Nutrien Ltd.

Greetings and welcome to Nutrien's 2023 Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow after the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Jeff Halsman, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to Nutrien's Third Quarter 2023 Earnings Call. As we conduct this call, various statements that we make about future expectations, plans, and prospects contain forward-looking information. Certain material assumptions were applied in making these conclusions and forecasts. Therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions are contained in our quarterly report to shareholders as well as our most recent annual report, MD&A, and annual information form filed with Canadian and U.S. Securities Commissions. I will now turn the call over to Ken Seitz, President Dio, and Pedro Farrar, our CFO, for opening comments before we take your questions.

Good morning, everyone, and thank you for joining us today. Nutrien delivered adjusted EBITDA of $1.1 billion in the third quarter and $5 billion through the first nine months of the year, down from the record comparable periods in 2022. We saw a number of positive market developments in the third quarter that are constructive for our business, including strong crop nutrient demand in North America and increased stability in global potash markets. In retail, North American crop nutrient sales volumes were up 5% in the third quarter and 10% on a year-to-date basis as growers were incentivized to maximize crop production. North American crop nutrient margins in the quarter increased by $10 per ton compared to the prior year, supported by improved margins for commodity fertilizers and growth in our proprietary crop nutritional and biostimulant products. These high-value proprietary products contributed nearly $350 million in gross margin through the first nine months of 2023. Crop protection sales in North America were down from the record prior year due to lower prices for certain commodity products and slightly lower sales volumes, a result of dry conditions in the US Midwest. We ended the quarter with North American crop protection inventories down more than $200 million from the prior year, and we will be patient with our approach to restocking inventories. Crop protection inventories in South America remained more elevated, resulting in pressure on prices and margins. Crop nutrient volumes for our South American retail business were up 25% in the third quarter due to improved grower demand and the benefits of our Casa do Adubo acquisition in the fourth quarter of 2022. Nutrient financial sales increased in the third quarter and first nine months of 2023 due to higher utilization of our financing offerings in the US, as well as the recent launch of our digitally enabled financing program in Australia. We are pleased with the uptake of our financing programs and see additional opportunity to drive organic growth for our retail business. In potash, we delivered record sales volumes, totaling 3.9 million tons in the third quarter. North American channel inventories were at multi-year lows entering the second half, and customers secured supply in anticipation of a strong fall application season. We had a very positive response to our summer fill program utilizing the strength of our distribution network to deliver 1.7 million tons to customers in North America. Our potash volumes and net realized prices were impacted by logistical challenges associated with the port strike in Vancouver and an outage at CampaTexas export terminal in Portland. Shipments through Vancouver returned to normal late in the quarter, and we expect the Portland terminal to be operational by the end of the year. We increased granular potash production to meet the surge in domestic demand, and our controllable cash cost declined to $56 per ton in the third quarter, highlighting the advantages of our low-cost six-mine network. Our nitrogen realized prices in the third quarter reflected the reset in benchmark values at the time of summer fill programs. Nitrogen sales volumes declined from the prior year due to production outages at our Trinidad Borger and Geismar plants. We completed two smaller brownfield expansions at our Geismar facility and installed the final of eight N2O abatement projects at our nitrogen sites, which we expect will be a key contributor to reducing our greenhouse gas emissions. Phosphate sales volumes increased in the third quarter due to a strong engagement from phosphate fertilizer customers. We did, however, encounter hurricane-related downtime in our White Springs facility that impacted production volumes and costs. Excluding this downtime, our phosphate plants have operated well following the completion of reliability initiatives in the first half of 2023. Now turning to the market outlook, global grain yields are projected to fall below trend in 2023 for the fourth consecutive year, limiting any meaningful recovery in stocks. New corn crop and soybean prices have incurred some seasonal pressure but remain 10 to 15% above the 10-year average. Fertilizer affordability has improved significantly over the past year, and projected grower cash margins are above historical average levels. Harvest in the U.S. has progressed ahead of average, providing an open window for fall fieldwork. We project U.S. fertilizer demand will be up 5 to 10% in the fourth quarter compared to the prior year. Global potash demand has increased in the second half driven by greater price stability and improved grower affordability, absorbing the gradual increase in Eastern European export volumes. We now forecast global potash shipments in the range of 65 to 67 million tons in 2023. We expect robust agricultural fundamentals and the need to replenish soil nutrient levels will support increased potash consumption in 2024. We project global potash shipments next year in the range of 67 to 71 million tons with the majority of year-over-year growth in Southeast Asia, Latin America, Europe and India. Global ammonia supply has been tight to start the fourth quarter due to outages in Europe and production challenges in other key regions. The area markets are relatively balanced as Chinese export restrictions and strong import demand in India offset weaker seasonal demand in other regions. Geopolitical conflicts have the potential to create additional volatility for global energy prices and nitrogen supply. Most notably, European natural gas prices have increased by 20% over the past month, and nitrogen production in Egypt has reportedly been curtailed due to gas availability. To summarize, agricultural fundamentals remain supportive and we are seeing strong demand for crop nutrients and from our grower customers. Global potash demand has strengthened in the second half of 2023 and we expect this trend will continue into 2024. And we anticipate constraints on global energy and nitrogen supply will continue to provide a positive backdrop for our low-cost nitrogen assets. I will now turn it over to Pedro to review our guidance assumptions and capital allocation plans.

