about future expectations, plans and prospects contain forward-looking information. Certain material assumptions were applied in making these conclusions and forecasts. Therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions are contained in our current quarterly report to our shareholders, as well as our most recent annual report, MD&A, and annual information form filed with Canadian and U.S. Securities Commissions, to which we direct you. I will now turn the call over to Mr. Chuck Magro.
Thanks, Richard, good morning, everyone. 2020 will go down as one of the most challenging years in recent history, and as you listen to this call, I hope that you and your loved ones are safe and healthy. We look towards 2021, we can see prospects of a much better year, both socially and economically. For Nutrien, this includes stronger agricultural and crop input fundamentals than we have seen in some time. Before I review our results and our outlook, I'd like to take a moment to thank all of Nutrien's employees globally for their ongoing dedication to providing farmers the sustainable crop inputs and services they need during this pandemic. The importance of food security and Nutrien's purpose to feed the world has never been more apparent and important, and your dedication and commitment are truly appreciated.
That dedication was also evident in the impressive execution right across our businesses in the fourth quarter. We achieved excellent progress across virtually all key operating metrics, including our best year ever for health and safety results. We remain committed to our long-term strategy of both growing our business in a thoughtful and fiscally responsible manner while also returning capital to shareholders. In this regard, we announced yesterday that we increa sed our dividend to $1.84/ share on an annualized basis, as well as our intention to implement a new share buyback program in 2021. Last year demonstrated the strength of our business. We see three factors that have reinforced our conviction for 2021 and beyond. First, we believe there is a cyclical recovery in agriculture underway, aided by some structural catalysts, including solid growth in food and fertilizer demand despite the global economic turndown.
Second, Nutrien is very well-positioned with earnings leverage from higher fertilizer prices and sales volumes growth. Finally, we have plans that will contribute to growth, cost reductions, and the implementation of industry-leading technologies that are within our control and that will further improve our competitive position across the ag input value chain. Now, turning to the results. Earnings and cash flow in the fourth quarter were up significantly over the same period last year. On an annual basis, we generated free cash flow of $ 1.8 billion and $ 2.4 billion after accounting for improvements in working capital. Even at the low point in the cycle, our dividend was at 56% of cash flow, well within our target of 40%-60%. Nutrien Ag Solutions delivered an excellent fourth quarter, with EBITDA up 29% year-over-year.
This was mostly a result of organic growth, stellar performance in Australia and Brazil, and a wide-open fall application season in the U.S. Retail gross margins for fertilizer and crop protection products this quarter were both up significantly due to higher volumes and firm percentage margins. Fourth quarter crop protection percentage margins were slightly lower than last year due to a mix effect from the growth in Australia and Brazil, where fourth quarter margins are typically lower than in the U.S.. U.S. crop protection margins were up noticeably year-over-year, both in the fourth quarter and for the full year. For 2021, we expect further improvement in our crop protection margins across all of the operations.
We intend to continue to strengthen our competitive leadership position through innovation in the retail Ag sector, offering new products and services, and expanding our full acre solutions that generate value for our customers and grow our business and margins. Organic growth in 2020 accounted for about 60% of the $ 200 million growth in annual retail EBITDA, with the other 40% from accretive acquisitions. Our EBITDA per U.S. selling location increased 11%, surpassing a million dollar per facility and fast approaching our 2023 target of $ 1.1 million per facility. Our strong organic growth rates were also demonstrated by the size of the increase in our EBITDA margins across all major regions in 2020.
Retail EBITDA to sales increased by nearly half a percent to 9.7%, while U.S. EBITDA to sales increased almost a full percentage point, reaching 10.6%. Retail earnings outside of the U.S. grew by 32% this year and accounted for just over 30% of total retail EBITDA in 2020. We also lowered retail's average working capital by nearly $ 900 million this year through supply chain improvements. These actions, combined with low end inventories resulting from the extended fall season, helped drive our retail working capital ratio to a record low of 15%, which is even below our 2023 target of 17%. Furthermore, our investments in technology and supply chain enhancements and our ongoing focus on cost reduction also contributed to an improved cash operating coverage ratio in 2020, which declined by one percentage point. This improvement was achieved despite the impact from the Ruralco acquisition, which we continue to optimize.
Our digital platform sales exceeded $ 1.2 billion in 2020, more than double our original goal of $ 500 million and over four times the 2019 levels. We expect to demonstrate continued momentum again this year and are now targeting digital orders of $ 2 billion in 2021, with a goal of achieving 50% of North American retail sales in the next three years. Moving to our potash operations, sales volume surpassed expectations in the fourth quarter due to exceptional demand in the U.S. this fall and continued strength in offshore markets. We leveraged our flexible network to meet demand, and we were able to increase our volume in North America. On an annual basis, volumes were up 1.3 million tons over last year. From a cost perspective, we achieved record low cash cost of $ 59/ ton for 2020.
