Picture supply: The Motley Idiot.
Nutrien Ltd. (NTR zero.70%)
Q2 2022 Earnings Name
Aug 04, 2022, 10:00 a.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Members
Ready Remarks:
Operator
Greetings, and welcome to Nutrien’s 2022 second quarter earnings name. [Operator instructions] I might now like to show the convention over to Mr. Jeff Holzman, VP of investor relations. Please go forward, sir.
Jeff Holzman — Vice President, Investor Relations
Thanks, operator. Good morning, and welcome to Nutrien’s second quarter 2022 convention name. As we conduct this name, varied statements that we make about future expectations, plans and prospects comprise forward-looking info. Sure materials assumptions have been utilized in making these conclusions and forecasts.
Subsequently, precise outcomes might differ materially from these contained in our forward-looking info. Extra details about these elements and assumptions are contained in our present quarterly report back to shareholders in addition to our most up-to-date annual report, MD&A and annual info type filed with Canadian and U.S. Securities Commissions. I’ll now flip the decision over to Ken Seitz, Interim president and CEO; and Pedro Farah, our CFO, for opening feedback earlier than we take your questions.
Ken Seitz — Interim President and Chief Government Officer
Good morning and I may even welcome you to Nutrien’s second quarter earnings name. Earlier than we get into the dialogue of our outcomes and outlook for the rest of 2022, I wish to spotlight three key messages. First, we imagine structural modifications to world power, agriculture and fertilizer markets will present a help atmosphere for Nutrien properly past 2022. Second, we’re accelerating strategic development initiatives that leverage the distinctive benefits of our built-in enterprise, generate wonderful returns on invested capital and improve our potential to supply sustainable options to assist feed a rising world.
And third, we’re dedicated to a balanced strategy to capital allocation that helps development and the sustainability of our enterprise, whereas additionally returning significant capital to shareholders. In 2022, we count on to take a position round $three billion on sustaining and development initiatives and distribute roughly $6 billion in capital to shareholders. Pedro will stroll via our plans in additional element in a while on this name. Now turning to our outcomes and outlook, Nutrien delivered file first half earnings pushed by the energy of market fundamentals, the advantaged place of our world manufacturing property and the superb efficiency of retail.
We proceed to progress our sustainability priorities and had wonderful security efficiency throughout the Firm, together with a robust engagement in our severe damage and fatality prevention efforts, which is crucial work we do. Nutrien Ag Options had a file first half with adjusted EBITDA of almost $1.7 billion, up 38% from the prior yr. The retail group delivered increased margins throughout almost all merchandise and geographies and supported by the energy of our world provide chain and expanded providing of high-value services to growers. Crop nutrient and crop safety margins have been very sturdy because of strategic procurement in a rising worth atmosphere and development in our proprietary dietary merchandise.
North American fertilizer volumes have been down within the first half to a mixture of a really sturdy fall season in 2021, some crop combine shifts and a condensed utility window this spring. Fertilizer gross sales volumes exterior of North America have been up from the prior yr, reflecting development in our Brazilian retail community. Potash adjusted EBITDA elevated to $three.four billion within the first half, supported by increased realized costs and file offshore gross sales volumes. Potash manufacturing elevated by greater than 5% in comparison with the primary half of 2021, and controllable money prices have been comparatively flat.
The rise in manufacturing lowered our per ton mounted prices and largely offset the impacts of inflation. Spot costs in Brazil and Southeast Asia have been up considerably in comparison with the earlier yr, and Canpotex continued to prioritize its obtainable volumes to those increased netback offshore markets. In nitrogen, adjusted EBITDA within the first half elevated to $2.2 billion as increased realized costs greater than offset decrease gross sales volumes and better pure fuel costs. The delayed begin of the North American spring season impacted gross sales volumes, specifically, ammonia and UAN, and was a serious contributor to the decline in nitrogen benchmark costs that occurred within the second quarter.
We had file phosphate adjusted EBITDA of $423 million within the first half as increased realized costs greater than offset the big enhance in ammonia and sulfur enter prices. Within the second quarter, we acknowledged a non-cash impairment reversal of $450 million, which was pushed by improved market fundamentals and a extra favorable view of phosphate margins. Turning to the outlook. International grain and oilseed inventories stay traditionally low.
The latest deal to reopen Ukrainian exports via the Black Sea can be a constructive improvement for world meals safety, if there’s a sustained enhance to shipments. Nevertheless, analysts imagine volumes will proceed to be challenged by labor and logistical constraints along with ongoing navy strikes within the area. Ukraine’s grain manufacturing and export ranges are projected to be down dramatically in comparison with 2021, leaving little buffer for any provide points in different areas this rising season. U.S.
grain circumstances have been typically favorable. Nevertheless, excessive temperatures in July seemingly capped yield potential and file excessive temperatures in Europe have lowered summer time crop yields. Crop commodity costs have been impacted over the previous month by broader market volatility however are nonetheless 25% to 35% above the 10-year common, and futures are buying and selling at elevated ranges on a multiyear foundation. In North America, we count on sturdy grower demand within the third quarter for high gown nitrogen, particular dietary merchandise and crop safety merchandise.
The crop was planted late, however is maturing quickly with the latest sizzling climate, and we’re planning for a traditional utility window this fall. In Brazil, grower margins are sturdy and soybean planted space is predicted to extend by 2% to four%. Fertilizer inventories have been gradual to maneuver from core to inland positions as consumers look to buy on a just-in-time foundation. However we anticipate sturdy actions over the following two months to make sure product is on the market for the upcoming planting season.
In potash, a lot of the main focus stays on provide challenges in Japanese Europe. Shipments from Russia and Belarus have been down an estimated 25% and 50%, respectively, within the first half of 2022. Russian potash shouldn’t be at the moment sanctioned, however has been impacted by restrictions on financing actions that facilitate exports. The impression of sanctions on Belarus provide has been extra important as a result of lack of entry to Tidewater via Lithuania.
