The Mosaic Company

Good morning, ladies and gentlemen, and welcome to the Mosaic Company's second quarter 2021 earnings conference call. At this time, all participants have been placed in a listen-only mode. After the company completes their prepared remarks, the lines will be open to take your questions. Your host for today's call is Laura Gagnon, Vice President of Investor Relations of the Mosaic Company. Ms. Gagnon, you may begin.

Thank you, and welcome to our second quarter 2021 earnings call. Opening comments will be provided by Jack O'Rourke, President and Chief Executive Officer, followed by a fireside chat, as well as open Q&A. Clint Freeland, Senior Vice President and Chief Financial Officer, Jenny Wang, Vice President, Global Strategic Marketing, and other members of the leadership team will also be available to answer your questions. We will be making forward-looking statements during this conference call. The statements include but are not limited to statements about future financial and operating results. They are based on management's beliefs and expectations as of today's date and are subject to significant risks and uncertainties. Actual results may differ materially from projected results. Factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release furnished yesterday and in our reports filed with the Securities and Exchange Commission. we will also be presenting certain non-GAAP financial measures. Our second quarter press release and performance data attached as exhibits to yesterday's Form 8K filing also contain important information on these non-GAAP measures. Now, I'd like to turn the call over to Jack.

Good morning. Thank you for joining our second quarter earnings discussion. I hope you've had a chance to review our posted commentary and slides, as well as our news release and performance data, all made available on our website yesterday. Today, I will provide some additional context before we respond to questions we received last night, and then we'll conclude with a live Q&A session. Mosaic delivered excellent financial performance in the second quarter, and the second half of 2021 is set up to be one of the strongest periods in over a decade. Our earnings are driven by two key factors. First, strong underlying agricultural markets, coupled with tight fertilizer demand dynamics are driving fertilizer prices higher. Second, and just as important, are the results of our effort to optimize our business to fully realize the benefit of these market trends. Throughout our long-term and ongoing work to reduce costs, we have created significant earning leverage, as this quarter's performance demonstrates. Looking ahead, we expect further upside. Our third quarter book is now 90% committed and priced, As a result, we expect a sequential increase of $90 to $100 per time in realized FOSA prices and $25 to $35 per time in realized FODASH prices. Beyond the third quarter, we are seeing buyer appetite for fourth quarter commitments as well. All of this implies higher earnings in the third quarter and very strong results in the fourth and into 2022. The dynamics fueling the agricultural markets point to a period of strength that we believe will extend well beyond 2021. Grain stocks remain limited, and global corn and soybean demand is growing, driven in part by surging Chinese demand and biofuels. As a result, agricultural commodity prices remain high, and the outlook is promising for continued strong farm income. and that is what drives higher fertilizer demand. Demand in the Americas is considerably stronger than we expected at the beginning of the year. Brazil is expected to once again set records for fertilizer shipments. Across the Americas, we saw a big recovery in 2020 and expected the demand growth to moderate this year. The opposite has happened. Demand for potash and phosphates is up substantially compared with last year, and nearly all of the fertilizer delivered this year has gone to the ground, which means channel inventories in most regions remain below historic norms. In North America, demand continues to be strong. Following the completion of our CVD petition, U.S. phosphate prices now trade at parity with global benchmarks, and the domestic market is benefiting from elevated imports from a more diverse pool of suppliers. This is reflective of a healthy market that's responding to the market's signals. In India, Farmer demand remains very strong, but importer economics have negatively impacted available supply in the country because of the disconnect in government subsidies. As a result, it is difficult for the Indian farmer to get the phosphates they desire. It is clear that more work needs to be done to rectify the imbalance, but we continue to see other regions absorbing fertilizer supply. Given how depleted Indian inventories are, we see India as a source of pent-up demand for the future. Southeast Asian fertilizer demand is benefiting from the strength in palm oil, and China is incenting its farmers to maximize yield. While the demand dynamics for potash and phosphates are similar, driven by the strong underlying agricultural markets, the supply outlook is slightly different for the two products. In phosphates, new supply is limited, and any new greenfield supply additions are several years from completion. Recently, Russia requested producers prioritize domestic demand to stabilize in-country pricing. And while supply from Chinese phosphate exports during the second quarter was elevated to meet global demand, Chinese exports are expected to decline in the second half of the year as in-country seasonal demand increases. This was reinforced by news last week that China's National Development Reform Commission has begun requesting the export of fertilizers to ensure adequate domestic supply. In potash, demand growth continues to exceed new supply from higher operating rates, recently announced by producers. As a result, prices continue to rise. In fact, price increases have largely offset the financial impact of our early closure of K1 and K2 shafts at Estherhazy. We recently resumed production at Kalonze and now expect our net production loss to be approximately 700,000 tons per the year. down from our original 1 million ton estimate. This also brings the sales impact down to approximately 500,000 tons as we draw down available inventory. Our earnings are leading to significant free cash flow generation, which has allowed us to proceed with the early retirement of our $450 million in long-term debt later this month. We are currently evaluating additional actions for capital deployment. Capital expenditures are expected to total $1.2 billion in 2021. This includes accelerated K-3 spending to speed up our ability to bring K-3 to full production, as well as approximately $75 million in additional high returning opportunities within our businesses. Given the strong cash generation, we continue to evaluate opportunities that also allow us to further strengthen our balance sheet, grow the business, and share with our investors.

