Chuck Magro - Nutrien Canada

Good morning, good afternoon everyone. Thanks for that nice introduction. This is my first time here. I'm absolutely delighted to be in Australia with you today. Yesterday I had a pretty unique day; I was able to tour some of the most hard-hit areas of the fires. I talked to one of our employees that lost their family home, and unfortunately, I met one of our customers that actually lost their home as well. Besides the devastation that was obvious and just the heartbreaking story, what I thought was really interesting and very powerful was just the act of kindness that they kept talking to me about. So when our customer lost his home, there was a mystery group of people that kept leaving bags of food and water and resources at the doorstep for about a week. And when he was telling the story, he was almost tearing up, and he was a 78-year-old farmer who is absolutely resolved and committed to rebuilding, which I thought was a powerful statement for agriculture and certainly for Australia. What I thought I'd do today is talk a little bit about Nutrien, and I'll be very brief. I'll talk a little bit about the global Ag trends. I think that would be an interesting perspective to consider, what it means for the industry here in Australia and certainly what we're planning to do to get ready for the future. So this chart here really shows the footprint of Nutrien. As mentioned, we're really only two years old. We're the merger of two Canadian companies: PotashCorp of Saskatchewan and Agrium out of Alberta. And we did a merger of equals, and the company really launched in the beginning of 2018. We're an integrated Ag company. We like to say we go from the ground all the way to the grower. And we provide everything including fertilizer for crop production, products, seeds, but more and more now, digital agronomy, technology services, financing, and even a lot of insurance products based out of here in Australia. We're a pretty large company; now we have about 25,000 employees in 14 countries. We are the world's largest fertilizer producer of NPK fertilizers. In fact, Australia would be a top 10 potash market for us, and we are the leading Ag retailer with 2,000 branches in about seven countries and almost 4,000 agronomists, and we service about 500,000 farmers around the world. This is our Australia business; we're very proud of it. We now have 300 corporate locations, 500 member facilities that serve farmers and ranchers coast to coast. We have about 400 agronomists here in the country, and we just built a new crop and soil testing facility in Western Australia. We're very excited to bring some new technology there and really trying to provide growers with timely information and help them manage their risks. Our proprietary products, we call them Loveland products, that just a few years ago didn't exist in Australia. Today it's $300 million of revenue; we have 400 registrations. And we're actually producing those products here in Australia for Australian farmers. We also bought the Louis Dreyfus assets several years ago, and we have now extensive storage and distribution capability able to bring our products to the farm very quickly, and we've built our financing capability as well. So now in Australia, we lend about $500 million to farmers to help them manage their operations. So since this is an Outlook Conference, I thought I'd talk a little bit about global agriculture and the trends that we're seeing. We really see three large trends that are going to dominate agriculture in the future. Some of this isn't new; it's been underway for some time, but we think that the impacts are going to get more profound. First, intensive Ag competition. Second, sustainable agriculture. And third, technology disruptions. And we think that all three of these, if they come together, may put us on a path of the fourth agricultural revolution. I'm not going to specifically address the coronavirus. I think some of my peers have done a really nice job there, but happy to take any questions through the Q&A panel. So, first of all, agricultural competition. A lot has changed in the last couple of decades, especially in the grain and oilseeds industry. Twenty years ago, the US accounted for 40% of trade. Last year it was less than 20%. Brazil is working hard to catch up. Again, last year it led the way globally. And Russia and Ukraine were 1% of global trade through grains and oilseeds 20 years ago. Last year it was over 15%. And Australia, very relevant in the global context. As you all know, it's a top producer and exporter of wheat, barley, canola, and cotton, and in many ways Australia and Canada are very similar in their rankings on this list. And when you consider the overall landscape, I think each country now is trying to figure out how to compete and strengthen our position, and it's going to become much more difficult. Now this isn't new. It's been underway for several years. But what is new is these new bilateral and multilateral trade arrangements. So it was already referred to, the US-China trade arrangement being probably the most profound example. $40 billion of Ag products committed, and that was almost triple what we saw in 2019. So, like Canada, Australia needs to find its place in this new world order. How do we compete against the US and against Brazil? I'll discuss that a little bit further. But it is going to take a combination of government, industry, and of course significant investment, we think, going forward. That brings me to the whole notion of sustainable agriculture. Today, climate change and food security are on everyone's mind. And of course, agriculture is relevant and at the heart of most of this. The fundamental question we're trying to answer is: can the