Nutrien Ltd. CEO Ken Seitz told Bloomberg on June 26 that fertilizer demand is just now starting to stabilize from seismic shocks of the past few years that left the company with wild profit swings.
“We’re getting back at least to a market that we would call stable,” Seitz said in an interview with Bloomberg, referring to previous Black Swan-like events – unanticipated calamities that pull markets into a tailspin – that upended the typical cycles of the market.
Russia’s 2022 invasion of Ukraine disrupted global fertilizer shipments and pushed prices and company earnings to record heights, but also triggered a slump in demand as farmers and retailers balked at the sticker shock. Nutrien earnings plunged 71% in the first quarter (GM May 10, p. 1) and company shares have tumbled more than 50% from a record in April 2022, shortly after Russia’s invasion of Ukraine.
“We are looking at demand that is after a very volatile period, with some demand destruction, that is only today returning to sort of trend levels,” Seitz said, noting that fertilizer prices today are below the 10-year average.
Nutrien has responded by scrapping big investment plans and putting some assets up for sale in South America as it focuses on restoring growth.
Brazil in particular has been a sore spot for Nutrien. Fears of supply shortages because of disruptions in Eastern Europe first led to an overbuilding of fertilizer inventories in the country. But surging interest rates in Brazil have made the glut even more challenging to manage. Farmers are now opting for just-in-time purchases, Seitz said, adding that a pesticide glut will take the remainder of this year and possibly into 2025 to be resolved.
Nutrien reported in May that it was halting three blending facilities in Brazil indefinitely, according to Bloomberg, citing a statement from the company (GM May 31, p. 1). Two of the plants are in Goias state, and the other is a new blender in Minas Gerais. The Minas Gerais plant was expected to start operations in June, a Nutrien spokesperson said.
In Argentina, Nutrien is working to sell its agriculture retail operations (GM April 9, p. 1) and is considering options for its 50% interest in Profertil SA, a urea and ammonia manufacturing venture it has with Argentina state-run oil company YPF SA. If Nutrien ends up selling the stake along with the retail businesses, it will join a slew of other major companies exiting the South American country.
The challenge of repatriating dollars is a key problem because of Argentina’s currency controls, Seitz told Bloomberg. Nutrien lost money when it transferred currency out of the country because it had to use a more expensive exchange rate.
“I wouldn’t say that we are clamoring to get out of Argentina, we’re just being very thoughtful about our strategic options there,” Seitz said. However, he added that “we don’t see any indication that anything is going to change” under the new administration of President Javier Milei.
Seitz estimated that US farmers planted about 90 million acres of corn and 86.5 million acres of soybeans this spring. While the prospect of fewer corn plantings could impact applications of nitrogen, Seitz noted that there could be ample use of nitrogen in the mid- and post-growing season, and he sees no reason to change the company’s nitrogen sales guidance of 10.6-11.2 million tons.
While crop prices have fallen, so have farm input costs, at a time when grower incomes remain healthy, according to Seitz. “All indications are that farmers are looking as usual to maximize yields,” he told Bloomberg.