Belarus is reportedly transport small volumes by way of container, which for a bulk commodity is a extra pricey and logistically difficult choice. We narrowed our world potash cargo forecast to between 61 million and 64 million tons in 2022 and count on shipments to be constrained by restrictions on exports from Russia and Belarus. Past the present provide challenges, we see the potential for delays within the improvement of latest potash capability from this area, which was projected to be the supply of roughly 60% of latest potash provide, excluding Nutrien, over the following 5 years. We count on nitrogen costs to strengthen within the second half supported by excessive European fuel costs in addition to restricted Chinese language urea and Russian ammonia exports.
European fuel costs averaged near $50 per MMBtu in July which equates to an ammonia money manufacturing value of over $1,700 per ton greater than 20% of the Europe’s ammonia manufacturing is estimated to be curtailed, and there are issues over fuel pricing and availability via the winter in Europe. Many consumers have delayed purchases given latest market volatility, and we paid by seasonal resurgence of then within the second half that would additional tighten provide. I’ll now flip it over to Pedro to evaluation our monetary steering and capital allocation plans.
Pedro Farah — Chief Monetary Officer
Thanks, Ken. First, a couple of feedback on our steering, we count on a robust second half and the projected adjusted EBITDA within the area of $14 billion to $15.5 billion and adjusted EPS within the vary of $15.eight to $17.eight per share. The midpoint of our adjusted EPS steering represents a virtually threefold enhance in comparison with 2021, reflecting each the rise in complete earnings and the discount in our weighted common shares excellent. Retail had a really sturdy first half, and we at the moment are guiding to adjusted EBITDA between $2.1 billion and $2.2 billion in 2022, which represents a 12% annual development fee over the previous 5 years.
We count on a extra regular fall utility season in North America and anticipate per ton crop nutrient margins under this traditionally sturdy ranges we achieved within the second half final yr. In potash, we narrowed our adjusted EBITDA steering vary and count on file volumes pushed by sturdy demand in offshore markets. Potash costs have been essentially the most steady among the many three main vitamins and we anticipate that may proceed via the second half. Our revised nitrogen earnings steering vary displays the impression of low North American benchmark pricing and better than beforehand forecast home pure fuel costs.
Regardless of this transformation, we preserve our constructive outlook for nitrogen markets via the second half of the yr and into 2023. We challenge money from working actions of roughly $9.5 billion assuming a money conversion ratio of 65% on the midpoint of our adjusted EBITDA steering. This ratio is decrease than beforehand forecast because of a change in timing of working capital necessities; nonetheless, we count on this to end in a extra favorable impression to our working money movement in 2023. As Ken talked about earlier, we now have a balanced strategy to capital allocation and intend on allocating roughly one-thirds of our working money movement to development in sustained tasks.
The remaining two-thirds we plan on returning to shareholders via dividends and share repurchases. Reinvesting 1.three to 1.four in sustaining tasks to make sure we preserve a protected and dependable operations, in addition to help our increasing manufacturing functionality. That is barely increased than our earlier steering and displays inflationary pressures on labor and gear. We imagine that inflation and gear, specifically, could also be transitory.
We’re allocating roughly $1.7 billion to advance excessive return strategic initiatives throughout our enterprise that we count on will drive earnings development via the cycle. Important accounts for almost 60% of the expansion capital with acquisitions and investments targeted on increasing our community in core geographies enhancing our digital capabilities and rising our proprietary merchandise portfolio. We’ve accomplished or introduced 10 acquisitions to date this yr in Brazil, final in Australia, for a complete funding of roughly $450 million. Following completion of the 2 latest introduced acquisitions in Brazil, we count on to surpass our said goal of $100 million of adjusted EBITDA by 2023.
Our portfolio of Brazilian acquisitions are performing very properly, exceeding our hurdle fee for this market. In potash, nearly all of funding is said to underground mine improvement and extra mining gear to help the accelerated ramp of our manufacturing functionality to 18 million tons by 2025. That is versatile, low-cost manufacturing functionality that’s unmatched within the business. And based mostly on what we’re seeing out there is manufacturing that can be wanted to satisfy world demand.
We estimate a capital value at $150 to $200 per ton, offering a really brief payback interval or in different phrases, a low remorse value based mostly on projected margins. We proceed to advance our low-cost Part II nitrogen brownfield enlargement tasks. And in Could, we introduced our intention to construct a 1.2 million ton clear ammonia facility at our present web site in Geismar, Louisiana. This challenge gives a chance to leverage present infrastructure and entry to tidewater.
We imagine this challenge can obtain enticing returns at mid-cycle ammonia costs, allowed Nutrien to take part within the present and rising finish use markets for service provider ammonia and play a key position in attaining our 2030 emissions discount objectives. To be clear, we aren’t counting on further quantity or a worth premium which will include the event of a bigger clear ammonia market. This can be an upside. Lastly, we intend on returning $6 billion in capital to shareholders in 2022, which equates to 13% of our present market cap, round $1 billion of that is our dividend, which was elevated by four.four% again in February.
Given the boldness in our working money movement, we introduced yesterday our intent to finish our present 10% NCIB in 2022. Finishing the NCIB to decrease our frequent shares excellent to round $500 million by year-end, we plan on factoring within the important discount in share depend within the determination standards as we goal sustainable and rising dividends over time. And now I will go it again to Ken.
Ken Seitz — Interim President and Chief Government Officer
Thanks, Pedro. I might simply make a couple of last feedback. The basics for our enterprise stay very sturdy, and the problem of feeding a rising world has by no means been extra obvious. Nutrien is uniquely positioned to securely and sustainably reply to this problem via our shut reference to the grower, our intensive world provide chain, and our high tier manufacturing property.