Thanks, Ken. I will start with our updated guidance for potash. We increased the bottom end of our full-year potash-adjusted EBITDA and sales volume guidance to reflect the strength of our market fundamentals in North America. We continue to see strong customer engagement and have increased our domestic reference price for deliveries in the fourth quarter. Spot prices in offshore markets have been relatively stable, and Campotex is fully committed on its sales plan for the remainder of 2023. In nitrogen, we narrowed our adjusted EBITDA guidance range as higher benchmark prices offset lower projected sales volumes. Our North American nitrogen plants are operating at higher utilization rates in the fourth quarter, including Geismar, where we recently completed expansion projects. We made a decision to bring forward a planned outage at our border site to address reliability issues that impacted production in the third quarter. We lowered the top end of our retail adjusted EBITDA guidance range to reflect pressure on crop protection margins in South America and the impact of weaker livestock markets in Australia. We maintain our outlook for North American retail business as fall fertilizer application rates have been strong. and per ton margins are expected to be above historical average levels. Based on these factors, Mutrin's full year adjusted EBITDA guidance range was narrowed to 5.8 to 6.4 billion, and adjusted net earnings was revised to $4.15 to $5 per share. Our effective tax rate and adjusted earnings in 2023 has been impacted by non-cash impairments and an unfavorable geographic mix of earnings. We do not expect these to be recurring items and anticipate our effective tax rate will return to more historical levels in 2024. We are projecting total capital expenditures of approximately $2.7 billion in 2023 and plan to return over $2 billion to shareholders through dividends and share repurchases. We are focused on investments to sustain our assets in highly targeted growth projects in our retail, potash, and nitrogen businesses. Based on current plan initiatives, we expect to reduce annual capital expenditures to a range of 2 to 2.5 billion going forward. In retail, our focus is on increasing earnings and free cash flow by enhancing margins and asset efficiency. This includes investing in our proprietary products, production capability, and network optimization and digital initiatives, which are all key drivers of organic growth for retail. We continue to evaluate retail tech acquisitions in the U.S. and Australia and will remain selective based on strategic fit and valuation. In Brazil, we believe the long-term prospects for agriculture are very strong and see opportunity for future growth of our retail platform. However, in the near term, we have paused additional investments until there's greater stabilization of the market. We will utilize this period to integrate recent acquisitions and optimize our cost structure. In Potash, our mid-cycle scenario assumes global demand returns to historical trend and nutrient sales volumes in the range of 14 to 15 million tons. This translates into volume growth potential from existing operational capability of one to two million tons compared to 2023. We are continuing to focus on further automation of our fleet, enhancing safety and productivity of our mines. Lastly, in nitrogen, Our priority is to complete in-flight brownfield expansion and reliability projects that support our mid-cycle sales volume scenario of 11.5 to 12 million tons. Brownfield projects are expected to add approximately half a million tons of nitrogen production capability by 2026, with projected returns well above our hurdle rate. Back to you, Ken.

Thanks, Pedro. I will just make a few final comments. We are encouraged by the positive market developments over the second half of 2023, and particularly the strength of crop nutrient demand in North America and increased stability in global potash markets. We're optimistic on the outlook for our business going forward and will continue to position the company to efficiently serve the needs of our customers. Our focus is on initiatives that strengthen the advantages of our integrated model, drive operational efficiencies, and increase free cash flow. As Pedro highlighted, we are proceeding with highly targeted investment opportunities and will maintain a balanced and disciplined approach to capital allocation, including the return of meaningful capital to our shareholders. We would now be happy to take your questions.

Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press star followed by the number one on your touchstone phone. You will hear a three-tone prompt acknowledging your request. If you would like to cancel your request, please press star 2. Your first question comes from the line of Andrew Wong from RBC Capital Markets. Your line is now open.

