CIBCHave a US$127.00 target. GLTA
EQUITY RESEARCH
June 23, 2022 Company Update
NUTRIEN LTD.
Lunch With Pedro Farah
Our Conclusion
We had the opportunity to host a one-hour call with Pedro Farah, CFO of
Nutrien, earlier today. Overall, the tone of the call was positive reflecting
strong grower economics and ag-input demand (NTR commenting on U.S.
farmer margins being higher Y/Y in 2022). NTR also pointed out that potash
demand has been solid and pricing remaining elevated (company
commenting that only 10% of Belarus potash capacity and 70% of Russian
potash capacity are being exported currently).
The weakness in NTR’s share price today is likely a function of weaker corn
prices (improved Midwest weather combined with escalating recession
concerns to spur heavy fund liquidation) and weak May fertilizer volumes
from Mosaic. That being said, NTR is more constructive on June and H2/22
ag-input demand. It was an extremely slow start in the U.S. for April/May
2022 planting, but June weather has been much better (therefore expect
better in-season urea and UAN demand but weaker ammonia demand).
While there is roughly a week left in Q2/22, our thinking post-call is that
management seemed confident on annual 2022 guidance but we could see
some Q2/22 earnings pushed into H2/22 due to the slower U.S. start.
Key Points
Corn planting wrapped up last week, while soybean planting moved ahead to
95% planted, now 1% ahead of the five-year average. This follows a slow
April, and a spike in May and June plantings to catch up to national
averages.
Today, July corn futures plunged 21 1/4 cents to $7.46 3/4, while December
corn fell 38 1/4 cents to $6.55 1/2, the lowest close since March 29. New-
crop corn dropped near a three-month low as an outlook for improved
Midwest weather combined with escalating recession concerns to spur heavy
fund liquidation.
With last week’s hike in European natural gas, urea traders moved quickly to
secure tonnes, pushing prices up in key markets. Brazil spot prices were up
$45/t CFR W/W to $600/t CFR on average, while U.S. NOLA spot jumped
$65/st this week to $505/st on average.