I am assured we will ship as a result of efforts of our proficient individuals throughout the group who I wish to thank for his or her laborious work and dedication to serving to Nutrien feed the longer term. I am joined as we speak by members of our management group, and we might be pleased to take your questions.
Questions & Solutions:
Operator
[Operator instructions] Your first query comes from Andrew Wong of RBC Capital Markets. Please go forward.
Andrew Wong — RBC Capital Markets — Analyst
Hey, good morning and thanks for taking my query. So simply relating to the nitrogen steering, clearly, the market was a bit weaker into midyear than all of us anticipated, but in addition, such as you talked about within the ready remarks, provide could be very constrained with the excessive nat fuel scenario that we’re seeing in Europe. And we simply already heard urea moved up about $100 final week and issues can transfer fairly rapidly in nitrogen. So simply type of curious what your assumptions are within the higher and the decrease finish of the steering vary.
And are you perhaps being a bit bit conservative right here simply due to what we’re seeing as we speak?
Ken Seitz — Interim President and Chief Government Officer
Nice. Thanks for the query, Andrew. And sure, I imply, it is true that we had a full utility season — a robust fall utility season in 2021. And naturally, the late begin to the spring, which led to some shifts in crop combine and a few stop plant space, which led to decrease utility charges and subsequently some carryover from the spring season.
So sure, we have seen some seasonal volatility right here, and but it’s a provide constrained market. I’ll — I will hand it over to first Raef to supply some further coloration simply on how we — that volatility and the way we have centered and relaxation via the yr.
Raef Sully — Government Vice President, CEO Nitrogen and Phosphate
Sure. Thanks, Ken, and thanks, Andrew. Look, as you famous, the volatility was a lot increased within the first half than we had thought. And that impacted our outcomes.
As Ken talked about, we had actually good utility charges final fall. We had the delayed begin to the season. We should always’ve had some provide constraints. That mentioned, wanting ahead, the basics stay actually sturdy right here, world demand continues to outstrip world manufacturing will increase.
As you talked about, the EU fuel pricing stays excessive, resulting in challenges there, which we will keep watch over is the conversion value of ammonia into — sorry, pure fuel into ammonia and likewise ammonium nitrate. And you’ll see that present pricing capability begins to get shut in, in Europe. Chinese language export reductions stay in place. There are — I feel ammonia export of about 750,00zero tons within the first half.
Our outlook might be going to be round two million, 2.5 million for the complete yr. That is rather a lot down from regular ranges of three million to 5 million tons. As well as, we’re excited in regards to the potential we see within the development of low carbon. So I feel regardless of the volatility within the first half, I feel we see a very good outlook for the second half and past.
However Jeff, I do not know if you wish to add something?
Jason Newton — Chief Economist and Head of Market Analysis
Andrew, I assume particularly, when speaking in regards to the outlook on benchmark costs. As you say, we have seen important volatility within the final couple of weeks with world — of world ammonia and urea costs and even in urea costs developing in North America. I feel if we glance towards the fourth quarter of the yr, we now have kind of typical seasonal enchancment in costs within the forecast as is generally the case, and we count on a constrained and tightened market. That mentioned, relative to the present market circumstances, that seasonal enhance to be comparatively modest.
And we definitely haven’t got included in forecast a return to costs as they have been within the first half of the yr. However when you take a look at the place pure fuel costs are as we speak in Europe and the impression that is having on manufacturing shutting down, definitely, marginal value is even above the place costs peaked on the first a part of the yr.
Operator
Your subsequent query comes from Jacob Bout of CIBC. Please go forward.
Jacob Bout — CIBC World Markets — Analyst
Good morning. My query is on potash demand. You are guiding down barely for potash volumes in 2022. How a lot of this can be a reflection of farmers pushing again to increased costs versus a compressed spring? Possibly you possibly can remark a bit on the U.S.
summer time fill program. After which what are your expectations for the second half for Brazil given the rising stock ranges there? Or is the expectation to export extra into the lower-priced markets like China and India?
Ken Seitz — Interim President and Chief Government Officer
Nice. Nicely, thanks, Jacob, for the query. Sure, perhaps what we’ll do is simply kind of go world wide, because it pertains to inventories that we’re seeing and the way we’re anticipating the about [Inaudible] unfold right here. So it’s true, sure, that we had, as simply talked about, that sturdy fall utility season in 2021.
After which the compressed spring and once more, some shift in crop makes, some stop shoppers space, which led to decrease utility charges. So popping out of the spring, it’s true that we had some carryover volumes on potash in North America. And so subsequently, down — Nutrien down some volumes in that area. Now we simply are closing our summer time area program and filling up our Q3 order ebook for the time being.
However we do not count on these North American volumes. We count on a robust fall utility season and the backdrop with the Ag fundamentals is robust in North America. However on the identical time, we do not count on a restoration of these volumes in North America. That mentioned, after we say it is 61 million to 64 million tons, we imagine it is a provide constrained world.
And once more, with the backdrop of fundamentals, growers in all elements of the world nonetheless incentivized to maximise yield and lay down the suitable agronomic stage of crop vitamins. As you say, in Brazil, imports have been up in that a part of the world for the primary half, and it is actually associated to — initially, the battle in Ukraine did not begin impacting issues till, clearly, after February. So — and shipments into Brazil have been up 30% — 37% yr over yr, and we’re seeing excessive port inventories as they put together for his or her planting season, we all know that these port inventories can be transferring in land and are transferring in land. And we additionally know that with these port inventories for the time being, they nonetheless solely have about 50% protection for his or her planting season.
So we all know that the Brazilians can be again out there shopping for for his or her large planting season. If we go to China, we all know that inventories are considerably down. Their imports have been down 11% yr over yr within the first half, and we put port inventories at kind of 1.eight million tons. So these are five-year lows for port inventories, and it is actually associated to the truth that because the lowest priced market on the planet, China or not getting the volumes that it wants.
