CF Industries Holdings, Inc. (CF) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, and welcome to C.F. Industries' first nine months and third quarter of 2026 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. We will facilitate a question and answer session towards the end of the presentation. To pose a question at any time, please press star, then 1, on your touchtone phone. I would now like to turn the presentation over to the host for today, Mr. Martin Jarosik, with CF Investor Relations. Sir, please proceed.

Good morning, and thanks for joining the CF Industries Earnings Conference Call. With me today are Chris Bone, President and CEO, Burt Frost, Executive Vice President and Chief Commercial Officer, and Andrew Scribner, Executive Vice President and Chief Financial Officer. CF Industries reported its results for the first nine months in third quarter of 2026 yesterday afternoon. On this call, we'll review the results, discuss our outlook, and then host a question-and-answer session. Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance. Involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. More detailed information about factors that may affect your performance may... Thank you. Thank you. No, let me.

Good morning, everyone. Yesterday afternoon, we reported results for the first nine months of 2026, in which we generated adjusted EBITDA of approximately $3 billion. Our results reflect the strength of CF Industries operational performance and the structural advantages of our business. At the foundation of that performance is our team's relentless focus on safety excellence. We closed the quarter with a trailing 12-month incident rate of .1 incidents per 200,000 hours worked, well below industry averages. That outstanding safety performance directly supports reliable production and high asset utilization. Since the beginning of the year, we have operated our available ammonia capacity at 97% utilization. Along with our consistent operational performance, we benefit from... the structural advantages of our low-cost, low-risk North American asset base. Our low-cost position on the global nitrogen cost curve supports our current $2.9 billion mid-cycle EVTA estimate, while our low-risk network provides upside during periods of global nitrogen market disruption. We have seen that dynamic play out this year, with adjusted EVTA through the The first nine months already exceeding our mid-cycle. Together, these strengths translate into strong cash generation. CF Industries consistently converts approximately 60% of EBTA into free cash flow, the highest rate in the materials sector and well above other fertilizer companies. This gives us the financial strength to invest Invest in high-return projects while returning capital to shareholders. We're making tangible progress on investments to grow our Advantage Network and enhance margins. Blue Point 1 began site construction in August. Donaldson Bill CCS is operating well, and the Yazoo City CCS project is progressing toward startup in 2028. We expect these projects to add $400 million to our mid-cycle EBITDA estimate by 2030, bringing it to $3.3 billion. Further out, we have begun a feed study for our Quartrite Diesel Exhaust Fluid Project. Alongside those investments, we have returned $1.3 billion to shareholders over the last 12 months through share repurchases and dividends. Over that period, we have repurchased approximately 6% of our outstanding shares, bringing total repurchases over the last three years to 22% of outstanding shares. Taken together, our structural advantages, operating performance, growth investments, and disciplined capital allocation position us to build on our track record of compounding value for long-term shareholders. With that, I'll turn it over to Bert to discuss the global nitrogen market environment.

Bert? Thanks, Chris. The global nitrogen market environment remained constructive through the third quarter. Demand strengthened as the quarter progressed, while supply remained constrained. Buying activity accelerated in North America, South America, and Europe as deferred demand returned to the market. Corn and wheat values strengthened during the third quarter before giving back some of the gains in the fourth quarter. At the same time, nitrogen values remained below the peaks reached during spring applications. We saw that demand pick up clearly in North America. Participation in our fall ammonia program has been very strong. Weather permitting, we expect fall ammonia volumes to be amongst our highest in the last 10 years. Our UAN fill program also helped us ship nearly 2 million tons in the third quarter, our largest quarterly UAN volume this decade. Globally, demand also remains robust. India has maintained a steady pace of urea tenders, and we expect imports to exceed 10 million metric tons this year. Brazil has been slower to purchase, in part because of credit constraints. However, improved crop values in the third quarter supported farmer economics and demand there. With nitrogen inventories low across the global system, including North America, South America, Europe, and Southeast Asia, we believe substantial purchasing remains ahead. On the supply side, geopolitical disruptions remain a significant factor. Since hostilities began in the Middle East in late February, we estimate that the global market has lost approximately 9 million metric tons of urea supply. Shipping availability and significantly higher freight and insurance costs remain constraints. Russia is another source of uncertainty. While production levels and plant availability are difficult to assess, disruptions in the Black Sea shipping lanes have affected traditional routes. At the same time, high-cost producers remain under pressure. European producers face challenging economics from high natural gas prices. We believe more than 35% of ammonia capacity in the region is curtailed. Additionally, natural gas availability continues to constrain production in other regions. Chinese urea exports are helping to fill part of the global supply gap, particularly in India. We expect the Chinese government to continue to manage export levels in line with its domestic food security policies. Against this backdrop, we expect the global nitrogen supply-demand balance to remain constructive into 2027. Purchasing activity that was delayed earlier this year is now being realized. Global inventories remain low. And meaningful portions of global production and trade remain constrained. Longer term, our outlook has not changed. Nitrogen capacity currently under construction is not sufficient to meet global nitrogen demand growth and expected permanent shutdowns through 2030. Additionally, the timeline and capital costs required to bring future capacity online have become longer and more challenging. This supports a structurally tighter global nitrogen environment through the end of the decade and reinforces the value of CF Industries' low-cost, low-risk, North American production and distribution network. With that, I'll turn the call over to Andrew.