We are progressing our continuous improvement in automation programs that will further reduce cost and improve safety in our operations. Similarly, for our nitrogen business, we saw excellent sales volumes both for the quarter and the year. We increased our nitrogen sales volumes by 700,000 tons in 2020 due to strong North American operating rates and benefits from our debottlenecks and optimization projects and good agricultural demand. These factors also contributed to a significant decline in our controllable cash cost position. In addition, as part of our ongoing portfolio review, we sold our 26% equity position in the MOPCO nitrogen facilities in Egypt for $5 40 million, as we believe we can reallocate this capital to higher return usage. Shifting to the outlook, the setup is excellent for the spring season in North America, assuming we get normal weather.
We could be seeing the start of a multi-year cyclical recovery in agriculture and crop inputs. Crop prices have improved for several reasons. While recent crop yields in North and South America have been slightly below trend, the major factor has been stronger demand, which we believe is more structural in nature. China is importing more grains and oil seeds to help ease food inflation, as domestic corn prices are over $11/ bushel. We believe that China will need to rely more heavily on crop imports going forward as they transition their hog industry to professionally manage large-scale operations utilizing feed rations as they rebuild their herds following the devastation caused by African swine fever. We also see the potential for increased demand for crops in the future for use in biofuels to meet climate change objectives set by many countries around the world.
In response to higher crop prices, we expect higher planted acreage globally. In the U.S. alone, we anticipate total planted acreage to increase by approximately 10 million acres. With strong crop prices and the highest U.S. grower margins in at least seven years, there will be strong crop input spend in 2021, which is supported by our level of customer prepay and soil sampling activity. Our annual guidance is for adjusted EBITDA of $ 4 billion- $ 4.5 billion, with all business units expected to achieve significantly higher year-over-year growth. We have good line of sight to a strong first half of 2021. We'll continue to refine our outlook as we get more insights on the second half of the year. Nutrien Ag Solutions expects to benefit from higher planted acreage, increased discretionary spend in North America, and continued growth in Australia and Brazil.
For potash, prices are firming in every market. The U.S. has seen the strongest price rise so far, but Brazilian prices are now transacting at $ 300 a ton. In Southeast Asia, standard potash prices have lagged the increase seen elsewhere, as they often do in a rallying market. However, we believe prices will firm further in the coming weeks and could approach $ 280 a ton in certain regional Asian markets. We continue to fill our order book at higher price levels, and we are fully committed on domestic and international sales through April without positioning or selling volume to India or China.
Our 2021 sales volume guidance is for 12.5 million-13 million tons, and we expect to match strengthening market conditions. In nitrogen and phosphate, prices and demand are being supported by stronger demand from higher crop prices and improved industrial conditions, as well as a higher cost curve.
We are also constructive on these markets in 2021. 2021 will also be a significant year from an ESG perspective for Nutrien. We will unveil a comprehensive long-term strategy with performance metrics in the first half of the year, which will demonstrate our continued leadership in this area. In regards to our new carbon farming program, there has been an overwhelming interest in this one-of-a-kind program by growers around the world. We have 100,000 acres lined up for our pilot program across the U.S. and Canada this spring, and we'll continue to work on scaling the program in the future.
Nutrien is well-positioned to lead in carbon management and its monetization in agriculture with our unique capabilities and expertise, including direct connection to growers and our investment in digital agriculture. We believe Nutrien is the best-positioned company in the ag sector to capitalize on improving market fundamentals across the value chain.
We have levers to grow our business and our earnings with actions under our control and exceptional leverage to improving market conditions. As always, we will focus on what we can control and follow through on our commitments. At our recent Investor Day, we outlined a pathway to generate a billion in value over the next five years that is within our control. This plan, plus the cyclical recovery in agriculture, presents a very compelling value creation opportunity we are currently experiencing. Finally, I wanted to let you all know that Mike Frank has decided to step down as Executive VP of Nutrien's retail business. On behalf of the entire Nutrien management team, we thank Mike for his valuable contributions over the past three years and wish him all the best in the future. With that, operator, let's open it up for questions.
Certainly. At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. To remove your question, press the pound key. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jacob Bout from CIBC. Your line is open.
Good morning. Hoping to get your thoughts on the recent activity in international potash markets. We've got one producer that was settling with China and India below market prices. I guess my questions are, do you see producers selling at similar prices? Is this a year that we could see India and China moving to a spot market? If you were to speculate, why would a producer settle at such a low price?
Yeah. Good morning, Jacob. Look, there's lots going on right now in the potash market for sure. What I'd say is, yeah, you're right. We've had one but only one major player sign contracts with India and China. Our perspective has been pretty clear right from the beginning on this. We feel that these contracts were actually rushed and certainly are not reflective of the current market conditions we're seeing around the world. We can't change that, and we're certainly not going to dwell on it. For us, what we're seeing is just strong demand basically around the world. If you look at North America, last year, we increased our sales volumes by over a million tons, primarily driven by strong domestic demand here at home.