And the identical is true for India, which, once more, shipments down about 37% within the first half in comparison with final yr. And inventories in that nation are 550,00zero, 600,00zero tons. They’re very, very low, and once more, simply not getting the amount given the place pricing is that. After which lastly, I would just say in Southeast Asia, these costs migrated up.
We have seen the primary half sturdy on oil costs. And so we noticed truly convergence of worth for normal a bit just like what granular product we’re promoting for in Brazil. So one other phrases, sturdy demand, however we do not imagine that Southeast Asia will get the amount they want both this yr simply because of provide constraints. The very last thing I will say, Jacob, is among the issues we’re seeing is for these locations which have stock like North America, albeit as a result of delayed spring, like Brazil was necessary stock only a second.
We see growers simply kind of ready at these worth ranges to just-in-time buying or last-minute buying. But once more, we all know with the sturdy backdrop of ag fundamentals, we absolutely count on that they’re going to be compelled to put down crop vitamins, however that it is going to be a provide constrained market.
Operator
Your subsequent query comes from Joel Jackson of BMO Capital Markets. Please go forward.
Joel Jackson — BMO Capital Markets — Analyst
Hello. Good morning. Staying on potash. If I take a look at the place you suppose pricing goes to play out and what your ebook seems to be like, we have seen another opponents discuss some anticipating a worth lower within the third quarter from a realized perspective as you mess around with which on spot costs within the midstream in China, India and different issues.
What do you count on for pricing within the third quarter into the fourth quarter [Inaudible]
Ken Seitz — Interim President and Chief Government Officer
Sure, thanks for the query. Sure, what I might say is potash amongst crop vitamins, and definitely in comparison with nitrogen, has been a bit bit extra steady when it comes to pricing. We’ve seen some slight softening, once more just a few seasonal softening right here and a spot like Brazil, the [Inaudible] fruits season. And we’re on this window the place we’re heading within the Northern Hemisphere right into a fall utility season, which we count on to be a large open season and all these items.
In order we head into Q3 and This autumn, we’re taking a look at pricing in all these markets and saying that is most likely — there’s some stability there for the time being and kind of forecasting that costs will stay in and round these ranges into the steadiness of 2022. I imply, that is not true essentially for India and China with these very low in-country inventories will or not it’s compelled to barter a contract sooner slightly than later in 2022, that might be doable however for the for the spot markets, like I mentioned, we’re kind of forecasting in and round these ranges for the steadiness of the yr.
Operator
Your subsequent query comes from Steve Byrne of Financial institution of America. Please go forward.
Steve Byrne — Financial institution of America Merrill Lynch — Analyst
Sure. Thanks. I am desirous about what stage of fertilizer shopping for your retail enterprise has made for this subsequent crop yr. Clearly, the wholesale aspect of your small business is fairly daring up about pricing for nitrogen and potash within the fall.
Is your — the retail aspect of your small business in settlement and loading up and aggressively shopping for to seize that margin this fall and subsequent spring. It looks like there was a few of that captured within the first half of this yr and perhaps the same touch upon crop chemical compounds, you clearly on the retail aspect of the enterprise, clearly captured margin on crop chems, was that due to buying properly upfront of the inflationary run earlier within the yr?
Ken Seitz — Interim President and Chief Government Officer
Proper. Nicely, thanks, Steve, for the query. And sure, our retail group has been profitable strategically procuring on this rising worth atmosphere. And as you say, mirrored in our first half ends in our retail enterprise.
Now heading into the second half, we see maybe some moderation on that as you say, simply given some leveling off of crop nutrient costs. However on the identical time, retail enterprise procuring for what they see is — what we see is an open window for a fall utility season. It is also true that we very strategically secured some crop chemistry within the fall of final yr, and that is a part of the success within the first half of 2022 as properly. However I will hand it over to Jeff Tarsi to supply — he has extra coloration on that.
So Jeff, over to you.
Jeff Tarsi — Interim President International Retail Nutrien Ag Options
Good morning, Steve. And — sure, I will take it into two classes. Possibly we’ll begin with fertilizer buying and — with late begin that we bought to the spring, one of many fears I had the place we will have a very tight window for fall utility this fall. However with the climate developments we have seen during the last month, this crop is actually progressing actually properly, and we’re seeing the maturity dates transfer up fairly a bit.
So I am rather more inspired that we might have much more open window for fall utility than I had anticipated after we bought this crop planning for this yr. As you understand, we transfer a big quantity of vitamins all year long and we’re all the time layering product and we’re beginning to fill our sheds now or in anticipation of the autumn. And we predict that growers are extra — primary, land costs stay very excessive so steadiness sheets are extraordinarily sturdy proper now. We expect that money margins are going to be good once more in what yield places out to.
And these growers are actually tailored now to wish to get an actual hedge begin on their nutrient functions. And most of them do not wish to put it off to the spring in the event that they might help it. So if we get a superb open fall, I’ll anticipate that we will have plenty of motion because it pertains to NPNK. And what our indications as we speak are, and I do not put plenty of weight on crop acreage intentions as we speak, however all the things factors that we might see one other two billion to 3 billion acres of corn subsequent yr.
And that is going to place extra emphasis on, I feel, eager to get some fall vitamins utilized. Because it pertains to the crop safety aspect of the enterprise, as you talked about, we had an amazing first half with our crop safety enterprise. Our revenues have been up 16.5%. Our gross margins have been outstanding at up 43%.
And plenty of that, Steve — and we have been very public about that in our previous calls, however we began layering product in final yr, actually simply as fast as we bought out of the crop chem summer time season. Anticipate plenty of provide chain constraints. And I feel you will see us do one thing pretty just like that this fall as properly as a result of if we’re speaking to our strategic suppliers, there’s going to be a variety of merchandise that can be constrained once more going into the ’23 season. So, we have got — as you understand, we have got a wonderful provide chain asset base.
