CF Industries Holdings, Inc. (CF) Earnings Call Transcript & Summary

Well, good morning, everyone. My name is P.J Juvekar. I head up the Global Materials Business at Citi, and welcome to day 2. We had a great conference yesterday on the Chemicals Day. Today is Ag Day along with paper and packaging and metals and mining. And so our next guest is from CF Industries, very well-known company. We have CEO, Tony Will; and CFO, Chris Bohn. Good morning. How was your break? How was your Thanksgiving holiday?

That was very nice. The weather in Chicago was terrific. And although it was much smaller gatherings than we're used to, we had a nice break. Thanks. And with us also is Bert Frost, who is our SVP of Marketing and Supply chain and all things operations.

Hey, Bert, I didn't see. Glad that you could join as well, Bert. I'm a big fan of you.

Thank you.

Well, Tony, I'm going to start with your green ammonia project, which you announced a few weeks ago. Clearly, you're the largest producer of ammonia, you got the infrastructure, your pipelines, ports and what have you. You guys know ammonia well. Was that driven by policy that you see down the road coming down, or was it driven by customers who are calling on you, saying, "Hey, can you supply us blue or green ammonia, how did that start?

Yes. I think it's a combination of connecting the dots in a number of different ways. So clearly, the world is headed toward decarbonizing economies, there is a need and a push for low-carbon energy sources and hydrogen has emerged as, I think, a key building block in what future economies look like. And we look at our own capabilities and what we're able to do and how we can -- what we can contribute. And then we also look at our emissions profile and say, we got to do something about this. It's inconsistent with where the world is headed and the kind of company that you want to be. And at the same time, we were starting to get some inbound inquiries from -- it starts with a couple of the Japanese utility companies and the consortium to supply them. There's ongoing discussions we've been having on the marine fuel side, where it looks like a very efficient conversion of internal combustion engines to run-off of ammonia, then they become IMO 2030 compliant immediately and a number of other side conversations. So we're seeing some interest on the market and demand side. We're clearly seeing some policy decisions and our own internal thinking about where do we need to be 3, 5, 10 years from now in terms of our own footprint. And all of those things came together in terms of the strategy around really decarbonizing the network and taking advantage of this growing demand side for, I think, a margin enhanced product and where we can really be leading the charge on decarbonizing economies globally. And I'm really excited about that because I think it fits very much with our vision and mission around feeding the crops that feed the world and helping economies decarbonize, those things, in my mind, kind of go hand-in-hand. So we're really excited about this.

And before we come to the economics of the project, one of my questions is, ammonia is NH3. Today, you're selling NH3 for the N-value to the growers. Tomorrow, you'll start selling it to the H-value to either utilities or fuel companies or shipping or what have you. How are you going to balance the needs of N, that's needed by growers, and H that is needed in this new economy. And do they compete with each other at some point?

Yes. I mean I think the good news being in our position is, the more demand there is and requirements for our product going different places. It gives us opportunities both for diversification in terms of end markets and uses and also the great thing about letting the market kind of decide from a price strata perspective, kind of where the highest use and the highest value for that product is. And I think it's not necessarily true that the low carbon product only goes for industrial applications. Our view, and Bert can talk a little bit more, about this is, as you see, penetration of electric vehicles continue to go up as you see average fuel economy continue to go up as you see gallons or ethanol kind of stagnate or come down. Then subsidies that used to be paid to growers in the form of the RFS, we believe, are going to shift to be more carbon sequestered in the soils. And on a carbon sequestration program for farmers, the carbon intensity of the inputs matters. And so we believe that all of a sudden, the carbon profile of the nutrients that they're putting on the ground may start becoming pretty important to them, and there may be a premium that they're willing to pay for low-carbon inputs into agricultural applications as well. So we think that this is really a margin enhancement, not only for new demand that's developing in power and in hydrogen vehicles and so forth, but also potentially in growers. And we've had some conversations with some of our large customers that are working with their customers, the growers to develop the right kind of platforms to be able to trade carbon credits that are sequestered in soil, and some of that is beginning to happen today.

