CF Industries Holdings, Inc. ($CF)

All right. Good morning, everyone. Welcome to our -- I don't know what the year is. We're in the third decade, I think, of our Global Farm to Market Conference and a Chemicals Conference, too. Very excited for the 2 days we're going to have here together. over 1,000 attendees this year, over 100 companies. It's always bigger and better and very excited about it. Same goal every year. We really want this to be a forum to explore the key themes across the food value chain. We're going to have lots of fireside chats, presentations. As you know, this conference really spans the entire farms to the market, fertilizer chemicals, agribusiness, protein, food, beverage, distribution, food retail sectors, coconut water. We have it all. I just want to really thank everybody at our conference here. We have a really great events coordination team here, our sales force. all the corporates that show up, all the investors, really appreciate everyone that shows up for us. Just talk about a couple of keynotes we're going to have this year. Today, we're going to do a panel, myself and Andrew Strelzik with our -- BMO is a very large commercial ag lender. So we're going to have 4 senior leaders in our commercial ag lending team, and we're going to talk about what's going on across agriculture and farmers in the U.S., really boots on the ground, and we'll see what's going on there. Tomorrow, we're going to have a keynote presentation from our new Chief Investment Strategist, Francois Trahan. He's going to focus on how investors can think about positioning portfolios for a potentially prolonged period of inflation and what the impact will be on the consumer. Okay. So we're about 30 seconds early, so let me just drag for 30 seconds to catch up to the webcast. But we really hope that you guys have a great conference, and this really helps you figure out where we want to be invested in food and ag. Okay. Let's kick off. So we're going to start off today with a fireside presentation with CF Industries, of course, a leading global nitrogen producer with a very large North American nitrogen base. Very happy to have Bert Frost, who's the EVP and Chief Commercial Officer of CF; and Martin Jarosick, who runs Investor Relations and Treasury. So I'll slip over here at 8:00. Perfect. There you go. Right on time.

All right. So why don't maybe we could start off with a bit of a state of the union. A lot going on in the nitrogen markets. Why don't you maybe talk about what's going on nitrogen this year and what's different this year versus other years?

Each year is different, and it's amazing when we sit down and talk about it here at your conference or on our conference calls and how we reflect on the oscillations of this industry. And you have so many things happening. But if you go back like to 2008 and talk about the peak and trough of that era or 2020 and COVID or Russian-Ukraine invasion, and now we have the Iranian situation or the Middle Eastern situation. But feathered underneath that are other, I would say, smaller issues in terms of gas issues in certain countries or areas or lack thereof, operational issues. We had a lot of old assets in certain places and inefficiencies. And so -- but the demand continues to grow. And it's an amazing story of continued 1% to 2% demand growth, but not necessarily additional capacity growth. And so where we are today is a very interesting place, I think, for CF and for North America because all of a sudden, the shift has shifted towards who is the safe place, where is the place to produce this stuff? Who has low-cost gas, who has the rule of law? Who has an area where I can build on top of some of the best farmland in the world. And that's the United States, and that's just a poster for CF Industries. And so we're very excited about what's -- how this is transpiring, not because of wars or conflicts. That's not something we're pleased with. But it's the structural advantage that we have built of CF Industries and where this industry is headed and the needs of the world, and we're well positioned to satisfy many -- much of those needs.

I mean it's a weird year, right? Like you could say it's like 2022, but it's not exactly because a different conflict, a different situation, the timing of both conflicts start around February, end of February. But this market, we've seen a surge in nitrogen prices just after kind of, I guess, the key stock-up period in the distribution for nitrogen in North America. How is the market playing out right now?

