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Key Factors You Need To Know About Nutrien

Jun. 10, 2020 11:28 AM ETNutrien Ltd. (NTR), NTR:CA28 Comments
Sven Carlin profile picture
Sven Carlin


  • It is all about potash prices where Nutrien is a low cost producer but there is also plenty of potash supply capacity out there.
  • Thanks to the merger with Agrium in 2018, it is likely that Nutrien will remain cash flow positive in any potash price environment.
  • From an investing perspective, Nutrien is a good buy, but not yet a great buy. It also depends on your appetite for dividends. I created 3 possible investing scenarios.

Nutrien (NTR) is a company created in 2018 after the merger of Potash Corporation and Agrium. Potash Corporation was always regarded as a really good business due to its low-cost production and Agrium as a good retailer thanks to its scale and leading retail position across North America. This made the business always too expensive for me from an investing perspective. However, at the moment, the business is trading at decade lows and therefore it deserves another good look.

I'll focus on the most important things when it comes to investing in Nutrien: potash, cash flows and the stock price in relation to possible future cash flows. I have created 3 scenarios that give a good risk and reward perspective for investing in Nutrien.


Potash is a cyclical commodity. When prices are high, lots of new investments usually lead to oversupply for a certain time and vice versa, when prices are low, there is limited investment that often leads on supply gaps.

5 years potash price - Source: Mosaic

We are currently in an oversupplied market with plenty of potential supply within the market. Just Nutrien can increase production by 6 Mtpa from existing mines without high costs. Until demand grows enough to cover for the current oversupply, potash prices can remain depressed.

Potash supply and demand forecast - Source: Mosaic

Given the net new capacity potentially coming into the market shown in the chart above, it is likely potash prices will remain subdued for years to come and that is also why investment banks downgraded Nutrien on 'lower for longer' potash prices.

Source: SA

So, it is unlikely that we will see a boom in potash prices and a subsequent boom in Nutrien's stock price in the coming years like it was the case in 2008 or in 2011

This article was written by

Sven Carlin profile picture
Passionate about value investing! Education: PhD - A Real Value Risk Estimation Model for an Emerging Market Experience: Investment manager at Let it grow investments, Netherlands Assistant professor at the University of applied sciences Amsterdam, Netherlands Data researcher at Bloomberg, London UK

Analyst’s Disclosure: I am/we are long NTR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (28)

11146471 profile picture
Another look alike fertilizer stock at all times low is ICL, Israel Chemicals, specialized in Dead Sea Potash and Bromine.
These days there is so much money floating around that all commodities get overdeveloped and overproduced and the commodity price slashes to zero profits (or worse).
Sven Carlin profile picture
not all commodities:-) some have natural limits:-)
$lik $ilver profile picture
@Sven Carlin You have indicated "some (commodities) have natural limits". It would seem you are including potash in this claim, yet I don't see anything provided to support such a belief specifically within the potash market. The article seems to imply the current breakeven for most miners in the space is ~$200/ton and that NTR could breakeven as low as about ~$100/ton. This means NTR is better positioned to endure prices below an average price to produce, and not much more.

All one needs to do is to clearly understand that the cost to produce any commodity HAS ALMOST NO BEARING on where futures traders will trade that commodity for profits, and that there is no "natural limit" up or down that matter more than basic wild volatility. This trading at below cost to produce has been verified with gold, silver, oil nat gas/ and others. Additionally most commodity miners don't have the option to cut their production when prices move down due to their minimum cash flow needs, and often they are forced to increase production to lower their cost per unit.

Please tell what you mean by "natural limits" Thanks
Sven Carlin profile picture
@$lik $ilver hehe, I said some commodities, potash definitely not with so much idle capacity and then many projects:-) There is plenty of potash, actually as much as you want :-) too much perhaps.
Another bag-holder here, agreeing that this is my worst investment ever. Very poor management of guidance and expectations. When was the last time NTR beat expectations or guidance? Just have to wonder how many stubborn retail are left. Maybe if Trump is voted out and free trade becomes the norm again, things will rebound. Not really hopeful on that front though, nor on the potash glut. Outlook always seems to be negative and worsening for this industry.
Sven Carlin profile picture
sorry to hear that :-(
Nicklaas profile picture
Thanks Mr. Carlin for your take.

I am new to a small position in NTR. On their Q & A and presentations they talk a lot about their
retail growth in US, Brazil, Australia. Online sales. Models for optimal seeds, fertiliser input ...
specialist to sell it to the farmers....--> More and at higher margin.

So you do not seem to buy that. Why?


Sven Carlin profile picture
there is talk and there is cash flows:-) I prefer the cash make the talking
any thoughts on domtar ?
Sven Carlin profile picture
sorry, no thoughts :-( Haven't analyzed it :-(
EM2C2 profile picture
My prediction, BHPB sells Jansen to Nutrien for a song. Buy it for the dividend, and the pot upside of complete market domination.
Sven Carlin profile picture
interesting prediction - but I think they will go on with it as they have already invested more than half
11146471 profile picture
BHP has the power to finish Jansen and then make an offer to buy NTR with stock/cash. After that they could carve out the old NTR together with Jansen and relist it with an IPO...
EM2C2 profile picture
nah, they'll jettison it faster than south 32.
jgrever621 profile picture
I am not able to analyze a stock as deeply as this report, but have done some work on NTR. My conclusion was to keep the stock more for the dividend than growth in the near future. Currently I am a bit underwater on it.

Sure like seeing your comments, which are more positive than mine, though I also felt the dividends were reasonably safe, and depending on world crops and supply of chemicals, could be quite a good one. The latter possibility seemed remote, so I really appreciate this article which paints a much clearer picture on these chances.

So, I am keeping it, though adding more isn't in the cards for now.
Sven Carlin profile picture
earlyriser profile picture
If this is your worst investment ever, you are doing pretty well.
Greatcrazyworld profile picture
Agree with everything written. Having said that would one have to assume that the management at BHP would have to go completely brain dead and invest further billions in a mine that at current and for the foreseeable future would be looking at break even pricing? If Jansen comes online it is pretty much a given potash prices would remain around $200ish/ton for many years and mean BHP would receive no return on investment? At $200/ton what could possibly be the catalyst for a decision to go ahead?
Sven Carlin profile picture
they are playing on the environmental card or something like that to make it look worthwhile :-( You never know what management will do
Greatcrazyworld profile picture
Not sure I understand..."playing on the environmental card"? They will only mine and sell one product and would with absolute certainty put the market for that product in an oversupplied position for years making it non-profitable for many years (the foreseeable future). How does the BHP board justify to its owners/shareholders that this would be an intelligent use of financial resources? On the other hand they could almost certainly sell and recoup the investment to date to an existing player that would mothball the mine until there was a need for the additional supply. Most would agree from a business perspective that makes far more sense than throwing good money after bad. So is it not at least equally or more likely that the board understands the non-profitability of this investments and bails?
They want to be able to say they are not an oil/iron company, but a diversified miner and show wheat and corn on their literature instead of tailing ponds. In a way, I imagine they view their investment in Jansen much like I view my investment in NTR. Not likely to make any money but I'm already in, so I'll just see it through and hope against reality that it turns out ok in the end. I think its called the sunk cost fallacy.
My worst investment ever. The share price has done nothing but drop for the last 5 years. Slowly and steady, the management team has put this stock in the toilet..do a reverse split...and then keep it going down.
Sven Carlin profile picture
it is because potash prices went down due to oversupply :-(
mpcascio profile picture
My worst investment ever.
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