Thanks, Bert, and good morning, everyone. For the first nine months of 2026, the company reported net earnings attributable to common stockholders were approximately $1.8 billion, or $11.60 per diluted share. EBITDA and just EBITDA were both approximately $3 billion. For the third quarter, net earnings attributable to common stockholders were $436 million, or $2.87 per deleted share. EBITDA was $822 million, and adjusted EBITDA was $833 million. We continue to convert EBITDA into free cash flow at a consistently high rate. A trillion-12-month net cash from operations was approximately $3.1 billion, and free cash flow was approximately $2 billion. As you can see on slide 9, our EBITDA to free cash flow conversion has averaged approximately 60% over the last five years. Conversion over the last 12 months has been slightly lower due to $306 million of deposits related to a historical U.S.-Canada transfer pricing matter dating back to 2012. These deposits limit the accrual of additional interest in Canada while the matter is resolved between the two governments. Following resolution, we expect to file amended U.S. federal and state tax returns seeking refunds of related taxes previously paid. Looking ahead, our 2026 consolidated capital expenditure outlook remains approximately $1.3 billion, with CF industry share at approximately $950 million. Construction of the Blue Point 1 ammonia plant is moving forward in line with our expectations. The projected total cost remains $3.7 billion, with ammonia production expected to commence in 2029. The cost of Blue Point common facilities also remains at our initial estimate of $550 million. The 40% share of the remaining investment in Blue.1 will be spread over three years. It is manageable given our consistently strong free cash flow generation. At the same time, we continue to return substantial capital to shareholders. During the third quarter, we repurchased 3 million shares for approximately $367 million. As we discussed last quarter, we believe the market continues to describe too much of our earnings and free cash flow performance to short-term geopolitical factors. Structural advantages Chris discussed, combined with the global nitrogen supply-demand dynamics Burr outlined, underpin our confidence in CF Industries' mid-cycle earnings power. We do not believe our earnings power is fully reflected in our valuation, supporting our continued opportunistic share repurchases. With that, I'll hand it back to Chris before we open the call for Q&A.

Thanks, Andrew. I want to thank CF Industries' employees for their outstanding performance through the first nine months of 2026. Our team is operating safely and executing exceptionally well while navigating significant disruption in the global nitrogen market. We are especially proud of our team's commitment to safety excellence. Our recordable incident rate at the end of the quarter was the lowest we've ever achieved as a company, a testament to our employees living our do-it-right culture every day. That commitment was also on display in this year's Wilson Award for Safety Excellence. Our Medicine Hat Complex earned this year's award, and I want to recognize that team, along with all of our finalists, for the innovative approaches to safety they developed and shared. As you've heard today, structural changes in the global nitrogen market are reinforcing the value of CF Industries' low-cost, low-risk North American asset base. Combined with our consistent operational execution. Differentiated sales and distribution capabilities, and industry-leading free cash flow conversion, we have a strong foundation for long-term shareholder value creation. We are building on that foundation today through disciplined growth investments and capital returns. As you can see on slide 10, our current growth projects, combined with our existing share repurchase authorization, We're expected to increase nitrogen per share by 15% by 2030. These initiatives build on our long track record of compounding value and leave us well positioned to continue to create value for long-term shareholders. With that, operator, we'll open the call to questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. The first question comes from Kristen Owen of Oppenheimer. Go ahead, please.

Hi, good morning, and thank you for the question. I just wanted to start with sort of your long-term supply outlook. You know, you called out the 37% of European nameplate capacity that's currently curtailed. Just given the volatility in energy prices, never mind the absolute cost challenges, what's the structural settling out point, and has your view on the long-term supply backdrop changed?

Good morning, Kristen. I would say our view has not changed. I think it's something that we've been talking about for quite a while. The only part that has changed, our view, I should say, in the aggregate hasn't changed, is we believe it's going to accelerate from what we thought was a 2030 timeframe with some of those European shutdowns to occur, whether it be 12 months or 18 months sooner than that, given the current dynamics that you discussed in the, you know, the energy volatility. So today we're seeing, like you said, close to 40 percent either offline or curtailed in Europe. And additionally, each quarter that this goes on makes it more and more challenging to start up that equipment because the capital costs that would be associated, and additionally, you know, to have fixed overhead absorption that continues and the work that's needed to keep that equipment in line to be started up at some unknown date is quite expensive. So I would say our position on the tightening in the global S&D market has been one that we have back all the way to 2025. It's just being accelerated now. That's also being compounded by what we're seeing in, you know, Russia, Ukraine, with no true resolution there. And I would even say, you know, what we're seeing in the Middle East, even if there is some sort of resumption, it will take a while in order for that supply to begin flowing again.