Well, actually, I want to -- I think your first point is very interesting in terms of how this is -- is this similar to 2022 or not? And again, back to these other, I'd say, excursions out of the mean from '08 to '20 to 2022 to now, most of those were demand driven. And so in 2007, 2008, there was, "Oh my God, can I get supply? I need to pull forward. " Well, the world pulled forward a lot of demand and they had a collapse. Same with 2022. The reality was the product came out of Russia that was being exported, maybe a little bit of a delay, but the world was afraid of not being able to have supply. So again, demand was pulled forward. Today, there are supply limitations. And it's not just what's happening in the Middle East with millions of tons that are not going to be produced and not going to make it out, but the nationalistic moves that have taken place from other places to say, well, wait a second, I'm going to secure my supply. I'm not going to allow exports, Russia, China, other places or needing gas. And so this is a supply, a unique supply limited market where will you get supply? And how long does it -- and what price will you pay for this product. And so when we look at the forward and you're talking about spring and positioning, when we look at the North American market, our estimates are 80%, 85% of at least nitrogen fertilizer was in place for spring and priced at the Q3, Q4, Q1 average at very attractive levels for the American and Canadian farmer. And so we were pleased with how we have worked with our channel partners, the retailers, the wholesalers and we don't sell to farmers, but that group that serves the farmer to make sure that the product is where it's supposed to be, when it's needed for planting and that's for nitrogen-free folks out there. That's ammonia first, which goes down in the fall and then the spring, UAN, urea and those products. So we feel very good about that supply, and we will then pivot to the global market once the U.S. and Canada are satisfied and begin exporting.

I forgot to mention that today, right now and for the rest of 2 days, you want to submit questions for these sessions on the app and down the conference app. People have to go in the lobby and then we have the iPad here to get your questions. I think we're seeing bifurcated markets right now, right? We've seen U.S. I don't remember it yesterday, I don't think I was reading yesterday, but NOLA is around $600, going to be sub $600 a short ton. Offshore prices are closer to be high $700, $800 a metric ton. So there's some arbitrage or there's some opportunities here, bifurcated markets. Talk about that.

You're correct. And it's an interesting phenomenon in that we are the lowest valued market today in the world at that $600 a short ton where Egypt, Algeria, Nigeria, those that have available tons to export are closer to $800. Part of that's a reflection of, again, the North American market is satisfied. We've imported sufficient volumes. CF has produced and kept those tons in market. And we had a drop in corn acres from 98 million. We were estimating 95 million acres, so a little bit less applied. We had a very good fall application in spring of ammonia. So when you add up the nitrogen needs, I think there has been sufficient where now the game is buying NOLA tons on a barge and reexporting them. So you're going to see vessels that have brought tons in, put on a barge, put on a vessel and sent out because of that price arbitrage. That will eventually correct. But kind of year in, year out, NOLA is one of the lowest-priced markets in the world, and there's a reason for that. It's an easy place for, let's just say, Russia, Egypt, Algeria or Nigeria, you're long a vessel, you can send it to NOLA and discharge into the vessel and store it that way, where in Brazil, you can't birth until you have it all sold and paper is nationalized. Most markets operate that way.

So I don't get anybody in trouble. But thinking about the export opportunities and some arbitrage or some better netbacks. I mean the U.S. government, new administration has been very vocal the last bunch of weeks and months with Rollins, other players in the government about fertilizer shortage. I don't think actually Hormuz is closed, but just talking about pricing and things like that. Is there a concern that the government -- if this conflict continues, is there a concern that U.S. could put a new policy like, no, you can't export nitrogen. No, you can't do things like that. Like other countries we've seen. Is that a crazy thought?

Does crazy drive crazy? I don't know. I think you have to take a step back and say, is that something that's in the interest of the government? Is that something that's in the interest of the -- in terms of policy? And is that something that makes long-term and short-term sense? And I would say no, because it's a global market. Things -- products move all over the world. We, at CF, we do export at times, but it's, I would say, a de minimis part of our portfolio. We're heavily focused on North America. We have an industrial base, and ag base and then that incremental volume that's exported generally during the off-season because you have a bell curve of demand. So you're building inventory until about March, April, and then you're dumping inventory where you're applying that product to the ground. And so the goal of a retail, our customers is to be at empty by the end of June. That's a good goal because it's a reset. And then we supply those customers. We announced our -- it's called our fill programs where we're filling the inventory. And so during that natural time of declining demand, we're still producing 24/7, 365. We're always going. And so we would -- we have inventory space for probably 2 months, we at CF. And so there is a natural time because of our -- where our assets are located that we can load vessels very efficiently, and that's good for the market because it takes 2 to play in this game. We produce, we want to sell, but we need our customers who want to buy. And generally, they don't want to commit their capital, their working capital nor their risk capital to fill their inventory maybe in June, July, they prefer to do that in August through December. So it's -- this is a natural oscillating market that there is a need to export at certain times.

