The Mosaic Company (NYSE:MOS) Q2 2021 Earnings Conference Call August 3, 2021 11:00 AM ET
Laura Gagnon - VP, IR
Joc O'Rourke - President and CEO
Clint Freeland - SVP and CFO
Jenny Wang - VP, Global Strategic Marketing
Conference Call Participants
Mark Connelly - Stephens
PJ Juvekar - Citi
John Roberts - UBS
Luke Washer - Bank of America Merrill Lynch
Adrien Tamagno - Berenberg
Joel Jackson - BMO Capital Markets
Rikin Patel - Exane
Good morning, ladies and gentlemen. And welcome to The Mosaic Company's Second Quarter 2021 Earnings Conference Call. At this time all participants have been placed in a listen-only mode. After the company completes their remarks, the lines will be opened to take your questions.
Your host for today's call is Laura Gagnon, Vice President, Investor Relations of The Mosaic Company. Ms. Gagnon, you may begin.
Thank you. And welcome to our second quarter 2021 earnings call. Opening comments will be provided by Joc O'Rourke, President and Chief Executive Officer, followed by a fireside chat as well as open Q&A. Clint Freeland, Senior Vice President and Chief Financial Officer; and Jenny Wang, Vice President, Global Strategic Marketing; and other members of the leadership team will also be available to answer your questions.
We will be making forward-looking statements during this conference call. The statements include, but are not limited to, statements about future financial and operating results. They are based on management's beliefs and expectations as of today's date and are subject to significant risks and uncertainties. Actual results may differ materially from projected results.
Factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release furnished yesterday and in our reports filed with the Securities and Exchange Commission.
We will also be presenting certain non-GAAP financial measures. Our second quarter press release, performance data, attached as exhibits to yesterday's Form 8-K filing also contain important information on these non-GAAP measures.
Now, I'd like to turn the call over to Joc.
Good morning. Thank you for joining our second quarter earnings discussion. I hope you've had a chance to review our post commentary and slides as well as our news release, and performance data all made available on our website yesterday.
Today, I will provide some additional context before we respond to questions we received last night. And then we'll conclude with a live Q&A session.
Mosaic they've delivered excellent financial performance in the second quarter, and the second half of 2021 is set up to be one of the strongest periods in over a decade. Our earnings are driven by two key factors. First, strong underlying agricultural markets, coupled with tight fertilizer dynamics are driving fertilizer prices higher.
Second, and just as important are the results of our effort to optimize our business to fully realize the benefit of these market trends. Throughout our long term and ongoing work to reduce costs, we've created significant earning leverage. And this quarter's performance demonstrates.
Looking ahead, we expect further upside. Our third quarter order book is now 90% committed and priced. As a result, we expect the sequential increase of $90 to $100 per tonne in real life phosphate prices, and $25 to $35 per tonne in realized product prices.
Beyond the third quarter, we are seeing buyer appetite for fourth quarter commitments as well. All of this implies higher earnings in the third quarter and very strong results in the fourth and into 2022. The dynamics fueling the agricultural markets point to a period of strength that we believe will extend well beyond 2021. Grain stocks remain limited and global corn and soybean demand is growing, driven in part by surging Chinese demand and biofuels.
As a result, agricultural commodity prices remain high and the outlook is promising for continued strong farm income. The world's farmers have solid incentive to maximize yields from every acre and that is what drives fire fertilizer demand.
Demand in the Americas is considerably stronger than we expected at beginning of the year. Brazil is expected to once again set records for fertilizer shipments. Across the Americas we saw a big recovery in 2020 and expected to demand growth moderate this year. The opposite has happened. Demand for potash and phosphate is up substantially compared with last year and nearly all of the fertilizer delivered this year has gone to the ground, which means channel inventories in most regions remained below historic norms.
In North America, demand continues to be strong. Following the completion of our CBD petition, U.S. phosphate prices now trade at parity with global benchmarks. And the domestic market is benefiting from elevated imports from a more diverse pool of suppliers. This is reflective of a healthy market is responding to the market signals.
