One-On-One With Nutrien CEO: $4 Billion To Be Invested in Ag Retail

Magro Nutrien ARA
Nutrien CEO Chuck Magro gave an industry and company update at the 2018 Ag Retailers Association conference on Nov. 28. ( Nutrien )

It’s been almost a year since the official formation of Nutrien (which happened on Jan. 1, 2018 as Potash Corp and Agrium merged).

Nutrien CEO Chuck Magro gave an industry and company update at the 2018 Ag Retailers Association conference on Nov. 28. He provided three challenges in the industry today, three changes that are coming, and the two things Nutrien is doing to prepare for the future.

“The U.S. ag retail industry is the gold standard around the world,” he says. “And there’s a reason for that. I was in China two weeks ago, and they said they want to duplicate what we have in the U.S. I’ve heard the same in India and Brazil. They see the value the U.S. ag retail industry brings to the farm. Over the past 50 years, this business has proven to be low-cost and value-enhancing to farmers.”

He says in the next five years the company will invest $4 billion in its retail business. This includes retail footprint investments in the U.S., Canada, Australia and Brazil. It also includes their investments in the Integrated Digital Platform, which was first introduced in July.

According to Magro, the three challenges facing the industry are:

  • U.S. farm economics: “I worry about the health of the U.S. farmer. Lenders are pulling back at exactly the wrong time when farmers need it,” he says. “At Nutrien, we’ve increased our ag lending to $2.5 billion—trying to do our part to support our customers.”
  • Trade wars: “We know this has impacted soybean prices, and some experts say by $2/bu. or $100/acre,” Magro says. “And there’s a second concern brewing—30% of all active ingredients for herbicides, insecticides and fungicides come from China. So all of us—agribusiness, retailers, and growers—will bear the increased cost if the 25% tariffs go into effect in January. That could be $3 to $5 an acre.”
  • Regulation: “There are many initiatives that are classifying fertilizers not as crop nutrition products but as pollutants,” Magro says. “It’s up to us in the U.S. to lead with how we proactively address potential regulations. And we have to be rooted in the 4Rs.”

The three changes Magro sees coming to the industry are:  

  • Improving fundamentals: “The corn stocks/use ratio is a barometer or indicator of what’s to come. We’ve never produced more food than we have in the past three years, and inventories are coming down,” he says. “People are consuming our food commodities, and while the trade war will cause uncertainty, we will get through it.”
  • Accelerating consolidation. “Consolidation is not new as the industry has always been consolidating, but the pace, size and scale has changed,” he says. “And more consolidation needs to happen as our customers are consolidating.” He says consolidation and concentration in the market may look very different across their business portfolio. He cites the company’s retail footprint in the U.S. having 20% market share today. As the No. 1 potash producer in the world, the company accounts for 20% of the market. And as the No. 3 nitrogen producer, the company produces 3% of the total global supply.
  • Technology: “With ag technology, billions are being poured into our industry,” Magro says. “The giants have woken up, and now Amazon, Google, Microsoft and IBM all have strategies involving agriculture.”

Magro says with those challenges and changes, Nutrien has decided to not sit still. He references the $4 billion that will be re-invested in the ag retail channel (that sum is part of the $6 – 8 billion expected to be raised after the final sales of properties as part of the company’s regulatory agreement at the time of the merger and from base operations).

“These investments will help move our retail business from just an inputs business—buying and selling inputs and services—to be an outcome company not just about improving yields for farmers but also profitability,” Magro says.

The company’s investments in technology will help pave this path. Every year, the company intends to spend $100 million on development, with a focus on its Integrated Digital Platform. In the first quarter of 2019, the company will launch e-commerce for limited products on the Integrated Digital Platform.

“After five months of launching our new platform, we have 40% of all North American revenue signed up and conducting transactional business with us,” he says. “And we feel compelled to enter the e-commerce space. We want to be seamless to do business with—on the phone, in person, or online.”

Also related to technology, Magro says while Agrible had an impressive e-commerce platform, they were most appealing to Nutrien as an acquisition because of their sustainability platform. He says providing this kind of traceability and transparency will be an important value to farmers moving forward.