Black Swan-like occasions — unanticipated calamities that pull markets right into a tailspin — upended the standard cycles of the market, the CEO mentioned. Russia’s 2022 invasion of Ukraine disrupted international fertilizer shipments and pushed costs — and Nutrien earnings — to report heights. However as farmers and retailers balked on the sticker shock, demand tumbled.
Nutrien and its rivals have been predicting higher market situations over the previous a number of quarters that to date have but to materialize. The Canadian firm’s earnings plunged 71% within the first quarter. Its shares, in the meantime, have tumbled greater than 50% from a report in April 2022, shortly after Russia’s invasion of Ukraine.
“We’re demand that’s after a really unstable interval, with some demand destruction, that’s solely at the moment returning to form of development ranges,” Seitz mentioned, noting that fertilizer costs at the moment are under the 10-year common.
Nutrien has responded by scrapping massive funding plans and placing some belongings up on the market in South America because it focuses on restoring progress.
Whereas some earlier provide disruptions have eased, transport stays a problem amid the continuing disaster within the Pink Sea area. Commerce routes for fertilizer have been dramatically rerouted as some nations are keen to take merchandise from sanctioned international locations.
Brazil specifically has been a sore spot for Nutrien. Fears of provide shortages due to disruptions in Japanese Europe first led to an overbuilding of fertilizer inventories within the nation. However surging rates of interest in Brazil have made the glut much more difficult to handle. Farmers at the moment are choosing just-in-time purchases, Seitz mentioned, including {that a} pesticide glut will take the rest of this 12 months and probably into 2025 to be resolved.
In Argentina, Nutrien is working to promote its agriculture retail operations and is contemplating choices for its 50% curiosity in Profertil SA, a urea and ammonia manufacturing enterprise it has with Argentina state-run oil firm YPF SA. If Nutrien finally ends up promoting the stake together with the retail companies, it would be part of a slew of different main corporations exiting the South American nation.
The problem of repatriating {dollars} is a key downside due to Argentina’s forex controls, in response to the CEO. Nutrien misplaced cash when it transferred forex overseas as a result of it had to make use of a dearer alternate charge.
“I wouldn’t say that we’re clamoring to get out of Argentina, we’re simply being very considerate about our strategic choices there,” Seitz mentioned. Nonetheless, he added that “we don’t see any indication that something goes to alter” beneath the brand new administration of President Javier Milei.
Within the US, farmers have raced to wrap up corn and soybean planting after a soggy spring. Seitz has estimated the US will plant about 90 million acres of corn and 86.5 million acres of soybeans, although corn “may very well be rather less” given current climate challenges, he mentioned.
The US Division of Agriculture is ready to launch its yearly acreage report on Friday.
Whereas the prospect of fewer corn plantings may impression purposes of the nitrogen fertilizer used to develop the grain, Seitz famous there may very well be ample use of nitrogen within the mid- and post-growing season, and he sees no motive to alter the corporate’s nitrogen gross sales steerage of 10.6 million tons to 11.2 million tons.
Whereas crop costs have fallen, so have farm enter prices, at a time when grower incomes stay wholesome, in response to Seitz.
“All indications are that farmers are trying as traditional to maximise yields,” he mentioned.
(By Kim Chipman and Gerson Freitas Jr.)