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

All right. Good morning, everyone. It's so exciting to be here live in person in New York for the 17th Annual Farm to Market Conference. Couldn't be prouder and more appreciative of this community of companies, investors, BMO coworkers. This year, we're expecting about 800 attendees at the conference. So let's start with thank you. Thanks to the management teams like Bert and Chris, which have been unbelievably gracious with time and insights. Thanks to our tremendous BMO sales team, editorial staff, conference coordinators, and of course, to you guys, the investors. We're very excited about the life of about 100 companies we have here this year. We're going to bring over the next 2 days, we have across the food and ag chain. We have fertilizer, ag chemicals, agri business, food and beverage companies, cannabis, grocery retail, and restaurants. Of course, the overarching theme this year is going to be no surprise. As a global recession is looming and inflation across the entire ag production and food supply chain is happening, unprecedented levels, how do we deal with all that? And of course, it's being impacted by geopolitics and sanctions and the role of Russia, Ukraine and even Belarus on crop production, fertilizer supply. In my coverage, we've seen unprecedented surges in crop prices and fertilizer prices. So that's the most interest we've seen in fertilizer shops in 14 years. They asked me at the CNBC, that's when you know that fertilizer is interesting. U.S. customs officers yesterday morning in Toronto asked me about fertilizer stocks. That's when you know it's going to be crazy. That was a 5 minute conversation, by the way, and that across the border, so I couldn't stop. Although normalization has to be expected eventually, we may see down the road the potential for higher commodity price floors and tremendous windfall free cash flow along the journey. And of course, the dynamic will also be great for seeds and crop protection, chemical producers. So there's so much to this conference to look forward to. We have a lunch keynote today with the professor and author of more than 30 books on consumer behavior, Michael Solomon. He's going to dive into the evolution and the future of consumer behavior and the new normal. So we really want you guys to be involved in this conference. I have 5 fireside chats this morning with fertilizer and crop input companies. I want you guys to ask questions. So please submit questions on the app and I'm going to weave them into the fireside chats. And let's go.

So our first presentation or fireside chat of the day will be with CF Industries. Of course, one of the leading nitrogen producers in the world. We've got Chris Bohn, who is the CFO. And we have Bert Frost, who still has the longest title in history. He's the Senior VP of Sales, Market Development and Supply Chain. So why don't we start off gentleman and talk about the current state of North American and global nitrogen markets. How the outlooks differ for UAN, ammonia and urea, and how does your order book look?

So I'll start with the latter first. Our order book is in good shape. As we go through spring -- this has been a very late spring for applications. Normally, you have ammonia applications that happen in March and early April, and a bell curve takes place where you're applying pre-plant of corn -- corn is what we're specifically focused on, and we have a system in the United States of terminals where we supply ammonia preprepared for spring, and then that's disgorged over time, but over a very quick period of time of some days 30,000 tons a day going out in trucks. And this year has been the latest -- you said 14 years, that's how long I've been at CF, in my 14 years when we look back, and in recent history as far back as we could go. And this is going to have an impact on yields, we believe. And so there's been, because of wet cold weather, access to the fields and then preparing the ground and then applying nutrients and then planting. What we're seeing is just going directly to planting. And so with where our order book is, we have tons on order that will be what actually we're pulling now in peak form. But we believe that the application season will last well into July, which is positive, I think, because you're going to see quick maturing and growth in the corn crop just due to the temperatures that will take place and the moisture profile of the ground. The state of the nitrogen market is, for various reasons, very strong and likely to continue like that or in this manner for years, we predict. And it's driven by several factors. One, the stock-to-use ratio of grains is very low. And so the need for our materials to make the crops for tomorrow and next year is great. There's not supply in many places in the world; stocks-to-use use ratio of corn is what we watch. But when you look around world, this is one of the issues of nationalization of protecting some of the core supply points. And you're seeing Indonesia restrict palm oil exports. India just announced last week restriction of wheat exports. And then you roll into the tragedy of what's going on in Ukraine, obviously, exports aren't going to happen. It's either being stolen or it's sitting and you can't even load a vessel, where a good percentage of the world's nutrients or let's say, wheat, corn and soybeans -- not soybeans, sunflower oil come from that region. And so the world is going to be tight. And as we plan, we've had weather issues around the world. Last year, we had a drought in Brazil. This year, we're having a late planting season in the United States. We have had various weather events around the world in different places that also impact yield. And so that coupled with the need for the nutrients that are now restricted out of Russia and Ukraine as well as China, 25% of the world's urea, globally traded urea, about 10% comes from China and about 15% comes from Russia and Ukraine. Both of those are restricted, obviously, for sanction reasons and then governmental reasons in China. The globally traded urea market is about 50 million tons. Take 25% of it. So we're starting with the need for the crops and then you have the need for the nutrients that may not be available, what does that do? Supply and demand are imbalanced, supply being low, demand being high, that's going to keep prices, we believe, in a very attractive level for at least 2 years.

