Greetings and welcome to Nutrien's 2020 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to Richard Downey, VP of Investor Relations.

Thank you, operator. Good morning, everyone, and welcome to Nutrien's conference call to discuss our second quarter 2020 results and outlook. On the phone with us today is Mr. Chuck Magro, President and CEO of Nutrien; Mr. Pedro Farah, our CFO; and the heads of our three business units. As we conduct this conference call, various statements that we make about future expectations, plans and prospects contain forward-looking information. Certain material assumptions were applied in making these conclusions and forecasts. Therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions are contained in our current quarterly report to our shareholders as well as our most recent annual report, MD&A and annual information form filed with Canadian and U.S. Securities Commissions to which we direct you. I will now turn the call over to Mr. Chuck Magro.

Thanks, Richard, and good morning everyone. Nutrien's second quarter results demonstrate the strength of our business even during these unprecedented times. The bottom line is that food is essential and there is no company better positioned to help farmers meet the growth in global demand. Our adjusted EBITDA was over $1.7 billion this quarter, and we demonstrated significant progress on our strategic and operating objectives. We were able to produce these results despite cyclical weakness in fertilizer prices and global economic uncertainty. In fact, Nutrien's second quarter EBITDA was higher than the combined total of the next four largest crop nutrient companies. We also generated $1.6 billion in free cash flow this quarter, aided by strong working capital management. I take three things away from our results today. First, the strength in performance of our Retail Ag Solutions business and the benefits of our growth strategy. We generated nearly $1 billion in EBITDA in the first half of the year primarily due to strong organic growth and significantly higher margins. We also had a tremendous uptick in our digital platform as we continued to build out. Second, we achieved excellent operational results in our potash and nitrogen business units, with strong on-stream times and lower production costs, demonstrating that we generate strong cash flows, even at the bottom of the cycle. And third, the fundamentals of the commodity markets are improving, including the agricultural markets. There are signs that fertilizer and most crop prices have stabilized and are beginning to recover, and the outlook into 2021 is now more positive. Let's shift to our results for the quarter and the first half. In the first half of 2020, our Retail Ag Solutions business delivered impressive EBITDA growth of 20% compared to last year, despite lower than expected U.S. seeded acreage. Three-quarters of the increase was from organic growth as we continue to offer growers new solutions and optimize our business. The other 25% of our growth came from highly accretive acquisitions, including from the Ruralco acquisition in Australia. Our Australian business continues to perform extremely well, contributing around $150 million in EBITDA in the first half of 2020. And we continue to be ahead of our Ruralco synergy targets. Total Ag Solutions EBITDA margin exceeded 10% in the first half of the year, as gross profit was higher across all product lines and total gross margin percentages improved. We also lowered operating costs as a percentage of gross margin; achieved efficiencies in working capital requirements and surpassed $1 million of annual EBITDA per U.S. location as well as making solid progress towards all operational targets set at our last Investor Day. We continue to make great strides in the adoption of our ag solutions digital hub. On a year-to-date basis, sales through the platform surpassed $700 million, exceeding our annual goal of $500 million in just six months. In the second quarter, 45% of sales available on the platform were ordered online. We continue to build out this industry-leading platform with new functionality and by collaborating with key partners. We plan to launch our new digital seed recommendation tool in the coming month. This is a data analytics decision support tool that helps evaluate seed options using the best and unbiased information and consider soil, weather, and seed trial performance data. We also continue to grow our footprint in Brazil, with the Tec Agro acquisition and within North America with the recently acquired AGBRIDGE, which provides valuable data transfer and management capabilities for equipment to our essential data network. This startup company is a small acquisition from a dollar perspective, but we believe that it will help improve our digital agronomy offering for growers and lead to improved utilization and optimization of our extensive fleet of custom application equipment. Shifting to potash, the breadth and flexibility of our operations and distribution system was highlighted this quarter. We achieved strong sales volumes for both the second quarter and the first half of 2020 as market demand was brisk. North American sales were the primary driver but volumes were also supported by improved offshore demand. Our second-quarter potash cash cost of product manufactured was $52 per ton, down $8 from the first quarter, and was the best quarterly performance on record. As a reminder, this is a weighted average of our product mix excluding white and specialty products, our standard-grade potash was priced below $50 per ton this quarter, ensuring we are at the low end of the potash cost curve. Moving to nitrogen, North American sales to the agricultural