Does it need government support or government regulations? Because otherwise, that green ammonia could be very expensive and that could raise cost of food. So is that something that you think is feasible anytime soon, next 3 to 5 years?

Yes. I mean I don't think that green ammonia per se necessarily ends up going into agricultural applications. I think what we call blue ammonia or low-carbon ammonia that you get to by sequestering the CO2 that is used to produce it, our view is that the production cost of blue ammonia, low carbon ammonia is very comparable on a net basis to conventional ammonia today. There's a little bit of incremental cost in the way of dehydration and compression and transport storage of the CO2. But that cost is basically accounted for in the federal credits, the 45-Q credits for carbon sequestration. And so those things balance off each other and you end up with blue ammonia that is basically net of carbon sequestration, carbon free. And the operating cost for that is comparable to conventional ammonia. We see that as a product that has a much higher demand profile in the short-term and likely to be used for agricultural applications and other things as well. I think green ammonia will tend to be a little more of a niche product for certain end markets that really demand a purely carbonless process. But to your point, the operating cost due to the electricity required is much higher for green ammonia. So it's going to be, again, based on a pricing perspective, a much more premium kind of product out there.

Right. And then how do you decide -- wouldn't you just buy -- at Donaldsonville, would you just buy green electricity or electricity that is certified as renewable as opposed to putting hydrolysers, or I should say, electrolyzers. How do you think about going the electrolyzer-route versus just buying renewable electricity?

Well, you need to have in the conventional plants, of course, methane or natural gas as the feedstock into the process. And then you crack that to create the hydrogen. You need to get the hydrogen from some place. And so if you're going to create green ammonia, you do need the electrolysis systems, the electrolyzer systems, and then you can put electricity into it. And about 25% of the total electricity that we purchase on a system-wide basis is already renewable. So the way that we're viewing this is because individual molecules are -- it's the same molecule, whether it's produced from a blue process, a green process or a conventional process. It's highly inefficient to have to track individual molecules through the chain and so similarly, we can -- it's more of an allocation or an accounting kind of bookkeeping around which molecules are actually certified blue, green or otherwise. Same thing with the input of electricity, 25% of our electricity is already renewable. It's an allocation of that renewable energy against that production that allows us to certify that as green ammonia. You just can't double dip on that. You have to keep very good accounting records of it.

Right. And how much would the total CapEx be for this project? And what -- how do you forecast returns when pricing is highly volatile on the product side? And we don't know exactly what the pricing is going to be?

Yes. So the project is going to cost roughly $100 million spread over about 3 years. So think of it as kind of $30 million to $35 million a year that fits easily within our existing CapEx budget because we've got moneys that are set aside in there for discretionary kinds of projects. And what we're doing is allocating some of that money towards this. In terms of a return profile, our expectation is that this will have a positive return even on this first increment. This increment does carry some baseline infrastructure that we can then leverage on subsequent capacity additions. So it is carrying more than just the cost of the unit itself. But even on that, we expect that this will have a positive return over time because the value of hydrogen as a fuel for hydrogen vehicles or other applications is so high that our expectation is this will be a good investment. And it's a great platform to continue to develop it and also to make improvements in subsequent investments. So again, we're really excited about this. Now this is the first tranche, which is green ammonia. It is about 20,000 tons a year. So it's not huge, but it's a good first increment. Subsequently, I think we can also develop a bunch of the blue projects that have to do with carbon sequestration and the cost of doing that we think is also going to be pretty low and pretty manageable. And it's really the blue ammonia that, I think in the near term, has the likelihood of really taking off from a demand standpoint because it does not require a huge price premium in order to be an attractive product for us or for the end users. And so we want to be able to participate across the spectrum of conventional blue and green. And I think we've got the right sort of investment profile to be able to do that.

And if I could just add to that. I think initially, P.J., the largest volume that, we're going to have, as Tony mentioned, where green is a 20,000 ton annual type of plant. With the blue ammonia, the amount of CO2 that we have the ability to sequester, you could have millions of tons of blue ammonia readily available for customers. And as Tony mentioned, a cost structure not much different from conventional.