So staying on the short-term here, did we learn anything from the Indian tender that's still kind of processing, like on the strength of supply and demand available right now? So prices are going to be rising this week a little bit.

They are, and they will. India is the largest consumer, largest importer of urea in the world. As much as 10 million tons of that 50 million tons goes directly to India. And they're different in how they procure that. They go through a government tendering program where the government is responsible to aggregate these tons and then make them available to the farmers at a subsidized level. This tender that you just referenced was 1.6 million tons that needs to be delivered by July 5, and that has a lot of tons in a very short period of time and who won that tender was a large representation of the Middle East, some North African tons, some Asian tons, a few out of China, a few out of the probably Baltic -- Black sea area. But what that tells you is, a lot of tons are going to be moving in that direction and be out of the other world markets. So if you have, again, 50 million tons per year traded, that's about 4 million tons per month, 1.6 million tons taken to one country, that times the market even further. And so what we've seen just post that tender announcement is a rise in prices from Egypt and other areas that supply like Brazil. Brazil will be entering their high demand period now because they plant their crops in August, September and October for corn; and then cotton in November and December; and then the second crop corn in January and February. So a consistent flow will need to go to South America starting now as well.

And then on the Russian tons, like I've done a bunch of homework on this and talked to people in the state department and it does seem like Russian fertilizer is getting -- they call them licenses, I call it exemptions, to where food and fertilizer gets exemptions. So even if it is VTB bank and SBER bank and it is U.S. dollars, it doesn't seem like there's real U.S. sanction issues for fertilizer from Russia. And that's where we see the potash, but it was going to Brazil. Do you have any comment on that? Or...

Well, that's an OFAC decision. And you're right, today for the U.S. government that is not taking place. However, there are company restrictions, so individual companies are deciding, but as well as governmental action from the EU and other locations. So it's a mixed bag with who and what and where is being sanctioned and how that's driving the global market.

And then on Chinese exports, it seems like they're available, but there's a lot of restrictions, you have the right paperwork and things aren't right. So what's your view on what you'll see out of China, will we get back to, I don't know, a few 100,000 tons a month exports? Or what's your view?

Well, our view is that, no, they're not going to be exporting to the degree that they have and they could. China is the largest producer of urea in the world at about 50 million, 55 million tons out of 180 million tons of supply. They have put restrictions. Since October of last year, they announced the restrictions that were going to be from November through June of this year, and they have not exported. And this is, again, a country that supplies 10% of your global needs. And what that is a reflection, I believe, is inflation. And again, back to the nationalism, we're going to take care of ourselves, we're going to keep this good within our country and, we're going to keep the cost structure low, so that our farmers have low cost inputs, and we don't really care if we export. And so what they did is they put in place these inspections and restrictions that even if they were to allow it, it's a 60-day process, it's not worth it at this point. And so you're seeing this slow rollout. We think this will go through 2023.