We’re in a position to transfer product and rapidly and again out — however we’ll use a few of those self same methods that we had final yr and get ourselves positioned to have the ability to service our growers going into the season. And once more, the identical means round our proprietary aspect of our enterprise. We had an especially sturdy proprietary plant first half. We bought plenty of momentum going with that aspect of the enterprise.
And I am unable to even let you know what number of provide chain constraints we hit throughout this previous yr in conserving our manufacturing crops going and such. However we really feel like we will place ourselves properly of the upcoming season as properly.
Operator
Your subsequent query comes from Adam Samuelson of Goldman Sachs. Please go forward.
Adam Samuelson — Goldman Sachs — Analyst
Sure, thanks. Good morning, everybody. I hoped to perhaps maintain happening the dialogue on utility charges and demand. And I assume simply taking a look at your retail crop nutrient enterprise in North America, the primary half of your volumes have been down 21% yr over yr.
If we do type of LTM, they’re down 14%. So I assume I am simply attempting to get a way of how a lot do you suppose functions, particularly on PNK however even on perhaps nitrogen in some instances due to the best way the spring performed out have been under regular? Do you suppose that is a reasonably correct illustration of the market type of during the last 12 months? And I assume, alongside these traces as properly, we have been in a rising worth atmosphere for the final yr that these worth will increase have type of abated for now. How ought to we take into consideration type of the per ton margins on crop vitamins within the again half and into subsequent yr if we perhaps have a bit bit extra stability on the pricing aspect?
Ken Seitz — Interim President and Chief Government Officer
Adam, thanks for the query. Sure. So we’d characterize the primary half extra as simply the compressed season and once more, a robust fall in 2021 when it comes to utility charges. And once more, it is compressed spring, which we simply did not see as many crop vitamins go to floor and subsequently, some carryover.
And that is actually the story of the spring in North America. I feel I will simply hand it over to Jeff. Jeff, when you can simply keep it up or the dialogue we simply had because it pertains to utility charges after which heading into the steadiness of the yr right here because it pertains to definitely maybe some moderation in margins on crop vitamins, however I imply, we have not grown organically as properly, and you may see that mirrored definitely in retail’s outcomes because it pertains to our provide chain, because it pertains to enlargement of gross sales to our digital channel and, definitely, our proprietary merchandise. However Jeff, over to you to supply some extra coloration.
Jeff Tarsi — Interim President International Retail Nutrien Ag Options
Sure, Adam, thanks. And look, truly, I feel the story whenever you begin taking a look at tonnage and charges and issues like that, I feel the story truly it goes additional again than only a sturdy fall of ’21. You need to do not forget that we had two file falls from an utility fee standpoint, each ’20 and ’21. I do know in my profession on this enterprise, I’ve by no means seen two falls as sturdy as these two again to again.
And so, whenever you take a look at coming into — and we now have a capability in North America, we do not have the identical potential in Latin America, Australia. However you might have a capability to financial institution some vitamins with the soil varieties that we now have right here in North America. And so whenever you take a look at coming into the ’22 planning season, and I feel we mentioned and we even forecasted our tonnage can be again within the spring of ’22. However whenever you look to the truth that you bought right into a late planting season, and growers — plenty of these growers had their crops ahead contracted.
And you bought to some extent the place they mentioned, ” what, I’ve had heavy, heavy functions, notably from a PNK standpoint the final two falls.” We do soil testing on all this soil, so we type of know what’s obtainable there for the crop. They bought urgency, and most of them had an urgency the one — to get in and get that crop planted. After which we take it as soon as we had in crop. And we have seen our full yr dietary charges enhance this spring fairly a bit due to that.
In order that’s one issue as you take a look at it. The opposite issue is, is whenever you take a look at crop shifts and after I take a look at crop shifts, I look particularly geographically the place these crops happen. And so, when you take a look at corn, the place we misplaced corn to soybeans, we misplaced that in an enormous share foundation within the South, and we now have an amazing retail community in that and an amazing retail presence in that space. And so that you ship a few million acres of corn to soybeans, from a dietary demand standpoint, that modifications considerably.
And we got here into this season pondering we plant someplace between 92 million and 93 million acres of corn, go by what USDA has as we speak, we’re extra round 89 million acres of planted corn and stuff. So there is a — we have listed the elements, however there are a number of elements that have been concerned. After which when you get in season, with it, I am positive there have been some growers, they lower some charges again. However they lower the charges again as a result of they felt like that they had carryover in soil.
One factor I all the time level out with growers as we speak is, look, simply on the seed, if we take corn, they’ve $150 an acre funding within the seed and seed remedy. That’s together with what they’ve in for. There aren’t any growers on the market that is going to make that type of dedication to value on a per acre foundation after which are available and say, properly, I’ll drastically scale back my finish PNK ranges, nobody that is going to have an effect on yield on the finish of the day. So our growers rather more refined in that method however we do plenty of soil testing.
It is a just about our functions to-date are based mostly on science. I feel you additionally requested a query round margins, and look, we did have super — whereas tonnage was down, I feel our gross margins on a per ton foundation have been up by $68 yr over yr, which was which was superb. And after I look even deeper into that and I take a look at the dietary contribution that our proprietary nutritionals made, they have been $38 of our margin this yr within the fertilizer ship versus $39 versus $28 a yr in the past. So once more, we had an amazing step-up with our proprietary nutritionals, that is within the face of the truth that they bought — they went forward and put the planters within the area.
They determined they deal with crop extra in season than perhaps previously. So I be ok with the place the vitamins went out at. I be ok with how growers are making choices based mostly on that. And each one among them on the market in a excessive commodity worth atmosphere or capturing for high ends of yields.