Prices now are quite high relative to, say, the contracts that have been signed in India and in China. Brazil has really good momentum going forward. Prices are moving up quite nicely there, and we're pleased with the progress in the demand book that we have for Brazil. What I'd say right now is that for us, the way we're thinking about India and China is all options are on the table. When we look at it, those markets now are clearly our lowest netback. We're going to allocate our volume accordingly, and I certainly don't expect us to put significant volumes in those markets at disconnected price levels from the rest of the world. We'll have to see how things unfold, and obviously, Canpotex is active in the discussions. We have better places to put our potash, and we're going to prioritize those for 2021.
Your next question comes from the line of Ben Isaacson from Scotiabank. Your line is open.
Thank you very much. Good morning, everyone. Chuck, can you talk about the deep freeze that we're seeing right now in North America and retail's exposure, especially in the Southern Plains area? What is the risk? Are there positives? Are there negatives? Maybe just as a follow-up, can you talk about what the goal is for your retail EBITDA margins? You guys hit 9.7%, I believe, overall, slightly higher in the U.S. How should we think about that growth of that EBITDA margin? Thank you.
Good morning, Ben. Look, on the deep freeze that we're seeing, it has not impacted our retail operations. It has impacted the nitrogen industry more broadly, and I will have Raef Sully maybe comment on that because it's probably important to talk through. Let me answer your retail questions first. Right now, we're seeing very good movement, even in Canada, with fertilizer. If you recall last fall, the fall application season was cut short in Canada. We've got very strong canola prices up here, and we're expecting just a very solid spring season. Fertilizer is still moving to the farm right now for storage and supply chain management right now in Canada. In the U.S., obviously, the weather has slowed down some of the retail activity, but we're expecting an incremental 10 million acres being planted.
We're expecting more corn in the South, and I would say generally, there's strong optimism of a solid spring season across the U.S. The weather really hasn't had much of an impact there. Before I turn it over to Raef just to talk about what we're seeing in nitrogen with the weather, to your question on EBITDA margin. We're seeing very good growth. In fact, I was looking at it the other day, and if you go back 10 years, this business had a 7.5% margin. We have really driven up the retail EBITDA margin slow and steady, and we think that there is a lot more opportunity to continue on that journey. The strategy is very clear. It's a strategy that we've been employing for at least five years.
What we're trying to do, of course, is sell higher margin products, part of that is our proprietary products portfolio, and at the same time optimize our overall network and drive supply chain efficiencies and reduce our costs. If you layer in now the digital platform on top of that, we think that there's going to be some opportunity to lean out our back office and make the relationship with the farmer more efficient, and we think that that over time will drive margins as well. I don't want to give you a number except to say that we think that there is significant upside, and it's on the same path that we've seen. What you should expect is a slow and steady increase in overall EBITDA margins for retail.
Raef, do you want to just comment quickly on what we're seeing from a weather perspective in nitrogen in the U.S.?
Thanks, Chuck. Ben, as Chuck mentioned, obviously the cold spell's impacted the nitrogen industry as a whole, with gas supply being impacted. We see, I think it's 8- 10 plants that have been down in the last couple of days. Most of them are selling off their gas supply because of the impact we've seen on pricing. We have had one plant that's come down for mechanical issues. We're running about 80%-85% at the moment. We expect the whole industry will be back up by the end of the week, largely as the cold spell passes on. Some impact to supply at the start of the spring season probably will mean there's a little bit of firmness continuing in pricing.
Largely the number of plants that come down have come down just because there's an opportunity for them to sell their gas into the market.
Your next question comes from the line of P.J. Juvekar from Citi. Your line is open.
Yeah. Hi. You talked about Chinese rebuilding of herds. How long would that continue? I think for pigs it takes about 9-12 months. Is that something that will continue into sort of 2021 into 2022? Maybe you can mention on the biofuels opportunity that you talked about, and how much sort of demand growth for grains would that come from?
Yeah. Hi, P.J. I'm going to have Jason Newton, our Head of Market Research, just answer your questions. Go ahead, Jason.
Good morning, P.J. When the hog herd rebuild started to unfold, we had heard that it was going to take anywhere between two and three years for it to recover. You've probably seen the numbers that I think the Chinese government estimated in late 2020 that the herd had rebuilt by about 90%. Private estimates within China were that the herd rebuild was significantly below that level. I think what we'd expect to see is a bit of a bumpy recovery as currently the pork prices are strong, and so rather than rebuild the breeding herd, hog farmers are selling into the meat market. That's going to slow things to some degree. Then you will see periodic outbreaks of disease, which is totally normal in China, that also causes a pause in the rebuild.