And when you look at -- when you think about the cost floors with European gases and there should be good support for urea and nitrogen prices as long as that gas price stays where it is, right? Like it doesn't feel like there's really an opportunity for prices to really drop much.

Well, you're reflecting on the secondary impact of what's going on in the nitrogen market. And with TTF, which is the gas hub in Europe, priced at around $30 today, we're at $8 in the United States; the Middle East is whatever it is, $2 to $3, Russia is $2 to $3. You're seeing in JKM, which is the Asia hub, is also around $30. That cost for the incremental ton is buying LNG gas in India 60% supplied by LNG. That cost structure you can take basically $30 x 25 plus your cash costs, and that gets you to what the marginal producer cost would be globally, and there's a significant amount of tonnage in Europe that is priced off that. That would keep the floor very high, and that's good for Egyptian and North African producers that will probably replace European production. And so what you're seeing is a change in trade flows. We've never had this before where these dynamic natures of Russian restrictions, Ukraine restrictions, high gas costs or Chinese restrictions, all those flows need to change. What does that impact? Freight costs, so your vessel freight has gone up. That's a further cost that's incremental to the product cost. All this is in the middle. So this is the flux that we're seeing within the market today that's driving and will drive the positions -- or our company's position in the market and what we do going forward.

Well, you guys can all ask questions on the app. No excuses. Turn your badge to that, download the app, if you didn't know that. I've done that myself recently. Okay. We talked about this on the earnings call 2 or 3 weeks ago about, did we see any demand destruction maybe in North America? I know it's been a late season on nitrogen. Trying to ration, maybe I don't want to apply 200 pounds an acre, I want to apply a little less, because I want to -- because of the cost. I was asking a question about if we do see demand destruction or lower nitrogen application rates, did it differ by higher-yielding acres versus lower-yielding acres. Maybe you could talk about that if anything has changed in the last 2 weeks?

Nothing's changed. If you are not applying maximum nutrients, you're just not that intelligent, because it's $8 corn, it's $12 wheat, it's $16 soybeans. Every crop that's out there that needs nitrogen or any nutrient is highly valued and highly valued because it's highly needed, so if you're doing those things, you're playing a mug's game, and we don't see demand destruction, we see demand deferral because of time, because of weather. And anything we wouldn't ship in North America, we could ship it around the world today. So you don't want it here, they want it there. It will move.

Okay. And back on the gas, are you guys looking at gas hedging? I mean, I don't think you would have -- no one anticipated gas going to $30 in Europe. We wouldn't have anticipated gas going to $8 in the States. Obviously, the differential is much wider, but are you guys looking at changing any gas hedging strategies?

Chris and I sit on the gas committee with another gentleman, Ashraf, and we debate and talk about these things daily. And at today's value for Henry Hub and you're going into the summer season and with weather and the way we model it, the short answer is no. But in the winter months, we do hedge.

Okay. And just sort of keep the way it is. Like you guys do the strip and you guys do a little forward sort of -- status quo.

We have discretion. On the short months, we have to go to our CEO, Tony Will; for the longer outdated months, we're not doing that.

Let's talk about how your logistics network worked this season. You had a bit of issue on the rail and the late season. How did your network perform this here and any lessons learned?

There is the benefit of the company that we have built over the years is the distribution network. So we have a series of terminals for all of our products. We utilize barge, truck, rail, vessel, and pipe and all of them have run at the maximum capability that they were set up to do. I think what you're referencing is that we went public with some difficulties we experienced from one of our rail carriers. One of our key rail carriers called us on a Friday afternoon and said, "By the way, we need you to cut tomorrow or by Monday 20% to 30% of your volume, and if not, we will embargo." Like, wait a minute, this is what we're keeping for spring. That's not very customer-friendly. So we scrambled, we met and kind of reconfigured our system. Luckily, we had some weather delays. We were able to put more barges on the water, some vessels that we took out to the West and East Coast. So we're well positioned, but it wasn't without some work.