Hi, good morning. Thank you for taking my questions. So, Utrecht recently paused on adding some potash capacity, which looks like it was the right decision for the market. But then, Now one of your competitors, BHP, announced that they want to accelerate a phase two project at Janssen. What's your thought on the economic rationale for that project? How does Nutrien view the future supply additions to the market and how Nutrien will respond to those changes in the market and just the broad impacts?

Great. Good morning, Andrew. Thanks for the question. Yes, as we've discussed, you know, we are in a growing market in our potash business, and that's owing to the things we talk about, growing population, decreasing rate of arable land expansion, and, you know, backcasting over the last couple decades. We've seen those growth rates, 2.5% average annual growth rate, so that, you know, as we've talked about, we get to the end of this decade and we're at 80 million tons. So a market that's growing, you know, we continue to maintain our sort of 20% market share growth, And we have always had a phase two for BHP's plans in our supply and demand forecast. So, you know, this is a surprise to us. What I will say is, you know, for our part and our ability to continue to expand volumes, yes, we've paused, but we've talked about our 18 million tons of low-cost additional capacity, the ability to expand beyond that in a demand environment that is growing. And I'll also say that, so here we are, it's 2023, first production announced, Gents, in 2026. I mean, these are challenging projects. We have 50 years of experience with that. And, you know, soft rock mining and ramping up in a phase one takes time. It's technically challenging. And then certainly going beyond that. So we are talking about volumes in phase two that are in the next decade. In the meantime, Nutrien, with our flexible six-mind network, the investments we've made in our supply chain, our customers around the planet, I mean, we will continue to serve those customers as the market grows.

Your next question comes from the line of Ben Isaacson from Scotiabank. Your line is now open.

Thank you very much, and good morning. Maybe to follow up on Andrew's question in terms of potash, Can you talk about the market balance for potash in 2024? Ken, you've said that you're looking for further demand growth in 2024 closer to the 67 to 71 million ton level. Some people are concerned about a slowdown in Southeast Asia because of El Nino. The Indian subsidy seems to be a little bit tepid for potash demand and Chinese inventories are high. And so how do you balance that against increasing production and exports out of Belarus and Russia? I guess the bottom line question is, do you see the market being tighter in 2024 than where we are right now? Thank you.

Yeah, a lot going on there, Ben. Thank you for the question. So yeah, we are constructive. And it's certainly, you know, the experience we're having here in 2023, North America, Brazil, where we've seen strong demand. And that's on the back of much improved affordability among our grower customers. As we peer into 2024, again, we're constructive, and I'll hand it over to Mark Thompson to talk about the details, but we can see that grower affordability continuing. We've seen destocking of the channel. We've seen some depletion of crop nutrients in the soil, and yet some supply-side challenges persist. But Mark, over to you to maybe walk through some of those details.