Operator
Your subsequent query comes from Steve Hansen of Raymond James. Please go forward. Please go forward.
Steve Hansen — Raymond James — Analyst
Sure. Good morning. Thanks for the query. I simply wished to observe up on a number of the remarks earlier round potential contract discussions via the again half of the yr right here.
Do you wish to maybe elaborate a bit bit extra on kind of the timing and expectations round contract discussions with China and/or India and perhaps maybe the timing of these and simply any common sense you got here on worth now, that is a more durable one.
Ken Seitz — Interim President and Chief Government Officer
Sure. Nicely, thanks, Steven. And — sure, we’re simply — I feel as everyone seems to be watching inventories in these elements of the world, and — it’s true that definitely in a spot like India we’re seeing demand rationing, the place potash is solely not going to floor based mostly on availability. So it is not kind of conventional potash utility charges dwindling the inventories in nation.
In order that mentioned, in a spot like India, as I discussed earlier, it is solely 550,00zero tons sitting on the bottom in that nation. So very near zero. So it is laborious to say precisely when India can be again out there. But when we are saying that there can be some affordable vitamins going to floor, and we supplied these vitamins within the deck that we supplied for this name, properly then, you’ll count on that someday this fall and perhaps later fall, India can be again speaking in regards to the new contract.
After which thirdly, with China, the place once more, port inventories, it is kind of a five-year mortgage. And after we say 1.7 million tons sitting at port, we known as it 1.5 million of that’s the so-called strategic reserve. So very low inventories in China, and we do count on that China will lay down some volumes as properly on this fall season. So like, India, once more, we count on it is a 2022 occasion the place they will have to return have some discussions about new volumes at a brand new worth.
What that worth can be in these contract markets? It is a fantastic query, Steve. If we go world wide and we see the place are normal grade markets buying and selling as we speak, we have seen Southeast Asia commerce as much as $1,00zero a ton now that is moderated considerably, however normal grade, these are a number of the largest normal grade markets on the planet buying and selling at these ranges. I count on, subsequently, that the China and Indian contracts should come up considerably.
Operator
Your subsequent query comes from P.J. Juvekar of Citigroup. Please go forward.
P.J. Juvekar — Citi — Analyst
Sure. Hello. Good morning. I’ve a query on seeds.
Regardless of — with these sturdy air circumstances this spring, seed gross sales have been up solely four%. Are you able to break that down between worth and quantity as a result of I feel expectation was that worth can be up mid-single digits? After which wanting ahead, what are your pricing expectations for subsequent yr given the enter value for seeds?
Ken Seitz — Interim President and Chief Government Officer
Nice. Nicely, thanks for the query, P.J. And I will go that one over to Jeff Tarsi.
Jeff Tarsi — Interim President International Retail Nutrien Ag Options
Sure, P.J. And look, whenever you take a look at it from a income foundation and once more, when you might have crop shifts, so when you take a look at corn, an acre, once more, I mentioned wherever from $125 to $150 an acre whenever you promote in corn seed. And also you shift that to soybean, you are shifting it from $50 to $60. So principally, you are chopping the income half in two whenever you make these shifts with it.
If I take a look at our seed portfolio, we’re very pleased the place we’re via the primary half on the seed aspect of the enterprise. I’d add, this previous yr, little or no worth enhance on seed going into the ’22 planning season with it. However look, our proprietary enterprise was very sturdy via the primary half. We grew a seed margins by 30% on our proprietary enterprise.
We have been up on income and margins actually throughout all areas because it pertains to the seed portfolio. And we have got an terrible lot of momentum moving into. Imagine it or not, we have began our fall seed marketing campaign right here within the final week. And so — we have got plenty of momentum going into that.
Now you talked about seed pricing going ahead. And I feel that we’ll see most of our seats provider I perhaps missed that window final yr to boost costs. I feel we’ll see one thing considerably completely different going into the ’23 season. I feel canola was most likely seemingly going to be up 5% to 10%, corn might be up as excessive as 10% pricing going into ’23, and indication that soybeans can be up from eight% to 10% going into ’23.
So we will see an increase in seed prices going into this new crop yr. We have been notably sturdy on our Dyna-Gro throughout our cotton, soybean and rice portfolio. And rice, this was an introductory yr however Dyna-Gro 263, which we have had an amazing quantity of success in getting that in as properly. So we predict when that is accomplished and the numbers aren’t accomplished for the yr, however we predict we’ll see a market share enhance throughout our seed portfolio this yr.
Operator
Your subsequent query comes from Christopher Parkinson of Mizuho. Please go forward.
Chris Parkinson — Mizuho Securities — Analyst
Nice. Thanks for taking my query. Simply type of a corollary of a bunch of those questions on potash, nevertheless it appears as if that Russians have discovered methods to make the most of their port techniques and get some product on the market, maybe a bit bit higher than anticipated. However costs are nonetheless principally holding in.
Evidently Belarusians are type of on the decrease finish of that when it comes to normalized export charges. By way of all people attempting to judge this over the following two to 3 years when it comes to how tight the SD will truly be, what’s your up to date detailed evaluation of that shortfall into subsequent yr, into 2023? I imply, how a lot can each nations actually in the end work out to get extra tons ’23 versus ’22? And simply maybe your main issues?
Ken Seitz — Interim President and Chief Government Officer
Sure. Nicely, thanks, Chris, for the query. And — sure, there is definitely plenty of transferring elements. And we’re all seeing studies of assorted types of cargo.
We’re not popping out of Russian and Belarus. Our estimate is that for the primary half of 2022, Russian exports are down about 25%. In order that’s a reasonably important quantity. After which, with Belarus nonetheless not accessing tidewater by way of Lithuania, we estimate that their first half shipments are down 50%.