And when nitrogen prices were a lot lower, I know you had looked at some projects years ago that how can you maybe optimize the logistics network? How can you maybe costs here. Maybe you got some products you were working on maybe 3, 4, 5 years ago. Did you -- I mean now prices are high and that's great. Is there anything that you maybe found a couple of years ago that you implemented or then you talked about that made things run better?

Yes. No, that's part of the game, it's how do you become more efficient, better, looking at your logistical options, your production options, how do you arbitrage different moves, how do you take care of customer X against customer Y?

And you'll be able to talk about that you found?

Yes. One excellent example is Hanford, California. We found a partner in California right in the center of the valley who built 3 tanks for us. We worked with the Burlington Northern to get direct unit train access, which we have, and we are looping trains. We went from 0, I'd say, very de minimis tons to probably this year, 300,000 tons of UAN, which of an 800,000 ton market is a substantial change, as well as linking up, which we haven't done in the past, loading full vessels in Donaldsonville through the Panama Canal, and really replacing the tons from Trinidad and Russia that have been tariffed in the United States to fully supply that market, which we didn't supply as much in years past.

I would say, the other things also that we added were, even at some of our other terminals, side loading of rail, where we could bring in more railcars, be more efficient with offloading for ammonia, different truck offloads as well, where primarily we were just loading out rather than importing into certain locations. And then in our Iowa facility, Garner, Iowa, put in a reinjection pump, so it allowed us to bring product down from Medicine Hat reinjected into the Nustar pipeline to get the premium that we get on the eastern cornbelt versus the western cornbelt. So that allowed the whole network to operate much more efficiently and actually take Medicine Hat tons and almost synthetically make those being an export or something appear down at the Gulf by doing that.

So I want to start to move into questions about kind of capital allocation and maybe long term. I just want to ask one more question that's kind of more imminent people ask about, which is, okay, so obviously, there's an investigation or review going on about potentially putting on duties against Russia and Trinidad UAN producers; obviously, with Russia there's a whole bunch of other things going on. And I think we're expecting decision on that somewhere later in June. How do I ask this question? The optics around that politically are not the best, considering prices are really high. How do you talk about that? Adding duties to nitrogen fertilizer right now would not be the best headline?

Well, we talk about and we go front-facing with our customers as well as investors and you're all welcome to ask a question about it. I think, look, a wrong took place. There is no question that in '19 and '20 that tons were imported in the United States below cost. If it was below our cost and a market economy, we could take that -- you're telling me a vessel could -- well, let's start with origin in the middle of Russia, rail that to a terminal, offload the railcar into a terminal, put it on a vessel, go through the Panama Canal, go around and go up and unload into another terminal and then truck it to the market cheaper than we could send it from Verdigris, Oklahoma, which is very reasonable gas, on a unit train to a terminal and truck it 20 miles. That defies logic. And that was going to the East Coast and the West Coast and the Gulf Coast. So in our opinion, and we won 100% with the ITC and the Commerce Department, a wrong had taken place. And in a free trading world, if we're going to trade freely, which we're free traders, then it's free trade, you have your market costs and those are reflected. And so we have the capability to supply, and we spent $5 billion on 2 plants -- over $5 billion, and we were being harmed -- we as well as others in the domestic industry, and that's what we're adjudicating. And so if you want free trade, you want free trade for corn, soybeans, and wheat, we do too; then you should want free trade for the feeding products that create those products and that's a better world.

So you guys are generating tremendous free cash flow this year. And you have a ratable buyback pace. I think you're going to use $700 million in buybacks this year, talked about $170 million a quarter.

Yes. $175 a quarter.

$175 million a quarter, sorry. Now obviously, it looks like this year you will make a lot more free cash flow than that, a lot more. What are you saving the dry powder for? And how aggressive would you get on the buyback? I think you talked about the price for the fall. Maybe you would do not one-off, but like a bigger, more lumpy buyback to be more aggressive. Like talk about that a bit.