In India, farmer demand remains very strong, but importer economics have negatively impacted available supply in the country, because of the disconnect in government subsidies. As a result, it is difficult for the Indian farmer to get the phosphates they desire. It is clear that more work needs to be done to rectify the imbalance, but we continue to see region's absorbing fertilizer supply.
Given how depleted Indian inventories are, we see India as a source of pent up demand for the future. Southeast Asian fertilizer demand is benefiting from the strength in Palm oil and China is incenting us farmers to maximize yield.
While the demand dynamic for potash and phosphates are similar, driven by the strong underlying agricultural market, the supply overlook is slightly different for the two products. In phosphate do supply is limited and any new Greenfield supply addition for several years from completion.
Recently, Russia requested producers to prioritize domestic demand to stabilize in country pricing. And while supply from Chinese phosphate exports during the second quarter was elevated to meet global demand, Chinese exports are expected to decline in the second half of the year, as in country seasonal demand increases.
This was reinforced by news last week that China's National Development Reform Commission has begun requesting the export of fertilizer be stopped to ensure adequate domestic supply.
In potash demand growth continues to exceed new supply from higher operating rates reasonably announced by producers. As a result, prices continue to rise. In fact, price increases have largely offset the financial impact on our early closure of K1 and K2 shops with Esterhazy.
We recently resumed production at Colonsay and now expect our net production loss to be approximately 700,000 tonnes per year, down from our original 1 million estimate. This also brings the sales impact down to approximately 500,000 tonnes, as we draw down available inventory.
Our earnings are leading to significant free cash flow generation, which has allowed us to proceed with the early retirement of our $450 million in long-term debt later this month. We are currently evaluating additional actions for capital deployment.
Capital expenditures are expected to total $1.2 billion [technical difficulty]. This includes accelerated K3 spending to speed up our ability to bring K3 to full production as well as approximately $75 million in additional high returning opportunities within our businesses, given the strong cash generation we continue to evaluate opportunities, but also allow us to further strengthen our balance sheet, grow the business and share with our investors.
Overall Mosaic continues to execute and perform very well in this robust fertilizer market. And we expect to continue building momentum from here.
With that we will move on to your questions.
A - Laura Gagnon
Joc, a number of analysts including Adam Samuelson from Goldman Sachs, Ben Isaacson from Scotia and Rikin Patel from Exane BNP are asking about fertilizer affordability. Specifically, globally, are you seeing any demand destruction due to affordability? Are there any regions or areas you're watching?
Thank you, folks. The way we look at this is actually is the grain prices and higher grain demand is driving the fertilizer. So from our perspective, it's demand for grains and oil seeds and the price of that's creating is driving fertilizer demand, which is of course, driving fertilizer pricing. So we see the supply and demand balance the other way around, if you will.
Now, we may see at some point the impact of high prices. Today tight grain and oilseed markets are going to be tight for a while. They're not going to loosen and just one growing season so this should last a while. And with gold prices up, it seems that most growers have been comfortable with the prices that we're seeing for fertilizer.
Now the one area of concern we've talked about this is India. And this is not an affordability issue for the farmer but an affordability issue for the importer, because of the Indian subsidy system. But sooner or later local Indian inventories will mean that they have to buy fertilizer.
A handful of analysts including Andrew Wang from RBC, John Roberts from UBS and Steve Byrne from Bank of America have asked about Mosaic's realized price progression. It appears that price realization has lagged in potash when comparing spot prices trends to the third quarter guidance. But stock prices and guidance appear to be fairly in line in phosphates. Can you discuss the underlying dynamics and what that means for price realization into quarter four?
The life between the product prices we're seeing at the mine gate today and the actual international prices are driven by a couple things. First of all, when we looked at international shipments through Competex [ph]. Q1, we had delays due to port issues. In Q2, we're now seeing delays due to wildfires and rail impacts as we go through the British Columbia carrier.
So the starting to push shipments back. So there is a normal lag period that we're experienced, plus, you have to consider that these prices are the Asian prices, which are lagging as well from the Brazilian and North American prices.