Are you lobbying in the new congress to push for the use of our blue and green? That's question #1. And question #2, Europe seems to be ahead with their green plant. And I think you mentioned that you do have U.K. site there where you could also add green ammonia and -- blue or green ammonia, or shades of ammonia. You started with Donaldsonville just because you have the infrastructure here and would a plan like that in U.K. cost a lot more?

Well, the labor content would probably be a little bit higher in the U.K. than it is in the U.S. I don't know but it would be a lot more over there. But one of the things in the U.K. is that they have recently announced a big carbon sequestration project at Teesside, which is where our Billingham plant is. And so I'm not sure that we would go to green ammonia if there's the opportunity to do the sequestration into blue, if that cap -- or capability already exists, then we might tap into that. But there's certainly the possibility of adding another green plant over there. And a lot of that just has to do with the customer demand base and what it looks like both in terms of local demand in the U.K. as well as in Europe. And if it looks like we can develop the demand and the price point is appropriate and we could sign that up, then yes, we could get started on a project over there concurrently with the Donaldsonville one. But that one is really going to be driven by finding the demand sources before making that investment.

Great. Now let's get back to the agricultural business. And I forgot to mention but for the audience who are listening in, on your landing page, there will be a link to ask questions. Those questions will be e-mailed to me, and I can read them out. [Operator Instructions] So coming back to the Ag part of the business, what -- let's start with raw materials. What's your forecast for natural gas, we had one energy company yesterday speak, and they were forecasting higher oil prices next year because of lower production. And you could argue -- one could argue that associated gas production could be down next year. So how do you see natural gas prices trending next year?

Well, I mean, there are a lot of projections out there for what gas and oil will be. We're just now in the mid-40s, which is a comfortable place from where we have and I agree that a lot of the projections are for $50 oil, we'll see what OPEC comes out with their meetings this week. But that -- if that get above $50, you need to continue to have restrained production, and we need the pandemic and the economies of the world to kick back and to achieve levels above that. I don't see that happening until at least midyear. What we did see in the market was a lot of hedging that took place once gas did achieve the $3 level. Which should -- which showed the profitability level to producers, at least in North America. So our predictions today are we're very comfortable where we are. We're very comfortable with where the North American gas opportunity is with pricing today below $3, even in the winter, we're $2.80s to $2.90s for January and February. But March forward, probably we'll be in that $2.50s or below, even with this reduced activity. And we're still above 90 BCF per day of production with a very high inventory level. So if the weather in North America continues on this warming trend, you're going to see, alas, one shoulder season. So we feel very comfortable with where we are on a cost structure, and Chris has talked about it and I'm telling also with our CapEx, I'm talking about our total cost structure with CapEx as well as gas. And we think -- one where our plants are located, which is low-cost freight to the market. Total cost structure against total opportunity, well-positioned for 2021.

And Bert, can you. A little bit about the cost curve. Chinese plants, urea plants are still at the high end of the cost curve, the thermal anthracite site coal. And I guess we can talk about natural gas, but it's all relative in terms of the energy spreads in different regions. So can you talk to the cost curve? And where do you see that going next year?

So we published our cost curve. We're in the range of the $220 million to $250 million, which we're already above that range today. And so the cost curve is a snapshot. It's like an average of the year coming out of a very difficult year a pandemic year, a demand constrained year and probably an oversupplied year. Now we're rolling into 2021, where all the wind is at our back right now with the positives of corn, gas, actually all the end consuming crops low stocks-to-use ratios. And so when I look at the cost curve and what was represented in the most recent India tender that closed with 1.25 million tons supplied, the majority of -- actually, a big majority of those tons are supplied from the air of Gulf and North Africa and Russia, and you're not seeing those Chinese tons bid-in. Why? Because the cost curve is at work. And these higher cost Chinese plants do not have product in position, have not planned to export and had prices above 280 metric ton FOB so that's substantially above the cost curve as represented what we published. And so when you look at the forwards, I think we've been very conservative in our cost curve estimates. And again, the issues that I raised that are positives are driving this market and demand seems very healthy. And so I think demand and limited supply and good agricultural fundamentals will drive this market and...

