Welcome to day two of the conference. Our first session this morning is going to be with Nutrien, who's, of course, the largest global fertilizer producer, also is a very large retail farm center network. Very happy to welcome Ken Seitz, the CEO of Nutrien, back again to the conference this year for a fireside chat. We want this to be interactive. If I can get the tablet up here with the app, if we have a tablet, so you can submit your questions on the app, and I'm happy to integrate them into the conversation. Ken, let's kick off. Investors have really expressed a lot of concerns on the state of the farmer, the health of the farmer, crop prices. How is your business being impacted by crop input affordability dynamic, lower crop prices, and maybe contracting farmer margins?
Right. It is true, of course, that we've seen corn prices come off. We've seen soybean prices come off. But it's also true that stocks on the planet and the global stocks-to-use ratios continue to be below the 10-year average. In other words, we still have some ground to make up, and there's still some supply disruption, as everyone knows, obviously watching what's happening in Ukraine and some of the challenges there. So if you look globally, we still have work to do in terms of getting stocks on the planet rebuilt. If we go region by region, you look at the U.S., for example, where, again, while prices have come off, so too have input prices.
So if we look at the affordability matrix, we can say that in the U.S., heading into the spring planting season, we're expecting normal application rates as growers look to replenish nutrients in the soil and as they look to maximize yields, especially given the way some of the pricing has come off. We see strong evidence of that with, we had a very strong fall application season. We had almost perfect weather in the fall, but we saw a lot of volume, a lot of product go to ground in the fall. We had very strong prepay in our Nutrien Ag Solutions platform just prior to the end of the year. Now here in the spring, we're seeing very strong orders for seed through our own proprietary business and our branded products.
So there's some signposts there, certainly for the U.S., that while prices have come off, the health of the farm is intact. And that's also owing to a very strong balance sheet coming out of two very strong years for growers in North America. And you can go to Brazil, where, again, we're expecting normal application rates. Weather has been a bit of a challenge in Brazil. And yet, as I say, we're expecting volume to go to ground given, again, that input pricing has come off. We go over to Australia, our Nutrien Ag Solutions business there. Of course, the Australians, a couple of years now, very strong yields combined with prices. So balance sheets are healthy. Watching El Niño in Australia, but nevertheless, the farm is in reasonably good shape in Australia.
And then the balance, the world, where, again, we're looking at crop nutrients in the soil, and we're looking at inventory levels. We're looking at what has been consumed over the last few years. Southeast Asia is a great example where we see strong rice prices, strong palm oil prices in a part of the world that has underapplied potash over the last couple of years. So we're expecting a rebound in Southeast Asia. So overall, Joel, it's absolutely the case that grower margins aren't what they were over the last couple of years, but nevertheless, strong balance sheets, expecting normal application rates.
So I think when I talk about Nutrien every day and the fertilizer stocks in general, but Nutrien every day is always here as a lack of catalyst, right, really wrongly. And you're clearly trading at lower than historical multiples. And many would argue that the type of earnings levels you're achieving now would be maybe the new mid-cycle. So if you're trading at lower than historical multiples and investors are a little bit noncommittal right now on the name, on you, you have a lot of free cash flow. You've done buybacks at $1 billion last year. Why not be really aggressive on the buyback? You do announce a new authorization. You do it every year. But why not really signal to the market that you're pricing us wrong, and we're going to buy back our stock?
Yeah. So we did renew the NCIB, but we sit here at a moment in time where we're just coming out of a couple of years of, by some measure, the most volatile period in the history of our fertilizer business. And so we're staring here at the balance of the year, and we sit and we say, given everything we said about the health of the farmer, normal application rates, that markets are stabilizing. We see that with our crop nutrients business across all three crop nutrients, where pricing is stable, demand is coming back, and some supply-side challenges still persist. But nevertheless, we're seeing some stability. We do, as you say, Joel, we have a legacy of returning and redistributing cash to shareholders, whether it's our dividend, which we just increased.
Again, we have increased that, I think, 33% since, well, 35% with this most recent increase since the company was formed. We bought back almost a quarter of the company. We sit here today, and we say, will we look at redistribution? We will. We just are being cautious at this moment in time as we watch stability return to the markets and the balance of the year unfold.
Do you think you kind of want to see how the Northern Hemisphere spring plays out, reassess? And last year was a very front-end loaded buyback, and then maybe this year will be more back-end loaded?