Thank you for that. And my follow-up is for Bert. I think you said fall application demand among the highest in 10 years. It's been a pretty dynamic year from a commodity price perspective. Obviously, a pretty healthy crop this year, but just maybe some indications on how you're thinking about acreage in 2027 would be helpful. Thank you.

So good morning, and the positive implications or directions in our fall ammonia program, which is one of the highest in 10 years, one, it has to weather, we always put in the caveat of weather dependent, because we're just starting the program now. We're well through our movement in Canada, and that's moving down into the Dakotas, and then we have to move into the Illinois, Iowa, and Nebraska states. So right now that's a little bit delayed just because of the wet weather and elevated temperatures. But, right, the indications are with that big program for fall applications, it does lead to positive implications for corn planting in 2027, and what we're looking at is probably in line with what the other recommendations or indications are from the other players is 95 to 96 million acres could be elevated depending on pricing. Right now, where corn is settling, one of the positive things for this year and for farm revenue is the settling of the crop revenue guarantee programs at $475 for harvest. That'll lead to, I think, a nice floor for a farmer in today's economics. And then interesting to see what's going to happen globally with yields due to, I think, some underapplications of nutrients. Around the world and what that does to stocks to use ratios and how that correlates then to demand, which we see as healthy in the ethanol and protein markets, and then therefore drives price. And I would say the expectation is driving price. 2027, which could drive acreage even higher than the 95 or 96.

I appreciate the time.

Next question comes from Andrew Wong of RBC Capital Markets. Go ahead, please.

Hey, good morning. Thanks for taking my questions. Just curious your thoughts on how you see the setup on nitrogen, the market today, when you compare it to where we were last year. It seems like we're in a tighter situation with a lot of things you've mentioned, higher energy prices. We also see stronger crop prices. When you look at nitrogen prices, and I think in aggregate, they're maybe only 10% higher from where we were last year at this time. What's your thoughts on that, and why do you think that is?

Yeah, I think you're correct in terms of your 10%. We were trading at a high 380s, probably 360s or 380s last year, and today trading at 430 for Q4. That's on a short ton for NOLA. And I do see a positive market going forward. Just a lot of this demand that has been deferred is going to catch up. And then you throw in, like we've talked about, a lack of supply. And the first world countries that can pay and will pay as we go into the northern hemisphere planting and application seasons. We see a robust demand coming, and we're actually seeing that with orders for our UAN programs and urea as well. And so my expectation would be we're on a positive trajectory in at least the first half of 2027 for nitrogen pricing.

Okay, perfect. And then maybe just between Looking at different products, you look at urea, ammonia, UAN. And we've seen more strength in ammonia and UAN recently, which I think is more reflective of what we've been seeing on European Nat Gas. But then urea seems to have lagged a bit, right? Like, why do you think that is? And do you expect some catch up as well on that chapter?

Yeah, when you look at the global market in urea, you're trading about 4.5 to 5 million tons per month seaborne traded. And I think with the Chinese supply that has come in, kind of covering what has been lost from the Middle East, as I said in my prepared remarks, we've probably lost. Nine million tons, and it's in our deck of what's been lost and what's been made up with different places, and so as we're trending into the back half of this year in Q4, I think the market's just in pause as you transition from hemispheres to hemispheres and planting and applications and building of supply, but inventories are low across the globe in our channel checks. I do see a positive movement for urea. UAN has been trading at a higher differential to urea at this time, and we're seeing solid uptake in the UAN program for 2027 as well. Ammonia globally has more impacted, you're correct, European demand and global demand for ammonia. Like Chris's comments mentioned, you're seeing curtailments and shutdowns and inability to source, and that is driven. Ammonia up higher in recent weeks.

Okay. Thank you very much. Appreciate that.

The next question comes from James Hooper of Bernstein. Go ahead, please.

Thank you very much for taking my question. How long do you think that the northern hemisphere farmer can wait before buying? I mean, are they looking at events this week thinking the Iran war might end and they can hold on for some time? Is that why pricing is only 10% higher Good morning, everyone.

