Q1 2021 Nutrien Ltd Earnings Call

Greetings, and welcome to the nutrients 2021 first quarter earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation off. As a reminder, this conference is being recorded. I would now like to turn the conference over to Richard Downey, VP of investor relations.

Thank you, operator. Good morning, everyone, and welcome to nutrients conference, call to discuss, our first quarter 2021 results in Outlook on the call with us today is Mister Schmidt, president and CEO of New Jersey, mr. Pedro, Farah or CFO as well as our heads of our business units and other key members of our team. As we discuss this conference call various statements, we make about future expectations plan Prospect contain forward-looking information. Certain material assumptions were applied to making these conclusions and forecasts are for actual results. Could differ materially from those contained. In our forward-looking information off 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 mdna and annual Information Form filed with Canadian and us the commission's to which we direct you. I will now turn the call over to mister Mayo Smith.

Thank you, Richard. Good morning. I want to thank you for joining the nutrient team today is we share news of our exceptional results and strong Outlook. Nutrient has a portfolio of integrated brake related businesses, that provide competitive advantages, our teams excited to execute our long-term and board approved strategy. This includes our 2023 financial and operational targ as well as our recently unveiled targets and commitments. We are dedicated to Growing nutrient, through Superior, operational performance. Focus Capital allocation to create shareowner value, very tight, Global supply. And demand growth has led to strong pricing across virtually all crops and we anticipate a tight supply and demand environment wage continuing through 2021 and Beyond as we speak today, Growers are responding by increasing seeded acreage and are focused on maximizing yields.

It's really an exciting time to be in.

Agriculture and is the world's largest provider of crop inputs and services. We are also helping Growers meet increasing Global Food demands, we're focused on the challenges of ensuring food security, safety and climate action.

Recently issued our new report highlighting how nutrient will focus on helping to transform the agriculture industry and three priority areas beating the planet sustainably office environment and climate action and inclusive. Agriculture would be hosting a detailed review of our priorities key, commitments and targets as well as our market-leading carbon program. At our ESG update in June,

No, turning to our first quarter results in Outlook. We delivered excellent performance across all our business units. Our outlook for the second quarter is very positive, thoughts field, work and seating are progressing very well that our expectations are for higher acreage in North America.

Is the largest agree Taylor in multiple countries. We are seeing firsthand strong interest of Growers to maximize yields and we are fully prepared to serve them with our broad selection of crop inputs and services. Our service offering includes our leading proprietary products or direct producer relationships. While Fielding more than 3,600 dead animals globally, and input financing program, and our investments and Innovative digital tools.

For nutrient Solutions, retail business delivery or record first quarter adjusted ebitda 109 million due to strong margins across virtually all product, lines and geographies.

Retail sales, increased 12% year-over-year and gross margins Rose to 22%.

Fertilizer margins were strengthened by the rapid rise in prices this quarter, although margins are expected to normalize in the second quarter as retails for recent fertilizer, purchases have been made on a higher levels.

Crop nutrients volumes were up just over 10% year-over-year. While total retail volumes were up 20% and gross margin per ton was nearly $15 per tire.

Crop protection margins and all geographies, demonstrated year-over-year Improvement. This quarter. The market has been fairly tight for certain products and regions due to the combination of the February, freeze off, impacting production in the strong, Global demand, and recent logistical bottlenecks both International and domestic.

However, due to the strength of our supply chain nutrient Solutions is well-positioned with product availability for our Growers, requirements for the season.

We also reported improvements across our retail metrics. This quarter total retail adjusted ebitda to sales surpassed 10% and was over 11% in the US. Bank well-adjusted ibadah selling location increased to over 1.1 million dollars, retail lowered their cash operating coverage ratio to 60%

I need to see impressive performance and utilization of our digital form, all metrics showing significant year-over-year Improvement

And potash our business continues to build momentum with near-record sales volumes into North American market for the first quarter and solid demand internationally insights and the potash or optimizing production across our six minds and progressing. Automated mining projects that will together improve safety performance lower cost and further of us are carbon footprint.

Our cash cost of production was lower by about $3 per ton compared to the first quarter of last year, despite an increase in the value of the Canadian dollar. We achieved significant fire potash sales volumes this quarter, despite the extremely cold weather in February, which slowed Logistics and divert, offshore shipments shifting about three hundred thousand tons of our plan. A national sales, into the balance of twenty, Twenty-One demand for our nitrogen products, remain strong across North America, with prices rising rapidly during the quarter cup race. Sully and his team delivered strong operating results, achieving a 97% North American and ammonia operating rate despite downtime due to extreme cold weather Thursday in February.

Sales volumes decrease year-over-year, due to the lower starting inventories, due to a robust fall season in 2020, and reduced production in Trinidad.

