Nutrien announces outlook for 2023

Days after announcing the financial results for the year 2022, Nutrien presented today (24/2) the reports to investors for that year. It also registered them with regulatory authorities in the United States and Canadian markets. The company was presided over by Ken Seitz (in the photo) recorded a net profit of US$7,7 billion and a record adjusted EBITDA of US$12,2 billion, in addition to a return on invested capital of 26%.

Nutrien's outlook for 2023 brings a lot of interesting information. According to the company's statement, agricultural fundamentals remain strong and are supported by the lowest global grain inventory ratio in more than 25 years. Crop production and exports in Ukraine are expected to remain limited by the impact of the war with Russia, and the company estimates that more than one harvest will be needed to alleviate market supply risk.

Spot prices for corn, soybeans and wheat are about 25% to 50% higher compared to the 10-year average, which should support producers' returns and encourage them to increase production in 2023. Nutrien predicts that the acreage of major U.S. crops will increase by about 4% in 2023, assuming a more normal planting window compared to spring 2022. Corn plantings are expected to increase from approximately 89 million acres in 2022 to between 91 and 93 million acres in 2023.

In Brazil, the numbers are positive. The economy of Brazilian soybean and corn producers is strong, which should support another year of above-trend growth in this market. Australian growers have benefited from several years of above-average yields and historically high crop prices, which positions them very well financially for 2023, and the company expects another year of strong production, provided weather conditions are favorable.

Nutrien projects strong demand for agricultural inputs in all markets it serves in 2023. However, it highlighted that gross margins for nutrients and crop protection could be lower in 2023 compared to the record levels achieved in 2022.

In turn, demand for potash for agriculture has improved in early 2023, but buyers remain cautious about inventory management, which could lead to a more concentrated shipping period as key harvesting seasons approach. application.

This is the market perspective presented by a company supplying agricultural nutrients in relation to the potash sector. According to the company, potash stocks in Brazil and the United States were reduced after a historic drop in the pace of shipments in the second half of 2022. The estimate for global potash shipments for 2023 is 63 to 67 million tons, still below of historical demand estimated at around 70 million tons.

Furthermore, potash exports from Belarus and Russia are expected to decrease in 2023 compared to 2021. Projections indicate a 40 to 60 percent reduction in Belarusian exports and a 15 to 30 percent reduction in Russian exports. This reduction in supply will be more apparent in the first quarter of 2023 compared to the same period in 2022, as exports from both Belarus and Russia were heavily concentrated in early 2022, before the imposition of sanctions and export restrictions.

Moving on to the nitrogen sector, the outlook for 2023 is for a global decline in prices in the first two months of the year due to the drop in natural gas prices in Europe and delays on the part of buyers. European natural gas prices are expected to be volatile throughout the year due to an offline nitrogen capacity of around 30% in the region in early 2023. In North America, gas prices remain highly competitive compared with Europe and Asia and Henry Hub prices are expected to range between US$2,50 and US$4,50 per MMBtu in 2023.

Nitrogen supply constraints, including reduced Russian ammonia exports, reduced operating rates in Europe and Chinese urea export restrictions, are expected to persist into 2023, impacting price volatility in periods of high seasonal demand. A tightening in the balance between supply and demand in the United States is expected ahead of the spring season due to the increase in corn acreage and increased nitrogen exports over the past six months.

Global economic growth is a potential risk to industrial demand in 2023. Macroeconomic pressures have impacted Asian markets throughout 2022 and there is potential for the reopening of the Chinese economy to have a positive impact on the region's economic growth later in 2023, depending on the impacts of COVID-19 and related policy decisions.

Nutrien's nitrogen ton sales expectation for 2023 is 10,8 to 11,4 million tons and assumes higher operating rates at its North American plants and continued gas cuts in Trinidad in 2023. Expected sales of tons of nitrogen include 300 to 350 thousand tons of projected sales of the ESN product, which prior to 2023 were included in the other products category.

Finally, in the phosphate segment, the outlook for 2023 is influenced by several variables. Restrictions on Chinese phosphate exports are expected to remain in place until at least April 2023.

However, demand for phosphate is expected to increase in North America and Brazil, as well as continued strong demand in India. Phosphate product margins are expected to be supported by reduced prices for sulfur, the raw materials used in their production, due to reduced operating rates and demand in China.

These perspectives may indicate a scenario of opportunities for producers and suppliers of agricultural fertilizers and nutrients, especially in countries like Brazil, which are among the largest producers of agricultural commodities. However, it is important to closely monitor market movements and the policies of the main players, such as China, to better understand the global scenario and its possible implications for the agricultural sector.

Risks for the future

Nutrien identified several factors that could, in theory, impact your business and strategy in the future. Among them, the following stand out: (a) changes in global macroeconomic conditions, including trade tariffs and other restrictions; (b) volatility in global markets; (c) supply chain restrictions; (d) greater price competition; (e) significant changes in agricultural production or consumption trends. These factors could lead to a low crop price environment and reduce demand for your products or increase the prices or decrease the availability of raw materials used in manufacturing your products.

Other factors that could affect the company's strategy and financial performance are: (a) changes in agricultural trends and productivity; (c) changes in consumer preferences; (d) increased focus on sustainability in agriculture, including soil health, availability of arable land, decreasing biodiversity and water management; (e) as well as technological innovation and digital business models.

Climate change was also considered as it could cause more frequent and severe weather events, impact growing seasons or crop yields, and affect freshwater availability. Physical and transition risks from climate change may also result in disruptions to operations or the supply chain, depending on the nature of the event.

In addition, changes in laws, regulations and government policies, including those related to the environment and climate change, as well as health and safety, taxes and royalties, could affect the company's ability to produce or sell certain products, reduce its efficiency and competitive advantage, increase its raw materials, energy, transportation and compliance costs, or require the company to make capital improvements to its operations.

Other challenges the company must face include cybersecurity threats, political, economic and social instability, difficulties in attracting, developing and retaining talented employees, lack of stakeholder support, capital reallocation issues and risks related to safety, health and the environment. environment.