Yes, and maybe if I could set the context on the overall capital structure to begin with, so over the past couple of years, we've done a lot to delever the company, to get it down to our target debt level of $3 billion. Now that we sit there, that really provides us a lot of opportunity anywhere through the cycle to execute what we've wanted to do, whether it be return to shareholders or whether it be acquisitions or other growth opportunities. I think as you look at the return on capital, the one thing the Board of Directors did here just recently was to increase our dividend by 33%. And in addition to that, we had in place a ratable share repurchase of $100 million a quarter. We recently also increased that to $175 million per quarter. So when you look at that, there's over $1 billion a year just going out on a ratable basis throughout the whole year. And a lot of that is based on increasing the dividend, increasing the ratable purchase based on what Bert just got done talking about for the last 20 minutes here is really not only the strength of the market we're in right now, but what we see going forward. So to your question, Joel, with what are we going to do opportunistically on top of that. I think the best example for that is really what we did in December. So in December, we started to see maybe the wavelength of this going longer and being much stronger than we even had anticipated from the fundamentals. And we went in and within 20 days we bought $500 million worth of shares in the high 60s. So what you'll see through this time frame is that ratable distribution back to the shareholders, but also probably a little higher cash balances from time to time. I think most of you in this room have followed our shares and you can see the volatility that really has nothing to do sometimes with the fundamentals that Bert just talked about. And it's sort of those disconnects or arbitrage opportunities where we're going a little heavier, take out more shares during that particular time. But as you mentioned, we've generated in the last 12 months, $2.8 billion worth of free cash flow. So we have a lot of opportunities, not only to do some of the small growth projects that we've announced out here, but also to be pretty aggressive when the time is right on share repurchases.

Okay. And let's talk about what your investments are, your current progress on some of the different green and blue ammonia projects you're looking at?

Yes. So those projects, 2 primarily, are the green project in Donaldsonville, which is a 20 megawatt green fertilizer plant that will do about 20,000 tons of green ammonia in a year, and that's scheduled to come on at the end of '23. So if you think of it, that's more of a pilot plant, really allowing us to get an understanding of electrolyzers, the efficiencies, even how we pipe it into the back end of an ammonia plant. All the major equipment for that has been ordered already, that entire project is about a $100 million project from last year through 2023. So pretty small spend on that. Additionally, we have a blue project at Donaldsonville, where we're looking to sequester the CO2 and get the 45Q tax credit that exists today. And that particular project is about $200 million. And if you think about the ammonia production process, it's different than other industrial companies, industrial gas companies, because we're already removing the CO2. So 2/3 of the CO2 we already capture. So there's no capital associated with that, and that's why the capital spend here is so low. And that equipment, we have the engineering done and some of that's on order as well. That we're looking to bring online for whether it be enhanced oil recovery or Class 6 permanent sequestration. Probably in the 2024 time frame, more EOR first, and then going into Class 6 as those become permitted probably in the 2026 time frame. But both those projects are excellent projects for really just doing a bit of a pivot of our strategy and the demand growth that we see with industrial ammonia beginning primarily in Asia first.

So do you worry if -- so a lot of companies are now looking at doing more ammonia, right? And whether it's blue or green, and hopefully, that transition -- every transition happens, but maybe it doesn't, and we have a lot of ammonia capacity out there. Do you worry about that? Not at all?

Let me start on this one. So Joe, this is back to 2012, 30 fertilizer plants get announced in North America.

