The world’s largest fertilizer and agriculture-supply retailer sees itself as a one-stop shop for grain farmers and at the forefront of a changing industry.
“This integrated business allows us to start with the farmer first and work backwards. Everyone else in our industry is doing it the other way around and in my humble view, this approach will transform the industry in just a few years,” Chuck Magro, chief executive officer of Nutrien, told the Greater Saskatoon Chamber of Commerce luncheon Feb. 21.
“The company who can get this right will generate significant value for shareholders and for all of our stakeholders, including the communities where we live and work,” he said during the sold-out event.
Nutrien was formed when Agrium Inc. merged with the Potash Corp. of Saskatchewan at the start of 2018.
“We put together a new, much larger and much more diverse company, a company that has a different mission. It has a different strategy and it certainly has a different purpose,” he said.
The merger brought key elements together. The company is set up to help farmers grow crops and maximize profits, while also being sustainable and transparent.
It provides a full line of products, agronomic knowledge, financing, and digital precision tools to about 500,000 farmers in seven countries.
Its supply chain includes 15,000 rail cars, 400 distribution centres, 1,700 retail facilities and 22,000 employees, which he said enables the company to deliver products, services and people to farms in a matter of hours.
“Our strategy is to continue building this integrated platform throughout North America, but also South America, Australia and eventually other parts of the world,” Magro said.
He said the agriculture industry is in the midst of a revolution, which is attracting billions of dollars in new technology investment.
“We’re seeing it poured into ag tech like you’ve never seen it before,” he said.
With the advancement and application of data science, agronomy tools, visual imaging technology and robotics the agricultural industry is at a point of major changes.
“It’s going to shift from becoming an inputs business to an outputs business. Inputs are the fertilizer, chemistry and the seed that’s applied to the crop. Outputs are the number of bushels of the profit per acre,” he said.
“So we’re already seeing the conversation with farmers. They’re changing. It’s shifting from how much fertilizer do I need to grow my crop to, how do I make $250 with this soil per acre. That’s what’s happened, and companies like Nutrien will take much more responsibility for growing that crop because we will have the data and the analytics to predict the outcomes.
“Basically, what we’re preparing to do is underwrite the risk for our farm customers, which is something that has never been done in our company or in the agricultural industry today.”
Magro said the integrated business model allows Nutrien to have higher earnings and cash flows, which attracts more shareholders, who have invested about $10 billion in the last few years.
“We expect to invest significant capital to grow our businesses, but also to invest in new products, new technology and new services. In fact, we are planning to invest about $3 to $4 billion in our retail business over the next coming years. Our retail consolidation strategy has been highly effective and we believe that this is the key to our long-term success,” he said.
Nutrien is set to launch a farmer financing business by year-end. As well, the company plans to budget $100 million per year to respond to software development and new digital platforms.
“We have seen significant uptake since launching this new platform in July, and I believe one day this could really change how we do business with our farmers,” he said.
Potash production increased by 600,000 tonnes last year because of higher demand from core markets like China, but also due to being able to sell it directly to customers through their retail distribution business.
As a result, he said Saskatchewan is better off today and “the clear winner as a result of the merger.”
He said if Nutrien successfully carries out its business strategy, it could add $1.5 billion more to the Saskatchewan economy over the next few years.
“Nutrien contributed an additional $750 million to the local economy. This is on top of what combined, Agrium and Potash Corp. did the prior year in just 12 months,” he said.
Nutrien will also continue to support local businesses, he said.
“Last year, we sourced products and services from approximately 2,000 Saskatchewan-based companies, spending about $700 million…. We expect this commitment will grow as our company grows.”
Nutrien intends to set up its corporate headquarters in Saskatoon and is spending $50 million over the next 15 years for space in a new office tower.
Magro said he will continue to reside in Calgary, but plans are underway to bring two additional executive vice-presidents to the province by year-end.