markets were strong this quarter, which helped offset a downturn in industrial demand. We proactively took downtime at our Trinidad facility to help balance regional trade and improve our cost position. We were able to lower our overall cost profile and achieved an impressive 97% operating rate on our North American assets in the second quarter. Much of our business remains among the lowest cash cost and highest margins across nitrogen producers globally. By the end of next year, we also expect to have added almost a million tons of North American production from brownfield projects and improved operating performance. Now let's shift to what we are seeing for the outlook. We expect a stable second half of 2020 and we are constructive on 2021 and beyond. As a result, the guidance we provided in May is largely intact, and we only lowered the top end in nitrogen to reflect the modestly slower recovery for ammonia and UAN prices. We maintain guidance for our ag solutions and potash segment, and we have raised expectations for phosphate. A few additional comments here on the ag market and fertilizers. The downward revision to the USDA's corn and total acreage has reduced carryout levels and stock-to-use estimates and improved the outlook for the 2020-2021 crop year and farmers' sentiment. Lower crop production combined with a recovering ethanol market and indications of potentially higher import demand from China has also provided a constructive backdrop for the fall season and into next year. In Brazil, growers are seeing record crop margins and have forward contracted a historically high percentage of their anticipated 2021 harvest. Brazilian soybean acreage is expected to increase by approximately 5% in the upcoming planting season, and grower sentiment is extremely strong. Solid ag fundamentals and a long runway for growth is the key reason why building our Brazil ag solutions business is strategically important for us. In Australia, moisture levels have improved significantly and grower sentiment is also very supportive. Australian planted acreage is expected to increase by over 10 million acres or 23% and should result in higher crop input demand in the coming growing season. We expect this environment will support good earnings for our ag solutions business and global fertilizer demand. In potash, prices strengthened in most spot markets throughout the quarter and demand continues to be solid. Our order book is fully committed into October and we remain confident in our full-year volume estimates for the global market and our corresponding sales. We expect potash sales volumes in the second half to be strong, particularly in India, Brazil, and Southeast Asia. We expect that global demand momentum that started in the second quarter will carry through to 2021, leading the potash supply-demand balance to tighten and markets to continue to recover. Our global potash demand forecast for this year still holds at 65 million to 67 million tons, and we expect to see growth from that in 2021. As we prepare our production network for this demand and take scheduled maintenance downtimes, we do expect our current costs will be slightly higher in the second half of the year. In nitrogen, we reduced our full-year earnings expectations as prices have been slow to recover than previously thought due to weaker industrial demand. Extremely low nitrogen prices have tested the cost curve, but there is limited new capacity under construction so as the economy recovers, so will nitrogen demand and prices. So these are unpredictable times, one thing is clear, we continue to strengthen our position as an integrated ag solutions provider. We made significant progress across virtually all of our long-term operational objectives and continue to grow our ag solutions footprint and solutions offering. We are paying a solid dividend to ensure our investors are rewarded throughout the commodity cycle. Our dividend remains within our targeted range, accounting for less than 60% of our expected free cash flow during the cyclically low period and accounts for only about 80% of our free cash flow from our ag solutions business. I want to finish up with some comments related to the environment, health, and safety. Nutrien's top priority is ensuring the safety and health of our more than 25,000 employees globally and the communities where we live and work. The company successfully implemented controls and procedures to minimize the potential impact and transmission of COVID-19 at our operating facilities. We remain vigilant in this regard and the company continues to be fully operational, and our people are doing an admirable job keeping each other safe while ensuring we operate efficiently and effectively. Second, Nutrien continues to be committed to improving ESG performance and reporting. We achieved another quarter of excellent results across our key metrics. We also issued Nutrien's first ESG report in April, and since that time, we have achieved significant improvements in company and sector ratings from a number of third-party ESG agents. We expect this trend to continue over the next year as we lay out our climate and ESG strategy and targets to lead the way for our industry. In closing, Nutrien has performed extremely well across all business units in a difficult and uncertain environment. We are well positioned with a stable and growing dividend, significant free cash flow, a solid balance sheet, and end markets where demand continues to increase. Now more than ever, we are proud of the significant role we play in feeding a growing world. With that, operator, I'll turn the call over for questions.

Your first question comes from PJ Juvekar from Citi. You may proceed.