Only the slide deck. You got to save this. [indiscernible]

Exactly, and I need you to give me offtake, so I can get those logic financing, all that. Four projects were built out of those 30, and they were built by the major players in the industry, 2 of which were ours. So I think you're going to hear a lot of announcements out there and to use a comment that Tony will use is a lot of it is vaporware as well. It's not going to find the funding to go behind it because you need the logistical system, which is already in place, and that doesn't come cheap. When you think of the billions of dollars of everything Bert mentioned with our logistical movements we do, that's not in place. You've got to build that. It's not just building a plant. Additionally, you have to have that end market customer base. One of the reasons we partnered with Mitsui is their conviction on where ammonia production is going globally for fuel use, specifically low carbon in the end markets aligns with ours. So not only do you have a producer like CF seeing that, but you have Mitsui on the end. So I think you will see ammonia plants to be built, but they'll be by the reasonable players. There would be a disciplined financial approach, but there will be a lot of noise on the outside, but nothing really occurring from that.

And we are seeing a change in that market with back to high-priced gas, limited gas available in Trinidad, different markets, whether it's Pakistan not producing or high-cost moves, you're going to see a shift, again, with the competitive advantage that we have in North America with abundant and low-cost gas and great logistics to move it anywhere in the world. So it's logical that we would produce and grow in that area that we're focused on for the reasons you mentioned.

And the final thing is, if we go back some years ago, a lot of companies were really trying to be less long ammonia in North America, because I'm trying to remember, I think there's the cost to ship ammonia around the States is getting more expensive as a hazardous or dangerous good. And so whether it was Koch or Nutrien trying to really be less long ammonia. Is that an issue? Just more ammonia moving around, hazardous good, is that something to think about, not really?

And this example is chalk and cheese because what Agrium did was dropped a urea plant into their plan of order and what Koch did was the same in Enid. But what we have at CF, we do have full access. We're the largest mover on the Nustar pipeline. We have the terminals to receive it. And so the limit for that example is rail. And the carriers don't want to and they're pricing it out. So what happens? We don't ship on rail. We ship it by truck, by barge, and we have the largest barge fleet as well as pipe access. What we're looking at though, what Chris talked about is an export-oriented facility. So no matter what we do, we're going to leverage all those assets to the maximum profitability of the system, but we're always looking globally as a global producer.

And have you learned anything in the early days into your green and blue projects? And also, I mean, what's the progress with hydrolyzer technology and other technology that maybe can lower the cost of some of this?

Yes. So I'll start with the second part of that question with the electrolyzers and just the whole push to the green. Green is going to be a while. I mean the efficiencies of these particular units, they're basically being hand-built rather than having any type of production line where there's a mass quantity of them. So our particular project, which is only doing 20,000 tons in the end here in North America will be the largest green plant in North America, just set that in context. So I think as you look at green, green is going to be evolving over the next decade as we see efficiencies in that lowering the cost as you mentioned here, Joel. From a blue standpoint, like I said, CF really has a leg up because we're already capturing 2/3 of our CO2 through our initial process right here. So we have low capital investments just to compress and dehydrate that and move it into pipelines in geological sequestration areas. And where a lot of our plants are, the one good thing about the U.S. is there is a lot of knowledge about where things can be put down into the ground. So we're working with a lot of partnerships on that. So it's something that we're excited about. We see blue being significantly in front of green from any type of commercial scale. And by 2024, we'll probably have something that's almost close to 2 million tons of blue ammonia that we'd be able to market. And what we're seeing in the end market side of that is a development where you are seeing more industrial ammonia, whether it's used for coal-firing plants in Asia or whether it's some of the work going on in the marine fuel area that we feel pretty confident in the next decade that will start to develop as well.

I know in the past you've had conversations with companies like Land O'Lakes and the Truterra project like trying to figure out what would the market for blue be? What would the premium be? How do you get the farmers -- how will farmers get value from being maybe more sustainable farmers and maybe that would help build the market for blue. Can you talk about any discussions there? Or it's been too early? I mean, I've done some work on this. And what you find out about carbon sequestration, maybe you can correct me, what I could find out is, number one, it's really hard to monitor the CO2 emissions; number two, you end up maybe sequestering less carbon than the academics say; number three, it takes a number of years to get the payback; number four, your yields really suck for the first bunch of years. And this is why covers at Land O'Lakes have stopped talking about carbon so much as sustainability. It's a very complicated topic. Do you have any views on that and how your blue offerings play into this?