Phosphate operations posted a strong quarter with $97 in ebitda due to higher realized prices. We do expect margins to temper going forward as costs rise from the dead stronger, sulfur and ammonia prices.

I'll turn into the Outlook, new crop, corn and soybean prices, and the cash. Margins are approximately 60% higher than this time. Last year, while spot prices have approximately double rally and crop prices, highlights the tightness and Global supply and demand balances, and a sensitivity to any potential Supply risk in 2021.

Retail is experienced an excellent demand for products and services of the mood amongst Growers is very positive.

We believe the final seeded acreage for corn and soybeans could be about four million Acres higher than the USDA March intentions report.

Even at a higher acreage, we expect to see a continuation of tight stocks-to-use ratios in strong, crop prices. In the next year, we have increased our annual wage guidance by 400 million to 4.42 4.9 billion and twenty Twenty-One. The increase is across all business units, supported by continued strength and cross-fertilize. Your price has a very positive outlook for potash and the second half of the year.

We believe that.

In the major Global markets, remain low, for this time of year and the global demand will be $68 to $70 million metric. Tons, we're expecting as much as a 20% increase in wage Indonesia and Malaysia this year, exceptional demand in North America and continued growth in South America and Asia. Canpotex is fully committed on volumes in the office. Timber anticipates that will gain market share in the higher net back regions outside of China and India.

Recent, the recent increase in the Baltic dry Freight index is expected to have minor impact on our offshore potash net box.

Year-over-year. Ocean Freight rates are approximately $20 per ton higher. We anticipate the impact to our International. Potash. Net box will be less than $10 per ton and 2021 month due to canpotex long-term, Freedom Arrangements.

We anticipate North American nitrogen and phosphate prices will remain firm through the application. Season are realized nitrogen prices in the second quarter will be supported by the higher proportion of aggravated sales. We expect typical summer seasonal, pricing and some moderation in nitrogen prices. In the second half of the year, due to an increase in global urea export availability off China and some new capacity coming on-stream boldly. However, we continue to be constructive on the nitrogen Market Outlook for the medium and long-term

And closing, We Believe agriculture, fundamentals, have positive momentum and nutrients exceptionally well positioned to benefit from the multi-year strength, expected and cropping. Fertilizer Mark, we also see great opportunity to demonstrate and benefit from our commitment to delivering products Technologies and services to ensure. We can collectively feed the planet or sustainably

We're uniquely advantaged to collaborate with Growers industry Partners to launch and scale a comprehensive carbon program that has the potential to accelerate climate-smart agriculture off.

Interest in the program is a parents were oversubscribed for our 20 21 Farm Pilots. Before we begin the question-and-answer portion of the call. I'd like to thank Chuck magro on behalf of employees customers or shareholders. There's contribution over the past eleven years, and do wish him success with his next steps with that operator. I'd like to open the call to questions for our leadership team here today.

At this time, I would like to remind everyone in order to ask the question. Please press star and the number one on your telephone keypad. Your first question comes from Steve, Bernie from Bank of America, your line is open.

Yes. Thank you. And just following up on the last comment about Chuck magro. Any, any comments on, you know on a truck left or does this represent any change in the direction of nutrient?

Thanks for that question. The board of directors in chalk, mutually agreed. That Chuck stepped down after a decade of strong leadership. And it was my honor to accept the role of president and CEO for nutrient office regarding the nutrient strategy. Certainly I had a front-row seat and developing and working with the team as chairman of the board with aspect of driving industry performance across all business lines. I might also mention that we go back to the value that's been created through the Moa. The merger of equals with Potash Corp, I headed that committee from a board level so it was wrong. You know, I think the boards thinking about combination of history, and building value and focus on an existing strategy and taking the business to the next level.

Your next question comes from the line of been Isaacson with the Scotia Bank.

Thank you very much. And good morning, everyone, give you a question for Jason Newton. If he's there has been very, very strong so far this spring and there's some concern that despite strong crop economics demand, may be getting pulled from the fall. And even from the spring of next year, can you address that please?

Sure, good morning been. I think we've seen really a couple of consecutive really strong application seasons in the US. Starting wage last fall, with really ideal weather and and and then continued strength and demand. Um, this spring, if you look at where, uh, afford ability is potash is remain very attractive relative to where crop prices are still well below average, um from a an index relative to Corn costs. And and we see that supporting demand and I think as we look toward the summer Phil. Which leads into the fall of 2021, um, I think there's already interest building for a summer fill-in and we expect that the inventories through the supply chain will be relatively low. Once we get to the end of the spring planting season, we know that as we looked off

Toward the fall weather is is really important, but the crop is getting in the ground at a good pace, which sets up well for the growing season and then as well into next year, we think the supply demand fundamentals and major crops continues to look strong, which should be supportive of continued, strength and crop prices and affordability back in the spring of of 2022, which should continue to support high levels of application rates and demand.