The good news is that despite some of the bumpy road that may occur, we've seen extremely strong feed grain demand in China as the herd, as it is rebuilt, is being rebuilt with more commercial style hog barns and feeding rations. On the biofuel side, unlike what we saw with Renewable Fuel Standard, a lot of the biofuel growth that the potential growth to occur going forward has not been specified and mandated. It's a little bit uncertain what that looks like. As part of the clean fuel standards that are being rolled out, talked about in the U.S. and Canada and EU, there's potential for biofuel to be a component of the fuel supply that helps reduce emissions. In the U.S., for example, if we move to a 15% blend rate by 2030, that would equate to about 2 billion additional bushels of corn.
Definitely incrementally positive, but I think the impact is uncertain because there aren't strict mandates in place outside of what we see in Indonesia and Malaysia with more strict biodiesel blending mandates.
Yeah, P.J., just one more comment on the hog herd in China. The rebuilding is one thing, but how they're rebuilding with the professionally managed feed rations, I think that's where we think could persist for the foreseeable future. That's the comment that I made in the prepared remarks on is this the beginning of a structural new need for incremental either soybeans or corn rations because of how they're rebuilding their herd. That's the thing that we're observing right now.
Your next question comes from the line of Chris Parkinson from Credit Suisse. Your line is open.
Great. Thank you very much. Just very quickly, Chuck, beginning on retail. Other than acreage growth in North America, can you just give us an update on all of your other initiatives across that platform to drive above-market growth and margins, so third-party product penetration, digital ag, et cetera. If you could also include just a quick update on your Australian ops, that would also be great. Thank you very much.
Good morning, Chris. Sure. Look, the plan for retail, of course, is multi-pronged. Obviously, we set out at our investor day that in the next five years we'd like to have the retail EBITDA to $ 2 billion, and that's the midpoint of what we provided. At the same time, we'd like to grow the EBITDA margins. That's the overall strategy, and we've been allocating capital to invest in retail, as you well know. If you think about that, then the way we're trying to do that is really with three direct strategies. One is we're implementing higher value products and services and technologies. The digital platform is certainly part of that. The proprietary products platform that we've built, I think, is second to none. We have that now same platform in Australia and in Brazil.
We have integrated products companies in those countries, which is driving margin enhancement and differentiation for customers. That's the first really major driver. The second, of course, is just geographic growth. We've had just tremendous success, I think, in building leading platforms now in Australia. We're off to a really good start in Brazil. In Australia, the Ruralco acquisition is well underway through the integration, and we've already increased what we expect from a synergies perspective. Every time I look at the performance of that organization, I just get very impressed that there's more they can do. We also had a few small acquisitions last year in Australia, which helped as well. In Brazil, when I look at what we did during the pandemic, it was pretty remarkable.
We did have two sizable acquisitions, and our platform now in Brazil, with the one we just announced two weeks ago, the acquisition we just announced two weeks ago, we now have 40 retail locations in Brazil with an integrated products company, and a run rate sales of about $ 500 million. Well on our way to what we wanted, which was about a billion dollars in revenue coming out of Brazil. That's the second driver, sorry. The third driver is network optimization, investing in the supply chain and really working with our suppliers. We've talked about this before, where we're having less suppliers with larger share, and a deeper relationship, even working jointly with technology solutions or new products that are going to be exclusive to Nutrien.
That's what I would say is the journey we've been on for some time, and we're starting to see, I think, success certainly in 2020. Technology, new products, geographic diversity, and then of course, optimization of the core business.
Your next question comes from the line of Adam Samuelson from Goldman Sachs. Your line is open.
Yes. Thank you. Good morning, everyone. I was hoping to maybe follow up on retail and just thinking about the 2021 outlook a little bit more. The EBITDA guidance is up 5% to 12% year-on-year. Your outlook for crop expenditures in your key markets is up kind of 4%+ in kind of all the key areas where you operate. I'm just trying to think about how you're framing the low and high end of that range, when certainly this would seem to be the best crop input market you've faced in at least five years. Probably some favorable mix as farmers trade up in terms of the inputs that they're buying. Help me think about the different ranges of outcomes there, investments that you're making that might temper what should be some pretty good operating leverage in a good volume environment.
Yeah, that's right. Look, I think the way I would describe it is obviously we're expecting very good EBITDA growth in retail. We've tried to provide a perspective. If you look at the midpoint, it would be up about 8% year-over-year. Last year, we grew the retail business 16%, and certainly since the beginning of 2018, I think retail is up 25%. Very good growth. As I mentioned, 2020 of the growth team, 60% of it came from organic growth initiatives. The EBITDA per location finally crested over a million dollars, on our way to our target of $ 1.1 million. What I would say for 2021 is expect more of the same. We think that we're going to have very reasonable growth year-over-year. The majority of that growth will come from our organic initiatives that I've outlined already.
Then we'll have M&A behind it. So if I was asked, the way you've asked the question about how we would get to the top end, it would be doing a little bit more M&A earlier on in the year. From a pipeline perspective, what we're seeing right now is we have a good pipeline of M&A opportunities both in North America but around the world, I would say. So we'll see. I think that the crop backdrop is very positive for retail. The 10 million acres, more planted corn and soybean acres, but more cotton acres as well in the south, all of that will benefit retail.