Right. So talking about demand, you've seen several tenders come out of India. India has been really strong, Brazil has been strong. Do you think that strength in those geographies will continue next year?

And so let's start with India. We're seeing record demand and that's total demand as well as import demand their domestic production has stayed relatively stable in the 23 million to 24 million tons of production and then the imports over the last several years have been 6 million to 8 million to 9 million tons. And this year, we'll probably approach 10 million tons, which is the April through March fertilizer year for India, that's amazing. And that additional 1 million to 2 million tons of demand, we do see that continuing. Why? There is one new plant in Ramagundam, which is coming onstream sometime in 2021. They still have old production capacity, and they've been staying relatively stable in that range of, let's say, 24 million tons. And with the government policies from the Modi Government, incentivizing production and incentivizing consumption of nitrogen-consuming crops, we see that 8 million to 10 million ton range continuing, very positive for global demand. And they're probably -- their inventory levels will be low coming out of this fertilizer year. Moving to Brazil, Brazil has been just a great story in the fertilizer world for the last 20 years. And today, total demand is 38 million, 39 million tons of NP&K, 10-years ago that was 28 million tons. Nitrogen, 10-years ago, it was 2.5 million tons of urea. Today, it's 6.5 million tons of imported urea. So we -- and North America have gone down because of the new plants that we and others have built of about 4 million tons in the last 5 years. All that has been replaced by Brazil. So we have good fundamentals in the kind of the exported ton, which is about 40 million to 45 million -- let's say, 45 million to 50 million in seaborne traded tons, you're seeing good demand and continued demand in North America, Europe, but this growth in Brazil, Argentina, India will continue. And we don't have a lot of new capacity coming on over the next 5 years. So when we track new capacity against demand growth on a nutrient basis, you exceed demand -- or you exceed the new capacity supply in the out years, very positive for the forward years.

Before I come to the U.S. ceased fall season what -- let me stick to China for a minute. What are your expectations for the Chinese urea exports over the next couple of years?

China has been a great story. And I congratulate -- if you look at the monolith of China. On their ability to change their economy over the last 20 years radically, become an industrial powerhouse and build this incredible fertilizer capacity that didn't exist, let's say, 25-years ago to being self-sufficient and an export powerhouse then quickly realizing that this is a heavy polluting industry, not a value-creating industry to export, ratcheting down from 14 million tons of exports to today down to 3 million to 5 million tons of exports. That's healthy. The world needs it back to the cost curve, the world needs to incentivize these tons once we hit a certain price level. And what that's telling us? That's around $300. Well, at $300 a metric ton FOB China, that's highly profitable for a company like CF Industries, whose buying gas for $2.5 on average. So I see China continuing to participate in the international market, albeit at a lower level than in the past, not building any new capacity, old capacity coming off-line and probably moderating -- today, they're operating at 70% capacity of nameplate capacity. I think older capacity will come offline, and that average will bump up, not only as a result of new capacity, but as a result of optimization of existing capacity and probably still self-sufficient to -- in exporting just during the off months. That's good for the global market.

And coming to the U.S. Obviously, you had a long ceased fall season here after the harvest. How did that go? And where do inventories stand? Are we all taking inventories down going into the winter months, and could you just talk about inventorying the channel?

So when you look at the fall season for a nitrogen producer like CF, it's predominantly an ammonia story.

Ammonia, right.

And so ammonia season generally starts when the soil temperature hits 50 degrees. And so it is dependent on the ambient temperature falling lower, lower in that soil temperature, therefore, allowing safe and agronomically correct and environmentally correct application of ammonia. So you're right, P.J., this has been a very good season, which we haven't had in 3 to 4 years of good ammonia application due to weather. It's been cold. It's been wet, it's been snowy or a combination of those 3. Well, we have had a healthy season. And we at CF industries, and we represent a good portion of that volume where our terminals and plants are located, have moved those tons to the ground. We believe our other producing and shipping compatriots in the industry have done the same. So inventories should be fairly low and that is, I think, bodes well for spring and spring pricing, which we're announcing soon. And those prices for spring will be out, and I think there'll be a positive reflection of urea has already improved. Ammonia, well, I think will also improve, and we see healthy demand. We're -- today, if I were to look at corn prices compared to soybeans and compared to the optionality to a grower, there is a high probability that the corn acres will increase over what our projections were just due to the financial implications that are available to a farmer. That will, therefore, increase nitrogen demand, and I think P&K also, I think all 3 of the major nutrients are in a very good spot for consumption and have had a good fall.