As a reminder, everyone will have the opportunity to ask one question. Your next question comes from the line of Adam Samuelson with Goldman Sachs

Mr. Samuelson, your line is open.

Your next question comes from the line of Andrew Wong with RBC Capital markets.

Hey, good morning. So just a question for for a male maybe just looking across the business. I mean there's been a lot of work done to improve operations and reduce costs over the past couple of years. Are there any areas within the business that you feel could see further improvements? And, you know, maybe just highlight some of those areas for us. That'd be great. Thanks.

Sure, terrific question, you know, in certainly, I absolutely agree with you and I was certainly a key participant and there's strong board alignment on the, on the changes. But I really think as we think about moving forward, not really a focus on the structural advantages that we have in retail on our production businesses. I think it's a really unique opportunity to put a fresh set up with leadership team on taking the business to the next level, and not specifically to your point. I think an internalization of operational benefits between the business units, you know, focusing on Pipeline margins facility, utilization areas around Logistics Transportation, which I say I've got a quite a deep background in and also, you know, working capital. And I do think we're really focused on our structural advantages. We think about how we

Focus, the organization on our proprietary, the scale of our transportation. And then, I would say the Symmetry and balance within our system, which in my view, can enhance the pipeline utilization of projects and growth. And, you know, creating profitability when we can find opportunities for growth for both organically and through acquisition and making sure those are profitable in the First full month of operation.

Your next question comes from the line of PJ juvekar with City.

Yes. Hi good morning you know as Growers are flush with cash. Do you think the upgrade in their seed and chemical purchases to preserve yield and may I direct you said that you expect maybe four million more Acres than what USDA suggested do you think that most of that goes towards corn? Given that corn is now at $7 and what's the upside from thank thank you for your question. I make a comment and all that Jeff Darcy to join me here you know the higher crop nutrients sales prices and volume from really strong America, votes wrong North, Americans spring application Seasons. What's, what's been driving? Our increase in Gross margins. We're quite positive about as we look forward and the opportunity and Jeff would you like to further, if you're on the ground and have a great sense of the the planting this year and intentions?

Sure.

Mayo and good morning PJ and PGA. I agree. I mean, look, there's a lot of optimism out in the network today especially with our customers. We see people, I like to use a term swinging for the fences. They're going to do everything in their power to maximize yields in 20 21. No matter what the crop is corn soybeans cotton and wheat and various other crops with it, as far as maybe trading up on the seat side of things, I don't see so much trading up on the trade side of things that the traits side of it is more determined by pest pressure and but what we do see is we increasingly see our Growers using technology to trade up on the germplasm life and being able to match the best. The best germplasm possible to the different soil that they have on their Farm. I digital Agronomy platform is allowing us to really utilize Jose.

Those two was going forward but, you know, we're going to see Growers, really for the inputs to this crop this year. If I look at our nutritional proprietary nutritional business, you know, I'm I'm seeing that today with some of the applications that are being made again and putting the very best germplasm out there and we think they're going to do everything they can to protect this crop as wage through the season. I would expect plant Health fungicides to be very strong as well as we get into the as we get a little bit deeper into this growing season.

And PJ just to answer the second part of your question on acreage. We'd see the potential growth to get to that four million acre level is relatively even between a corn and soybean so roughly two million Acres of each corn and soybeans.

Your next question comes from the line of Joel Jackson with BMO Capital markets.

Hi, good morning, welcome to this new role at nutrient questions, so just maybe find one answer earlier, you know, if higher wages prices and Farmers training up on germ, plasm is that a good thing or a bad thing for for Dyna-Glo? Like, might be seated on a girl who share this year. Farmers are less price sensitive and then second choice potash, you know, will the strategy going forward be the same when it comes to Priceless? Volume like you try to push more tons out how might this change if we get some work coming on in the in in Russia and Belarus,

Jeff, do you want to take that first question? And I'll take the potash, please? Sure. Absolutely. And again, the morning Joe, hey in respect to the germplasm Joel and I absolutely could not, that's not a negative to Donna growing. Anyway, I germplasm there's no matter what what the property is, as it relates to dyna-gro is, is, can compete with anything out on the marketplace as long as a matter of fact, if I look at our share through the quarter with Don and grow up, I see our shares increased across corn soybeans cotton canola, which will be under the proved side of things, but, no, we don't take a backseat when it comes to dying to grow. And, you know, if you look at our yields as it relates to those by crops, we we compete with anything out on a parking and depending on the geography and some of those markets, we actually have leading germplasm in those areas.

May all turn it back to you.