That is awesome.

We're saving the world and we're saving the dolphins -- so some of the things I said are true.

No, look, we are all a part of -- let's just take a step back on what we're trying to do. we are trying to produce a low-carbon, environmentally better product, great. We have the investment capability to do that. Awesome. We're going to do it. As a matter of fact, we're doing it. And so we're going to have 2 million tons of this better product and we believe -- and we're talking to a lot of people, whether that's the ethanol folks, who want to get the low-carbon stamp for California, how do you do that? You look at the whole value chain. So POET and others and ADM with what they're doing with their sequestration moves, awesome sustainable aviation fuel. Another step there as well, and we should throw in renewable diesel. All these things are in the same context and all of them are moving forward. And one of them is how do you help a farmer improve his -- is it the carbon score, but it's in the context of yield and money. The farmer has to make money. We're all about that. We have to be a partner to that farmer. We actually don't sell to farmers, we sell to retailers. So the Land O'Lakes of the world, the CHSs, the Nutriens, we need to work with them to have the nutrients available that are quality, that are produced safely, that are produced low cost, and where we're heading is, and the fourth is that are low-carbon. That area will grow just like precision farming has changed farming. I grew up in the Midwest, I grew up in Kansas, great farm state. And my backyard was a wheat field. We're a farming family. There are so many things that have changed with equipment and precision and applications that are continuing to evolve. And all the land-grant universities are focused on this, and guess who's wanting to talk about carbon, those people. So I think it is too early to say it's going to be this, it's going to be that, or it's going to be this percentage. But the trend line is very positive and we want to be a part of it.

Well, I think in the end, as you mentioned, Joel, one, you can't sacrifice yields, and two, there has to be an incentive for the farmer, right? What did the one say, green is green and that means money. So the government, whether they're stepping in with incentives like they are with the 45Q for producers, or whether they're doing something for the farm, that's really what's going to drive this forward.

It's tough. You run the numbers and like cover crop seeds cost a bunch of money. And like it is interesting math and, yes, farmers want to go out and see that their yields drop 10% year 1 and 2, but don't worry because in year 5, you can have the best soil, it's tough. So you need to get subsidized early on. You need to buy into the idea that down the road, you're going to be in this ecosystem of, I don't know, tied to the food chain of more sustainable whatever and you're going to get a premium, but it takes time.

It does.

We have about 5 minutes left. So okay, so you have a lot of free cash flow and you can do the buybacks, you can do other stuff. You can do some green and blue investments. Any M&A opportunities that might make sense for CF? And are you going to be true nitrogen producer, and that's what you are, or other things you branch into?

So I think from an M&A perspective, we're always looking at both organic and organic. And in the inorganic side, as you look around the world, the world has gotten pretty challenging. There's been a lot of European assets for sale over the years. And we just felt they were in too high gas cost regions. And as you're seeing play out now, as Bert mentioned, with TTF being at $30, you're seeing a lot of those plans are curtailed. I think there's other plants around the world that are interesting, but there's probably significant CapEx that needs to go into those. Here in the U.S., probably the regulatory environment has gotten more difficult from an M&A standpoint as well. And as we look at -- so that's one of the reasons why we're looking at outside, both from an organic standpoint, but also, like I said, continuing to keep an eye if something attractive comes along M&A wise. But I think importantly, on that is -- I lost my train of thought here. I'm sorry, is just that we have the, as you said, the free cash flow, the equity value and such that we're going to continue to look at opportunities. If we can't find those opportunities, we'll buy our own asset back, which is share repurchases.

And by our history, we demonstrated that we can, we do, and we will look at different opportunities as they're available.