This is Kendall Marthaler on for PJ. So just looking at retail, during the first quarter results, you noted that you wanted retail inventories pretty low. You expected they would be low, so you could restock going into the fall. So just given very strong sales and retail in the first half, can you provide a little bit more detail on the inventory situation there specifically within crop nutrients and crop protection? And would you say they're lower than normal or just about in line with what you were expecting?

Good morning, Kendall. Yes. I’ll have Mike Frank answer the question specific to retail.

Yes, Kendall. So our inventories across our network globally are lower in crop protection and in crop nutrients, particularly in North America. We did come out of a season with strong sales, as you saw from the report today, and overall lower inventory. So we achieved the operational metrics that we were looking for. In fact, if you look at our overall working capital metric, we're down to about 18% in our working capital ratio, which is really strong performance for us. So if anything, we're probably a little bit ahead of expectations.

And just more broadly speaking, Kendall, what I would say is, across our ag value chain, including the wholesale businesses, generally speaking, after 2019, we and the industry had a significant amount of fertilizer inventory due to poor application seasons we saw last spring and last fall. We're feeling very good. It's part of the reason why we're more constructive for the second half. As we move into 2021, most of that inventory has normalized, and in fact, in some parts of the ag value chain, as Mike has alluded to, it's quite thin in terms of our inventory position. Looking at our order book on a forward basis, our order book is quite full right through the third quarter now.

Your next question comes from the line of Ben Isaacson from Scotiabank. Your line is open.

Nice job on the quarter. Chuck, you guys have spent billions of dollars on a physical retail infrastructure, obviously, including your tuck-in strategy. You've now realized, I think 45% of North American retail sales available were made on the digital platform as that continues to succeed. Just working out backwards if you're realizing $0.55 to $0.60 on the historical dollar from the physical infrastructure, is that the most efficient use of capital going forward? Is there shareholder value that can be unlocked by consolidating or thinning out the brick-and-mortar business model in retail? Thank you.

Good morning, Ben. So look, we've always said that the digital strategy is integrated; we call it an omni-channel with the physical distribution network. In fact, we couldn't deliver the great results on the digital platform without the several thousand agronomists that work inside of Nutrien and with farmers on a day-to-day basis and, of course, the physical facilities to move the product. Agriculture is one of these very unique industries where, when the season is open and farmers are ready to go to work, we need to get products, people, and our assets on the farm in a short order in a matter of hours. So we think that the work that we've done on the digital platform is fantastic. We do believe that we're going to change how and what we can offer farmers and make farmers more profitable, help them manage their farms, as well as help them navigate the sustainability world. That’s a big part of our investment. But we do think that it goes hand-in-glove with our physical network. In fact, we’re very confident we've seen other players in this industry just have a digital platform and not have the physical infrastructure, and they just cannot be successful given the demands that are pressed when we’re in the heat of the season and the requirements that our customers need.

Your next question comes from the line of Steve Byrne from Bank of America. Your line is open.

As you noted, the urea prices have really surged in the last couple of weeks. If we look into the U.S. Midwest pricing, the urea on a per-unit nitrogen basis relative to UAN and ammonia is at a real premium, while UAN and ammonia pricing there is nearly at multi-year lows. So, I'm curious to hear what your view is for where did that disconnect go from here? Do you think that disconnect narrows because the urea pricing is potentially unsustainable, or do you think the UAN and ammonia pricing could rally from here? Which of those scenarios is likely getting reflected in your guidance?

Good morning, Steve. I will have Jason Newton talk about the dynamics between urea, ammonia, and UAN and what we’re seeing. Then I can address the guidance question at the end. Go ahead, Jason.

Yes. Good morning, Steve. Yes, typically, what you see, especially at this time of year, is that the urea market is being driven by dynamics offshore and, in particular, really robust demand that we're seeing from India and, to date, a little bit of the inability for Chinese suppliers to get in on those tenders. We've seen a tight global urea market and prices moving up in response. Typically historically, you don’t see the other product prices, ammonia and UAN, moving in tandem unless you're in season. So the spreads fluctuate because urea prices can be volatile. As we get closer to product actually being applied, you'd expect that those end market prices of ammonia and UAN will move to be more in line with historical levels relative to urea. I think you've already seen some of the sentiment turn a bit more positive toward the other products because of the strength in the urea market.