Good job. Thank you. Thank you Jeff. You know when we think about are upon us, we're certainly you know, focused on price oversupply, you know. And we also look at the the increases we're thinking about the next ten years. You know, the two to two and a half percent growth and that could produce as much as fourteen to twenty million more tons of demand. Over the course of the next ten years to work quite positive. One about price down, secondly, growth in that market and will continue to focus on that. And as we see you know right now we're fully committed on our office or sales volumes through August. I think is Kenneth Seitz. Make a comment, your jump in can but you certainly been focused on the opportunity in these markets to price and that's why he's concentrated on certain markets.

Yeah happy to mail. Thank you and Joel. Yeah just maybe reiterate what Mayo said and that is you know nothing changes for us. We believe we have a good strategy, obviously focusing on net box. You know, it continues to be the case that we have this flexible, my network and will meet demand in the market where where it is and we demonstrated that in the first quarter with or six mines and, and our significant structural Advantage is throughout North America. Be its supply chain, and our three hundred watt warehouses and then internationally by Kappa texting you looking at the balance the year, things are very positive. And you know, so we're going to stay the course.

Axiom mail.

Thank you.

Your next question comes from the line of Michael Pitkin with Cleveland research.

Yeah, good morning. Question about nitrogen. If you could just talk a little bit about, you know, where you are with respect to running your Trinidad plants and you know, any kind of plan turn around that you have for some of the page there facilities over the remainder of the year and how we should be thinking about the cost structure for nitrogen business, going forward. Thanks Michael. So, let me just start in North America. You will notice. I am asking to use a steady increase, you know, utilization rates, that's as a result. I can give some incentives that we got out of the merger. This year, we've got two large turnarounds. We're during these past couple of years, have also been trying to take care of some large end-of-life issues, where equipment is coming up to forty or fifty years of service. We have two large turnarounds, we're in one at the moment at borga with us and we have another one, starting in a couple of months in Redwater. That's pretty normal for us to have one turned around a year in the US and one turn around in in Canada.

Unusual thing about these. Is there a bit larger than normal because of the end-of-life issues? Do it? Talked about. So coming out of those we expect to see an increase in production capability and continue to increase in reliability. I'm Trinidad, a little bit life story day. We have four plants. As, you know, at the moment, all four of them are actually running two of them. However, running it reduced rates, and we have, we have a turnaround plan for one of the plants down in starting in a few weeks time and then another smaller minor turn around the later. In the year the the outcome of that will be that you'll see us produce a level equivalent to about three plants over the course of the over the rest of the course of the year and that's of course depending on gas supply.

your next question comes from the line of Jacob bout with CIBC

Morning all male perhaps a bit more color in your strategic view. Specifically, your thoughts on how you're prioritizing investment in Wholesale Club retail. And it doesn't make sense to, to keep them together as they're, you know, value created by by splitting on part.

In fact, thanks for that question. You know, I, I think that when we think about the internalization that we're focused on between the two of, you know, between the different operating units that would be the pipeline origins of facility, utilization way, just 16 transportation. And that's supply chain is just critical for success. And you know, when we think about the Symmetry and balance in our system, we think about the research and development, we have to generate a proprietary seed off, then the ability to take that seat to the ground and supported by all of our wholesale fertilizer. And I think this is really a unique opportunity to put a new again, a fresh set of eyes on how we drive more to that internalization off within the system. And so we we actually, you know, believe that we're stronger together. We also know that we have to set ourselves up to the advantage structurally. And when we look at rejection or or countries to make sure that, when we're working, not only competitive with in particular zones, but but also, through the throughout, the transportation Logistics Network as well.

So we think there's strength in the operating teams together and we're going to really be focused on that internalization over the next course of time. And and look at our structural advantages.

Your next question comes from the line of Vincent Andrews with Morgan Stanley. Thank you two quick ones first on the three hundred thousand tons of potash. That was delayed. You mentioned that that it would be delayed into the balance of the year. So I'm just wondering, are you now holding that product back? These are the rising price environment and expectations that you get get prices for it later on. Or will it actually just float crew in, in, in, in 2 q and then? Secondly, just I noticed was a very light by back in the quarter. So just wondering, if there was anything specific to that page given it, you raised the buyback. It's worth border. Thanks very much.

And do you want to think? I'll put a dash and then I can pick up the buy back portion. You bet. Yeah. Thanks man. Said so yeah with respect to three hundred thousand ton that really was just related to some challenges with with supply chain and Logistics in the first quarter. It was weather-related, we had some cold weather in February and then rain and off the coast where we load vessels and so we did those three hundred thousand ton computex did and it's really kind of splits spread over Q2 Q3 and Q4 month. That's not to say that our sales people aren't watching you know the rising potash price environment and timing sales accordingly. They definitely are but with respect to those three hundred thousand tons, it's really just a deferral into the balance of the year.