Thanks, Ken. Good morning, Ben. So look, maybe we'll just parse out your question to a few different pieces. I think just to reiterate, as Ken said, we have been encouraged by the stability that we've seen in prices and the attractive affordability levels have really accelerated the return of demand to the potash market, which has certainly been a positive in 2023. I think just to bridge to 2024, we've got to talk about 2023 a little bit and I think the story on 2023 versus where we were in August on our Q2 call is really about three markets. So first of all, in North America, we've seen continued very strong engagement in North America. Our fall fill program was very, very strong. We've seen continued interest from retail customers and growers for product going to ground and things are moving well in Q4. And obviously that whole backdrop has contributed to our Midwest reference price moving from a fill value at 370 to two increases since then, and most recent reference price in the Midwest achieved at that $420 per short ton level. So North America certainly has been a positive story in 2023. The two markets internationally that have really contributed to that demand growth in 2023 versus prior expectations are Brazil and China. And overall in Brazil, we've continued to see very good engagement on fertilizers. And despite the fact that growers are still a little more hand-to-mouth in that market, we're seeing consumption levels back at 2021 levels, which is a positive indicator. And trade in recent weeks has been relatively thin there, which is normal. But if we look at inventory levels in Brazil, they're similar to a year ago, but significant imports are required over the next two months to meet demand for Safrania. And if that doesn't materialize, inventories will be very, very tight. So we expect a positive transition in the demand side in Brazil heading into 2024. Coming to your question on China, because that's also part of the 2023 story, really in China, I think 2023's big increase in shipments is primarily due to two factors. The first is that apparent consumption in China just generally is very strong across all the nutrients. We're looking at consumption levels that appear to be demonstrating growth of about 5% across the board and domestic production in China is down in our expectations somewhere between 750,000 and a million tons this year. So that's all led to inventories actually in September that had been drawn down to levels just below two and a half million tons. Now we do expect that by the time we get to the end of the year, some of the shipments will have gone to rebuilding inventories to some extent. But as we look to 2024, as you would see in our materials, we do project a bit of a step back in China next year. So other markets are really driving that growth in 2024. Those markets that we've called out, Ben, in 2024 really are Southeast Asia, India, Europe, and continued growth in Latin America. So to your question on Southeast Asia, In 2023, shipments were down in Southeast Asia quite substantially, and we've seen conditions improve. Inventories have been drawn down in Southeast Asia. We've seen from Capitex indications of good interest returning in Q4. We've seen interest already in Q1. Palm oil prices and rice prices and fundamentals in particular are very strong there. So we do expect a rebound in shipments. Of course, to your point, Watching dryness in the region is a risk factor we'll have to watch, but given the depressed level of consumption in that market this year, we do expect a meaningful rebound there next year. You also asked about India in your question. We expect growth in India next year. While Indian inventories are improving as of recent months, they are still relatively tight. And even with the subsidy changes, I'd say those were about as expected for us. Importers are still making just over a 10% margin in that market. And shipments in 2023 were depressed by historical standards. So we do expect good things in 2024 in India. And Latin America, obviously, this year has been a positive surprise. We expect continued growth there, as I've outlined. And then in Europe, Europe's another market that has worked through its high-cost inventory. And in Q4, we've seen good engagement. So As Ken said, when we transition into 2024, we see demand stepping up at the midpoint by another 3 million tons next year, which will further support market fundamentals.

Your next question comes from the line of Jacob Bout from CIBC. Your line is now open.

Morning. I had a question on the nitrogen division. I think this is the first time that I've seen three outages in the same quarter. How much of this is coincidence or maybe just talk through any maintenance or reliability issues? And then any comments on Trinidadian gas supply contracts and availability?

For sure, Jacob, thank you for the question. So yeah, we had outages at our Geismar, Borger and Trinidad sites and varying reasons there, including some of those that you mentioned. Yes, we are also in the middle of a contract negotiation with the National Gas Company in Trinidad. I'll hand it over to Trevor Williams, our president of the nitrogen business, to talk about those pieces.

Hey, good morning, Jacob, and thanks. So a couple of comments. So year-to-date, actually, the majority of our assets have actually run quite well, averaging about 97% capacity utilization. excluding our planned turnarounds. However, as folks have referenced, we did experience some issues at three of our facilities, primarily Trinidad-Borg or Geismar. Now, at our Geismar facility, typically, historically, a top quartile performer. We just took on and completed our five-year major overhaul here in Q3. However, during the outage and coming out of it, we did experience some issues with some large rotating equipment as a result of some quality challenges, which did force us to come back down a couple of times to address those. Thankfully, those repairs have been completed, and now the site is back up and running well and at the new capacity, the ball neck capacities. In Trinidad, this really comes down to a story around some of the challenges around some of the gas curtailments. We did experience several, I'll say, deeper curtailments through the year that forced us to take some plants offline. As a result of cycling those plants, we did experience some equipment failures that required us to come down to make some repairs. Those repairs are underway, and we expect the site to return to normal levels of operation here in November. And as Ken alluded, we are working with the National Gas Company to develop more effective ways here going forward to manage some of these curtailments. Such that we don't compromise the Trinidad facility here going forward and in addition with some of the recent announcements related to longer-term gas supply We're optimistic returning back to full capacity over the course of the next couple years and we will be taking steps to prepare the site in terms of being able to take maximum advantage of that opportunity and then finally from a border perspective I You know, we did have several reliability equipment-related issues that were scheduled actually to be addressed in our 2025 turnaround. However, in order to reestablish the reliability of that facility and safe operation, we did elect to take an outage here in Q4 of this year to address a number of those operational risks and really set the site up here for a successful run going into the next major turnaround. And then finally, just a couple of things in terms of overall reliability program. I just wanted to highlight The first thing, obviously, is really prioritizing our capital to focus on increased uptime and efficiency, obviously managing the risks associated with our facilities, really doing a lot of work in terms of enhancing our reliability program, using data analytics, people skill development, and some organizational structural changes within the organization of the company. And then finally, which is really a big step forward to us, is around external monitoring, troubleshooting, and optimization. through our recently commissioned operations or remote operations center in Loveland, Colorado. And finally, we just put together over the course of the last couple of quarters an infield reliability task team that's really been put in place to drive operational improvement through targeted reliability initiatives across the organization. So that gives you a good picture in terms of the reliability front, and thanks for that. In terms of Trinidad gas contract, yeah, we're in the final stages of finalizing the contract with the National Gas Company, and we expect to be announcing something here in the short term.