overall mosaic continues to execute and perform very well in this robust fertilizer market and we expect to continue building momentum from here with that we will move on to your questions doc a number of analysts including adam samuelson from goldman sachs ben isaacson from scotia and rick and patel from exam bmp are asking about fertilizer affordability specifically globally, are you seeing any demand destruction due to affordability? Are there any regions or areas you're watching?

Thank you, folks. Now, the way we look at this is actually it is the grain prices and higher grain demand that's driving the fertilizer. So from our perspective, it's demand for grains and oilseeds and the price that that's creating that's driving fertilizer demand, which is, of course, driving fertilizer pricing. So we see the supply and demand balance the other way around, if you will. Now, we may see at some point the impact of high prices. Today, tight grain and oilseed markets are going to be tight for a while. They're not going to loosen in just one growing season. So this should last a while. And with global prices up, it seems that most growers would be comfortable with the prices we're seeing for fertilizer. Now, the one area of concern, and we've talked about this, is India. And this is not an affordability issue for the farmer, but an affordability issue for the importer because of the Indian subsidy system. But sooner or later, low Indian inventories will mean that they have to buy fertilizers.

A handful of analysts, including Andrew Wong from RBC, John Roberts from UBS, and Steve Byrne from Bank of America, have asked about Mosaic's realized price progression. It appears that price realization has lagged in potash when comparing spot pricing trends to the third quarter guidance, but spot prices and guidance appear to be fairly in line in phosphates. Can you discuss the underlying dynamics and what that means for price realization into quarter four?

The line between the potash prices we're seeing at the mine gate today and the actual international prices are driven by a couple of things. First of all, when we look at international shipments through Capitex, Q1, we had delays due to port issues. In Q2, we're now seeing delays due to wildfires and rail impacts as we go through the British Columbia interior. So this is starting to push shipments back. So there's a normal lag period that we're experiencing. Plus, you have to consider that these prices are the Asian prices, which are lagging as well from the Brazilian and North American prices. If we turn to North America, a lot of the tons that we're delivering now and will deliver through quarter three are tons that were sold in early May for August shipment to meet summer fill demand. And, of course, those were delayed further due to the K1, K2 closure, which means a lot of the May volume won't be priced or shipped until October. And so the pricing lag is higher than it would normally be. But I will emphasize that we are, in our distribution business, seeing and selling at the $600-plus price that we're talking about being the spot market.