So, actually fairly important out of that a part of the world. And once more, recalling that shipments out of Russia at the very least weren’t constrained within the first two months of this yr. As we glance ahead, what — for the steadiness of 2022 and into 2023, what may that seem like? And, sure, for 2022, once more, we count on the Russian shipments might be constrained by up as a lot as that 25% full yr. After which equally with Belarus for 2022, we count on exports might be constrained by 50% to 65% in comparison with 2021 stage.
So once more, actually fairly important. Our assumptions for 2023 present that out of Russia, at the very least, we’ll see extra quantity coming and a few channels can be developed. In spite of everything, Russian potash shouldn’t be sanctioned. It is simply that financing actions and people segments are making it considerably tough for the time being.
However for 2023, popping out of Russia, we predict that manufacturing may be down within the vary of, say, 5% to 20% from 2021 ranges. After which out of Belarus, once more, rather more important due to these challenges attending to port. And out of Belarus, our assumption for 2023 is perhaps 30% to 50% of manufacturing down from 2021 ranges. So that is what’s in our assumptions, in our numbers.
I do know that, Chris, we see studies, for instance, of Belarus taking a look at transport volumes by way of containers via the ports of St. Petersburg and lot of up inventory, that is — I can let you know, I’ve expertise of that from Canpotex, that is an actual problem. They’re all the time speaking about two million to 3 million tons. So truly, the volumes are comparatively small, however even for 2 million tons, that is 80,00zero containers of potash.
And on the load port these it’s good to tip up a container and stuff them filled with potash, and much more difficult on the discharge port, they should be geared up to tip these containers and empty of them. So I feel it stays to be seen how profitable that can be. However even when they’re absolutely profitable, it is solely two million to 3 million tons, which, by the best way, they need to do with a view to meet on the backside finish of our vary. In order that’s at the very least how for the time being, we’re seeing issues unfold and, therefore, our view that the basics for potash are going to stay sturdy proper via 2022, proper via 2023, after which it will be a provide constrained market.
Operator
Your subsequent query comes from Vincent Andrews of Morgan Stanley. Please go forward.
Vince Andrews — Morgan Stanley — Analyst
Hello. Thanks and good morning, everybody. Questioning when you can simply give us an replace on kind of how your digital technique in retail is progressing. Any new initiatives or simply kind of some benchmarks in addition to perhaps what you are seeing competitively in case your bigger opponents are advancing these methods as properly?
Ken Seitz — Interim President and Chief Government Officer
Nice. Thanks, Vince, and that — right here we’re, and it is simply previous the center of 2022, and we now have just about surpassed that we put via our digital platform in 2021. So simply over $2 billion, and we’re on monitor to satisfy our goal of $three billion of gross sales via digital. And plenty of that has to do with all of the work we’re doing on digital agronomy, and success out within the area.
However I will hand it over to Jeff Tarsi to present you a bit extra element and coloration.
Jeff Tarsi — Interim President International Retail Nutrien Ag Options
Sure, Vincent, thanks. And as Ken talked about, we proceed to make plenty of progress because it pertains to our digital initiative, our digital platform. Our individuals within the area are actually engaged in what we name a digitally enabled gross sales. As Ken talked about, we put over $2 billion via that class year-to-date.
And our individuals getting actually comfy with utilizing these two. What I am enthusiastic about is that this fall, we launched our Echelon 2.zero because it pertains to digital, and that is just about round our precision agriculture. And I feel that is the place the actual worth seize is for our enterprise and our business. Our growers are getting an increasing number of eager to utilizing these digital instruments and our agronomists notably — this offers them a heck of a bonus in having the ability to take a look at our growers, take a look at it by — on a by-field foundation and make suggestions that simply use plenty of knowledge and a simulation to make — to construct one of the best crop answer going ahead that enables our growers to maximise ROI and it additionally permits us a chance to seize margin as properly with it.
And so we’re — it continues to be a piece in progress, and I do not suppose we’ll ever see it not be a piece in progress as new know-how comes alongside we’re actually busy out attempting to mop as a lot of our growers feels as doable because it pertains to that. And once more, like I discussed earlier, we have began our fall seed marketing campaign. And an enormous a part of our all seed marketing campaign proper now could be having the ability to use our seed selector, which is embedded in our digital platform. This helps our grains to make the make one of the best choices going ahead for our growers on what germplasm we wish to place by which fields.
And once more, to present our growers greatest alternative for ROI, it’s also — our digital platform can also be core to our platform round sustainability in carbon and it’ll play a really, very important position in that we had spring pilots final yr associated to carbon sustainability and we have been very public and dedicated that we’re rising these acreage by thrice this yr. And in order that platform performs a big position. And as you understand, sustainability and carbonate will play an rising position going ahead in the way forward for agriculture, and I do not suppose that anyone out there’s higher positioned than Nutrien and Nutrien Ag Options is to seize that worth going ahead.
Operator
Your subsequent query comes from Josh Spector of UBS. Please go forward.
Josh Spector — UBS — Analyst
I used to be simply questioning when you might share some ideas on China. And particularly, something you are seeing on manufacturing of nitrogen and phosphate. And I do know we’re in an export constrained atmosphere proper now given the constraints there. However is there any indicators of a list construct or change in manufacturing technique that would foreshadow any shift into subsequent yr?
Ken Seitz — Interim President and Chief Government Officer
Nicely, thanks for the query, Josh, and I will go that one over to Jason Newton.
Jason Newton — Chief Economist and Head of Market Analysis
Josh. Sure, we have seen, I feel, to some extent, the business in China, each from a nitrogen manufacturing standpoint and phosphate, get stunned to some extent by the prolonged restrictions on exports to have taken place. And so the second half of 2022, urea exports are actually constrained and restricted by the federal government and on phosphate export quotas have been put in place, which is able to scale back export volumes. Previous to that, within the yr, urea manufacturing truly was up yr over yr.