I think we will see one other thing most likely in the second half of the year, which we really haven't seen meaningfully in retail for a couple of years, is more discretionary spend on yield boosters, adjuvants, micronutrients, those sort of products. As soon as the crop comes out of the ground, we're expecting a very high interest, which we really haven't seen in the last couple of years because of crop pricing.
Your next question comes from the line of Joel Jackson from BMO Capital Markets. Your line is open.
Hi, good morning, Chuck.
Hi, Joel.
Hi, Chuck. Let's go back to the discussion on global potash prices and the bifurcation between granular and the Asian pricing. Can you maybe answer a couple of questions? Why has it been so challenging to get Southeast Asian prices up, which is why China, India is there? If BPC and Belaruskali have a bit of a different mandate than you and other players, and they seem to want to lock in volume, so they want to get predictability and cash flow out of China and India, not be so concerned on pricing. If they want to lock in pricing in Brazil up to a year in advance, price you'll have to match. How do you deal with that, and how do you reconcile? You've got to sell a ton somewhere, and BPC has tons everywhere, too.
Okay. There's a lot there to talk about, Joel. First of all, what I would say is no one company can sell all the volumes in every market. This is a massive global market, and it's growing. Don't forget this year we are expecting up to 2 million tons of incremental growth in terms of global demand, and not that much of incremental supply coming into the market. We like the backdrop. To answer your question on Southeast Asia, let me pass that over to Ken Seitz, because he's working this day by day right now with Canpotex, and he can provide you a perspective, and then I'll come back with some other comments on the rest of your questions. Go ahead, Ken.
Great. Thanks, Joel. In fact, we are seeing some strengthening in Southeast Asia. Now I'd argue that if you see reported prices, they're lagging what's actually happening in that part of the world. Of course, we saw significant demand destruction in Southeast Asia with palm oil prices dropping off in 2019. We saw recovery in demand in 2020 as palm oil prices recovered. Palm oil prices continue to strengthen, so that into 2021, we see Southeast Asian demand getting back to sort of 2018 levels. In other words, strong demand. Malaysia, Indonesia, Southeast Asia, those are spot markets, but it's a little more seasonal in nature because they are procuring potash using their tender system. Over the next sort of month and a half, we'll see another round of tenders coming in.
Like I say, we do expect to see a strengthening in Southeast Asia with that round of tenders. We're seeing it now. You may not, with the lag, see it in reported prices, but we believe Southeast Asia is going to be on trend with the rest of the globe as potash prices strengthen.
Yeah, Joel, so just to wrap up, we like the backdrop that we're seeing in the potash business. If you just look at global operating rates, we are expecting a continued tightness. Even year-over-year 2021 versus 2020, the global operating rate is going to increase. Our expectation is that it'll be somewhere close to 95% in terms of a global operating rate, which usually means we're going to have forward momentum in pricing because the supply-demand is going to be quite tight. I think that Nutrien will be able to move the volumes that it wants to move into the market. We're just, as I said before, we're going to prioritize the markets where we have the highest net backs, but make sure that we service our customers the way we need to.
Your next question comes from the line of Steve Byrne from Bank of America. Your line is open.
Yes, thank you. One of your slides indicates that your proprietary products generated 23% of retail EBITDA in 2020 and 2019. I would like to hear your view on what gives you confidence you can drive that to 29% given flattish the last two years. Do you see this as being driven more by the Loveland brand or the Dyna-Gro brand? How do you think you're going to get there?
Yeah. Good morning, Steve. We think that when we look at the investments we've made over the last couple of years, we've added Actagro to the portfolio, we've added Agrichem to the portfolio in Brazil. We've got a more robust, I'd say, a broader set of offerings that are all kind of wrapped up into that phrase, proprietary products. We're very confident that we've got just a suite of products that are going to add tremendous value to farmers' bottom line, and we are expecting to be able to grow. Certainly, when you look at crop protection, if you look at even the fourth quarter of last year, our CPP margins were up. For the full year, they were actually up in the U.S.
We just need to move through now the CPP products through the new channel that we have with Ruralco in Australia. That's just getting kind of sorted out right now, and of course, the new acquisitions that we have in Brazil. I'd say from a crop protection perspective, we're well-positioned to continue to grow that percentage. You mentioned seed and Dyna-Gro, and what I'd say there is that we've got germplasm that is second to none, and we've just had tremendous success, I think, with Dyna-Gro in our core markets. We have a lot of optimism around what that will do. If you just plainly look at our order book for 2021 for our Dyna-Gro seed, it's up versus this time last year. We are seeing good forward momentum, I think, in terms of the percentage of our proprietary products.
That's what really drives the confidence that we'll be able to get to the numbers that you indicated.