Yes. Just to put that together now with our guidance and how we're thinking about it. Look, we think that the crop maturity is quite advanced right now for this time of the year. We are expecting an early harvest and a nice application window for a fall application. So from a demand perspective, and that's clearly what our order book is showing right now, is that we're expecting solid demand. I say this as a general comment not only for nitrogen but potash and phosphate, which is helpful. And the reason we trimmed our guidance in nitrogen was purely just on the ammonia and UAN. We just don't think that there is going to be, because of the economic slowdown, and the hit to the industrial demand for nitrogen products, we just don't think that there is going to be as much forward momentum when it comes to pricing. We do think that urea certainly is strong, and there are reasons for that; the supply-demand is quite tight as Jason articulated. When you look at the bottom of our range, what we need is a weather event, so a very shortened application season. We're not calling for that today, but that would be the bottom of the range. On the top, of course, is a nice wide application season and a little bit of forward momentum when it comes to recovery and some nitrogen prices, but not a lot. We don't really need a lot to hit the top end.

Your next question comes from the line of Jacob Bout from CIBC. Your line is open.

My question is about retail margins. There has been significant improvement, and we are looking at year-end to enhance margins further.

Good morning, Jacob. Mike Frank, will you take that question?

Sure. So, Jacob, look, our first half was really about driving operational excellence and focused on organic growth and EBITDA margins, and we executed against that strategy. Our stronger margins are partly a result of mix; for example, in crop protection, we saw a really strong market for trees, corn, and soybeans, and there's solid margins on those products. Obviously, in crop nutrients, prices were off, but if you saw in North America, we pretty much were able to hold our per ton margins. Our teams just did a really good job of selling the value of the products. I would say lastly, on the seed side, our seed revenues are about flat; we actually walked away from some of our wholesale seed business, which impacted revenue in a market where there were more planted acres, but it strengthened our margins. We executed across each of our platforms. We think that these margins are sustainable. Obviously, the digital platform is giving us more insights and helping us work with our customers to make better agronomic decisions. It's also simplifying and making the entire purchase process more efficient, and that's also driving some margin efficiency for us. So it's a number of pieces that came together, but Jacob, we think these are sustainable. In fact, we think there's a runway of opportunity ahead to continue to drive both organic growth and EBITDA margins.

Yes. And Jacob, just one further point. We also think there's some further upside in margin simply because we're still integrating the Ruralco acquisition. That was a large acquisition for us; it was a public company. We laid out the synergy targets that are going to take a couple of years to accomplish. As the rest of the synergies are delivered, we do think that it will have some upward potential for overall margins because it was such a large acquisition. We like what we see. I think Mike and the leadership team of the retail group have done a great job. There is some upside as we further integrate the Ruralco acquisition into the overall company.

Your next question comes from the line of Joel Jackson from BMO Capital Markets. Your line is open.

I wanted to follow up on the discussion regarding seeds and seed margins. This year has shown a more competitive landscape in seeds, particularly in soybeans, and you noted that your margins have improved. There is also some uncertainty about future registrations for the use of extend. So my question is twofold: How are seed price dynamics changing? Do you perceive a more competitive market, and how might this impact margins? Additionally, what are your strategies concerning the uncertainty around extend as Enlist continues to grow? Thank you.

Good morning, Joel. Mike Frank, will you take those questions, please?

Yes, you bet. So, Joel, good questions. Look, if we just kind of look across the seed industry, if you start with corn, what we saw on unit pricing in our retail businesses was that prices were up just a bit, about $3 a unit, so less than 1% price appreciation. So, it's a competitive market; we didn't see a big shift in trade mix. The corn market seems pretty stable, and margins are relatively stable as well. I just mentioned previously, we walked away from some wholesale business both in corn seed and soybean seed. More specific to the soybean market, it's extremely dynamic, obviously, with the legal issues on dicamba that we faced at the end of the application window. Those were challenges, but in the end, we were able to get dicamba on most of the acres that farmers wanted to get down on. Our pricing on soybean seed was really flat. In fact, there was no appreciation or depreciation on selling price. Early in the season, there were some really aggressive pricing, and we for the most part stayed out of that. The market came back, and overall, again, we saw pretty flat pricing, and on the retail side, it was similar to flat margins on soybeans. Now, going into '21 obviously, there's a question on whether or not extend is going to be re-registered, and so we’re working closely with our suppliers, Bayer, BASF, Corteva; we'll be prepared to sell whatever the farmer ends up wanting. We expect that we’re going to sell both extending and enlist seeds next year; the real question is whether there’s going to be registration to allow us to apply dicamba over the top. We think we'll continue to see strengthening of the Enlist platform. We think it was about 20% of our mix this year; next year we expect it'll be north of 30. So, there's definitely some momentum with Enlist right now, but we're sitting back and waiting to see from a legal and regulatory standpoint what tools our customers can use, and we’ll have the available seed to sell them regardless of how these regulatory decisions get made.