If we turn to North America, a lot of the times that we're delivering now and what delivered for the quarter three are times that we're sold in early May for August shipment to meet summer field demand. And of course, those were delaying further due to the K1 K2 closure, which means a lot of the main volume won't be priced or shipped until October. And so the pricing lag is higher than that would normally be. But I will emphasize that we are in our distribution business, seeing and selling the $600 plus price that we're talking about being the spot market.
Joc, Steve Byrne, Rikin Patel and Adrien Tamagno from Berenberg are asking questions about the impact of increasing ammonia volumes delivered under the CF contract. What do those increases mean for spot purchases? And are there any volume related discounts provided or premiums required under the contract?
Thank you. Historically, our ammonia tonnes have been split roughly evenly between produced spot and CF. With the increased CF supply in the second half, which means for the following year, in the range of 75% of our total ammonia needs will be based on a natural gas price and be below today's market. This reinforces our competitive advantage in ammonia and the effectiveness of our hedging program to make sure that we have a number of supplies that buffer up against times like this.
In another raw material related questions. John Roberts and Ben Isaacsonare asking about the potential for future sulfur supply disruptions through 2021 and into 2022. What risks do we see? And how are we managing them?
Thank you. Today our position on sulfur is much better than a was at quarter ago. At this stage you can see by the sulfur price which just settled at about $195 per tonne versus $192 in the second quarter that the refinery rates and the demand balance for sulfur has really equalized.
Now it's a little too early to forecast quarter four, but what I can tell you is gold refinery operating rates have stabilized and gone to normal rates. We have really done a lot of work to get good inventory of sulfur in our system which we did not have coming out of quarter one. And if you remember the issue we ran into at quarter one was low operating rates in the refineries, some turnarounds in the refineries and then freezing weather the shutdown a lot of the Gulf refineries.
So the combination of the three meant are normally type situation was exacerbated quite a bit. So this date we see the risk is significantly lower.
Joc, we had a number of analysts acknowledged accelerating cash flows. These analysts including Seth Goldstein at Morningstar, Mark Connelly of Stephens, and Jeff Zekauskas from JPMorgan. Are [technical difficulty] will do with it? How we will allocate it aside from debt reduction and small growth capital? And looking for specific insight into how we are thinking about share repurchases and dividend increases?
Thank you, gentlemen. [Technical difficulty]. Our strategy is and always has been that we will balance our capital allocation between debt repayment and working on our balance sheet projects that offer a great return to through growth and then returning money to shareholders.
In terms of the specifics, let me hand it over to Clint, because I think he can give you a little more color on that.
Thanks, Joc. I think as we go further into the year, I guess one thing to note is that, as we generate free cash flow and cash builds on the balance sheet, we're not going to let it just sit idle. I think we've got options. And whether that is additional debt reduction for some of the maturities that are coming due, we've got existing share repurchase authorizations, we can always take a fresh look at the dividend.
We also have a program in place to review some of some really high returning internal projects, like our opportunity CapEx relatively small dollars, but very high returning projects that will continue to look to invest in. But I think - again, I think as we look forward, I think we have a number of options. And again, I don't see us generating cash and letting it sit idle on the balance sheet. And I would expect further into the second half of the year that will provide more clarity on what that allocation program is going to look like.
Andrew Wang, and Adrien Tamagno are interested in more detail on our opportunity capital spending. Clint, can you elaborate on the new $75 million gross spending allocation? With phosphate capacity expansion ever be on the agenda? And what can we expect to be allocated to the new soil health initiatives?
Thanks, Laura. I think when we look at our opportunity CapEx investments for this year, overall, I would say it's about one third in North America, about two thirds in Brazil. I think there's more of focus in Brazil. But I would say that those investments are generally being made in a number of different areas. But I would include the following.
A number of these investments are around automation. We've spoken about some of the next gen investments that we're making in our production assets and that is ongoing, that's part of this program. Another example is down in Brazil, where we're looking to increase gypsum sales, and we need to make some investments in infrastructure to be able to accommodate that. In potash, we're looking to increase some of the supplier capacity.