Jack, Steve Byrne, Rickon Patel, and Adrian Tomogno from Barenburg are asking questions about the impact of increasing ammonia volumes delivered under the CF contract. What do those increases mean for spot purchases, and are there any volume-related discounts provided or premiums required under the contract?

Thank you. Historically, our ammonia tons have been split roughly evenly between produced, spot, and CF. With the increased CF supply in the second half, it means for the full year, in the range of 75% of our total ammonia needs, we'll be based on a natural gas price and be below today's market. This reinforces our competitive advantage in ammonia and the effectiveness of our hedging program to make sure that we have a number of supplies that buffer us against times like this.

In another raw material related question, John Roberts and Ben Isaacson are asking about the potential for future sulfur supply disruptions through 2021 and into 2022. What risks do we see and how are we managing them?

Thank you. Today, our position on sulfur is much better than it was a quarter ago. At this stage, you can see by the sulfur price, which just settled at about $195 per ton versus $192 in the second quarter, that the refinery rates and the demand balance for sulfur has really equalized. Now, it's a little too early to forecast quarter four, but what I can tell you is Gulf refinery operating rates have stabilized and gone to normal rates. We have really done a lot of work to get a good inventory of sulfur in our system, which we did not have coming out of quarter one. And if you remember, the issue we ran into in quarter one was low operating rates in the refineries, some turnarounds in the refineries, and then freezing weather that shut down a lot of the gulf refineries. So, you know, the culmination of the three meant a normally tight situation was exacerbated quite a bit. So at this stage, we see the risk is significantly lower.

Jack, we had a number of analysts acknowledge accelerating cash flows. These analysts, including Seth Goldstein at Morningstar, Mark Colley at Stevens, and Jeff Zucoskas from J.P. Morgan, are asking what we'll do with it. how we will allocate it aside from debt reduction and small growth capital, and looking for specific insight into how we are thinking about share repurchases and dividend increases.

Thank you, gentlemen. You know, let me reiterate, our strategy is and always has been that we will balance our capital allocation between debt repayment and working on our balance sheet, projects that offer a great return to us through growth, and then returning money to shareholders. In terms of the specifics, let me hand it over to Clint, because I think he can give you a little more color on that.

Thanks, John. You know, I think as we go further into the year, I guess one thing to note is that, you know, as we generate free cash flow and cash bills on the balance sheet, we're not going to let it just sit idle. I think we've got options. And whether that is additional debt reduction through some of the maturities that are coming due, we've got existing share repurchase authorizations. We can always take a fresh look at the dividend. We also have a program in place to review some really high-returning internal projects like our opportunity CapEx, relatively small dollars, but very high-returning projects that we'll continue to look to invest in. But I think, again, I think as we look forward, I think we have a number of options. And, again, I don't see us generating cash and letting it sit idle on the balance sheet. And I would expect at the further end of the second half of the year that we'll provide more clarity on what that allocation program is going to look like.

Andrew Wong and Adrian DeMogno are interested in more detail on our opportunity capital spending. Clint, can you elaborate on the new $75 million growth spending allocation? Would phosphate capacity expansion ever be on the agenda? And what can we expect to be allocated to the new soil health initiatives?

Thanks, Lauren. You know, I think when we look at our opportunity capex investments for this year. Overall, I would say that's about one-third in North America, about two-thirds in Brazil. I think there's more of a focus in Brazil. But I would say that those investments are generally being made in a number of different areas, but I would include the following. A number of these investments are around automation. We've spoken about some of the next-gen investments. that we're making in our production assets, and that is ongoing. That's part of this program. Another example is down in Brazil, where we're looking to increase gypsum sales, and we need to make some investments in infrastructure to be able to accommodate that. In Potash, we're looking to increase some of the spire capacity. But again, as we look at these investments, they're all relatively modest investments, typically single-digit million-dollar investments, but with very, very significant returns, some in the triple-digit type of return. on an after-tax basis. From a phosphate capacity expansion standpoint, I would say that really the things that we've focused on and talked about is along the lines of potentially increasing microessential capacity in the future. Demand for that product continues to increase, and to the extent that we need to expand capacity there, I can see that. Beyond that, I think our rock and concentrate capacities are in fairly good balance at this point otherwise. When we look at the new soil health initiatives, again, those are relatively modest investments. Those are typically expensed because we treat that really more along the lines of R&D. And so I would say, overall, those are relatively immaterial investments, not additive to CapEx. And again, I think that's is supplementing our R&D into new products for the future.