Well, I think you're seeing some indications of actual stepping in and buying. Our UAM program from our retail friends has been sold down a lot to farmers, and so that's a product we've already shipped. And we've talked about the ammonia program has been sold down to farmers, and I think ours and the other suppliers in the United States and Canada have also done or had or have prepared a good program for fall, which indicates, again, farmer uptake. We will launch our spring program for ammonia post the application season this fall, and I expect that to be well uptaked. I think where you've seen some cutbacks in P and K is a reflection of the higher prices for those products, but I think nitrogen is a very good value, and it's been reflected in purchasing. I think the slowdown, if you're taking the whole northern hemisphere and the slowdown in Europe is a reflection of... Natural gas costs in European producers of nitrogen, those prices are much higher than in North.

And just as a follow-up, can you just expand a little bit more on where you see Chinese urea exports going? I mean, it looks like this is the highest level in 10 years, but do you think this could be a new normal or just a one-off with helping India out effectively?

There are two Chinas. There's the prilled urea producers and the granular urea producers. What has helped stabilize the market in India and Southeast Asia has been the prilled supply, which is generally not demanded in first-tier, first-world markets like South America or the United States or Europe. And so if you extract the prilled supply out, I would say the granular supply out of China is probably given a balanced market at this point. So Chinese, the export authorizations now total almost 9 million tons. So it is higher. Historically, last year was just a little under 5 million tons. But again, in a strange year, with the limits out of the Middle East, it made sense for China to open up a little bit more. But it is consistent with, I think, what China has focused on is their own food security and food issues. The production and supply of fertilizers to their farmers on an economic basis, and so I think that's the first focus for China, and then excess has been exported. Whether that's next year, 6 million, 7 million, 8 million, I won't project at this point.

Yeah, I think the other thing with China, you said it's their highest export in over 10 years. It would also require them to have their highest asset utilization over a decade. So I'm not so certain some of the 8 to 9 million tons of export that, you know, Bert was talking about there don't move a little bit into the early part of next calendar year as well. And that's where maybe that bumps up against some of the domestic food supply constraints that they're looking at doing there. So a lot to keep our eye on with that, but it would be quite a bit for them to export before the end of the year here.

Thank you very much.

The next question comes from Joel Jackson of BMO Capital Markets. Go ahead, please.

Hi, I just want to get an update on Yazoo, and would you expect the level of insurance inflow from Yazoo to be similar in Q4 and Q1, let's say, as Q3 levels? First question.

Yeah, so I'll let the numbers in the insurance part go to Andrew, but just on an overall update with Yazoo, our expectations are still that towards the end of the first half of next year that we will be starting up components of that. As you recall, we've idled the ammonia, the nitric acid, and the AN plants there as we rebuild the AN supply. Additionally, we're looking at, as part of that reconfiguration, is building out some of the logistics and distribution attributes of the site to make it more flexible than what it's been in the past, being able to serve more customers. So we're excited about that plan getting back in operation in the first half of next year. But I'll turn it over to Andrew. He'll talk through a little bit more of the timing of insurance payments.

Yeah, and hi, Joel. So the way that I would think about it is I would take a longer view. I think when you look at both the capital build and the timing of when the cash payments will go out at the end of this year and into next year relative to the insurance pieces, what we expect is that you're going to offset. So if you take a longer-term view and you kind of go through once we're complete with the rebuild and this is all wrapped up, we see that the tool will largely offset. We're not trying to give guidance on what it's going to look like quarter over quarter, but I would say feel assured that that longer-term view will largely offset.

Okay, and then you're just a little bit of months into, you and your partners, into construction at BluePoint. Any observations or thoughts you want to share, you know, what you've learned so far about the project, things you're thinking about changing, or any observations?

Well, I would say we're in very early days related to that. But, you know, we have hit some significant milestones with receiving the permits that were required. There's significant civil work that's ongoing down there. Our long lead items have been ordered. And, you know, we're looking to begin our module work at the, you know, beginning part of next year. I would say the learning is that I think we are fortunate we made the decision when we did on a timing basis. So if you think about it, we made FID 18 months ago, but about six months prior to that, we had put in orders on electrical gear, given we knew that to get in queue there was important. So we're really two years ahead on some of our ordering of equipment, and I would say if you were to announce a project today and look to build a world-class plant of something similar to that, no matter where it is globally, you probably would have an extension of the duration by 12 to 18 months in completion of that. So I think the one thing that we're happy that we made was the decision when we did and also the pre-ordering of some of that. Critical equipment prior to the start.

Peter, we can move to the next.

Okay, I'll move on. The next question is Lucas Beaumont of UBS. Go ahead, please.

Thank you. Good morning. I just wanted to ask about the controllable non-gas costs. So, it's sort of been running up about $200 million year-to-date, year-on-year, which is about a 12% increase. So, I mean, it's been choppy quarter to quarter, but it's generally been higher. Could you just kind of talk us through the drivers there and how you see that evolving into the fourth quarter and into next year?