I think that's well put, Joel. Yeah, let's watch the spring planting season here in the Northern Hemisphere. Again, we're seeing good indications of a demand rebound in Southeast Asia. We'll watch that play out through the tender season, and let's see how the year unfolds.
OK, let's talk about the 2024 earnings bridge. I think you've just described 2024 as being a transitional year for retail, maybe $1.75 billion. You talk about a mid-cycle number being more $1.9+. You did a little bit lower last year because of some write-downs, things like that, as corn prices change. Can you explain the bridge from 2023 for retail and then kind of what has to happen to get to that mid-cycle number of over $1.9 billion?
Yes. So, just guided, as you say, in looking at 2024, and still a bit of a transition in 2024, where in our North American and Australian business, we have seen margins return to more normal levels or normalized margins in our retail business. We're still working through some challenges in Brazil. And that's going to take us probably into the latter half of the year as we really crop chemistry, as we continue to work through some higher-priced crop chemistry that we have in inventory. And like I say, that's probably going to take the balance of the year. Heading into 2025 then, we expect that normalized margins across our business, and we continue to grow. We continue to grow with our Loveland Products business. We can talk about what we've done there since the company was formed, but it's really impressive categories.
That we continue to focus on Loveland Products. And that's certainly part of the story when we say 1.9-2.1. We continue to work on network optimization, and we've made those investments. We continue to make those investments. And we continue with our work in our digital platform, and we continue with tuck-in acquisitions. So you put it all together, and you say normalized margins as we work through 2024, the back end with Brazil, and then continuing to grow our business in the way that we have since the company was formed.
OK, let's stay in retail for a little bit before we go into the wholesale businesses. As you talk about tuck-ins, I mean, you have invested in Brazil and retail. It was something that you got into the last bunch of years. It seems like it's been a bit more challenging. I think maybe the retail business didn't make money last year in Brazil. I think you said on the call last week that you're pausing Brazil. Maybe talk about the growth in retail inorganically. So is Brazil sort of done for now? And then what kind of tuck-in opportunities would you be willing to underwrite to maybe Australia and the States?
Right. So that's exactly right, Joel. We have just pausing on any further acquisitions in Brazil. And that's not to say that Brazilian agriculture is not of interest to Nutrien. Of course, it is. I mean, there is a market there that has been growing and will continue to grow. And as the largest producer of fertilizer on the planet and the largest retailer, I mean, we're going to be in Brazil. But having done a series of acquisitions, and our most recent one, the Casa do Adubo acquisition, we're just integrating those acquisitions, systems, safety, branding, Loveland Products, getting the network right. That's a lot of work that's to be done there. We will continue to focus on that in 2024, getting the operating model right, getting our cost structure right, and our capital structure right in Brazil. That's work for 2024.
So we're not going to be doing any more acquisitions in Brazil until we get that right and build the platform to continue to grow. For the balance of the network, yes, absolutely. We did 27 acquisitions last year, and we'll continue to focus on those very niche tuck-in opportunities that fit within our network, that from a geography point of view make sense for us, where there's synergies, and where we can, through our integrated model, continue to flow crop nutrients through that retail space. So we'll always look at those. We'll look at those in North America. We'll look at those in Australia. And again, we have a track record of integrating those acquisitions in those jurisdictions into our network and realizing those synergies and optimizing the network.
I think Agrium and/or Nutrien expressed in the past a desire to get to something like 30% market share of retail in the States. You're probably now well into the 20s. Is that 30% still something you focus on, or not really?
I would say we're not putting a target out there. What I would say is it's more about quality than quantity. So like I say, we're really looking for those niche opportunities where a number of storefronts in a part of the continent where we want to grow, where we see the opportunity to deploy, like our Loveland Products, where we see the opportunity to consolidate around our network. And behind that, all of our trains, planes, automobiles, warehousing, and the largest network of crop nutrient production in the world. So we're not putting an aspirational market share. It's more about quality than quantity.
So obviously, one of the biggest, largest stories in crop inputs last year has been just the crop chems destock. You're obviously, for a large part, on the other side of that. You're the buyer, the purchaser of pesticides, crop protection. What sort of purchasing behavior changes have you seen, both Nutrien as a purchaser and then also from growers on crop chems and fertilizer in the last year or so?