Your next question comes from the line of Joel Jackson from BMO Capital Markets. Your line is now open.

Good morning. You know, usually when a potash corp or a nutrient, you see global shipments rise so much since you hold the excess tons. Usually, you know, you gain disproportionately share. This year, obviously, I guess the Belarusians picked up as they've gone up to 80, 85% of capacity utilization, sorry. So now you're modeling a very bullish outlook next year for 3 million tons of further potash demand next year. How much of that 3 million tons do you, in your model, are you assuming nutrients should be able to benefit? How much more do you think Belarus has to go? So yeah, how much of the three next year should we assume in your base projections that nutrients should get?

Morning, Joel. Yeah, thank you for the question. So yes, obviously, when we say 65 to 67 million tons, so that's up from last year. And, you know, as Nutrien, as I mentioned earlier, we continue to maintain our market share. So we have been deploying our tons into the market. There have been a few challenges this year, as I'm sure you know, with the logistics side of our business, and we talk about Campotex and the strikes that we saw on the West Coast, which certainly challenged our volumes, and we did have a volume impact there. You know, those shipments have returned to normal, but we're still dealing, Campotex is still dealing with an outage at its Portland facility, which, you know, that work has been underway to get it back online, which we expect to happen by the end of the year. But there have been there have been volume impacts associated with both of those outages. Yeah, as we peer into 2024 and talk about 67 to 71 million tons, and with what we believe will be some ongoing challenges with FSU exports, and it's not to say that we don't plan for those exports to come back over time, but we expect that next year there will still be some of those challenges, that yes, Canadian potash and nutrient potash will play a role, certainly, in filling some of that void.

Your next question comes from the line of Vincent Andrews from Morgan Stanley. Your line is now open.

Thank you. I just kind of wanted to follow up on that in terms of your expectations for that normalization of Russian and Belarusian supply. And it seems like maybe they, as we move through the course of this year, they were able to export a little bit more than you thought. And it seems – I'm wondering if that's, again, going to be the case next year versus what you thought three, six, nine months ago. If that's true, what is it that's allowing them to get more product out faster than you previously anticipated?

Yeah, thanks, Vincent, for the question. Yeah, what I'll say is, yeah, certainly those volumes are at the top end of – what we saw coming out of the region this year. I mean, there's, of course, a lot of uncertainty, so to say, with this. And, yeah, we see volumes going into China via rail from Belarus, albeit at $280 a ton, we think, to deliver to that part of the world. And, you know, we see, depending on the Chinese domestic price, we see those volumes coming up when it's affordable and coming back down again when it's not. And then there's the shipments off the coast of Russia. A lot of moving parts, as I said, at the high end of the range. The reality, though, is there continue to be sanctions against the Belarusians, and the terrible conflict that carries on in Eastern Europe aside, those sanctions were in place prior to this conflict. So we think there will still be challenges. I'll hand it over to Jason Newton to maybe talk a little bit more about some of those details.

Okay, thanks, Ken. Good morning, Vincent. Yeah, if we look at the exports coming out of Russia and Belarus, what's been the majority of the increase that we've made quarter over quarter for 2023 has been from Russia. And what we've seen there is particularly Eurocali has been operating at a higher operating rate than we would have expected and shipping more out through St. Petersburg. Now, if we look forward to 2024, as mentioned, we'd expect that volumes will continue to increase from Russia. But actually, there's less potential growth there to get back to pre-war levels than was the case before. And so incrementally, we'd expect somewhere in the range of a million tons additional supply. As Ken also mentioned, Belarus continues to be constrained. And actually, if we look back At the monthly shipments that we've seen over that region really since the end of q1. It's been relatively steady volumes And as the Chinese contract was signed we've really seen a prioritization of shipping the lowest Cost logistical routes which are through st. Petersburg and bronca and left through the other Russian ports which really limits the upside on logistically we believe in the volumes that can get to port and Through the summer months, a little bit of higher volumes moving into China. The strong demand, as mentioned, that we've seen seasonally in China that supported prices and volumes in that market led to a little bit higher volumes moving into China. But again, that's a high cost to serve location. The rail distance just to get to the border is 10 times what it would have been to get to Klaipeda port. And to get to the port warehouses in China, it's a cost to serve in the high 200s. on a per ton basis. So it's a high cost region to get those volumes out. And so as we look forward to 2024, we don't expect significant increases in the Belarusian volumes that we've seen. Although as a whole with the region, we'll continue to watch and likely to continue to be variable from month to month, depending on downtime that's taken and market conditions through the year.