Doc, we've also had a number of questions related to our potash assets, including questions from Adam Samuelson of Goldman and PJ Juvicar of Citi. So this is really a three-part question. One, what was the driver behind changing your volume-impacted guidance, and how does this change total production expectations for 2022? Second?

what are the aro costs associated with the closure of k1 and k2 and lastly what does the cost structure look like in 2022 thank you laura our volume production guidance was adjusted basically because of two things first of all the acceleration of our shaft at k3 and being able to move into production areas sooner in that k3 area which will increase the contribution from that mine in the fourth quarter. We also were able to optimize some of our turnarounds at the mills because they aren't being fully utilized. And then the second part, is a successful restart of Kwanzaa, which really has come up very well. And we've been very pleased with the rate at which we've been able to get it into production. Matter of fact, it commissioned the mills just the other day, so we're fully ready to run their Kawase. And between the two of them, we've been able to accelerate our ability to produce tons at those two operations, which has mitigated some of the loss that we had from the early closure of K1 and K2. as far as closure costs for K1 and K2. In the second quarter, they were $158 million, most of which was non-cash write-offs. $110 million was fixed asset write-downs. $37 million was ARO adjustments. And then MRO write-offs. $4 million was contractor severance. In terms of the ARO itself, The $37 million brings a total up to about $120 million for ARL, of which $70 to $100 million, let's say, will be in the closure of those two mine shafts. Of that, 40% or so will be spent this year, and the rest will be spent next year in final closure of that. For the third part of the question, our cost structures, If we do the sum of the parts, our K3 mine at 6 million ton operating capacity will be one of the lowest costs in the world. We've said that in the $50 range already. Bell Plain is also very low cost and very well positioned on the cost curve, and that's 3 million tons of our operating capacity. Colossae costs are still expected to be in the $100 per ton range, as per our preview guidance. We're looking at ways to reduce that amount. So you can kind of work it out from that, that 80% to 90% of our costs will be at that very first quartile, and then we'll make up the difference with slightly higher costs from Colanzi at $100 a ton, assuming we actually need those tons to meet the market requirements. Let me emphasize that at these prices, Kalonze tons are still very profitable, and we would expect that to have a very good margin in today's environment.

Thank you, Jack. Operator, at this point, we'd like to open it up for follow-up questions from the phones.

As a reminder, to ask a question, you will need to press the star 1 on your telephone. To withdraw your question, press the pound key. We will limit participants to one question.

You called out in the script and the prepared remarks an increase in inflation there. You seem like you're moving from both phosphate conversion costs and rock mining costs away from your 2023 cost targets. And I'm just trying to get a sense of kind of what the plan is to maybe bend the curve on inflation and get back down to those 2023 cost targets over the next 18 months or so.

If you go back to our multi-part analyst presentations, I think you'll remember we did say that we would correct the expectations of these cost things based on inflation and over time our expectation is if there's higher inflation in brazil that that will be offset by a weakening um brazilian rei so you know i just want to highlight that we had accounted or we were not expecting to account for inflation and this was a method of with offsetting inflation. So you have to adjust those cost numbers based on that. But overall, we continue to drive very hard. I think you'll see in our results that We continue to drive very hard for those transformational benefits, as we call them. And a big chunk of that is reducing our costs of mining. And in that, you know, I just want to highlight that this quarter was exacerbated by lower rates caused by some downtime. And that does increase your costs because of the fixed cost absorption.

Our next question comes from the line of Mark Connolly. Thanks, John.