And then something just schedule. I think just to comment on the on the buyback of course, nothing really changed in our Capital allocation, we continue to use it to sustain our first class assets and and then we kind of a provided a, a dividend increase in the first quarter and we look at everything else in a compete for Capital basis. So that we made some kind of a choices. Of course, we also preparing for a very strong spring season here, so what you see is is looking at the best return that Capital at that point in time. Of course, we approved the ncib and got approval from the board for a reason. So we were considering that as an option, but that option would be exercised. A lot of trade-offs between organic and organic and shareholder distributions in the future.

Your next question comes from the line of John Roberts with UBS.

Thanks, welcome Mayo. You talked about the CEO change having something to do with taking nutrient to the next level. Does that imply, the 2023 targets laid out at the last investor day may not have faith enough? Or are you thinking about something else? When you talk about the next level? You know, I think it's a combination of things and thanks John for the question, we're putting a fresh set of eyes with leadership teams. Operational excellence. You know, we think about as I mentioned earlier are structural advantages. We have throughout the sector a globally today and to a greater degree taking full advantage of those and enhancing that pipeline of utilization of products. So we really think that, you know, as far as we think about those targets. Those are of course going to be driven by a combination of the advantages that we have in the marketplace in our life. Ian. So the focus on the leadership team here is going to be both on execution and we think about even you know, a wonderful business to retail that we have today. Can't imagine we think about this site sucks.

North America in Brazil that we can't buy new new and unique opportunities in those businesses. And so that's the area that we're going to really be focused in on

your next question comes from the line of Mark Connelly with Stephens Inc.

Thanks. I was hoping you could talk a little bit more about the performance of the Brazil business and how urgently nutrient thinks it needs to grow that strategically, you know, my sense is that listening to Chuck new boss wants to be a lot bigger and more impactful there.

We certainly do and we see an opportunity to be more impactful and we think that as as we're looking at progressing in that particular Market, there's unique opportunities as it develops. So, we've got a keen focus on that area and that that will continue. We expect to see you know, growth in earnings there as well. And of course, we have an expectation of a bit of a higher rate of return in that market, particularly with any level of risk being in in different countries as such. So Pedro. Do you want to make any comments about that? I was just say that we, we have capability for a corporate development. Expect expansion in Brazil, very rich pipeline. So we have many paths to grow in Brazil. We will like to grow in Brazil as we have stated many times before, but I'm on a disciplined basis. So we'll take our time to get the best assets and we're very encouraged by the performance of the existing assets at this point, in time, which club

It's more confidence about our strategy in the future.

Yes, good morning. Couple of questions, just around China in potash. I mean, if you look, you know, China has obviously been buying a ton of corn and soy kind of price and differential in that stands, you know, really juxtaposed to what they've done with potash. Where it seems like, you know, you're fighting over nickels and dimes around pricing can you square? Why they would be so tight on the potty outside when that can actually affect their internal corn yields versus buying? A lot of you know, Global product and then just the fall under that is as you sit here today, how do you see the contract? Developing with them on potash this year.

Your next question comes from the line of Duffy with Barclays.

I might just comment to start with and draw kin in here, you know, we look at the change that, you know, we've gone, we've gone through the, the tariffs that is applied in China off work through that, you know, which created obviously an extension of Brazilian exports into that market and then the African swine flu and the recovery from that. And then the, you know, I think it's a combination of like that swine flu recovering and secondly is China. Building strategic food supply is driving a lot of this demand and we we do expect to see it continue. Kim, would you like to comment further off?

Yeah. You bet male. Sure, and thank stuff you for the question. So, yes, it is a unique year with respect to the Contracting process in China. Of course, that month that contract with one of the big International suppliers was on the heels of an agreement with with India at the same price level at the 247. We're watching Chinese inventory levels quite closely with moment, exactly. As you say. Because demand in China will be strong this year and and, you know, will continue to be strong, going forward, inventory levels at the moment or about 2 and 1/2 million tons that's down from about three point. Seven million tonnes this time last year. And an important to note that of that two and half million tonnes. One and half million is, is the so-called strategic reserves. So really only 1 million tonnes sitting at the Port that's that's usable.

If we look Inland at the Shanghai Salt Lake, we believe that those inventories were depleted at the end of last year and continues to be the case. So inventory is level are low to your point Camp attacks. Often said that it's committed right through to the end of August and so it remains to be seen. You know how the Contracting situation will evolve in China, you know, with this very strong demand and with inventory levels coming down. So yeah so I think it plays into the timing around discussion for a new contractor, a new price level in China, you know and again that remains to be seen as we watch watch this strong demand and the depletion of inventories with with frankly suppliers targeting other higher net pack markets in the world as opposed to sending as much potash to China and you see that reflected in canpotex as numbers as well.

your next question comes from the line of

Steven Hansen with Raymond James.