Your next question comes from the line of Adam Samuelson from Goldman Sachs. Your line is open.

So, the question is on the potash market and I would love to just get your views on China as we think about the second half of the year and into next. Chuck, in your prepared remarks, I think areas of strength in the potash market, China was notably absent from that list. Could you reflect on how the contract evolved, spring port inventories, and how you think the utility of a China contract kind of works going forward given the experience both this year and the last couple?

Okay, good morning, Adam. Yes, the market fundamentals for potash, as we said, are very good for the first half. Demand was strong. We’re seeing brisk movement. I mentioned our order book before, and the markets I did call out for strength were Brazil, Southeast Asia, and India. We are holding our overall market demand forecast to 65 million to 67 million tons in 2020. Certainly, we think that in 2021, the market will grow again. Specific to your question on China, we do think that shipments to China in 2020 will be down, and that's built into our overall forecast, and the numbers we provided. It's clear that they drew down their inventories and tapped their strategic reserves to gain leverage in the last contract, and they won't be able to do that again this year unless those shipments are significantly higher than we predict. So, I'm not really overly concerned about the port inventories. I think there's some gamesmanship happening here, and we view overall inventories in China, not just the ports but in country, to be reasonably tight because the fundamental demand for potash in China grew year-over-year. We’re feeling very good about the overall potash market, China included; if we can get to a point here where we continue to see solid demand in 2020, I think it sets up for another growth and good year in 2021.

Your next question comes from the line of Duffy Fischer from Barclays. Your line is open.

Two questions. The first one is, just there have been a couple of news articles about COVID potentially hindering the overall ability to pull in the crop this year and to prep for next year. So, with all your touch points in the field, do you think COVID will be an issue this fall on a macro basis for North America? And then, the bigger question is, we're about a decade into the push into digital. It was about maybe seven years ago or so that the climate forecast came to investors' minds on how big this might be. Originally, people thought it was going to be revolutionary; you might have one winner. Obviously, none of that has really played out; if anything, it’s evolutionary to kind of non-existent, with what we see from the outside as analysts looking at the numbers for the company. What went wrong with digital, or what didn't happen over the last five to seven years that was supposed to? Can we crack those nuts going forward? Do you see digital becoming kind of revolutionary, or will it continue just to be evolutionary in your mind?

Good morning, Duffy. I'll have Mike Frank give a perspective on COVID and the harvest, and then Mike, feel free to comment on your views on digital, and then I can come back to that as well.

Yes, you bet. I wouldn't anticipate any issues getting the harvest off. Think back to the middle of March when COVID ramped up and concerns were really rising, and that was right in the busy time for farmers in North America getting the crop planted. Our employees on the frontline didn’t lose a beat. Every day they came to work, focused on making sure they were safe and the customers were safe, and very importantly, ensuring that our customers were making the right decisions. I think it's going to be the same thing as the crop comes out. Farmers will get in the field and harvest; grain elevators will operate, and I wouldn’t anticipate any material issues from a COVID standpoint. Now look, good question on digital, revolutionary versus evolutionary. Our focus on digital has been very pragmatic. It’s really about what we can do as a retailer based on our breadth and the focus and the value that we add in the value chain. We’re using our digital tools to help our agronomists and our customers make better agronomic decisions. We’re doing that with seed, we’re doing it with fertilizer, variable rate applications. I would say those two tools are working extremely well and are adding value to our customers and to our business. We're also now using our digital platform to help our customers plan ahead and do complete crop plans across their entire farm, input by input, ultimately creating a business plan, and then being able to execute that business plan even as the season plays out. All of this being done digitally streamlines the entire operation from our perspective in terms of how we work with our customers. Because once you plan ahead, you can basically execute on that plan. Again, it’s as simple as going into our digital hub and ordering the products, whether it’s our customers doing that directly or our sales agronomist on their behalf. We’re adding new features really month by month. Chuck talked about this in his prepared remarks. This new seed selection tool that we've just rolled out will be the industry-leading seed selection tool. We’ll have all of our seeds that we offer to our customers, and we've got an incredible database of both research and plot data and public trail data crossed by weather and soil environment. We’ll be able to help our customers make ROI decisions on seed selection, get access to the best financing programs through that same tool, and ultimately, order the products. It not only helps from an agronomy decision standpoint but is incredibly efficient for our customers and for us. We believe that we’re going to continue to invest north of $50 million a year in our digital strategy, and that makes sense based on the size of the business that we can leverage that against.