There's a longstanding perception among investors that more operational hiccups than other producers. And you obviously can't control the supply of sulfur and stuff like that. But when you look at all the operating metrics internally and the changes you've made to process, has your Florida system become materially more reliable? And I'm very curious how you would answer that question on potash too.

Thanks, Mark. Well, I would say definitely yes. We've spent a lot of time in a lot of the area where our cost improvements have come from better operational reliability, better maintenance control, better outcomes of turnarounds. there is a high level of unpredictability in any large system. And, you know, frankly, our system runs very close to its capacity. So, you know, in the case of the sulfur, with a very good spring ahead of us, a little sulfur hiccup impacted our system. But I think if you look at it over time, you'll see that, you know, really we have run very close to our capacity and have made big improvements in that area. Likewise, in potash, I mean, if you look back where we were running, you know, the three potash mines continuously, you had a lot of flexibility, which we don't have anymore. So we do need those plants to run consistently all the time. And for the most part, we believe they do now. And I think those have been big improvements to how we can keep our costs at a much lower level.

Your next question comes from the line of CJ Jivakar from City. Your line is open.

Yes, hi. Good morning. A question on phosphate. You know, as phosphate prices moved up, China maybe opportunistically raised exports. And we've seen that in other fertilizers as well, in ammonia, but urea, as Chinese exports went up. What is your confidence level that Chinese exports will decline in second half, which is what you said in your remarks?

Yeah, thanks, P.J., I'll talk a little bit about this, but I'm going to hand it to Jenny because I think she's got a pretty good idea on the world's supply and demand and some of the forces here. But let me say, the Chinese do need to get their domestic phosphate to their farmers for the growing season in the next quarter, and as such, internal demand is going to be high. You know, one of two things basically has to happen. Either the price has to go up internally in China or they will put restrictions on exports. Either way, our expectation is from a supply and demand perspective, that demand is there internally in the country and these exports should slow down. Jenny, do you want to talk a little bit about particularly some of their government interactions?

sure jock peter you are right um we have saying um the chinese exports of phosphate probably urea as well have increased in the first half of the year driven by very strong international market um the demand was so strong and um it's a pure economic driven As a result of it, the Chinese government has been growing concerns over the supply availability for the domestic market, as well as the raising prices for the domestic market as well. So as a result of this concern, the NDRC, they call it the super ministry in China, the development network, the National Development and Reform Committee has required the major producers of nitrogen and phosphate to meet, basically, the guidance in DRC to the major producers were, you guys need to stop export. and you need to prioritize your supply to the domestic market and also stabilize the price. We know why they do it. They need to maximize the ag production in China. So that's their priority. So at this moment, NDRC's requests are kind of a soft regulation. The requests are mainly to the state-owned enterprises. How these major producers are going to comply and follow the guidance from NDRC, the government is closely watching it and they're looking at whether the domestic supply has been improved and if the prices have been stabilized. if the situation is not believed to be improved over the next period of time, we may see a very hard measurement to be taken by NDRC. The reason that we have that confidence, one, is coming from the other industry, if you pay attention to the steel industry, which the Chinese government imposed export tax in May. And then that was not strong enough at the time, and yesterday they hiked export tax again. So that's one of the measurements that the NDRC has taken to the steel export. Whether they're going to do the same to phosphate and possibly to urea, it will really depend on how much export is coming up over the next two months. We foresee the significant slowdown will come in from September and Q4 because the export in July and August probably have been committed earlier before this request was sent by NDRC. Over to you.

Thanks, Jenny.

Our next question is from John Roberts from UBS. Your line is open.

Thank you. Could you talk a little bit about the Belarus potash sanctions and maybe compare and contrast that with the earlier U.S. sanctions on phosphates?