But again, as we look at these investments, they're all relatively modest investments, typically single digit million dollar investments, but with very, very significant returns, some in the triple digit type of return on an after tax basis.
From a phosphate capacity expansion standpoint. I would say that really the things that we've focused on and talked about is his long lines of potentially increasing micro essential capacity in the future. Demand for that product continues to increase and to the extent that we need to expand capacity there and see that. Beyond that, I think our rock and concentrate capacities are in fairly good balance at this point otherwise.
When we look at the new soil health initiatives, again, those are relatively modest investments, those are typically expensed. Because we treat that really more along the lines of R&D. And so I would say, overall, those are relatively immaterial investments, not additive to CapEx. And again, I think that's supplementing our R&D into new products for the future.
Joc, we've also had a number of questions related to our potash assets, including questions from Adam Samuelson of Goldman and PJ Juvekar of Citi. So this is really a three part question. One, what was the driver behind changing your volume impacted guidance? And how does this change total production expectations for 2022? Second, what are the ARO costs associated with the closure of K1 and K2? And lastly, what does the cost structure look like in 2022?
Thank you, Laura. Our volume production guidance was adjusted basically, because of two things First of all, the acceleration of our shaft and K3 and being able to move into production areas sooner in that K3 area, which will increase the contribution from about buying in the fourth quarter.
We also were able to optimize some of our turnarounds at the mills because they are being fully utilized. And then the second part is a successful restart of Colonsay, which really has come up very well. And we've been very pleased with the rate at which we've been able to get it into production. Matter of fact that commissioned the mill just the other day so we're fully ready to run there Colonsay.
And between the two of them, we've been able to accelerate our ability to produce tons at those two operations, which is mitigated some of the loss that we have from the early closure of K1 and K2. As far as closure costs for K1 and K2, in the second quarter, there were $158 million, most of which was non-cash write-off, $110 million was fixed asset write downs. $37 million dollars was ARO adjustments, and then [technical difficulty] MRO write offs, $4 million was contractor severance.
In terms of the ARO itself, the $37 million brings a total up to about $120 million for ARO, of which $70 million to $100 million, let's say will be in the closure of those two mine shafts. Of that 40% or so will be spent this year and the rest will be spent next year of final closure of that.
For the third part of the question of our cost structures. If we do the summer parts, our K3 mine, at 6 million tonne operating capacity will be one of the lowest costs in the world. We set that doing the $50 range already. Belle Plaine is also very low cost and very well positioned on the cost curve and now at 3 million tonnes of our operating capacity.
Colonsay costs are still expected to be in the $100 per tonne range as per our previous guidance. We're looking at ways to reduce that amount. So you can kind of work it out from that 80% to 90% of our costs will be at that very first quartile and then we'll make up the difference with slightly higher costs from Colonsay at $100 a tonne, assuming we actually need those times to meet the market requirements.
Let me emphasize that at these prices, Colonsay a tonnes are still very profitable and we would expect that to have a very good margin in today's environment.
Thank you, jack. Operator at this point we'd like to open it up for follow up questions from the phones.
[Operator Instructions] Our first question comes from the line of Adam Samuelson with Goldman Sachs. Your line is open.
Yes, thanks. Good morning everyone. Was hoping to maybe ask about the fertilizer advantage business a little bit. You've called out in the script and in the prepared remarks, an increasing the inflation there. It seemed like you're moving from a both phosphate conversion costs and rock mining costs away from your 2023 cost targets. And I'm just trying to get a sense of kind of what the plan is to maybe bend the curve on inflation and get back down to those 2023 cost targets over the next 18 months or so?
Thanks, Adam. Look, if you go back to our multi-part analyst presentations, I think you'll remember we did say that we would correct the expectations of these costs things based on inflation. And over time, our expectation is if there's higher inflation in Brazil, that that will be offset by a weakening Brazilian real.
So, I just want to highlight that we have accounted or we were not expecting to account for inflation. And this was a method of offsetting inflation. So you have to adjust those cost numbers based on that. But overall, we continue to drive very hard. I think you'll see in our results that we continue to drive very hard for those transformational benefits as we call them. And a big chunk of that is reducing our costs of mining.
