Plans to increase the production offertilizer will be accelerated by the posts record net earnings.
A miner stands near the cutting head of a digger near an active mining wall. There is a potash mine in the province.
James MacDonald took the photo.
On Tuesday, the company posted a record net earnings and said it would accelerate plans to increase production, signalling it sees continued disruption in the global food supply chain for years to come.
The company's net earnings in the first three months of the year were a record, up from the fourth quarter of the previous year, which was attributed to higher commodity prices.
The company raised its full year guidance for adjusted earnings before interest, taxes, depreciation and amortization to $14.5-16.5 billion, a 45 per cent increase at the low-end from February, when it expected $10-11.2 billion.
In a conference call with analysts on Tuesday morning, interim chief executive Ken Seitz said his company will step in to fill demand with plans to increase both potash and nitrogen production significantly next.
Seitz said on the earnings call that they were discussing the supply challenges in the context of 2022. The potential to create more lasting changes to global trade patterns as customers prioritize reliability of supply is caused by the sanctions on Russia and Belarus.
There is a storage facility in the province.
The photo was taken by David Stobbe.
Canada, the U.S., and other countries imposed sanctions on Russian exports after it invaded Ukraine. The country has been under sanctions since 2020.
Seitz estimated that global potash production would decline to as low as 60 million tonnes this year, and that the two countries represent around 40 per cent of global potash exports. Statistics Canada estimated 2020 global production at 69.2 million tonnes.
The six mines operated by Nutrien have a total annual production capacity of 20 million tonnes. Seitz said the company would continue to monitor whether it makes sense to ramp up production beyond 15 million tonnes, but noted that capital investments would need to be made to increase its workforce.
He promised more details at the company's virtual investor update on June 9.
The recent sanctions against Russia led to billions of dollars in losses for some companies. Trade disruptions caused by sanctions are creating economic opportunities for some companies.
Seitz expressed sympathy for the people affected by the conflict. He noted that Russia and Ukraine account for a significant portion of the world's supply of agricultural products.
A farmer is in a wheat field.
The photo was taken by Thomas Peter.
Seitz explained that the global food chain is connected. As global grain and oilseed inventories decline, and the price of corn, soybeans, wheat and other key commodities move higher, prospective margins on crops also move higher. Many farmers plant more acres and apply morefertilizer to take advantage of the good market conditions.
The cumulative effects of sanctions on banking, shipping, insurance and other parts of the economy are expected to affect production.
Potash production in Russia is expected to decline by two to six million tonnes in the year 2022, according to the chief economist of Nutrien.
It will take some time to rebuild the export capabilities of the two countries, who are expected to add up to 70% of the new potash supply in the next five years.
The cumulative effect of the supply challenges and higher commodity prices more than offset the impact of a delayed start to the U.S. growing season.
Seitz said that many growers are looking for alternative sources offertilizer.
Canpotex, the Canadian firm responsible for selling potash production out of Saskatchewan, has been ringing since he left as chief executive.
From a global demand perspective, Canpotex has homes for potash, and that is what is driving us, as we said in our opening comments.
Email: gfriedman@postmedia.com
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