Your next question comes from the line of Steve Hansen from Raymond James. Your line is now open.

Yes, good morning. One thing at a time. Your ability to move record volumes in the face of the logistics constraints you outlined is impressive, perhaps at the risk of being too granular. Can you maybe give us the latest update on when precisely you expect the Camp Tech's terminal to be back up and running? I just want to understand the potential risk for not being able to serve the demand you're speaking to. And just as a related question, how do you feel about the relative price spreads we're starting to see between North America and Asia? You've described a pretty robust demand environment there. Do you expect to see some normalization of those spreads over time? Thanks.

Yeah, great. Thank you, Steve. So, yeah, with respect to the logistics piece, yes, our supply chain and CampaTex's supply chain, in light of some of the logistics challenges that we've described, but also the you know, low river levels along the Mississippi. It's made barge movement very difficult. We've seen challenges with rain in the Panama Canal and obviously bottlenecks there. But given the investments that Campotex has made both on the West Coast, but of course on the East Coast as well, and then with our vast network throughout North America, we have been able to meet the needs of our customers. And I think it's just demonstrates the resilience of our network and, you know, all backed by, obviously, our six mines as well. So, yes, we have been able to, like I say, meet the needs of our customers. With respect to the Portland outage, I mean, as I said, Vancouver, the terminal in Vancouver, our Neptune Chemitex's Neptune terminal is back at normal operating rates, and we expect Portland to be back up by the end of this year. So that peering into 2024, We expect to see full export capacity through the Campitex terminals. When we talk about the spreads between North America and Asia, I mean, you know, of course, these are granular markets versus standard-grade markets, and there is a distinction there where we've seen this very strong demand in North America as we've certainly heading into the fall application season and You know, that is our largest granular market, and as we said earlier, we're expecting a strong fall. With respect to the standard grade markets, we've talked about those in terms of Chinese consumption. We've talked about Southeast Asia and what we expect to see there. Could we see a narrowing of those spreads? You know, we could in 2024, but I think it's really a distinction between grades. Thanks.

Your next question comes from the line of Adam Samuelson from Goldman Sachs. Your line is now open.

Yes, thank you. Good morning, everyone. I was hoping to maybe dig in a little bit more on the retail side, and I know you gave some color on crop protection, kind of vertical in the prepared remarks, but can you just talk about where the channel inventories in your retail system are in North America and Australia, Brazil, kind of looking through the end of the year, how you've seen grower behavior change, if at all, this year. It would seem, based on some of the suppliers, that it's not just the distribution chain that's been slow to purchase products. And if you think you're getting to a normalization point, looking into next year, that'd be helpful. Thank you.

Great. Thank you, Adam, for the question. Yes, crop protection inventories have been drawing down in North America, although we'll continue to be quite selective there. I would say opportunistic, a little different in Brazil where we're still working through some higher cost inventory. But I'll hand it over to Jeff Tarcy to walk through all of that.

Yeah, good morning, Adam. And as Ken just said, we came into the year wanting to work diligently to get our crop protection inventory down. I think we've done a good job year to date. On that, we've drawn our inventory down and our retail business about $200 million below where we were this time last year. Sitting in a real good spot in the US market. As Ken and Pedro mentioned in their commentary, Brazilian markets are a bit more difficult, more product in the channel there. We think by the end of the year in our retail business, we would have worked through the majority of that crop protection inventory. in the Brazilian market. You know, we look from the supplier side of things. As Ken said, we'll be very selective and opportunistic on our purchases in the fourth quarter. And I do think he used the word normalizing. I do think that the purchases supply demand has normalized over the last 12 months. And growers don't, you know, they're not as keen to purchase ahead of time right now because they're not as worried about supply and inventory from that standpoint. At the same time, we've seen our margins on crop protection normalized very nicely from the first quarter as well.

Your next question comes from the line of Steve Byrne from Bank of America. Your line is now open.

Yes, thank you. tap into your brain from your old Campotex days with respect to the current pricing in potash. And if you were to think back a few years and see a scenario where tonnage out of FSU could be down, say, 5 million tons for the coming year, now you've got a little bit coming out of Laos, but you clearly have a supply shock. You've got favorable fundamentals in the world, would you expect Amputex to be sold out for the rest of this year and spot pricing in some key markets to be what looks to be fairly modestly above levels from a few years ago before the supply disruption? Is that logical to you?