Yeah, thanks, John. You know, interestingly enough, I guess the Belarus sanctions were I'm going to call them relatively toothless. They didn't have very much bite to them in the basis that they didn't include what were the most of the main grades of potash. I think they only affected about 20% of the industrial potash that Belarus might have sold. So other than I... other than a slap on the wrist, it really wasn't much of a restriction to the Belarusians. And with security concerns in the mix, I'm not surprised by that. Compare that to the CBD, which was, I mean, the countervailing duty case was all about unfair subsidies and, you know, really taking advantage of those unfair subsidies to protect impact the market and particularly harm the U.S. producers. So I think, you know, very, very different sort of situations and drivers. But what I would say about the CBD, and I think I've said this in my opening remarks, is now with the CBD, what we're seeing is we're seeing a number of new countries and companies importing into the U.S., and we're seeing the market run at essentially parity to other major markets which i think is what we expect in the case of the belarusian i mean it was simply a political uh statement to uh hopefully put a pressure on lukachenko to do something about some of their uh well some of their human rights issues our next question is from steve barron from bank of america your line is open

Hi, good morning. It's actually Luke Walsher on for Steve. I wanted to ask about your Chinese or your thoughts on Chinese port inventories of potash. Where do they vary from what you can tell relative to history? And when do you think China should start looking to renegotiate a potash contract?

Yeah, thank you, Luke. Again, I'm going to hand a little of this over to Jenny, but I can tell you right now that, you know, the the potash inventories at port and probably up country as well are starting to get fairly depleted and I think you're starting to be at a place where they'll have to dip into their national reserve if they're going to continue to supply the NPK producers and the internal market. So from that perspective, this is getting pretty tight for China. And I expect that they will, not the producers, because I don't think the producers are in a position of needing to ship those tons. But I think China will have to start looking at negotiating their next round of purchases sooner rather than later. Jenny, any comments on port inventories?

The specific port inventory as of today, we see it is below 2.3 million tons. This is 35% lower than the same time of last year. So if you recall, the National Reserve itself is 1.5 million. So the available tons really is really minimal. So that's just to support Jack's earlier comment. With a very strong demand domestically in China, strong spring has slowed down the inventory and also we believe imports in the second half will be largely slower down. So we foresee the buyers, the importers will have to come to the table for a negotiation of a new contract sooner than many would have expected.

Just like to highlight that the Chinese contract is probably $100 lower than the Asian price. So that really makes it difficult for them to receive the product they need at those prices.

Our next question is from Adrian Canagno with Brandberg. Your line is open.

Hello, good morning. Thanks for taking my question. It's a question on Brazil. So you mentioned low-channel inventories across the globe, and I would like to ask you a bit more specifically if that's also the case in Brazil and your expectation for Q3 volumes in the countries.

Yeah, thank you, Adrian. Well, our belief is that, yes, in fact, the volumes are relatively low inventories in Brazil. Obviously, with the prices, what would show up on our books will be slightly higher than normal because of the price of the product. inventory is lower than usual, although it is, of course, built up for expectations of a strong third quarter where we do deliver most of our product. So our expectation for the third quarter will be very strong in Brazil. What we expect to see there is with the drought conditions, planting may be a little later, so it might push the purchases back higher prices and pretty strong demand for fertilizer in this third quarter and probably heading into fourth quarter.

Our next question is from Michael Peekins with Green Down Research. Your line is open.

Yeah, hi. Good morning. Yeah, just wanted to follow up a little bit more on Brazil and specifically looking at kind of the distribution business and just trying to understand.

You mentioned that some of those sales took place at $600 potash. When you think about kind of the timing of when your distribution business typically purchases inputs, is there the potential? the margins to maybe be a little bit higher than normal on the distribution side, and then also just want to understand on the production side how much of a freight advantage you might have with some of your in-market phosphate production. Thanks.