Yeah, good morning. Mail nutrient has been a clear industry leader on the digital strategy front here in recent years. And I noted that it's a platform sales have doubled in the first choice of your key, perhaps to speak to the digital strategy in particular going forward. And how you see that changing if at all. Appreciate it. Thanks, I'll be happy to thank you. You know, one we've had good success in rolling out the the the Canadian digital strategy that has been over the course of the last year. And as we think about moving forward, we've been working robustly on the, the US strategy and he'll roll that out really good progress. In payment of receivables, on the digital platform and we're seeing a growing demand for producers that are willing to order and do their own not put. And we're supporting that, you know, unfortunately we have the 3600 agronomist and also the the support staff behind that, they're able to assist Farmers. So for us it's a matter of a combination of birth.

Enhancing that digital platform experience for our producers, while also a helping them with their planning needs in the farm with Precision Agriculture. And if you think about below all of that, you know, our support that we have sustainability. And we look at, you know, even thinking about not only digital rolls into our our total pilot acreage Target of a hundred thousand acres wage oversubscribed on the on the car program. So there's you know there's many whether it's the financing that we do or the planning we do with whether it's fertilizer seeds and then, of course, the input and receivable. So we're quite positive about it. It's it's a big effort. It's across the company. That's requiring Focus, every level of leadership.

Your next question comes from the line of rikin. Patel with Exane.

Just a question of nitrogen. Firstly, Germany expectations or guidance on the current ending in September and how that might impact the market. And then, secondly, even mentions Monopoly end of five and a half million tons for Chinese urea exports this year. I'm just curious what sort of scenario and change into that 5.5 million down. I'd like to ask Jason to address that question. You've got great great experience that are adjacent please.

Yeah. Good morning. Great question. In terms of the Indian tender, I think we're seeing some of the offers come in today at certainly is something over the past couple of weeks, it's provided support to the international urea Market. I think that leads well into talking about the Chinese exports situation. So we've bumped our forecast of Chinese exports to between four and five and half million tons, that the top end of the range would be in line with where exports were last year. And I think what drives getting to the top end of the range is a delay in, in, in commissioning and the ramp-up of some of the the projects that we see coming on stream in the second half of the year, in addition to continued strength and demand from India. And and that's a bit tied is one of those, uh, re-approach X's as in dog.

Yeah, we know that Indian production year too.

David is down about five hundred thousand tonnes. But uh, is is projected be up on the full year. So if that doesn't happen there's upside and Indian import demand and and that came directly through to the Chinese re-export expectations.

Your next question comes from the line of Fate with brown.

I am I here a long time, a welcome aboard really roll, just a question on you, maybe expand a little bit on the digital side. Do you lay off of those the Strategic plan BC? Its kind of be more moving towards, like trying to get the farmers onto the digital platform. But do you see opportunities to create new stable, recurring Revenue stream through your digital platform somewhere in the future like what your thoughts are on that?

I think it's certainly possible as we extend expand on that experience in digital lag. And, you know, I think not only there's going to be efficiencies for the producer, but we're going to realize some efficiencies, as well. And whether it's, you know, a prepaid or paying receivables, we're seeing some acceleration of opportunity in those areas. So, I, I agree with your point. I think a number of those things were to be discovered. We haven't ruled out the us, although, it's underneath Planning and Development right now, we've got a very robust approach to the US, so it's going to be about, you know, a keen execution. And of course, we've had the experience in Canada. We were able to adjust to some of the challenges that we experience in Canada and we've built about the platform that we're operating right now.

Do you have a follow-up question from the line of Adam Samuelson with Goldman Sachs? Yes, thank you. My apologies for multiple earnings calls this morning. I was hoping to get a little bit more color on your view on on the nitrogen Market. As we think about the second half seems like ammonia prices and the supermarket have may have topped up. The May contract for Tampa rolled over. We are seeing Chinese urea exports. Pick up and just trying to get a sense or if there are lower prices in the second half. Just bought, how, how far do we think they're actually going down, given the grain price environment and the demand and cost curve dynamics that we have today. Thank you.

And thanks to the question. Obviously, we spent a lot of time thinking about what might happen second, I think. Let me just step back for a minute and look at the macro supply and demand. You know, if you think about where we were met, a lot of people, a lot of Supply on the market prices are down, 2018, Ford. We're not seeing same amount of projects coming online. The overall nitrogen Market, how about a hundred and fifty million tonnes globally at the moment and growing it, you know, one and a half to two and a half million tonnes a year, you know. So, a full-scale ammonia battery dead. I'm so, you know, we've seen that tightening. Now, we're expecting it to tighten a little earlier, but you saw that last year, second quarter, we saw it decline, Judah COVID-19 industrial demand dropped about 20% off. We've seen that industrial demand, come back and come back strongly.