Yes, that was a good segue to my next question was that farmer health and balance sheets have improved, commodity prices have rallied here. China has been buying a lot of commodities from Brazil, from U.S., Brazil buying from U.S. So where do acres go in your mind next year, both corn and soy, and what does that mean? Because your ability to pay a higher price has also improved. So talk about how urea pricing evolves. Is it a repeat of last year where as you get into planting, urea prices begin to go up and catch up with international prices?

So back to your first point on the farmer, it has been a very good year for the farmer. And that's why I think you see middle of the country red and part of the reason is because of on how much money the federal government has poured on to producers in the form of kind of just checks. And so that, coupled with $4 -- plus $4 corn, plus $11 beans, $6 wheat, $12 or $15 sugar, $72 cotton, all those and our NP&K crops are in a positioned, which we haven't seen in years, that results in -- and they're able to hedge that, that results in -- to form up an income to the farm gate to these rural communities that will be spent. And how that's going to play out is we believe for tax reasons, a lot of money will be going to the retailers and the co-ops by the end of the year which will then be commitments to producers like ourselves or mosaic or nutrient for a raw material, and so urea has improved almost $30 dollars, probably over $30 in the last 6 weeks, why? Partly because of global issues, which we've already highlighted, partly because of the dynamic of supply and demand and again, when money is available to farm gate, it gets spent. And the cost structure today for a corn farmer. When you layer in fertilizer, seed, chemical, diesel and even land rents coming off, it's going to be profitable. And then you go to the other issues that you've highlighted with China exporting a record amount. We're going to export 11 million tons of corn, now granted, we produced 350 million tons, but that's just that incremental volume that is taken out of the supply base and good feed numbers, healthy ethanol production, our stocks-to-use ratios are going to be low and it's dry in Brazil and Argentina. So when you look at -- if I'm a farmer and I come from a farm family that we're pretty excited about 2021 for the planting abilities. And for the income opportunities, and I think you'll see a migration to corn. And so you asked earlier about our numbers, we were 90 million to 91 million acres of corn. I would bet on the upside and possibly up to even 94 million acres of corn.

Interesting. I know I'm getting a lot of questions coming in. So let me ask one question to Chris. Chris, you've cut your CapEx down I think CapEx probably back to $400 million to $450 million level next year. You guys have great free cash flow, just under $1 billion, but really strong free cash flow. When do you begin to ratchet up the buyback program? And then Tony, you've looked at different M&A in the past. Is there anything on the mine in terms of M&A? Or do you focus on these high return projects?

So I'll start with the capital allocation question, P.J. So our capital allocation philosophy hasn't changed. I think what's changed a little bit is a little more clarity on our strategic direction and where we may make some organic investments as we're doing both with the blue and the green. But as you mentioned, both of those, we think, initially, you are going to fit within sort of our CapEx $400 million to $450 million. And if we were to go outside of that, I don't think it's going to be all that great. So we do have remaining a little over $500 million on our $1 billion authorization of share repurchases. So similar to the past, our first point of businesses, as we've mentioned, is paying down the $250 million of the 2021 notes. So it'll take our gross debt down to $3.75 billion and our net leverage probably under 2.5 turns. And then it's really to look at growth opportunities that we want to invest in, and we have a few that we've mentioned here that we'll continue to invest in that have returns that are much greater than our cost of capital. The excess free cash flow, as Bert and Tony have talked about, we're pretty bullish on what we're seeing, definitely here in the short term, but even longer term, as demand outstrips supply, there's probably going to be some time for -- if we don't have investment opportunities that are greater cost than capital, which will return that to shareholders, no differently than we've done in the past. I think the slight difference here is we've put out organic projects that we're investing in right now.