So I think it's fair like we're going to -- we're getting into part of the where maybe some of the pressure comes off in the Northern Hemisphere, not so much the Southern Hemisphere, Northern Hemisphere. It's early, but do you have any views on how fill might go versus other prior years?

I always have views. You guys want to hear.

Yes.

No, we believe that this year, fill will do very well because of that earlier comment on there's going to be almost no inventory at the retail level. The focus from our communication and discussions with our customers is we're going to be empty. We want to be empty, and then we want to reassess where the market is, whether that's the corn market or wheat or whatever crops are being supplied, understand the credit needs and position of their customer, the farmer. And then we like to work synergistically with our channel partners and price based on the world market, but also be attractive that they are willing to buy and commit their capital to this process. So I expect to have a very good fill program. What we did last year was interesting. We communicated a month before and said to the customer base, we're going to start fill on this date in August, and we will call you on that day and offer you a price and then get your tons, your needs organized with your customers, and it went very efficiently. I anticipate doing the same thing.

What day -- do you know what day in your head right now -- do you think you're going to do that?

I would say sometime in early August.

Okay. So early July, starting talking people about, you have a month.

Yes, we got that, and we have the Southwest Fertilizer Conference where we meet and talk about all things fertilizer.

Okay. And do you think we'll see any change in sort of retail purchasing behavior where maybe they don't want to empty the bins at the end of the season. Maybe they're worried about supply? Or do you think it will be similar behavior?

No, I think they're going to empty the bins. It's -- and this is -- I'm speaking only of nitrogen. So you have nitrogen, phosphate, potash, some sulfur products that -- and then the crop protection and seeds. And so I would anticipate all that is focused on liquidation and repositioning.

So I mean we've known in quotes for 9 months, 10 months that we're going to see an acre reduction -- or acre shift from corn to soy in 2026. And we got our first USDA estimates end of March. And then a lot of people in the industry think well, there will be a more -- a wider shift like more acre reduction, more soybean acres. Do you have a view if the USDA has got it right?

Our view would be whether they're right or wrong, I don't want to comment, but our view is 95% or maybe even higher than that. And there's a reason. The one product you can make, if you're a farmer that you have a yield impact is corn. And so if you're a 200 bushel per acre producer and you are -- you've prepared your land, you've picked your seed optimization and you've got good soil moisture, which all is in place today. If you fertilize and specific to nitrogen fertilizer, the yield uplift opportunity, and that's the revenue opportunity is there. And so in this kind of market where you're at $5 corn today, we're at $5.03 for December, the corn-to-bean ratio favors corn. But again, if you can get 10, 5 additional bushels per acre, which is highly possible, when you're looking out to the world today, what is going to happen to the supply, the stocks-to-use ratio of corn, you should ask the Bunge and ADM guys this. But our perspective is that you've got an opportunity because of what's going on in the world and the lack of nitrogen and the lack of movement. And so second crop corn is something place where you might see an impact, but that will be in 2027. And so if you're a farmer here, you shoot for yield, you've got on-farm storage, you hold your crop in the fall of 2026, and we expect to see an increasing value for that output, and that's fantastic for the American farmer.