Yeah. I think the way we have been looking at it sort of flows right through to the grower. That is, as we worked through some of the higher-margin, higher-priced product and now returning to, as I said, now more normalized margins, it's really being opportunistic in that purchasing activity, heading into the spring season. We had managed through 2023. We had managed crop protection inventories quite well, I would say. So today, it's about being more opportunistic as we restock the channel and obviously get ready for the season.
And then we saw the other week, surprisingly, kind of shockingly, that a pushback now onto dicamba use in the States. It's not so great for growers in the interim. I mean, with the registration being pulled, does that affect Nutrien this year? If that is a new restriction, how would that affect Nutrien's business going forward?
Yeah. I mean, obviously, as the largest retailer, yes, that flows through our channel, that product. We're watching that quite closely. It's only a watch at the moment. It's not like anything's been restricted. But at the same time, yeah, that flows through our channel. Now, that said, we have alternatives that we can service our growers with. And we'll be working with our we've got 4,000 crop consultants and agronomists working with the growers on those alternatives as they seek to maximize yield. So I don't have a good answer for you today, Joel, on how that's all going to play out and ultimately what happens with dicamba. But in the meantime, we've got our own Loveland Products branded lines with a huge group of registrations there and alternatives for the grower to achieve those similar outcomes.
Some of the potash market, so we've seen prices drift a bit lower for the last bunch of months, hopefully stabilizing here. You gave some new guidance last week that you see the potash market bring about 2 million tons this year, and that Nutrien would pick about 200,000 tons of that. Let's call it 300 for Canpotex, right, between you and Mosaic. What are the underlying assumptions here? I mean, 2 million tons, Canpotex gets a few hundred thousand. And then talk about how you got to that. And then if the market grows another million tons, who gets the extra million? Is it Canpotex disproportionately now, or what would you think?
Yeah. So the assumptions on the demand side of the equation are really that we've seen, obviously, crop nutrient demand return in North America. We're watching that in Brazil as well. And we can talk about inventory levels in these regions, but just fundamental demand. In other words, volumes going to ground. We've seen strong demand in North America and Brazil. Got a couple of regions that we're watching closely now. And so Southeast Asia is a great example where we're expecting Southeast Asia to rebound by a few million tons, actually. And that's after a couple of years of underapplying volumes and with very low inventory levels in the region. Similarly, Europe, we expect to return to the market where, again, given some of the volatility we've seen under application and lower inventory levels, we can talk about India where inventories in the country continue to be very low.
And so for 2024, we expect some rebound in Indian demand as well. And then China, where yes, we've seen record imports, actually, last year, rail from Belarus, rail from Russia, seaborne imports, some additional Laotian volumes. But while we have seen those volumes going into China, we've also seen record consumption in China. So on balance, you look across the planet, and we say, yes, we think that demand rebounds by 2-3 million tons, somewhere in that range. At the midpoint, you're right, Joel, it's a couple of million tons. And again, Southeast Asia, Europe would be a big part of that story. On the supply side of the equation, we've assumed that for the most part, the FSU volumes are back in the market this year, some ongoing challenges in Belarus, but nevertheless, for the most part, back in. We've seen some additional Laotian production.
We can certainly talk about that. But then, as you say, Joel, the balance coming from Canada and the role that Canpotex is going to play. To the extent that the market surprises on the upside, we would absolutely. We have the capacity. We have the ability to produce more tons. We preserve some of that flex capacity in our network for precisely the situation that you describe, where demand surprises on the upside, which we know happens, or where there's challenges on the supply side. And yes, we could certainly play a role there.
You're guiding to 13.4 million tons around that this year. But with the resources you have now, equipment and miners, I mean, you can do, what, 15, 15.5 if you had to?
Well, we would have to staff up for that, Joel. Suffice it to say that we talked about the top end of our guidance there at $13.8. We can absolutely do that.
What could you do? What's the most you could do this year without staffing up?
Yeah. It depends on when, because as we go to hire, it takes a little bit of time to onboard people. So we probably, at this stage, at this point in the year, we'd probably say around 14 million tons.
OK. So obviously, everyone, I've done this job for 16 years at China, the contract, the India contract, right? Smartly, Nutrien and Mosaic aren't giving any projections around that this year. This is good. But seriously, there's always been a discussion that maybe one year we won't have these annual contracts. They are. I'm making a joke, but they are very disruptive. Everyone's waiting. This year now, with more shipments going through Russia from Belarus and Russia directly by rail to China, there's a bit waiting for some Indian subsidy delay. We've seen more cargoes by cargo shipments in India. Is this the year we don't really have seaborne contracts, more cargo by cargo, or no, it'll be probably status quo and just a bit delayed?