Duffy, just a few other comments to augment what Mike has said: we don't really think about it in those terms. What we do know, being so close to the customer as an independent advisor, is that the relationship matters. We don’t expect ever that the digital platform or portal is going to replace that. This business has been built on relationships for generations, and we want to build on top of that. Our approach is different than the ones you outlined where other companies that have tried to do this probably got less results than they hoped. We’re really letting our customers guide us; we’re not building these things and then expecting them to use it and pay for it. The seed selector tool that Mike outlined was built because growers can't find a platform where they can get all the seed varieties in an unbiased view; as a company that is independent and sells it all, that should be our role. We believe that over time, there's a tremendous value created for farmers and for our shareholders, but this is an evolution in my humble view, this will not be a revolution.

Your next question comes from the line of Andrew Wong from RBC Capital Markets. Your line is open.

I just want to ask about geopolitical risks as potash. I mean, on the upside or the downside. Belarus just had a pretty contentious election; Canada's relations with the U.S. and China have pretty strained; and Russia's relations are strained with pretty much many countries. Is there anything we should be watching there in terms of impacts on the potash market, potential tariffs, potential sanctions, anything like that? Thanks.

Good morning, Andrew. Yes, look; we’re in a world where I don't think we've seen as many geopolitical risks as we've seen over the last two to three years across the world in multiple industries. I can't sit here and say, 'Don't worry about it.' But what I can say is, look, we're pretty well connected and plugged into at least the jurisdictions where we operate.

Your next question comes from the line of John Roberts from UBS. Your line is open.

This is Lucas Beaumont in for John. I just wanted to touch on your retail acquisition pipeline. Now that you've had a few more months of experience with the current disruptions, what are your expectations now to be able to complete bolt-ons in North America in the second half? Given it's traditionally your high period of activity, are you expecting things to be lower this year given ongoing challenges with due diligence, and if that occurs, would we be likely to see high deal activity in the first half of next year, or would that basically push everything back 12 months? Could you also discuss how your smaller retail competitors are faring currently, if they are healthy or struggling and how this is impacting potential opportunities?

Good morning, Lucas. Mike Frank, over to you.

Yes. We made a couple of nice acquisitions in Brazil; I would call them medium-sized acquisitions. We see more opportunity to continue to do that in Brazil. I would expect to continue to have opportunity in that market, just like we've seen here over the past several months. In North America, the pipeline has slowed down a bit. We talked about this after our last call, partly because of COVID. It makes the entire process more challenging, so we've seen that play out. Some companies that maybe would have thought about exiting at this time are probably slowing down their plans a bit. I do think that'll impact our deal flow a little bit coming out of 2020; that likely builds opportunity for 2021, as you mentioned. In terms of how our other retailers are doing, we’re still looking at probably a dozen or so deals right now in North America, so we get to see the income statement and balance sheets from a lot of smaller players. I would say it continues to be tough. There’s a lot of value in scale. You need capital to continue to upgrade your physical assets and invest in your people. We’ve seen that companies that are subscale are challenged because of that, and I think that needs to play out, which in my mind means that we’ll continue to see consolidation across the retail industry for the next several years ahead.

Your next question comes from the line of Vincent Andrews from Morgan Stanley. Your line is open.

I would like to follow up on the seed advisor recommendation platform. I'm interested in understanding if your customer base in North America aligns with the market shares of the large seed companies, or if you are overrepresented among growers who are not using the seed companies you sell, compared to those that use Pioneer, which you don’t sell. Specifically, if the seed advisor suggests that a farmer should solely use Pioneer when they have been using another brand, it stands to reason that you would lose that seed sale since the farmer won't be purchasing from you. I'm curious if the intent behind the seed advisor's unbiased approach is to attract more growers into your overall network, not just for seed sales, but also for selling them the other inputs they require. I would like to understand how this operates.

Good morning, Vincent. Mike Frank?