Your next question comes from the line of Mark Connelly from Stephens. Your line is open.
Thanks. Chuck, I was hoping you could sort of put the puts and takes of higher freight and complicated logistics into context for us. My sense is it's probably a net positive in nitrogen, at least in the spring. I'm just sort of curious if you could walk us through the businesses.
Yeah. Maybe what I'll do is I will have Raef talk a little bit about the nit rogen logistics, and then I can have Ken do the same in potash for you, Mark. Go ahead, Raef.
Look, I'm sorry, Mark, could you just give me a little bit more on the question that you're looking for?
Sure. I'm really trying to think about big picture, what the impact of higher freight rates and the kind of complications we're sort of hearing about everywhere in logistics are affecting your business, both from a global perspective in nitrogen and in terms of moving product into place for this spring season.
We've had some recent successes actually getting better rates. We've got a network of about 300 terminals or warehousing locations across the country. I guess it's been a positive for us. Using the network we've had, we've been able to be ahead of the spring season and having tons close to the customer. I'm not sure that's answering your question, but perhaps I'll pause there and see if you've got anything specific you want to add.
Let me jump in here then, Raef. I think you've answered the question. If you look at the overall network, we do have one of the largest distribution and storage networks in North America when it comes to ag inputs. It is highly integrated between the upstream business and the retail downstream business. Literally, we are able to store, and if you just look at this spring season, Mark, I think if you look at what's in front of us, the product is forward placed right now and ready to go for the spring season. I'm not sure we can say that about all of our peers in the industry.
We just had a review actually last week, and the fertilizer crop inputs and the seed, when we looked at it last week, it's exactly where it needs to be in anticipation for a wide open spring. I think from an international perspective, we also have some advantages, and Ken, you can talk to that, I think, for potash.
Yeah, absolutely, Chuck. Mark, I would just say domestically, rail movements and our 300 managed warehouses between ours and our customers, those continue to service well. We saw that in the fourth quarter of 2020, where we mobilized that infrastructure to meet growing demand. While it's true that inventories are low in North America at the moment, very low, we are utilizing our supply chain effectively to meet our Q1 and Q2 order book, which, as I said earlier, is heavily committed. Internationally, it's true that we've seen some ocean freight rates go up, but those are mostly in the Cape size vessels and the ones carrying iron ore. We expect that the ocean freight market will tighten as global commodity prices go up and more volume is moving around the globe. I think as you say, Mark, that is a net positive for us.
As it stands today, we're expecting, again, record potash demand, and we expect absolutely to be able to meet all those commitments.
Your next question comes from the line of Jeffrey Zekauskas from JPMorgan. Your line is open.
Thanks very much. Can you give us your impressions of the tightness in the phosphate market? I know for a while you were a little bit bearish about that. Do you view that market differently now?
Yep. Good morning, Jeff. Raef, do you want to talk about what we're seeing in the phosphate market right now?
Yeah, certainly. Look, Jeff, I think the tightness is continuing. I think a lot of what we're seeing in North America is tied up with the countervailing duties ruling that we saw. Obviously, March the 25th, we'll see whether that is finalized or not. I think even if that doesn't go ahead, I still think there is an underlying tightness in the phosphate market. I suspect that towards the latter end of the year, we'll start to see increased production from OCP and others. We should see and we may see some imports coming into the country in the second half. I think the tightness will continue. I think structurally, there's a tightening in supply.
Your next question comes from the line of John Roberts from UBS. Your line is open.
Thank you. Does the buyback authorization imply that we're unlikely to see any significant acquisition activity in retail, especially in Brazil?
Good morning, John. No, it does not. What we expect to do with the plan this year, as we talked about, was for retail. When we look at the growth opportunities we've got in front of us, the plan is really predicated on stronger organic growth. We've always looked at M&A opportunities, and we have a very good pipeline, as I mentioned, and we'll be able to do both. If you think about where we're sitting, I think we finished the year last year with Net debt to EBITDA, right in the middle of the zone where we'd like it to be, around 2.6x . We have the financial capacity. We're going into a market of expanding margins, and we expect to generate very strong free cash flow in 2021.
We will prioritize, and we'll look at the best returns longer term for shareholders, but you can expect it would be a mix. The buyback is certainly an important part of that the board approved yesterday. We do expect to allocate capital to grow the retail business in 2021.
Your next question comes from the line of Andrew Wong from RBC Capital Markets. Your line is open.
Hi, good morning. I just want to focus a little bit on the EBITDA guidance. Maybe using history as a guide, 2019, we had $ 4 billion. When you compare that to 2021, retail is obviously higher with the acquisitions and acreage. Nitrogen and potash volumes are higher. Costs are, I'm assuming, lower as well with the synergies and whatever improvements we've seen since then. Obviously, pricing is a little bit of that delta, but market fundamentals are also pretty strong. Is it fair to say that maybe there's some conservatism in the guidance range that you're putting in there?