And relative to consolidation or acquisition opportunities, I think one of the things that we have found when we did the Terra acquisition and even looked at other opportunities over the years is that we maintain really an industry record kind of onstream factor and reliability for our assets. So we get better asset utilization. We typically have a graph in our earnings release materials to talk about if you took basically the difference between the other North American onstream factor -- the other North American producers, their onstream factor and our onstream factor. We're about 10 or 11 points better onstream factor. And if you apply that against the size of our network, that's the equivalent of a full additional ammonia plant that we get more production of out of our asset base than other people do. So one of the things that we found, though, when we acquired Terra is that, not surprisingly, no one else keeps their assets at that level of operating -- operability than we do. And so the first check, you're right, is just to acquire the assets and then you're writing all kinds of checks to improve the reliability and the maintenance and the capital spare program and everything else in order to get that kind of asset utilization out of the equipment. And so when we're doing the math and we think about where our asset values are trading versus where other people's are, it's hard to make that math work if you're paying a premium to buy somebody else's asset and then you're having to spend all the money to get their assets up to where ours are currently operating. And in an environment that we didn't have any sort of other growth opportunities, you might be able to justify getting there with SG&A takeout and all kinds of other things. But based on what we see is ongoing demand and real growth trajectory going forward for low-Carbon Blue and green ammonia projects. We think that again, on a risk-return basis, that's a much better return profile for our investors than buying other assets. Now never say never, right? At the end of the day, it's a price value kind of relationship in terms of what we can get out of the backside of it. But as we look at it, we're really, again, excited about controlling our own destiny and organic growth opportunities that we see ahead.

Right. That makes sense. And these kind of projects also improve your ESG ratings, which are very important these days. So this is a good point to stop and take some questions from the audience. So I'm going to read these out. The first question is, how far ahead are you compared to your competitors in terms of green ammonia?

Well, we've announced the project. We believe we will be onstream and producing by 2023. Given that -- to our knowledge, no one else has gotten that far in terms of engineering or any kind of announcements. It's hard to know what's going on inside the other companies, but I would be surprised if anyone else could be there by 2023 or maybe even 2024, depending upon who it is and sort of their level of technical expertise. So I feel that we're at least a year or 2 ahead. But our view is the demand for blue and green ammonia is such that it's going to bid in a lot more production. It's got to. And so that you can't have the demand develop unless there's a supply base that goes along with it to help support it. And so we're not looking at other announcements and other projects that come up as being a negative or a competitive situation. We think it's critical that other investments get made in order to help support the development of the demand side of the equation because if you don't have supply, then the demand would whither on the vine. So we're excited that I think the whole industry can move in that direction, improve their ESG scores, improve their -- reduce their emissions and really help develop this as a not only viable but thriving part of the energy picture for decarbonizing economies.

That's great. I agree with you. The next question is I think this is for Chris. Can you provide an update on your targets? As it relates to leverage and credit ratings profile over the long run, also any thoughts on capital allocation priorities. I think capital allocation, you talked about, but maybe, Chris, you can talk about leverage and credit rating?

Yes, that sounds good. So as we said, we don't set the credit rating, so we can only strive to get the metrics that we believe are investment-grade metrics. I firmly believe that, that's where we are right now, but that's not up for me to change those ratings. But as you look at where we look at our capital structure being, as I talked about, the $250 million that's out there is a stub of the 2021 notes. We'll probably be taking those out relatively soon. And that will put our gross debt down to $3.75 billion. The next tranche that comes due isn't really until 2023, that's $750 million. With treasury rates where they are right now, it's almost punitive to pay those off early given the make holes that are corresponding with those particular notes. So right now, our position is more or less around the $3.75 billion gross debt, which we believe puts us under 2.5 turns on a net leverage ratio. Pretty comfortable as we see just even on an LTM basis, as Bert and Tony have mentioned with some of the prospects that we see with urea price rising here, that could be even lower than that going forward. But we feel pretty comfortable about where we sit with the capital structure in place. The other thing I want to mention is the reason why we feel comfortable at that $3.75 billion is the steps we've taken previously to lower our fixed charges, to lower our cost -- controllable cost per ton. Which is sometimes overlooked because it's not a huge amount, but all that focus we put on over the last 3 years, it's really allowing us to have the flexibility to do some of these organic projects with potentially returning capital to shareholders.