Yeah. Morning, Steve, and thank you for the question. So You know, what I would say is the dynamic and the volatility since this conflict in Eastern Europe started and all of the supply side events that followed have just created a situation where, you know, we saw the big inventory movements at the start of this conflict where there was concerns about supply and And those rushing into the market, Brazil is a great example of that building inventory and all of the impacts on price that followed, which from a grower affordability point of view, while the fundamentals in agriculture were and continue to remain very strong from an affordability perspective, I mean, prices just reached to a level where affordability was compressed. And of course, we saw that buyer strike as a result. And we saw that buyer strike in North America. We saw it in Brazil. And we saw that continue until those inventories had been drawn down. And we've been watching those inventories come down from market to market. And as those inventories coming down, of course, no one stepping in until we're able to sort of see an inflection point. And so that's, I believe, you know, we can characterize the last 18 months along those lines. And then, you know, where is that inflection point? Or what does stability look like? And I think I would say, Steve, from a camper tax perspective, peering now into 2024, and as we talked about, very strong consumption in China this year, and as we talked about Southeast Asia stepping out of the market, and really now with CPO prices, rice prices being where they're at, an expectation that they're going to be stepping back into the market, with Europe having cleared high-price inventories. With India, actually, I think we believe suffering yield losses because of lack of crop nutrition and stepping back into the market. You know, we're constructive on 2024. And while, yes, Campotex has placed volumes and committed through the end of the year as markets have been stabilizing and, you know, us continuing to run our six-cost, our six-mine network of low-cost production, you know, this is where we are. But, yes, we're peering into 2024. And we're expecting even more normalization across those markets. So, yes, it's been an interesting and volatile 18 months, but here we are and constructive on 2024.

Your next question comes from the line of Michael Tupom from TD Securities. Your line is now open.

Thank you. Within the nitrogen business, the brownfield projects that were completed in Q3, can you talk about how much incremental annual production volume those contribute to Nutrien? What you're expecting to add in terms of volumes in 2024 from any additional projects and perhaps the settlement of the gas contract in Trinidad? And then kind of bigger picture, any commentary you can provide on how you're thinking about year-over-year nitrogen volume growth in 2024 versus 2023, both for the overall market and then specifically for nutrients?

Yeah, thank you, Mike. And yes, we certainly expect increased volumes in 2024, getting above 11 million tons. But I'll hand it over to Trevor Williams to talk about some of those details.

All right. Thanks, Mike. A couple of thoughts here. So with the de-bottlenecks that we did this year, we'll add about, in the range, about 150,000 to 200,000 tons this year, mostly in UAN. A little bit on the ammonia side, but, again, most of this geared from the work that we did at Geismar earlier in the year. Going into next year, we do have a couple of small de-bottlenecks as well. It's in the smaller volume of, you know, 40,000 to 50,000 tons that will be completed. Mostly on the ammonia side in the in the Alberta system But if you think about where our glide path is, you know this year we provide our guidance in the range next year we think we'll be in that kind of a you know a little bit above the 11 or 11 million tons and And as we look forward to 2025, 2026, getting back to that mid-cycle expectation of being 11.5 to 12 million tons on a run rate going forward. Mark, maybe over to you just in terms of some of the comments in terms of the market.

Yeah, sure. Thanks, Michael, for the question. Look, I think Trevor summed up the volume story really well. From a nitrogen standpoint overall, the market's quite constructive generally. We've seen supply constraints increase. certainly in urea and ammonia around the world, playing a role the last several months, and that's led to a significant tightness in the market. I think much as Ken has described here this morning, just generally from an agriculture standpoint in North America, things are quite positive from a nitrogen standpoint. I think, as Jeff Tarcy would probably tell you, it's a little bit early to call acreage shifts for next year, but we do still expect healthy corn planting and strong agricultural nitrogen demand next year. think just double click a little bit on you know where things are in the market certainly from an ammonia standpoint on our q2 call we had articulated that we felt ammonia was fundamentally undervalued given the tightness in the market and we've certainly seen things firm up here over the last several months which really has been a supply driven event and so ultimately we've seen ammonia now come back into balance from from a value on an end basis with urea and UAN we do expect good fall applications here across the nitrogen complex as we move through the rest of Q4, and I think the setup looks pretty good peering into Q1 next year.

Your next question comes from the line of Richard Garchitarayana from Wells Fargo. Your line is now open.