And in that, I just want to highlight that this quarter was exacerbated by lower rates caused by some downtime, and that doesn't increase your costs because of the fixed cost absorption.
Next question comes from the line of Mark Connelly with Stephens. Your line is open.
Thanks, Joc. There's a longstanding perception among investors that more operational hiccups than other producers. You obviously can't control the supply of sulfur and stuff like that. But when you look at all the operating metrics internally and the changes you've made to process, has your Florida system become materially more reliable? And I'm very curious how you would answer that question on phosphate potash curve?
Yeah, thanks, Mark. Well, I would say, definitely, yes. We've spent a lot of time and a lot of the area where our cost improvements have come from better operational reliability, better maintenance control, better outcomes of turnarounds. There is a high level of unpredictability in any large system.
And frankly, our system runs very close to its capacity. So, in the case of sulfur, with very good spring ahead of us, a little sulfur hiccup impacted our tonnage. But I think if you look at it over time, you'll see that really, we have run very close to our capacity and make big improvements in that area.
Likewise, in potash, I mean, if you look back where we were running the three potash lines continuously, you had a lot of flexibility, which we don't have anymore. So we do need those plants to run consistently all the time. And for the most part, we believe they do now and I think those have been big improvements to how we can keep our costs at a much lower level.
Your next question comes from the line of PJ Juvekar from Citi. Your line is open.
Yes. Hi. Good morning. A question on phosphates. As phosphate prices moved up, China, maybe opportunistically raised exports. And we've seen that in other fertilizers as well in ammonia, Chinese - urea as Chinese exports went up. What is your confidence level that Chinese exports will decline in second half, which is what you said in your remarks?
Yeah, thanks, PJ. I'll talk a little bit about this, but I'm going to hand it to Jenny, because I think she's got a pretty good idea on the world supply and demand and some of the forces here.
But let me say, the Chinese do need to get their domestic phosphate to their farmers for the growing season in the next quarter. And as such, internal demand is going to be high. But one of two things basically has to happen, either the price has to go up internally in China, or they will put restrictions on exports. Either way, our expectation is from a supply and demand perspective, that demand is there internally in the country. And these exports should slow down.
Jenny, do you want to talk a little bit about particularly some of their government interactions?
Sure, Joc. PJ, you're right. We have seen the Chinese exports of a phosphate probably urea, as well have increased in the first half of the year, driven by very strong international market. The demand was so strong and it's a pure economics driven. As a result of that the Chinese government has been growing concerns over the supply availability for the domestic market as well as the raising prices for the domestic market as well.
So as a result of this concern, the NDRC they called the Ministry in China Development - The National Development and Reform Committee has required the major producers of nitrogen and phosphate to meet basically the guidance NDRC to the major producers where you guys need to stop export. And you need to prioritize your supply to the domestic market and also supervise the price.
We know why they do it. They need to maximize the production in China. So that's their priority. So at this moment, NDRC's requests are kind of soft regulation, requests are mainly to the state-owned enterprises.
How these major producers are going to comply and the follow the guidance from NDRC? The government is closely watching it. And they're looking at whether the domestic supply is being improved and if the prices have been civilized. And if the situation is not believed to be improved over the next period of time, we may see a very hard measurement to be taken by NDRC.
The reason that we have that confidence one is coming from the other industry, if you pay attention to the steel industry, which are the Chinese government imposed exports tax in May. And then that was not strong enough at the time and yesterday, they hiked exports tax again. So that's one of the measurements that NDRC has taken to the steel export. Whether they could do the same to phosphate and possibly to urea, that will really be depending on how much export is coming up over the next two months.
We will see the significant slowdown will come in from September and Q4 because the export in July and August probably has been committed earlier before this request was sent by NDRC.
Over to you.
Our next question is from John Roberts from UBS. Your line is open.
Thank you. Could you talk a little bit about the Belarus potash sanctions and maybe compare and contrast that with the earlier U.S. sanctions on phosphates?