Yeah. I mean, I spent a number of years negotiating those contracts. You have to distinguish a little bit between China and India. I don't think that the annual contract in China is going away anytime soon. I think that that mechanism has served the Chinese well in terms of potash pricing. At the same time, there's a lot of control in place as it relates to issuing import licenses to suppliers of potash, that's being one. So that annual contract is in place until such time as the Ministry of Finance and Commerce in China and those three members of the buying committee that issue the export licenses until they believe that now is the time to renew the annual contract. They do that for a number of reasons: inventory levels in the country, trajectory of pricing, and all those things.
So we're always watching that closely. Of course, inventory levels at the port are elevated at the moment. But I'll also say that for our part, and you can see that in Canpotex's numbers, with the redistribution of trade flows on the planet, and that has happened, rail from China and some increased sorry, rail from FSU and some increased volumes out of Laos, we have reduced volumes into that part of the world in favor of places like Brazil. So as those trade flows have shifted and redistributed, we're a little less beholden to China and a little more watching the granular markets like Brazil. So that's China. India, that's absolutely true, Joel. We've seen some cargo by cargo sales, not at a price above the agreed contract price. So in other words, the pricing mechanism is still in place in India. But inventory levels are very low there.
Potash is depleted in the soil. Yes, they need some cargoes. They don't have the very strict import restrictions locked down the way that China does. So those cargo by cargo sales can take place, but we don't see them taking place at a level that's above the contract.
In Brazil, do you think we've hit the stabilization point? I mean, one of your competitors last week was saying prices are starting to go up. Some of the trade journals are saying we're stabilized. What's your view on that sort of in real time?
Yeah. In real time, here we are at their point in the season. We expect that Q2, Q3, we will see increased demand and volume moving through the channel. I mean, you can look at pricing levels in Brazil today. We believe that and I just talked about redistribution of trade flows that the marginal cost of a delivered ton of potash is probably $50 more than it was not all that long ago. That is challenges in the Red Sea. That is obviously things like rail to China and getting volume now to Brazil as well. So if you add that $50 to that marginal ton, I mean, you're almost at that level in Brazil.
Plus Belarusian tons having to go through Russia to a couple of ports in St. Petersburg.
Well put. So you put that all together, and we would say that you're probably at a level now. And you see some resistance from suppliers at current price levels in Brazil saying, no, this doesn't make any sense. So it's where we're at in the cycle combined with, yes, we see Q2, Q3, we expect to see volumes moving and some strengthening, frankly, in Brazil.
OK. So I've got a bunch of questions on the app. Many are about Jansen. The last of the Jansen question and I'll ask it the way I want to ask it. But people ask about Jansen. Well, my question is really so Jansen is going to come on. They say 2026. Let's say it's late 2026, some tons in 2027, maybe meaningful in 2028. Maybe you have a different view than me. I don't know. But how will Nutrien and Canpotex manage potash in a post-Jansen world later in the decade?
Yeah. So we will do it in the way that we've always done it. And that is, again, we're seeing now demand for potash return to trend levels. And when we say 68-71 million tons for this year, it's exactly that story. And if we look at the last 20 years, it's been 2.5% average annual growth rates. And we have good reason to believe that that's going to continue. So by the time you get to the end of the decade, which is when we look at it and given our experience in building potash mines and producing potash, that's when we expect sort of phase one volumes from Jansen to hit the market, that demand at that time around the 80 million ton range. And again, that's just forecasting those types of growth rates.
So at 80 million tons, you can stack up where supply is going to come from. And we say there's opportunity for us to continue to grow our volumes. In other words, maintain our market share. There's room in the market for something like Jansen and a few other of the new volumes that we have seen in the market. I mean, so yeah, I think, Joel, we would look at the end of the decade and say from a Canpotex perspective, from a Nutrien perspective, we're going to continue to work with our customers. We have established what I believe is the best channels to customers in over 40 countries around the world. Over the last 50 years, we've done that. So we've got those channels established. Those customers in markets in those 40 countries are the customers that they're growing in their markets.
We're going to grow along with them. So yeah, Canpotex will just carry on.