Yeah, good morning, Andrew. Look, this year, it was a bit difficult to put a pin in the guidance range, as prices, certainly in fertilizer, were moving pretty quickly. Here's how we think about the range that we provided. First, it goes without saying that there is a lag between realized prices and the benchmarks, and that's true with any of our companies because we have to forward sell to place the product. If you were to look at today's market prices for NPK fertilizer and you were to look at that for an entire year, well, we would be well beyond the top end of our guidance range. Obviously, what we're expecting is a normal seasonality in pricing, especially for nitrogen and phosphate.
We do expect after the spring season for prices to subside somewhat, but with higher lows than we saw last year, which I think is important. The bottom end of our range would have what I would consider to be a more significant seasonal reset based on changes to supply-demand. That's how we bracketed it, is today's prices, if it was to continue for the full year, we would be well above the top end of our guidance, and you'd have to see a pretty significant reset to come near the bottom. We'll update the market as we learn more, that the crop, certainly in North America, isn't even in the ground right now. Like I said, this was a particularly challenging time because fertilizer prices were moving up so quickly.
Your next question comes from the line of Vincent Andrews from Morgan Stanley. Your line is open.
Thank you. Good morning. Just looking at slide 24 in your global potash deliveries for 2021, the forecast. Just maybe if you could put a little color around North America. It looks like you're projecting it to be flattish to down, which would, despite the favorable economics and the good acreage, kind of put it even potentially below 2017 and 2018. What's the thought process there?
Yeah. Good morning. Jason Newton can answer that question for you. Go ahead, Jason.
Yeah. Good morning, Vincent. We certainly expect to see strong applications of potash in the spring season and throughout 2021, just given the fundamentals and the high acreage expectations. We did see a really historically strong fall application season in 2020 driven by weather. So the range would assume more of a normal weather scenario throughout 2021. You point out 2017 and 2018, which were years where we saw channel inventories build in the North American market. Our assumption would be that the channel inventories remain flat through the year to come up with that 9.5 million tons-10.5 million tons range.
Just maybe one other comment. With the Waypoint soil sampling data that we have now, it's been really interesting to watch the data come in, and what we've seen is that there's actually an increase in the number of soil sampling in the U.S. up by about 25%. Farmers are really looking at their soils, and there are pockets of fertilizer deficiencies. On average, what we're seeing is that the soil levels for fertilizer are about constant over the last two or three years, which is good. I think what that showed us is we were concerned that there was a lot of forward pull into 2020 at the end of 2020, and there wasn't. If you look at our customer prepay in retail, that is also up about 25%.
There's a strong indication here of a very solid spring season, and I think the way Jason has phrased that is absolutely accurate. I think that where the determining factor will be in the second half of the year, and we won't know that until we sort of get through the first half.
Your next question comes from the line of Michael Piken from Cleveland Research. Your line is open.
Yeah. Hi. I guess this is sort of related to a follow-up question that one of the other analysts asked. Looking at the nitrogen segment significantly, one of your competitors earlier said that they're viewing this as potentially one of the most favorable backdrops for nitrogen in nearly a decade. It looks like in your presentation, you were talking about Chinese exports maybe only being 3 million-5 million metric tons this year. I guess, what are the factors that you think might cause nitrogen prices to be low enough to the point that you're getting to your numbers, in light of that and the rising global cost curve and your demand expectations? Thanks.
The nitrogen outlook, we would certainly agree that the backdrop is positive, certainly for the first half. We're seeing it in our order book. I've mentioned the other kind of barometers that we're monitoring. I think there's no question that nitrogen's going to have a very strong spring season around the world. It's driven by quite a tight supply-demand, but also a steeper cost curve in Europe and in other parts of the world. I think the fundamental question that we have to ask ourselves is what happens after the spring season? There is some new capacity that was deferred from 2020 that we do expect to start up in 2021. They're in jurisdictions that normally have a bit of a rocky startup. When do they come online? How much do they produce?
Those are all things that we need to understand as we get through the next several months or quarters. I think that beyond that, if we think past 2021, we would agree that nitrogen, from an overall supply-demand after this new capacity comes online, there isn't a lot of new capacity. I think that the difference in view, if there is a difference in view, is that we are expecting a good spring season. We expect some new supply in the second half of the year, which could have a reset effect. I think longer term, the supply-demand fundamentals are quite strong in nitrogen, and that's why if you look at Nutrien and how we've allocated capital, we're in the middle of several brownfield expansions adding about a million tons of capacity between last year and this year and 2022.
That's because we are constructive on the overall supply-demand for nitrogen.
Your next question comes from the line of Steve Hansen from Raymond James. Your line is open.