Yes, Vincent, good question. A little bit detailed, but here’s what I would say. We have a very broad portfolio of seeds we sell. We've got our own Dyna-Gro brand where we have seeds in corn, soy, and cotton. We sell DeKalb/Asgrow. We sell Syngenta seeds, and we do sell Corteva, Pioneer brand in the southern half of the U.S. We've actually acquired some Pioneer dealers in the Midwest, so we do sell Pioneer in select areas in the Midwest as well. Corteva has a new retail brand called Brevant, which they're providing us new germplasm to sell through our platform as well. Our seed advisor tool will present to our customers those seeds that we have the portfolio where we can execute the sales. If it's an area where we're not selling Pioneer or another regional seed company, we won’t be recommending those seeds because we can’t execute on the sale. As a retailer, there is no retail company that has a broader seed portfolio than we do. That’s one of the benefits that we can offer to our customers: we sell seed from a variety of seed breeding companies. Those varieties and hybrids that we have available will show in our seed selection tools, so that our customers can make the best decisions on those products that we can offer them.

Your next question comes from the line of Chris Parkinson from Credit Suisse. Your line is open.

Can you talk a little bit more about your nitrogen asset portfolio, how we should be thinking about your TNT production over time, including gas contracts, your appetite for additional brownfield and debottlenecks, and even M&A within the North American or global market? Thank you very much.

Good morning, Chris. So I have Raef Sully just talk a little bit about the current portfolio platform in the brownfield projects that we've got underway, and then I can add to the larger strategic question. Go ahead, Raef.

Thanks, Chuck. Our plants are located in three different regions. We've got about a third of our production in Canada, where it's traditionally been lower priced than Henry hub. We’ve seen that get close a little bit, but it's still a very, very good cost gas. Just over a third of our production sits in the U.S., and the remainder, just less than a third is in Trinidad. You saw we took a plant down in May and another one in June, just based on market conditions. The world has changed a little bit in the last six months; we’re seeing trends that go from second- or third-quartile to third- or fourth-quartile as the LNG is pushing down prices across the globe, particularly in Europe. Those plants in Trinidad will probably stay down until we see market conditions improve. What we have been focusing on is brownfields. Chuck mentioned, we're coming close to being able to put online close to a million tons more in North America. Some of that has helped us in this quarter with our record productions. We’d like to continue that where it makes economic sense; that’ll be our focus. Chuck, I don't know if you want to add to that.

And then Chris, just the broader strategic comments. We like the nitrogen business; we're a top three producer globally. I think we're a strong operator. As Raef mentioned, we've got a good gas position. If you look at some of our margins, there's some of the highest in the world based on how we operate our networks. The industry itself is the most fragmented industry that we operate in. We believe in consolidation; we think it drives cost efficiencies, and in this business, cost is everything. We’d be looking for a consolidation opportunity, but our primary focus is the way Raef described it. We've got about a million tons going to come online; we’ve already seen some of that this year, but by the end of next year, we’ll have a total of a million tons of incremental capacity, which I think is great. We’ll continue to look for both brownfield opportunities, but also M&A opportunities, but they have to make economic sense.

Your next question comes from the line of Steve Hansen from Raymond James. Your line is open.

You’ve already described a number of different initiatives around M&A and retail and digital strategy expansion. I'm just curious, Chuck, how you think about all these opportunities relative to your own stock right now in terms of capital deployments. Stocks are not trading at really lofty levels. Do you think about share repurchases being a priority through the back half of this year and into next, or do you feel like the opportunities are still better on the internal side? Thanks.

Good morning, Steve. So from a capital allocation perspective, what I’d say is, as we look forward, some things haven’t changed; we'll keep an eye on some other things. For us, we want to ensure that our assets are very safe and reliable, and so we would allocate capital to the sustainability of our asset. The balance sheet; we've got a strong balance sheet today. I think Pedro and the finance team at the company have done a great job, and we want to ensure maximum financial flexibility with that balance sheet. We do consider it to be a core asset for us as we move forward. The dividend is key; as I mentioned in my prepared remarks, we like having a dividend policy where the dividend will grow and it's sustainable. We’ve always said we want that dividend to be around 40% to 60% of our free cash flow. At this point in the cycle, that's exactly where it is, but it's less than 60%, which is where we would expect it with the pricing that we've seen in the last few months. Going forward, nothing is going to change in those three areas. The look forward for us is that we are trying to balance the need to grow the retail platform. We did see some great opportunities in Brazil. I think that Ruralco acquisition, it’s been positive already, and it’s got potential. But you're right, when we look at our stock, that would also be a very strong use of capital. We're going to continue to assess things before we would get more interested in buybacks. It’s about certainty in the forward markets, not just the agricultural industry but the overall economic backdrop. We’ll take a wait-and-see approach on buybacks, and we're working through the rest of our growth platforms.