Yeah, hi, Lucas. This is Ed. Let me kind of talk you through Q3, because I think what you'll see, Q3 was also consistent with Q2, and that will give you some context here. So if you look at Q3, our cost of sales were up 11%. If you tease out the impact of volume, it was up about 4%. You probably saw within the quarter we had some gas favorability, but I know what you're focused on is kind of what are some of those offsets. There were really three things that were coming through there, and I'll kind of put them in materiality order, but there's a couple of ones I want you to make connections on. So the biggest impact that we saw coming through was higher cost of purchase ammonia, and this is largely in support of our U.K. operations. Just keep in mind, we benefit from higher ammonia selling prices, and so there's kind of an overall, when you think about the overall P&L, that flows through our fixed costs, but it's not necessarily structurally disadvantageous to us in aggregate. The second piece is fixed cost absorption. We do have puts and takes between timing of turnarounds of this year versus last year, but the net of what's coming through is the Yazoo City rebuild that we're doing and the fixed cost absorption coming through. The other connection I want to make there is, you know, I know it would be intuitive potentially to say I'm going to tease out the impact of the insurance costs and just look at the fixed costs, but those two need to ride in tandem because that insurance recovery is in part to offset those higher fixed costs we're actually seeing coming through, and so I would kind of think about those two things together, and then the third bucket, which is probably the smallest of the three, but it does have an impact, is distribution and logistics, and there's two things happening within that. One, you do have some mode mix, where we're seeing some shifting from barge into rail. That's really a function of our order book, and we're really focused on our netback. But you do see some of those costs coming through from a mix standpoint. What you do see that's a little bit more sticky is you do see increases in rail itself and some fuel surcharges. I think when you tease that out, what we've been seeing for the last couple of quarters, it's largely been the purchased ammonia and the Yazoo City fixed costs flowing through has been the primary driver that you've been seeing come through. Hopefully that helps.

Great, thanks. And then you mentioned that you've sort of seen Middle East and your rear exports tracking at about half the levels they were previously sort of coming out of the region since the conflict began. How has that been trending over time? Is that improving? Is it slowing? Is it stable? And how do you kind of see the outlook there short of us getting a full resumption in open trade? Thanks.

So the Middle East has been a question fairly opaque at first. When hostilities began in late February and March, there were vessels that were trapped behind, unloaded or empty as well as loaded, that delayed months to get out. So there was a period of time when it kind of opened up and things moved in May and June. And then, obviously, froze up again. And there's been a lot of vessels that have moved with transponders turned off, and so it's kind of difficult to track those. But outside of Oman, we're probably considering 500,000 to 550,000 tons per month has been exiting the Gulf and then throwing Oman on top of that because it sits outside the Gulf. You're probably around 800,000 tons out of 1.5 to 1.7 normally per month. Iran has been moving some tons, but less than their previous capacities. And so when you consider that you're probably losing close to 700,000 to a million tons per month out of the Gulf consistently. How quickly that recovers is another question because of the risks and costs of going in and out of the Gulf today. It will take a long time not only to untangle what's there, but for vessels to reposition themselves to load and just the cost associated with freight. So if hostilities were to end tomorrow, I would think it would take months to get back to what is a quote-unquote normal volume. And then you've got to consider which of those plants are inoperable or are operating at a suboptimal rate. Some activities with drones or with inattention or maintenance. So I think those two or three things combined would say you're going to be four to six months

The next question comes from Adlane Rodriguez of Mizuho. Go ahead, please.

Thank you. Good morning, everyone. I mean, just a philosophical question. So when you look at the... Overall, ag complex. You know, corn prices have been down sharply since the last WASDE report. Whether it gets revised down or not next week, who knows? So farmers' income is under pressure. Like, what do you think this is doing to farmers' psychology and their willingness to pay higher prices for crop inputs?

Well, you have to start with the premise of that's the business that they're in, is to plant a crop, harvest a crop.

Farmers have to plant, yep.

And so as coming from a farm family and with a lot of friends growing up in Kansas, that's just what you do. Now, relative to cost, there has been a lot of money from the federal government in the three tranches to support farm income. And then, per my earlier comment about the crop, It's called the Crop Guarantee or Revenue Guarantee Program with the minimum price set at $4.75 for harvest. It's much more attractive than where cash is today, so you have another kind of form of support. But I do see with what's going on around the world, those farmers who have the ability to inventory or store their crops through a cycle. Probably some good opportunities in the forward market relative to the impact of El Nino around the world, the impact of lower nutrient levels utilized for the crop that's being put in the ground, and the stock use ratios that are in the market relative to demand being strong with ethanol and protein production. So we've got some positives in line to support crop prices, which then therefore support farmer income, and that's a knock on wood.