I feel like I ask this question every year. But where are we in digital ag, biologicals, nutrient management programs? Are we really seeing any -- or even like in some of the seed technologies, as always that, well, we're going to create the new seed technologies that are really going to make you have to apply less nitrogen every year. Have you seen anything really to thread in sort of the normal nitrogen application rates?

I think parallel to your blue discussion, a lot of activity is being done, whether that's Pivot Bio or you can talk to Chuck at Corteva and what they're doing with seed technology. We talk to a lot of these people and have exchange of information just to see where and how things are developing. But there are a lot of -- people look at agriculture, it is a dynamic environment, and it gets back to costs and it gets back to money and your output, but this is the year that we believe this will be tested. And in some of these biologicals that have put out there on their marketing, this would be the year because of expensive inputs to try to see if they work. And we'll see, especially with the way planting has gone and field work with wet cold start to our spring. So yes, we monitor it. No, we have not seen the success that is propagated. And I would still believe that this year, next year and for decades to come, you're going to need nitrogen to grow the crops to feed the world.

So maybe our last question here. If you think over the next 2, 3 years, what is CF's biggest opportunity? What's your biggest risk?

Look, we're in a very difficult algo first. We live in a difficult world today. And one of the things I brought up earlier is nationalism. We all grew up, those of us who are around my age or maybe a little younger, we had a closed world, we had 50% of the world you couldn't travel to, and it was limited, and we only got pictures. Wall falls, 1989, 1990, the world opens up, and we travel. We have trade agreements. I've been all over the place. So kid from Kansas that gets a chance to walk Red Square as well as in Beijing as well as all these different places and make friendships and go over people's houses and have dinner, what a beautiful world, and agriculture gets to play a part of it. Lived in Brazil, lived in Argentina, loved it. Just in the last several months, with what has happened, with an unthinkable thought that somebody would invade another country to take what, people, land? What are you getting other than causing absolute destruction and devastation in people's lives and an interruption in all these things that we've taken for granted, and so when I look at the biggest risks, it's that, it's people doing things that don't make sense. And whether it's my children, when they were younger, play nice in the sandbox, let's play nice in the global sandbox, and get back to a place where we do have freely traded market-based goods. I think that's 1 of the biggest risks we have today is the understanding of culture, the understanding of needs, the understanding of movement, the understanding of taking care of people and the context of what we do every day, that is a gigantic challenge.

And off of that sort of said, no, the opportunity side is we do see a lot of free cash flow generation over the next few years. So I think as people say, what are you going to do with that? I think the answer is, we can do everything with it. We can do the new strategy for the green and blue, which is kind of limited capital expenditures. I think the M&A, as you talked about, even looking at some ancillary that play into our core competency, and then return on capital, specifically the shareholders through share repurchases, but even the dividend increase we just did here recently. So while all these things Bert said are creating a lot of strain on a global and geopolitical, from an organization standpoint, those aren't going to be solved tomorrow. And as a result of that, this is going to go on longer as you see yields get lower or certain areas not be producing as much fertilizers. So from our perspective, we have a pretty strong next few years ahead of us. But I have one question for you, Joel. What did you tell the customs gentleman about CF?

Yes, I was in Toronto. He asked about Nutrien. But then I asked him... First of all, this man could literally stop me from not crossing those 3 feet and coming to this conference. It's a long term for another day, but I went to Belarus to go down the mine shaft, I don't know, 7 years ago. which is why I'm friends with multiple friends. I know people in Belarus. And that trip cost me -- every time I went through the U.S. customs, for 3 months, I got, no joke, interrogated about why I went there for 3 months. But anyways, what was funny about the customs officer was I was asking him how did you hear about fertilizer stocks and he's like, "Oh, I have my ear to the ground," but it was just the way he was talking, him and his buddy talking about fertilizer stocks. And yes, the first thought was like, "Oh no, we've hit peak." Oh, no. That's the first thing you think of, right, when customs obviously ask you that, but he was asking about Nutrien being based in Toronto. So there you go. Gentlemen, thank you very much. Appreciate it.

Thank you.