They might will be a little reset, as we get out of the spring season. We're expecting a very strong spring season, but there's always a little bit of a reset the summer. We just don't think it's going to be as marked as we've seen wage. And we certainly think that the prices through the the back half will be substantially above where they were similar. Last year.

Your next question comes from the line of Steve Byrne with Bank of America.

Yes, thank you for the follow up here, the gross margin expansion. In, in the fertilizer sales, in retail is dead, is intriguing, my understanding is historically, the relationship was wholesale, could move tonnes into the retail Channel, you know, as a wage moving product offseason. But retail had the decision of when to when that product would be priced and went to to lock it in, can you comment on whether that is still the case? And I asked because that, you know, the the fertilizer price inflation during the first quarter was, was was real Boston. So the question is, you know, when did your retail Channel essentially lock in the purchase pricing for the fertilizer, that was sold in that quarter and phone number.

more importantly, for the second quarter sales, and I'm sure that are going on the ground right now was, was that volume locked in, you know, earlier this year as well, to to represent a, a nice margin expansion, just simply on price,

Thanks, Steve for the question and all all. I'll pull in Jeff.

Start with

unique to the agriculture sector certainly with you know my past record in in handling you know seat chemicals fertilizers and the internalization of demand there's going to be the internalisation Thursday between wholesale and resell but we also are uniquely positioned to be able to trade and transact outside of our own own system to to peers in the marketplace. And that's one of the things that we look at. In terms of the balance of our system is to where our wholesale is located, the transportation Logistics and sales program between the two. So we do have that real unique opportunity to look both internally and externally to maximize our margin. So Jeff would you like to continue the to comment? Sure. Sure, I would say. Yeah, it looks the you, you're familiar. What I Network and my first remark be that to move as many tons of fertilizers. We moved through our Network into the fall. And end of the spring, we have to start, well, well ahead of time of putting the inventory in our shed.

And we did last fall, we were able to obviously take advantage at the time of of some lower prices. And as we came into this first quarter, as you, you've seen our numbers, we were able to take advantage of some of that inflation that we saw on those fertilizer tons. And I think our guys have done a great job, right there, above trying to 2 p.m. is close to replacement. As we can't, obviously we're we're we're we're getting, we're running out of that inventory on that, what I would call that first turn. We're, we're actually having to buy back into the market son today. And, and I think in the second quarter, you'll obviously see more normalized margins as it relates to home from a per time basis on it. But I'll also add steam. You know, we worked really hard on our proprietary and nutritionals and those kind of figure into that margin per tonne basis to, and we've done a lot of great work with actagro pig.

products and things like that that are

Also contributing to that margin as well with it. But, and, and again, as I mentioned earlier, you know, we we've seen rate increases as well as these Growers are really off Mystic about giving their crops every chance to maximize yield and such and look will you know, will start will start another month month or so getting ready for the fall? Fertilizer S, as in and and obviously we're going to have to layer a lot of product in because we're going to anticipate with these strong prices. It's going to be strong demand again. This fall as well.

Your next question comes from the line of John Roberts with UBS.

Thank you. You're targeting 29% of retail margin from proprietary products and 2023. Can you get their organically? And is there any particular category that's expected to age of that increase?

Jeff, do you have that one, please? Yeah, yeah, I think we can get to organically. We made. We've made numerous Investments and Acquisitions on that proposal to your side of our business. Whether we're talking about crop protection, nutritionals or seat with, with our proven and Dyna Gro brands of see with it. And look, we, we've gotten off to a month, you know, I think a fantastic start through the first quarter with our proprietary business, our revenues are up, and our GP is up again. We we see in a special environment of high commodity pricing. You know, we see a lot of, we see a lot of our products. Like I need traditionals that are in very strong demand today, are crop protection payment as well is positioned very nicely for these markets and again I look at I look at things like our adventure fact that markets and we measure them on a metronome.

Percent of two crop protection and we see nice increases there as well. So, I think we've got a, a really good trajectory to get to that metric that we talked about in 2023. It, I don't, to be honest with you, I don't think it takes a lot more investment safe from an acquisition standpoint. I know we're working on things that we can do to make our manufacturing and Logistics side of it more efficient going forward. And I think those are normal Investments that you making that side of the business. But we're extremely optimistic, about about that side of the business and the, the portfolio that we built and we we want to utilize that.

Your next question comes from the line of Vincent Andrews with Morgan Stanley.