Yeah, thanks, Michael. Great couple of questions. You know, the way we report the earnings in our distribution business, of course, is we're purchasing from Campitex and in the market. So what you can expect there is us to have an ongoing position, if you will. And so in cases of a rising market like we see today, there's no question we will have a positioning gain. And our product management team is very efficient at making sure that we understand the market so that we take the positions and can realize as much, you know, as great a margin as possible. And certainly in this environment, we're able to execute on that and take advantage of that distribution margin. The second part of your question, I mean, comes to an important piece of our whole investment thesis in Brazil, which is to compete in Brazil being in country and having that transportation advantage. is a great thing, both from a cost perspective. And so if you look at our in-country production, it's very competitive on a cost basis. Also competitive, our overall is competitive on a logistics basis because we can really take advantage of moving product more effectively than if we didn't have the assets we have.

Again, if you would like to ask a question, you will need to press star 1 on your telephone. And the next question is from Joel Jackson from BMO Capital Markets. Your line is open.

Hi. Good morning, Jock. Good morning, Joel. Jock, we talk about the liquidity in potash markets. I appreciate your commentary earlier on the issues in Western Canada around the wildfires, the ports and the rail. And some of your competitors in potash have been saying that the benchmarks we're seeing report every week just really aren't real. You know, not getting 600 in Brazil, not even getting 500. And then some of the Southeast Asian prices have been interesting the last couple of weeks. Maybe it's based on one deal or two deals you tell me in Thailand or Vietnam. So I wanted to know, like, what is the liquidity like right now in the potash markets for what you're selling versus normal times? Like, are these benchmarks as liquid as usual?

You know, Joel, thanks for the question. Let me start by saying, first of all, the liquidity question is very seasonal. We're not selling a lot in North America right now. We're sort of between. I think we had a crew that was at the Southwest Conference recently, and most of our North American customers are probably 70% to 75% supplied for the So in that sense, there's not a whole lot of activity except for delivering on previous contracts. If you think about some of the other areas, there's liquidity in Indonesia, Malaysia and some of the Asian countries. that would be sort of more normal. And then if you look at Brazil, again, we're sort of between seasons a little bit, but it's been a bit slow. So I would say it hasn't been a particularly liquid market at this stage, but that is not atypical for this time of year.

Our last question comes from the line of Rakeem Patel from Accent BNP. The line is open.

Hi, Joe. Hi, Clint. Doing well. Just one last one on potash demand. You have a shipment forecast of 69 to 71.4 million tonnes for 2021. But just curious into 2022, could you size what you think demand could look like? You guys flagged obviously the lack of available supply as sort of constraining demand to an extent at the moment. So if we do get that sort of release, potentially next year, what do you think demand could look like in 2022?

Thank you. Yeah, thanks, Rick. Yeah, I think that's actually quite relevant. I think supply has been a limiter to demand growth, if you will, in this year. You know, we had some six million tons of growth last year, and we really expected it to moderate quite a bit this year. So with this year growing as it has, I think the biggest limitation has just been getting supply. As we go into 2022, it's always hard to look into the future, but I would think we would be returning to more normal growth rates One of the things to talk about this year, though, is I don't think we've built up about a bunch of channel inventory, so I think channel inventory stays low. 2022 will be normal demand growth, call it million to million and a half tons, in that 2% plus range. And then what the question will be, will there be channel inventory build, in which case, which ultimately has to happen for this market to be more fluid as per Joel's previous question. So if the channel inventory can build, we could see a higher demand growth in 2022. So, you know, it's going to depend obviously on the ag markets, but we're looking pretty positive for a 2022 opportunity for growth. Jenny, anything to add to that?

No, I think you get this covered. We believe with the commodity prices, not only corn, soybean, but also the palm oil prices for Malaysia, Indonesia, and other crops, we believe that demand to potash next year will continue to grow very strongly. The supply is likely going to be a limitation factor.

There are no further questions at this time. Now I turn the call back over to Jacques for closing remarks.

Well, I would like to thank everyone for joining us on this call. I will say it has been a strong quarter for us, and as we look forward, we still see strength going forward. So we continue to drive for improvements in our operating performance The markets continue to be positive for that. And with that, we believe we are well positioned for continued performance as we go forward. So thank you for joining our call. Please have a safe day. Go get vaccinated. Take care.

This concludes today's conference. Thank you for participating.

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