Right. And the next question was similar about when do you think you get back to investment grade? Do you have a year? So I think people are looking at when you can get there?

I mean, you're asking the wrong person. I would say...

I mean, I think as Chris said, we view our metrics consistent with investment grade. I think the rating agencies have kind of taken a little bit of a wait-and-see attitude around the chemical sector in general, particularly with the downturn as a result of the pandemic. Now for our business, there wasn't an impact on the volume side. Pricing got a little soft during the middle part of the year. But our argument would be -- our demand is not really subject to the vagaries of pandemics and so forth that people still got to eat. And our demand is robust and resilient. But I think the rating agencies are -- we'll wait-and-see kind of approach on this. So I think once you start seeing economic recovery more broadly, along with the steps that Chris has talked about in terms of retiring the stub of the 2021s that are out there and just an ongoing consistency of performance, we'll get there. But from a metric standpoint, we all believe that we're there today. So it really is just the lagging portion of the indicator, how long it takes them to recognize that.

Right. Great. And the next question, kind of interesting is from a European investor. Currently, the focus with respect to sustainability is really on carbon. However, fertilizers next to providing the world the opportunity to grow sufficient food in a lot of areas have also been linked to depleting biodiversity. In areas like the EU, this has led to growing pressure to reduce usage of nitrogen. Do you expect these kind of regulations to impact demand at some point? And how can CF contribute to the issue of depleting biodiversity?

Yes. So we spend a fair bit of money with a couple of different organizations that look at sort of best practices from a nutrient management, nutrient stewardship perspective. It's clearly our goal to help minimize nutrient loss to the environment. I think that's good for everybody concerned. But we don't really touch the growers directly. So we're working through a variety of other agencies and providing research and education to growers or through our customers. And that's kind of at this level, what we can do because we don't have a direct relationship with most of the growers. But we work with the nature conservancy on the 4R Plus programs and 4R program through TFI and so forth. And I do think that it really is making sure that the growers are putting in place the best practices around nutrient management programs to minimize losses. That said, I think people very quickly point to rate, and that's only one of the things that contributes to nutrient loss. There is putting down the right type of nutrients. Are you putting it in the right place at the right time? Do you have the buffer strips around the edges of fields and waterways. Do you have bioreactors to help make sure that you're consuming nutrients before it runs into the waterway system. There's a variety of other things that go along with it. And it's really easy for people to point at rate, the thing that they miss when they're doing that is if all you're doing is focusing on rate, then you're clearly going to drop yield, the minute you start dropping yield, then the price of food goes up or you're talking about importing food. And food security tends to be one of those issues that's pretty top of mind of most governments. So while it's a quick and easy answer for people to say, let's go after rate. What you find is that's not always the solution. I think the right solution is a set of best practices around nutrient management at the grower level to make sure that we're minimizing the losses but maximizing the yield because, ultimately, the number of acres under cultivation land use is a much bigger contributor to greenhouse gas emissions. And so what you want to do is maximize yield, minimize the number of acres under cultivation, but keep the nutrients on the field so that they don't run off.

Right. That's all the time we have. Sorry, go ahead.

No, I think it's an issue of land use. And when you go around the world, that's a first world issue right now, especially our European issue, but if you talk to those who are working in Brazil or Africa and our work with One Acre Fund, as we can increase yields and decrease land under cultivation, that's also a very positive move for the world and improving the diets of those who substantially need to have improved diets. So it's a multi-edge or multifaceted issue that Tony addressed some of those issues, that land is another use area and consumption is another area. And we're involved in all of those discussions at different degrees.

Right. Well, great. Thank you all, Tony, Chris, and Bert thank you so much for your time, and I wish you a Happy Holiday season.

You as well, P.J., good to see you. And hopefully, we'll be able to see each other in person come the New Year.

Can't wait for that. Thank you.