Great. Thank you. So, I just wanted to circle back to potash demand and sort of your expectations going So, you know, with 2024 basically around 57 to 71 million tons of demand, and then on the supply side, potentially at least 1 to 3 million more tons of supply from Eastern Europe, I guess just wanted to know your thought process in terms of how you think about the expansion plans and when we should think about maybe you starting to move forward more quickly on the 14 to 15 million ton target for mid-cycle. And also, just on that follow-up, is the CapEx guidance for, say, $2 to $2.5 billion going forward include any spend for growth, either in potash or nitrogen, or is that essentially sustaining CapEx?

Thank you. Thanks for the questions, Rich. So, yeah, with respect to 2024 and our potash expansions, When we talk about the mid-cycle in our business, I mean, we would say that that's 14 to 15 million tons of capacity that we have available to put into the market. And as it relates to 2024, yeah, we expect demand to continue to grow. We expect it to continue to grow beyond 2024, of course. And as it grows, we'll maintain market share. We'll continue to meet the needs of our customers. And as our customers are calling for volumes, we'll get those volumes into the market. So We absolutely believe that we're on a growth trajectory here and that we'll be able to deploy our additional low-cost tons into the market. As we talk about the $2 to $2.5 billion on the CapEx side, I mean, absolutely, as we look at the investments that we're making in potash, today we feel comfortable with the volumes that we've had. Hence, we talked about the pause in deploying capital toward increasing expansion. At this moment, of course, we can return to an expansion trajectory with low CapEx to go beyond the 14 to 50 million tons as we watch the market evolve and as our customers are calling for those tons. But again, for today, we feel comfortable with the investments we've made. Where we are deploying capital in Potash is the ongoing work associated with automation, associated with predictive maintenance and advanced process controls. Of course, the automation work, in addition to having the big safety benefits, has increased. productivity benefits, and we're in the process of realizing those benefits actually as we speak, as we deploy automated mining machines in our five underground mines. So certainly part of that, the $500 million that we talk about in investing CapEx, growing our business, part of that is in the automation work that we're doing in our Potash network.

Your next question comes from the line of Josh Spector from UBS.

Good morning. This is Lucas Spellman for Josh. So just sticking with potash, the top, I mean, six to seven million tons of capacity there on the cost curve, it accelerates pretty rapidly in terms of the cash costs from sort of low 200s up to kind of 350s up range. With the incremental capacity coming from the two phases of BHP plus the rollback in of sort of Russia and Belarus through the end of the decade, you know, I mean, that's pretty much equivalent to kind of what would be 10 years of demand growth kind of historically. And that's not sort of counting any of the other smaller projects that may or may not sort of come online. So do you think that top portion of supply is going to get pushed off the cost curve out there? And if that does... I mean, that would seem to imply that pricing support is really kind of back at 2016 to 2019 lows versus sort of what you guys are assuming sort of for your mid-cycle pricing, which is quite a bit higher than that. So if you could just kind of give us your thoughts there on the dynamics and how you see that evolving, that'd be great.

Yeah. No, thank you, Lucas. And I think you described just a number of moving parts there that I would say have a lot of unknowns and risk associated with them. Again, we would have a lot of conviction around the fact that we're in a market that just continues to grow. We can continue to talk about the reasons that it's growing, but for disease resistance, drought resistance, yield, potash is going to continue to be used. Again, we've seen that, those growth rates over the last few decades and looking forward, we just have a lot of conviction that that's going to continue to be true. Taking that assumption, then looking at the supply side, you know, we do know that some of this FSU planned, new planned production that was in the pipeline to come to the market is delayed. It is, in fact, delayed. And, you know, it's delayed probably measured not in months, but in years. And so as that new volume is pushed out, of course, that creates room in the market. Yes, there is an announcement of a phase one and a phase two at a new Saskatchewan mine. But I'll just say again, we've looked through our risk lens associated with bringing on those types of volumes in soft rock mining. And soft rock mining is a lot different than hard rock mining. I have done both. And those are challenging mines to bring on stream. There's always unknowns and there's always some surprises. You know, as we factored in a phase two from BHP into our plans all along, but as we factor in these new volumes, we are applying our own lens, which would say that at the end of this decade, the start of the next decade, that you put it all together, and certainly we believe there's room in the market for these tons. There's room in the market for our growth with our customers in the markets. And we're not talking about knocking someone off the high end of the cost curve.

There are no further questions at this time.

I will now turn the call back to Jeff Holtzman. Please continue.

Thank you for joining us today. The investor relations team is available if you have any follow-up questions. Have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.