world feed itself, assuming that there's going to be another 2 billion people on the planet by 2050, all while reducing the amount of greenhouse gases that are being emitted? So in the few minutes that I have today, I really can't go deep into this topic, but I'll tell you that we fundamentally believe the answer to both of those questions is yes. We don't see this as a big challenge. In fact, we see this as a tremendous business opportunity going forward. But if you look at the overall context, today when you consider crop production and land use, and livestock accounts for 25% of the global greenhouse gases, that's only really one side of the equation. That number could have been a lot worse if it wasn't for modern agriculture. Modern agriculture has allowed us to keep pace with food demand because we've been able to dramatically improve and increase productivity on our existing land. Everything from the mechanization of the farm to better crop inputs like fertilizer and seed technology, precision agriculture, have helped us avoid, according to our calculations, almost twice the amount of farmland that would have been needed without these technologies. If you put that in terms of climate, it means we avoided releasing another 80 billion tonnes of carbon over that same timeframe, almost double what is currently emitted every year globally. So now we face a new set of challenges. We need to take sustainability to the next level. The industry has been good; it just hasn't been good enough. So from my perspective, we need to do three things. First, we need to better utilize the existing tools and technology. In other words, we need more of Australia. We need more of Canada. We need more of Europe and we need more of the US. These farmers are leading the way with new technology. Places like India, China, Brazil, and Africa need to catch up. Use the tools that already exist. This will go a long way to reducing contributions of greenhouse gases from agriculture. Second, we need smart policy. It's already been referred to, but farmers today collectively manage 3.5 billion acres of farmland capable of storing massive amounts of carbon. This means we need to use the carrot and not just the stick, providing the right incentives for farmers to improve the sustainability of their crop and their land. Now this is happening in some parts of the world, and I know discussions are active in Australia, but we certainly need to accelerate this. Which brings me to my last topic: technology disruption. Today we're seeing billions of dollars poured into ag tech, and it's absolutely critical that continue. Everything from drones, AI, sensor technology to optimize on-farm decisions, to biological and nature-based products that will supplement and in some cases dramatically reduce the need for traditional fertilizer or crop protection products, to new gene-editing tools that can provide significant breakthroughs in seed technology to the farm and bring them much quicker and lower costs than we've ever seen before, to new ways to buy inputs, sell commodities, and manage risk. In 2019 alone, $20 billion flowed into ag tech. The US actually represents the lion's share of that, but other countries are quickly catching up. And I know Australia recognizes the importance of investing in ag tech. But the numbers here are still relatively small, according to our numbers, about $100 million, which would put Australia 19th or 20th of the top 20 countries investing in ag tech. It tells me that there's a lot of opportunity here at home, and innovation needs to become core to what we do, not only in the venture capital space but for companies of our size and our scale. In fact, Nutrien, for its part, has invested about $1 billion over the recent years advancing our product and our digital portfolio, helping farmers drive yields and improve the sustainability of their soils. So, what does this all mean for Australian agriculture? We believe Australia sits in a very unique position. It's on the doorstep of one of the fastest-growing regions in the world. And it has already taken a progressive and collaborative approach to its agricultural economy. That's why Nutrien has invested here. But in order to keep up with the changes and the trends, I respectfully suggest that it comes down to two things. First, Australia should set the bar for quality and reliability. Australian agro products already mean something. It has a brand that is deeply respected around the world, which will be critical to build on as we go forward. But it means that we need to continue to build on infrastructure to ensure product reliability and consistency. We also believe that more than ever right now, Australia should lean in and drive the real definition of what traceability and transparency mean when it comes to food. This is an open space, I believe, and something that I think Australia would just absolutely have a competitive advantage if we can get this right. Today, most consumers want to know exactly how their crop was grown, what inputs were used, and the impact on the environment. And finally, embrace sustainable agriculture, become a role model for how government, industry, food producers, and consumers work together. I believe we need to build a framework to ensure ag technology can grow and prosper here in Australia and provide incentives for farmers and ranchers to use new technology, drive positive behaviors, and be recognized for stewarding their land. If we can get that right, I think that we can achieve the goal of $100 billion of agricultural products. So, that brings me to my time. I just want to thank the organizers for inviting me. It's been a real pleasure to spend a couple of minutes with you, and I look forward to the panel. (APPLAUSE)