Yeah, and I would just say from CF's perspective, you know, I think the area that we focus on is providing as much supply as we can globally by our production, and that's operating our sites like we have at a utilization rate at 97%, making consistent investments over the year into those assets so they're safe and have that high reliability that we can serve the farmer, and then increasing, you know, production, whether it be through debottlenecks at our plants or even our distribution network in order to make certain that we can get the product. to the farmer at the lowest cost and move it through the system when they need it for application. So our our whole focus is really on the supply side The S&D balance here in order to...

Thank you. That's what I have.

The next question comes from Ben Thurer of Barclays. Go ahead, please.

Good morning, Chris, Bert, Andrew. Thanks for taking my question. A lot has been talked about already on the supply side and obviously the ups and downs here, but I wanted to dig into one of the demand drivers, particularly Brazil, and what you're expecting here for the next... Call it one to two quarters. Trending behind on a year-to-date basis in terms of imports, but you still have, at least based on your presentation, a pretty sizable uptick into the fourth quarter. So given the volatility of Brazilian politics, the BRL, the corn price, and so on, as well as soybean prices, how confident are you about the level of potential uptake for urea in Brazil? That would be my first question.

Yeah, I think with the rally in Q3 that we saw in corn, hedging had taken place at the $5 level was pretty attractive for second crop corn in Mato Grosso. So safrinha gets planted generally late January through early March, but we are seeing it is a credit-constrained issue with a lot of Kind of carrying costs that the suppliers of nutrients have to, you know, have long-dated credit and getting repaid. That has delayed purchasing from the importers, which has delayed sales to the farmers. And so our estimates today is that for urea, Brazil would be down probably a million tons compared to 2025. And overall, with NPK, probably down... Seven to nine million tons of total fertilizer demand cut due to an inability to pay for it in terms of being competitive and, again, these credit issues. But I think one of the overhangs of Brazil today is this super El Nino that all the weather prognosticators are predicting is the impact when it's dry and you're planting at the tail end of the rainy season. And does that come early and impact yield?

Okay. And then my follow-up question, maybe help us understand with this very big spread on gas prices and Europe being at the high 20s, almost $30 MMBTU, obviously completely out of money where the prices are. So why has that not driven higher prices globally just yet? Is it just because the demand's not there? Is it because of the supply from China? What is holding back a better pricing just given what the cost for the last producer, so to speak, is versus what the cost for you guys is that has been very, very stable on a nine-month basis?

I think you have seen a supply contraction with our estimates of 35% of European production is either shut down or curtailed. And the impact then on ammonia, you've seen a $100, $200 rally in ammonia prices and seeing North African as well as North American ammonia moving towards Europe. to supply those producers that can import ammonia and produce CAN or AN or UAN, and so I think with what the supply constraint in Europe relative to the total global supply is lower, and I think you'll be seeing some deferred purchasing around the world that is also probably not impacted. Supply hasn't had to move into those positions yet. So when you combine demand deferral globally with prompt demand in Europe, I think that's why we're not escalating in price to the level that probably you would expect.

Thanks for that.

The next question comes from David Simmons of BNP Paribus.

Go ahead, please.

Hi, thanks. Yeah, just a question on the announcement of some of these modular ammonia plants coming internally in the U.S. Do you have any view on where those guys might land on the cost curve and whether it impacts distribution margins or if it's just a removal of imports in favor of domestic production? Thanks.

Some of these discussions that are coming through are part of the fields program that the USDA had with expanding production that the top four producers were not eligible to participate in, but a lot of those are very, very small. And you sort of question on scale their efficiency and really their capital cost per ton that could happen. And then on some of the other announcements related to fields, you're looking at some pretty small bottlenecks, things that we look at through our network all the time to increase efficiency. And obviously, we believe, given our technical expertise, we can do that on a lower cost per ton than anybody else. But in the end, you know, those announcements, you're looking at sizes that are in the 50,000 to 150,000 ton ranking here, where our blue point, at minimum, is going to be 1.5 million tons. So you're kind of, you know, just nipping around the edges from what it's going to do from the overall supply standpoint. And I think that just really touches why our view, both near, mid, and long term, is so constructive on nitrogen. We're seeing demand, as Bert said. Yes, there's some deferral, but it directly affects yield with the lack of nitrogen. So demand continues to grow, but we've seen not only what's happening with geopolitical, but European shutdowns occur, and then this lack of new supply being bid into the market. And then add on top of that, as I mentioned earlier, the duration to start up a new plant is long. All of this, you know, even though we hear these announcements of these smallers, are not moving the needle to the tightness we're seeing in the global S&D balance, not only this year, but over the next several years.

That's clear. Thank you.

The next question comes from Vincent Andrews of Morgan Stanley. Go ahead, please.

Thank you. I wanted to come back to Yazoo for a moment. At this point, when you're talking about first half of 27, does that mean at some point the complex will restart then, or does that mean you think the ramp of the restart will be completed by the end of the first half? So any color you could provide on that would be helpful.