So, although exports are down considerably, within the first half of the yr, down from over two million tons final yr to simply over 700,00zero tons this yr, manufacturing charges have been up, which partially factors to increased home use, however I feel to your level, additionally home stock is rising. And we have seen working charges decline since these added restrictions have come into place. And home Chinese language costs are declining in order that the unfold between the home Chinese language worth and the export worth has widened in consequence. On the phosphate aspect, capability utilization charges have positively declined.
They’re estimated to be under 50% as we speak. And that is one of many elements in phosphate that is — produce world sulfur demand, and you’ve got seen a dramatic decline in sulfur costs in consequence in a part of the lowered demand from China. As we go into 2023, the large issue to observe can be how worldwide costs carry out versus the home market in China as a result of the federal government in China seems to wish to goal decrease costs for Chinese language growers. And with constrained provides globally, it definitely seems to be supportive of worldwide costs.
And so we would count on some type of restrictions to proceed into.
Operator
Your subsequent query comes from Ben Isaacson of Scotiabank. Please go forward.
Ben Isaacson — Scotiabank — Analyst
Thanks very a lot and good morning. Your opponents more and more profiting from nitrogen export alternatives and win product exterior of the U.S. Their system clearly has arrange a bit bit completely different than yours. As you look ahead over the following five-plus years, and naturally, you are constructing a brand new plant within the U.S.
Gulf. Do you see your self in a position to reap the benefits of export alternatives for nitrogen, not simply on the clear ammonia aspect, however actually for total nitrogen?
Ken Seitz — Interim President and Chief Government Officer
Thanks. Good morning and thanks for the query. I will go that one over to Raef Sully.
Raef Sully — Government Vice President, CEO Nitrogen and Phosphate
Sure, Ben, the straightforward reply is sure. And what I might level to is the truth that we have been exporting extra UAN this yr than we have accomplished beforehand. We’re additionally actively taking a look at alternatives for exporting extra ammonia as a substitute of urea and UAN. And so — and a part of the work we’re doing in brownfield expansions is to present us extra flexibility to export as and when these actions these alternatives happen.
So the reply is sure, we’re truly doing it now, and we’re planning on increasing our capability of exporting in future.
Jeff Holzman — Vice President, Investor Relations
Operator, we now have time for yet one more query.
Operator
Your subsequent query comes from Michael Tupholme of TD Securities. Please go forward.
Michael Tupholme — TD Securities — Analyst
Nice. Thanks for taking the query. My query pertains to potash demand and the rationing we have seen this yr. You narrowed your 2022 world potash cargo steering, and you are still taking a look at a significant year-over-year decline in world potash demand this yr due largely to the worldwide provide constraints.
I do know you have not given steering for 2023, however I am questioning when you can share any ideas you might need on what the availability pushed pullback of potash demand this yr seemingly means for potash demand as we glance out to subsequent yr after which how which may feed into the pricing outlook?
Ken Seitz — Interim President and Chief Government Officer
Nicely, thanks for the query, Michael. And sure, there’s a variety of transferring elements there. Clearly, some others we simply talked about because it pertains to challenges in Russia and Belarus, however on the identical time, we, ourselves, as you understand, are rising manufacturing. So, I might say, a variety of transferring elements.
However I’ll go it over to Jason Newton simply to supply a bit extra element on our assumptions.
Jason Newton — Chief Economist and Head of Market Analysis
Positive. Good morning, Michael. I feel Ken touched on it a bit bit earlier as properly, as we glance towards 2023, our expectation for Belarusian provides can be just about in step with the place the vary is that this yr simply given the expectation of continued port restrictions there. For Russia, additionally, I feel simply provided that we narrowed our vary this yr, if we glance yr over yr, we count on them to be down two million to 4 million tons this yr, would most likely widen the vary a bit bit going into 2023, however in that very same kind of vary.
The one issue to observe for 2023 is that Nutrien can have further quantity to insert into the market. And so doubtlessly elevated provide obtainable that may when you suppose what the vary of shipments would enhance that vary of shipments subsequent yr, most likely within the vary of 1 million to 2 million tons versus this yr’s ranges. However we all know that due to the demand rationing that is occurring this yr, there’s more likely to be pent-up demand. And so any shock to the upside from a provide perspective, we predict can be absorbed, notably as we take a look at agricultural fundamentals and within the energy and demand ought to proceed into at the very least the primary half of 2023.
Operator
There aren’t any additional questions at the moment. I wish to flip the convention again to Jeff Holzman for closing remarks.
Jeff Holzman — Vice President, Investor Relations
OK. Thanks for becoming a member of us as we speak. The Investor Relations group is on the market for any follow-up questions.Have a fantastic day.
Operator
[Operator signoff]
Length: zero minutes
Name contributors:
Jeff Holzman — Vice President, Investor Relations
Ken Seitz — Interim President and Chief Government Officer
Pedro Farah — Chief Monetary Officer
Andrew Wong — RBC Capital Markets — Analyst
Raef Sully — Government Vice President, CEO Nitrogen and Phosphate
Jason Newton — Chief Economist and Head of Market Analysis
Jacob Bout — CIBC World Markets — Analyst
Joel Jackson — BMO Capital Markets — Analyst
Steve Byrne — Financial institution of America Merrill Lynch — Analyst
Jeff Tarsi — Interim President International Retail Nutrien Ag Options
Adam Samuelson — Goldman Sachs — Analyst
Steve Hansen — Raymond James — Analyst
P.J. Juvekar — Citi — Analyst
Chris Parkinson — Mizuho Securities — Analyst
Vince Andrews — Morgan Stanley — Analyst
Josh Spector — UBS — Analyst
Ben Isaacson — Scotiabank — Analyst
Michael Tupholme — TD Securities — Analyst
Extra NTR evaluation
All earnings name transcripts