Is Jansen different in that it's not Uralkali or Belaruskali in Russia? It's in Saskatchewan using the same rail lines and the same ports or in the same area, same down to the States. Is it different because it's Nutrien and Mosaic backyard?
You know.
So it's different, perhaps, in that when we look at our supply and demand models and the fundamentals over the next 20 years, we absolutely have Jansen factored into our models. In other words, we believe that BHP is going to produce potash. Maybe it's just going to take a little bit longer to ramp up to those volumes and ultimately, out in time, get to the phase two volumes that they've announced. But we believe that those volumes are there if there's sufficient rail capacity in Canada to move this volume. There's going to be sufficient port capacity. But there's also going to be sufficient demand on the planet. And so yeah, it's not like we're saying that's never going to happen or that additional potash off the prairies is a non-starter. We believe that those volumes are going to be there, and we're planning accordingly.
OK. So let's talk about Nitrogen. Obviously, urea has been a bit stronger. Ammonia has been a bit weaker. You've got gas prices coming in everywhere. But the spread between North America and Europe is actually, Europe and North America seem about the same. What's your view on Nitrogen here, and what's next?
Yeah. So we think it's, well, a little bit volatile, obviously, over the last little bit here. But if you look at where we're at in the season, we expect we've seen seasonal softness, but now some strengthening on urea pricing. And we expect, with the spring planting season upon us, that we'll continue to see a bit of firming. There continues to be supply-side challenges in urea as well with Chinese export restrictions and so on. So urea pricing, let's see. But we expect some firming. Ammonia, a couple of challenges in ammonia where industrial demand continues to be weak. We expect some recovery in the second half as it relates to industrial demand for ammonia. But that's still a big part of the story in ammonia.
Of course, you just said it, Joel, the spread on natural gas pricing in Europe, where for this year it's kind of like $8-$9 in Europe. We continue to see about 30% of that production shut in. The spread between our geography, North America, and Europe at kind of that $7, $6, $7, somewhere in that range. That spread exists, and making our capacity still some of the most competitive on the planet. But ammonia, big story about softness of softening of natural gas pricing in Europe and weak industrial demand in the first half of the year.
Let's give it a minute or two left. So I think you're, what, a little over two years now in this role, between interim and what's the title? Normal CEO, interim, not interim. What do you think is now you've spent some time with the company at the top seat. What's sort of your view of how this company evolves? Do you just try to push more potash and hope demand gets back to normal rates, normal growth rates, and you have the excess capacity, do some tuck-ins, do some things like that? Do you have a view that maybe you could look at some radical change? You could go buy a crop chems production business. You could split off retail. You could get big in retail and try to buy one of the biggest, larger private ones or co-op ones.
Is there a desire maybe to flip the script a little bit?
Yeah. I mean, so a few things. One, we'll always look at acquisitions, and those opportunities come our way, whether it's tuck-ins or whether it's something more meaningful. But if you look at the current platform, Joel, I get pretty excited about starting with our access to the grower. Over 500,000 grower accounts. We have 150 million acres that we touch as Nutrien. And we're filling that channel with our own Loveland Products. We're filling that channel with financing solutions. We're filling that channel with, of course, all the branded products across chemistry and seed. We're filling that channel with fertilizer as the largest producer on the planet. We're filling that channel now with sustainability solutions for the grower. And behind that, I keep saying, right from Rocanville, underground a kilometer, all the way through to the grower, we have the channel.
Whether that's all of this energies that come along with supply chain, number of touches, warehousing, reliability of supply to our grower customers, I mean, there's a big story there. As it relates to growth, we continue to focus on Loveland Products. That's an exciting one for us. We've seen really extraordinary growth over the last five years. Those registrations, whether it's biostimulants and crop nutritionals, whether it's what we do on adjuvants and surfactants, Loveland Products is an exciting growth vector for us. We're going to continue to focus on network optimization. Those four storefronts, we turn them into one. We service our customers better. They're more efficient. They're safer. We can do those. We've proven that we can do those. Our digital platform continues to grow. We know that when we have a digitally engaged customer, they're a stickier customer. The share of wallet grows.
But behind that, of course, as demand for crop nutrients through our channel and through the rest of the world continues to grow, we have the capacity. So yeah, you look at the current platform, you say there's ample opportunity for us while at the same time keeping people safe and staying to the left on the cost curve, which we've always done.
Thanks, Ken. Thank you very much.