Yeah, Vincent, that's a good question. Really, we're seeing that as the ramp begin at that particular time. It may be even slightly earlier than that as we start to bring up the ammonia plant, but then may take it down just given the amount of storage capacity. But obviously, this plant will have been down for... Basically, about a year and a half. So our intention is in the first half of the year, we're ramping it up, doing it safely, making certain that we have We're able to, when the AN side is completely ready to go, that we can move into AN production in the second half of the year. In addition to that, also, as we're ramping it up, it would be looking at, you know, some of the construction on that logistics flexibility that we're looking at, whether that be through DEF loadout, ammonia loadout, et cetera, would be part of that.

Okay, and then for Bert, another question on China, slightly different, though. We saw, I think it was last week, they're starting to put quotas on ammonia sulfate exports, so obviously urea is up more than we all thought, but AS, which had been something that they'd kind of run wild the last few years, now they seem to be holding back on that. Any thoughts on what's going on there?

Good morning, Vincent. That was a surprise. I think on top of the amazing amount of ammonium sulfate that has gone out in the world, over 20 million tons, and it's just been kind of a cheap replacement for urea, but I think it's related to sulfur and the cost of sulfur, the cost of production, and the need for sulfuric acid for other applications, and so that was just a tightening and a restriction of the ammonium sulfate to be produced or exported.

Thanks, everyone.

The next question comes from Chris Parkinson of Wolf Research. Go ahead, please.

Great. Thank you so much. Ever since summer fill, you've undergone, for all intents and purposes, looks like very solid demands through the fall in terms of reactions to that program, and you've seen a continuation of that in the price on a quarter-to-quarter basis. How are you thinking about building order books in the spring? And ultimately maxing out your network on an end-unit basis based on where prices reside, at least today. Thank you.

Hey, good morning, Chris. And when you look at the Summer Fill program, Mike and the team have done a great job putting that out in early July, and the roll-up was very fast. We took over probably over 2 million tons of orders and have been shipping against that, and then in parallel building the book through Q4, and now we're sold into Q1. And the pricing on that was, we started in the high, like, $280, $290, and you saw that reflected in the positive price of $322 as an average price for Q3, and that has continued to escalate. One is a reflection of just the need for nitrogen. Two is a reflection of the global market and kind of just, I think, a migration to UAN. Parallel to that, we've exported a lot less of UAN and have kept a lot more, one of our decision earlier in the year, to keep tons for the North American farmer or the American farmer, and as we position for spring, I think we always compare between the nitrogen products and try to stay in relation, but we're seeing a very positive spring demand, I think, coming, again, back to the... The corn acres that are going to be planted and applied, as well as what we expect to have a better corn price.

And just a quick follow-up, perhaps a slightly longer-term question, but, you know, a couple years ago, India, there were very brief talks about India trying to be, you know, independent on the RIA side, which has been anything but over the last two years, and obviously have, I'd say, disappointed in production, obviously, a period of times, you know, over that frame. How are you kind of thinking about that market over the longer term in terms of market growth versus perhaps U.S. LNG contracts towards the end of this decade? Is that something where you're looking at it sustainably, let's say, in the high, you know, High singular millions in terms of the market, in terms of the import market? Do you see that declining slightly? Do you see it growing? Just trying to get kind of a grasp on how you're viewing the longer-term supply-demand dynamic based on them. Thank you.

Yeah, so today India is approaching 40 million tons of total consumption and production of around 30 and imports of around 10 million tons. So imports have ranged between 5 to 10 million tons over the last several years. The Modi government has directed a Made in India program. They have built new plants. But some of those that are gas supplied are expensive. So if you're paying the world price for natural gas today at $25 to $30 and you're competing against import urea, it makes much more economic sense to not operate those plants and import urea, especially from China, which is the cheapest source, and they're a big buyer of prilled urea. So I would look at it in that range of there is a new plant coming on in 2027, about a million ton plant in India that is slated to come into production. So I would make that range or think about that range in that six to nine million tons into 2027. And then if gas prices are expensive, it should be on the high side. Thank you.

The next question comes from Matthew Dale of Bank of America. Go ahead, please.

Yeah, good morning. Thanks. How are you seeing ammonia demand for phosphates transpire? Obviously, the last six months, one direction, but we're starting to see some capacity come back. So what do you expect there, and how do you think about the circular reference for price of ammonia and perhaps? Some of the ability for the phosphate players to actually restart.