Thanks, John. Interesting and I guess the Belarus sanctions were - I'm going to call them relatively toothless. They didn't have very much fight to them in the basis that they didn't include what were the most of the main grades of potash. I think the only affected about 20% of the industrial potash that Belarus might have sold. So other than the slap on the wrist, it really wasn't much of a restriction to the Belarusians.
And with food security concerns in the mix, I'm not surprised by that. Compare that to the CBD which was - I mean, the countervailing duty case was all about unfair subsidies. And really taking advantage of those unfair subsidies to impact the market and particularly harm the U.S. producers.
So I think very, very different situations and drivers. But what I would say about the CBD and I think I've said this in my opening remarks is now with the CBD, what we're seeing is we're seeing a number of new countries and companies importing into the U.S. And we're seeing the market run at essentially parodied other major markets, which I think is what we expect, in the case of Russia. I mean, it was simply a political statement to hopefully put pressure on Lukashenko to do something about some of their human rights issues.
Our next question is from Steve Byrne from Bank of America. Your line is open.
Hi, good morning. That's actually Luke Washer on for Steve. I wanted to ask about your Chinese or your thoughts on Chinese import inventories of potash. Where do they today from what you can tell relative to history? And when do you think China should start looking to renegotiate at a potash contract?
Yeah, thank you, Luke. Again, I'm going to hand a little of this over to Jenny. But I can tell you right now that the potash inventories at port and probably our country as well are starting to get fairly depleted. And I think you're starting to be at a place where they'll have to dip into their National Reserve if they're going to continue to supply the NPK producers and the internal market.
So from that perspective, this is getting pretty tight for China. And I expect that they will not the producers, because I don't think the producers are in a position of needing to ship those tonnes. But I think China will have to start looking, negotiating their next round of purchases sooner rather than later. Jenny, any comments on port inventories?
Sure. Specific port inventory, as of today, we see it is below 2.3 million tonnes. This is 35% lower than the same time of last year. So if you recall, the national reserve itself is 1.5 million. So the available tonnes really is really minimal. So that's just to support Joc's earlier comment.
With a very strong demand domestically in China, strong spring has drawdown the inventory. And also, we believe import in the second half world will be largely slower down. So we foresee the buyers, the importers will have to come to the table for a negotiation of a new contract sooner than many would have expected.
Just like to highlight that the Chinese contract is probably $100 lower than the Asian price. So that really makes it difficult for them to receive the product they need at these prices - at those prices.
Our next question is from Adrien Tamagno with Berenberg. Your line is open.
Hello, good morning. Thanks for taking my question. So question on Brazil. So you mentioned low channel inventories across the globe. And I would like to ask you a bit more specific things, that's also the case in Brazil, and your expectation for Q3 volumes in the country.
Thank you, Adrian. Well, our belief is that yes in fact, the volumes are relatively low inventories in Brazil. Obviously, with the price is what we shop on our books will be slightly higher than normal because of the price of the product. But yes, the prices are - the inventory is lower than usual, although it is of course built up for expectations of a strong third quarter where we do deliver most of our product.
So our expectation for the third quarter will be very strong in in Brazil. What we expect to see there is with the drought conditions, planting maybe a little later. So it might push the purchases back slightly, but there will be higher prices and pretty strong demand for fertilizer in this third quarter and probably heading into fourth quarter.
Next question is from Michael Pickens with Beacon Research. Your line is open.
Yeah. Hi. Good morning. Just wanted to follow up a little bit more on Brazil. And specifically looking at kind of the distribution business. And just trying to understand you mentioned that some of those sales took place at $600 potash. When we think about kind of the timing of when your distribution business typically purchases inputs, is there the margins maybe be a little bit higher than normal on the distribution side.
And then also, just wanted to understand on the production side, how much of a freight advantage you might have with some of your in market, phosphate production. Thanks.
Yeah, thanks, Michael. Great couple of questions. The way we report the earnings and our distribution business. Of course we're purchasing from Competex [ph] and within the market. So what you can expect there is us to have an ongoing position, if you will. And so in cases of a rising market like we see today, there's no question we will have a positioning game.
