On Thursday, May 28, Nutrien's President and CEO Chuck Magro provided a more of a positive outlook for the remainder of 2020 compared to earlier guidance the company gave during the COVID-19 pandemic.
“The sharp pull back we were expecting in the nitrogen business, the decline in biofuels—those are starting to abate sooner than we thought. The situation for corn looks better. Planted acres will not be 97 million like USDA forecasted,” he says. “For fertilizer, the bottom is in. We’ve seen it in potash and we’ll see something similar in nitrogen later this year or early in 2021.”
He made his comments during the virtual Bernstein 36th Annual Strategic Decisions Conference. Click here for a full replay.
One investment in their business that has paid off during the pandemic has been the digital customer portal, which was launched in 2019.
“10% of our total sales are going through the digital portal,” Magro says. “Of the products available online, 40% of those products’ sales are online.”
During the company’s first quarter investor call earlier in the year, Magro said $200 million of orders were placed via the online portal, which is four times greater than in 2019.
He says the investments in the digital product have been to improve the relationship the farmer customer has with their sales agronomist. And during the times of COVID-19 it’s been a tool to keep everyone safe, healthy and productive.
“We’ve shown in COVID-19 we can conduct business differently–more efficiently and safely,” Magro says. “The omni-channel isn’t intended to do anything but support our agronomists. We gained market share last year because the market was so compressed with weather they [farmers] went with companies they knew would deliver. And we are a company known that we will deliver.”
In 2020, the company is investing $60 million to add functionality and new features to the platform.
“Over time, you’ll see it (the platform) will drive a higher share of wallet, reduce the number of customer churn, and allow us to weed out some of our costs,” he says. “It’s allowing farmers to do business with us how they want, where they want, when they want. There will be value ascribed to that.”
Magro commented that the USDA’s programs to provide financial relief to farmers during the health crisis are helping provide liquidity and financial strength in the market.
As for how the company intends to expand its footprint, company leaders said acquisitions are in their future during the 1st quarter investor call. They shared there may be more activity in the second half of the year as travel and meetings solidify deals they have in the pipeline.
Regarding the fertilizer market, Magro says this year has provided a much needed window to catch up on applied acres. Because of the high number of prevent plant acres in 2019 as well as market supply, there was built up inventory. For nitrogen, he sees the market working through that inventory by end of the spring and setting up a healthy market landscape for the fall.
“Every retailer we know will try to be empty at the end of this season,” he says. “With today’s pricing level, in the second half of the year you’ll see a response from the supply side and there will be strong demand for nitrogen.”
Earlier in May, the company said it was decreasing its production capacity of anhydrous ammonia at its facility in Trinidad.
As for potash, he’s extending his forecast for a tighter supply/demand equation.
“This year will be the worst year for any new capacity to come online,” he says of potash.