Thanks for thanks for the follow up. I just had a question on your comments and Retail crop protection. Where you talked about sort of the favorable application conditions. I just want to understand whether you've meant that Thursday that was allowing for Farmers to do some fieldwork that might have taken place otherwise into queue, or whether it was leading to Greater application rates or, or potentially, or potentially both and then on C. If I don't think this has been discussed yet, but you talked about the elevated competitive environment in the US, is that outside of soybeans. And it doesn't sound like you're seeing that in your whatever the competitive issues, then some like you're seeing it in a business.

You want me to take that mail if you'd like to bring in David? That's that's terrific also but please continue. Yeah I think on the on the crop protection side of it if you have to take yourself back last fall and you have to compare yourself against both, nineteen and years, nineteen and twenty where we really had late. We had late harvest in eighteen and nineteen. A last fall was getting an early early Harvest and really good conditions. We were able to get most of our souls prepared for this 21 cropping season. Is that makes a tremendous difference as you come into the season. I think you would have seen that this past week with the planning progress that we were able to make Growers were able to just drop right in off and start and start that farming practices and that that really bodes well for the crop protection side of the business, because there are a lot of chemistry's. We use their we call in a burn, down to Georgia.

Studio really desiccate any weeds that are up prior to planting. We're also able to get in and put a lot of our pre-emergence type herbicides on these Acres on this acreage, as well as it relates to that versus. If you come into a year, will you need to start the spring with a lot of tillage you do that? You do that mechanical mechanically versus organically with with crop protection chemicals and such. And from the from the seed side of the thing, side of things that relates to competition on it, I would say that competition more keen on the soybean side of things as it at versus corn and cotton for that matter. But they're also would say it's not anything. That's that's really neat unusual or that we might not see. During the normal course of the year. We've got, you know, we we've got some competing traits. Now on the soybeans side where, you know? Yep.

Ben versus enlist and that creates some competition as well David. I don't know if there's anything you want to add to that. Please please jump in. Yeah, Jeff

I do think the introduction of, you know, the platform of e3 probably getting sort of north of 30% this year. You know is offered a new competitor in the marketplace but also in terms of our platform, put us in a great position to offer to Growers. You know, choices not only from what unique perspective, but also from an HT trade perspective. And so Jeff, everything you suck for a protection. You clearly spot on, but in terms of feeds the introduction of this do HT platform is offered as opportunities.

Your next question comes from the line of Andrew Wong with RBC Capital markets.

Andrew, your line is open.

Your next question comes from the line of Adrian to Magna with berenberg.

And good morning, one question with Porsche assume E Langston goes through. Would you be willing to have some price Corporation talks with btg, at some point? Or how do you see the project at this stage? Thank you.

Actually, you know, we're we're certainly focused on our our business and driving the most value for shareholders. We do expect to see long-term potash and demand continue to grow, you know, they'll be monthly be a competitor and all leave their decisions in economics to them. But we think about our system, you know, we're the world's largest soft rock, Miner and potash producer by capacity, we've got a tremendous home network of flexible of mine's six low-cost Minds. Our automation has been going, remarkably well, and, and a proven track record, and I think the other thing I think about 2 with our potash business office is, you know, getting the Tidewater, you know, Ken and his team have done a tremendous job of, you know, now, you know, historically, you know it was great success in the, in the, in the industry, loading hundred car trains and pins loading trains going to Tidewater. So it's a combination of the internal and external infrastructure and we're really well-balanced in our system. So the idea of, you know, obviously challenges of cooperating with birth

At the same time, we're focused on price and efficiencies and, you know, and can you may wish to comment further, but the automation programs you're bringing and taking your cost by $3 was really quite impressive.

Yeah, no. Thank you meal. And Adrian, the absolute, I mean, we make our own decisions independent of what other what our competitors are doing. We just maintain that we have 5,000 tons of available capacity ready to go into the market and Brownfield opportunity. Significant brownfields opportunities beyond that that from production costs, but also developments would be the most competitive in the world. So, yeah, we feel pretty good about about our position. And then you layer on some of the advantages that manages described including as many as said, some of the work that we're doing on our mind of the future, you know, we have all of our mining machines with operator not present equipment at are the largest potash mine in the world at rocanville. We're outfitting at the balance of our minds as well and that's just one example of several projects. We have on the way to get better, reduce costs and improve safety. So we feel pretty good about birth.

About our trajectory. And and we're, we're heading, you know, with our decision making

Is there a no further questions at this time? I would now like to turn the call back over to Richard Downey for any additional or closing remarks.

Thanks operator. Well, thanks everyone for listening today. It's got any further questions. Investor relations is available to respond to any areas of interest and have a good day. Thanks, bye-bye.

Ladies and gentlemen, this does conclude today's conference call. You may now disconnect your lines,

Off off off off.