And our product management team is very efficient at making sure that we understand the market so that we take the positions and can realize as much greater margin as possible. And certainly in this environment, we're able to execute on that and take advantage of that district margins.
The second part of your question, I mean, comes to an important piece of our whole investment thesis in Brazil, which is to compete in Brazil, being in country and having that transportation advantage is a great thing, both from a cost perspective. And so if you look at our in country production, it's very competitive on a cost basis.
It's also competitive - our overall is competitive on a logistics basis because we can really take advantage of moving product more effectively than if we had - didn't have the assets we have.
[Operator Instructions] The next question is from Joel Jackson from BMO Capital Markets. Your line is open.
Hi, good morning Joc. Joc, you talked about liquidity in potash market. I appreciate your commentary earlier on the issues in Western Canada around the wildfires, the ports and rail. Some of your competitors in potash, I've been saying that the benchmarks we're seeing report every week just really aren't real, now getting 600 and Brazil, now I'm getting 500. And then some of the Southeast Asian prices have been interesting last couple weeks, maybe based on one deal or two deal you told me and kind of [Indiscernible].
So I want to know what is the liquidity right now in the potash market for what you're selling versus normal time. Like are these benchmarks as liquid as usual?
Joel, thanks for the question. Let me start by saying first of all, the liquidity question is very seasonal. We're not selling a lot in North America right now. I think we had a crew that was at the Southwest Conference recently. And most of our North American customers are probably 70% to 75% supplied for the fall season. So in that sense, there's not a whole lot of activity except for delivering on previous contracts.
If you think about some of the other areas, there's liquidity and there's liquidity in Indonesia, Malaysia, in some of the Asian countries, that would be sort of more normal. And then if you look at Brazil again, we're sort of between seasons a little business been a bit slow. So I would say, it hasn't been a particularly liquid market at this stage. But that is not a typical for this time of year.
Our last question comes from the line of Rikin Patel from Exane BNP. Your line is open.
Hi, Joc, hi, Clint. Hope you're doing well. And just one more spin on potash demand, you have shipment forecast of 69 million to 71.4 million tonnes for 2021. But just curious into 2022 could you size what you think demands could look like? And you guys flagged obviously the lack of available supply and as sort of constraining demand to extend at the moment so we do get that sort of release, potentially next year? What do you think demand could look like in 2020? Thank you.
Thanks, Rikin. I think that's actually quite relevant, I think supply has been a limiter to demand growth, if you will in the year. We had some 6 million tonnes of growth last year, and we really expected to moderate quite this year.
So what this year growing as it has, I think the biggest limitation has just been getting supply. As we go into 2022. It's always hard to look into the future, but I would think we would be returning to more normal growth rates. One of the things to talk about this year though, is I don't think we've built up about a bunch of talent already. So I think channel inventory states low. 2022 will be normal demand growth called million to million and half tonnes in that 2% plus range. And then what the question will be, will there be channel inventory build, in which case - which ultimately has to happen for this market to be more fluid as per Joel's previous question.
So if the channel inventory can build, we could see a higher demand growth in 2022. So, it's going to depend obviously on the ag markets. But we're looking pretty positive for 2022 opportunity for growth. Jenny, anything to add to that?
No, I think you get this covered. We believe with the ag commodity prices, not only corn, soybean, but also the palm oil prices for Malaysia, Indonesia, and other crops. We believe the demand to potash next year will continue to grow very strongly. The supply is likely going to be limitations factor.
There are no further questions at this time. Now I turn the call back over to Joc for closing remarks.
Well, I would like to thank everyone for joining us on this call. I will say it has been a strong quarter for us. And as we look forward, we still see strength going forwards. We continue to drive for improvements in our operating performance. The markets continue to be positive for that. And with that, we believe we are well positioned for continued performance as we go forward.
So thank you for joining our call. Please have a safe day. Go get vaccinated. Take care.
This concludes today's conference. Thank you for participating. You may now disconnect.