Yeah. Good morning, guys. The digital strategy is clearly exceeding expectations thus far from a sales standpoint. You've outlined a $ 2 billion target for this year. Chuck, your opening remarks also made some reference to 50% penetration, I believe. I just wanted to get some color around that rollout from here to there, and how confident you are in that. Is it possible to give us just a sense for how many of your customers are actually using the platform at this point, as opposed to just the dollar value? A lot of your peers and a lot of the other players in the digital space, of course, talk about acres. I don't think that's super relevant, but just trying to get a sense for the penetration rate you've actually seen with the number of customers you have today. Thanks.
Steve, we have some of the data available. We'll have to deal with some of it offline, I think. Generally, like I said, the way you phrased the question is absolutely accurate. We're very pleased with the progress with the digital platform. COVID probably helped, to be very honest, last year with the restrictions in mobility. To have $ 1.2 billion of orders come into the platform, we are expecting $ 2 billion this year, continued really good growth. We're also seeing an increase in online payment, which we do expect to see from customers to actually double in 2021. We'll have to get you the percentage of customers. The customers that are digitally active, we do have some data now that is quite interesting.
What we're finding is that customers that are digitally active, we have a 30% improvement in share of wallet. Actually, the revenue we get from customers that are digitally active with us is actually double that of non-digital customers. Our churn rate is 60% less. These are all very good indicators that the program is value-adding for our customers, for both them and for us. If you look at the program that we're rolling out in 2021, we're pretty excited about our offering. We're going to add even more of our products to the platform. We're still working on the percentage of our products to get on the digital e-commerce platform. We rolled out the field planning capability, which is really exciting. Growers can go in now and basically create an entire field plan for each of their fields for their crops.
I call it a digital model of their farm. They can take that plan to a contract right away, a digital contract with us, and they can even order the products and services now online. The digital experience now goes right from the beginning of the planning process to the commercial connection to Nutrien. Just in January, we tied in our Nutrien Financial capability on a set of pilot programs with our very large digitally active customers. The feedback we're getting is really quite strong and positive. We think that that'll be another good reason to kind of get digitally engaged with the Nutrien platform for growers. The journey we're on is more investment, trying to drive up more of our customers on the platform.
As they hear more about it, I think that the feedback we're getting is quite positive. We'll have to follow up with you on the exact numbers. I don't have those on my fingertips.
Your next question comes from the line of Jonas Oxgaard from Bernstein. Your line is open.
Thank you. Actually, I appreciate the enthusiasm of our operator. Looking at your potash forecast, it looks like outside of other Asia, practically every region you are forecasting more or less flat. For 2021 over 2020, which seems surprising given the strength of the Ag environment and your commentary. I guess the two-part question is, the first, does that reflect that the strong fall application took some of the 2021 volume and already put it in the ground? B, what do you think the variability is here? Could we see more than your projections here?
Yeah. I think, look, we'll have to get into a bit of detail here. Ken, why don't you look at each of the regions and what you're seeing from a demand perspective, and then our part of that, if you can. Hopefully that'll help you understand that we're actually thinking, look, the global market demand is going to be up a couple million tons, and we expect the Nutrien volumes to follow that. That's the macro backdrop. Maybe we'll just have a quick look at the region. Ken, go ahead.
Yeah. Jonas, thanks for the question. Yeah. I guess one of the things that we're staring at is, in fact, we have seen record shipments and consumption in several regions across the globe in 2020. The starting point is actually record global demand of 68 million tons in 2020. China was at 16.1 million tons. That's more than they've ever consumed. Brazil was at 11.5 million tons. That's up from sort of 10.5 million ton previous record. The starting point is already record global demand. As Chuck said, we're expecting it to grow from there, maybe 1 million or 2 million tons. When we look at the ranges, again, China, we're expecting a bit of demand growth there, and that's on top of record demand in 2020.
India, while we saw a million ton growth from 2019 to 2020, we're expecting it to be in sort of that 4.5 million-5 million ton range, which is sort of the three-year average. We saw strong demand in North America. We've talked about that on this call. We expect strong demand for all the reasons Jason Newton described earlier in North America and in Indonesia and Malaysia. As I said earlier, we're expecting demand to go up this year. Those are the big regions that we serve. Again, when you add it all up, building on a very strong record global demand in 2020, we're expecting further growth into 2021.
Your next question comes from the line of Michael Tupholme from TD Securities. Your line is open.
Thanks. Yeah. At your Investor Day in late November, you provided an expectation for 2021 global nitrogen demand of 156 million tons or up about 2.5% year-over-year at that point. Just wondering if that still hol ds true or if you have any updated views on global nitrogen demand expectations for this year.
Okay. Michael, Jason Newton can answer that question. Go ahead, Jason.
Good morning, Michael. That's in line with where we'd expect the demand gr owth to be in 2021. I think versus where we were in November 2020, probably ended up a little bit stronger. It's still 2.5% growth in 2021, but from a stronger base in 2020.
Operator, we're coming up to the hour here, and we know there's another call after this. We thank everybody for joining us today. If you've got any questions, investor relations is available. Thank you.
That concludes today's conference call. Thank you everybody for joining. You may now disconnect.