Yeah, it's been a difficult road for the phosphate producers because of sulfur and the price of sulfur elevating to over $1,000 a ton. As an ammonia supplier, and we do supply some of the major producers and have very good relationships with them, and both contractually and spot funds we sell. Through conversations with them, we're expecting demand for ammonia to increase in 2027 based on two drivers. One, we expect sulfur to come back in line, maybe not back to historical values yet, but trending that way, as well as just overall demand for phosphates, which globally have been cut 20 or 30 percent. You've had underapplications in all the major markets for phosphate, and that, again, eventually will have a yield impact. And then an ability then to pay for phosphate. So we're constructive, I think, in 2027, probably more positive going into 2028 for ammonia demand from the phosphate producers.

Thanks. I'll pass it back.

The next question comes from Salvatore Tejano of KeyBank Capital Markets. Go ahead, please.

Yes, thank you very much. Firstly, you made a comment before some of the higher costs you incurred outside of gas were due to higher shipping costs, but you focused on the netback. And on that front, I wanted to understand a little bit With your Midwest Corn Belt ammonia operations, can you talk a little bit about what is, what percent or what dollar amount of the spread between, say, NOLA ammonia price and Midwest? It's part of the cost of transportation and perhaps storage versus what kind of the premium netback you as a CF can get by having access to barges and a storage network. And also, can you shed some light into what volume you ship to the Corn Belt kind of on an annual basis?

So how we look at ammonia through the Midwest and the terminal system, we have our terminal distribution that is principally supplied by the Sunoco pipeline that starts in NOLA at our Donaldsonville plant and then intersects and then splits off into Indiana and Iowa up through Nebraska. And we ship about one point total ammonia for corn applications or wheat would be about 1.3, 1.4 for CF. And so then we stair-step the costs. The most economically advantaged ton is shipped by the pipeline, and we maximize our volume through that. The next step is our barges, which we own and lease some, and we move up through our river-served terminals. And then some are served by truck that, as we move excess ammonia from maybe our Oklahoma system or extraneous tons from Courtright, Ontario, into one of those facilities. That just balances it out. So that's your stair-stepping-in costs from pipe to barge to truck and rail. And yes, costs were up a little bit, but as Andrew said earlier, a lot of that is a reflection of the increased volume that we moved, and then we expect to receive, as those tons go out and are applied, the revenue and the margin from that, which is...

Thank you. We can keep all our plants... Thank you. Thank you. By location to distribution facility by distribution facility, that there's never any type of curtailment from, you know, our production network, given that our production network.

Perfect. And I wanted to ask also a little bit about low-carbon ammonia. Can you refresh us firstly on where you stand with, you know, any sales commitments or volume commitments from Donaldsonville for whether it's ammonia or urea and the premiums that had first disclosed a year ago? And are you seeing any new markets gaining traction? It seems like there have been some ammonia-powered vessels now that have been manufactured. Are you seeing anything there on the energy market incremental versus a few months ago?

Yeah, so I'll start with the first part of your question. You know, BERT's team has done just a fabulous job of month-by-month building the low-carbon book that we have, and we're starting to see significant volume. Move through that at what I would say is probably an average price, a little over $20 per ton, and that was primarily focused on ammonia. We now have our certifications that we're working through on UAN, so we're beginning to see UAN come through that, not only because of the sequestration we're doing with the CO2 on the ammonia production side, but also our abatement projects on our nitric acid plants. That's a market that we just continue to see as really upside opportunity that, once again, just, you know, demonstrates the differentiation between our network and others in our space and really the leadership. We're doing through the low carbon network. So we continue to build that book. Our expectation is next year with CBAM and some of the pending details on certification process getting worked out, we'll see that expand quite a bit more.

The next question.

Yes. Our next question comes from Mazahir Mamadli of Rothschild & Company. Go ahead, please.

Hi. Thank you for taking my questions. Just a question on sort of high-level ag fundamentals. I'm curious to hear your opinion on the current crop price environment. Do you think... The current new crop futures reflect the reality on the ground in terms of what the yields could turn out for corn and other important crops.

Regarding yield, we're almost an information taker as well. We do have our channel checks and different farmers we talk to. I am surprised I'm surprised by some of the farm yields or corn yields I'm hearing about. In the northern tier, like in North Dakota on dry land, as well as the irrigated performance in Nebraska and Kansas. But overall, I was surprised on the USDA's revision compared to Pro Farmer and some of the other information that came out. So whether we move from 181 average yield to 183, which is what's projected, or... But taking a step back and going from a global perspective, I do see a challenged market. Again, weather-related, nutrient, lack of nutrient-related in South America, specific to Monte Grosso, is a potential for yield cuts there. I think Argentina is expected to have adequate rains and performance. So when you take a step back on where we are on demand, I would hope to see corn values start to rally as we get into 2027.

Great. Thank you.

Ladies and gentlemen, that is all the time we have for questions for today. I would like to turn the call back to Martin Jerosek for closing remarks.

Thanks, everyone, for joining us today. We look forward to seeing you at upcoming conferences.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.