Your next question comes from the line of Michael Tupholme from TD Securities. Your line is open.

Can you elaborate on your expectations for industrial ammonia demand in the second half and talk about what you've seen so far through the first portion of Q3? And then, also, what you've got baked into guidance as far as industrial ammonia demand?

Okay. So why don’t we have Jason Newton just talk a little bit about the outlook for industrial demand, and then I can try to give you some perspective on guidance. So Jason, go ahead.

Yes, sure. We’ve started to see some improvements in certain markets; particularly if you look at China, for example, the industrial ammonia used is starting to pick up, and, in fact, Chinese imports of ammonia were pretty much in line with your levels for the first half of the year. We've also seen demand start to pick up in some of the surrounding Asian markets, which has provided support to that region. On the other hand, in the Western markets in Europe and North America, the rebound has been a little bit slower. Overall, on a year-over-year basis, we'd expect industrial nitrogen demand to be down about 10%. But we expect agricultural growth to offset that, so it's pretty flat overall, in terms of nitrogen demand outlook.

The way we built our guidance is, we believe our order book is strong. So there’ll be a shift of our product mix into agriculture. If we get an early harvest and a nice wide fall application season, we’ve seen that in historical years. Our guidance does not reflect a volume change; in fact, our volume should be quite strong. The reason we took the top end of the guidance range down is, we just don’t think there is going to be as much forward momentum when it comes to pricing. However, we do think that urea is strong, and there are reasons for that. Our projections are based on what Jason's outlined quite nicely. We don’t foresee the pricing momentum we normally would in the fourth quarter.

Your next question comes from the line of Michael Piken from Cleveland Research. Your line is open.

I just wanted to ask about your expectations for the fall season. Sounded like you're pretty optimistic for retail, and if we do end up getting kind of a bigger fall season and there's potentially a contraction of several million acres in corn next spring. I mean, what type of retail trajectory do you think we could see from '20 to '21, if we end up with a big spring that we have this year following the weak fall and then potentially a strong fall season? Thank you.

Good morning, Michael. Mike Frank, do you want to take those questions?

Sure. So, Michael, obviously lot to play out until this fall. I would say, what we saw in planted acres this year were 87 million soybeans, 92 million corn; that’s within our normal range. Obviously, cotton was down a couple of million acres, which are high-value acres for us. We would expect if weather improves in West Texas, we’ll see some cotton acres come back next year. That said, it’s too early to forecast how '20/'21 will play out on the retail side. We would expect acres to likely be somewhat similar in total planted acres to what we saw this year. The mix always changes a bit from year to year depending on commodity prices. If we get a great open fall window, that will help our business this year, and then we’ll get busy next spring with helping with the spring needs. So, with crop progress coming in pretty quick, it should line up for a nice open fall window for fertilizer applications at least in North America this year.

Your next question comes from the line of Silke Kueck from JPMorgan Securities. Your line is open.

I have two short potash questions. Can you discuss what effect that repricing of potash tons in China had on the offshore potash prices, and have all of the tons repriced? Secondly, I was wondering what your potash forecast is for North America, like, does this year's 10.9 million to 11.5 million tons forecast assume that strong post-harvest season in the U.S.?

Thank you very much for the question. Ken Seitz, why don’t you take those?

Sure. Good morning, thank you. Yes, so we did, with the pricing of the Chinese contract there at the end of April. We did have a price adjustment in the quarter. We’ve taken all of that behind us in our results. With respect to the balance of the season in this fall, we talked about a little bit on this call, but with the flush of inventories throughout the balance of this year and assuming some good weather in China, North America, and certainly strong farmer affordability in Brazil and India, we expect, as Chuck shared, our guidance of 65 million to 67 million tons to remain intact, and our guidance of 12.1 million to 12.5 million tons to remain intact as well. I think that positions us, as an industry and as Nutrien, heading into 2021.

There are no further questions at this time. I'll turn the call over to Richard Downey, VP, Investor Relations for closing remarks.

Thanks, operator. Thank you, everyone for joining us this morning. If you have any extra questions, IR is available to answer them. Thank you. Bye-bye.

This concludes today's conference call. You may now disconnect.