So I actually spent some time Monday and yesterday with AGCO, right, the big equipment manufacturer in Toronto and Montreal. And the view that they're trying to push is 2027 should be bullish and to get people buying tractors again because sort of some of the things you're touching on, which is that, okay, farmers might apply. Well, their view is farmers are going to apply less nitrogen per acre, yields will go down. This will -- crop prices to go up and so everyone is now going to buy another new tractor next year because they have more money. Now I don't know if I necessarily subscribe to that because I think sophisticated farmers, if they're going to apply corn, they're going to do their 200 pounds, whatever of nitrogen. And if they don't want to do that, they'll just apply -- they'll plant some other crop that doesn't use nitrogen. Like do you have any views on yields, application rates, what it means for next year?

Well, again, my view on yield is you're going to apply nitrogen for yield. I do think that phosphate is expensive, and so that goes to soybeans. Potash at 350 is probably reasonable.

Cheap.

If I were Canadian, I'd say that. But I do think that around the world, these are the calculations that farmers around the world are making. But on nitrogen, and this goes, again, back to yields is we're short 5 million tons at a minimum coming out of the Gulf. That's not going to be replaced. Every day that this goes on, the untanglement of the Strait, you got 1,000, 1,500 ships on the West side. You've got ships on the entrance side that need to come in. That's like -- it's a little highway. So you've got this movement of ships that has to -- and what ships go first? Do petroleum goes first? Does refined fuels go second?

No, [indiscernible] sulfur.

So we're short sulfur. I was just on the phone with -- last night, Darla and I were flying in. I was on the phone with a guy I deal with in China, talking about some of the needs and movements and the impacts sulfur on phosphate in China. We are going to be short phosphate in the world. And -- but we're also short nitrogen. So yields are going to be hit in some places. And who's going to be impacted are those that either can't afford it or can't get it. And so again, back to this in a needs-based world where a majority of -- at least in the United States, corn goes to feed and then to ethanol or corn refining, we have consistent demand for that output for the farmer. So again, back to where I think the impact is, is rising prices, which we hope leads to rising incomes for the farmer.

Okay. I got a question from someone on the app. Thank you. So you mentioned you were liquidating inventories to reassess. Would that keep prices high and availability tight? How are you managing credit terms to customers?

Credit terms?

So for credit terms, we keep them pretty tight. You can see from our financials, we don't have bad debt expense. We don't have write-offs. So we manage our credit very tightly. And as prices go up, it generally becomes tighter. I would say we manage it very tightly.

We have negative working capital, right? And so it's -- we -- a lot of our product is prepaid. So I think our position, but again, on the pricing issue, it's a global market. So it's -- as much as we would -- I think people like to say that, that's controlled by industry, it's not. And this is a dispersed industry. We're the world's largest producer of ammonia, and we're 5% of that 200 million tons of ammonia is consumed. 200 million tons of urea, we're 5 million of that tonnage. And so as products move or demanded and during this crisis, I had phone calls from many different places around the world. And it wasn't a question of price. I need a vessel of this product or that product. Can you load it? No, we can't because we're committed to the North American market. When can you? I'll pay this price. And so it's -- that's the kind of drivers that are taking place right now.

So a silly question, but we all get asked every day, the war ends tomorrow, although didn't end in 2 weeks. War ends tomorrow, and things unwind take some time, whatever, some reasonable question, the war ends tomorrow, things start to unwind. How do you see the market sort of normalizing or developing in that ridiculous preposterous impossible to understand scenario?

Yes. I got an answer. Yes, yes.

No, you get my guess.

I do. And I remember on February 28 and March 1, when I got the call -- generally, I wake up and I look at the gas market, I look at the corn market, and it's kind of annoying to my wife. But -- and then I look at the news, what's happening today? And when the hostilities commenced, it was pull pricing. We -- and let's sit down and assess that then the week after the -- Monday, Tuesday, Wednesday after that was calling customers, what do you need? Where are you at? This is -- what does this mean? -- thinking that was a 2-week issue. Okay, maybe it's a 3-week issue. Okay, maybe it's a month issue. Well, now it's a 2.5-month issue. And we can end hostilities and open the Strait. Again, I would say it's 2 months just to -- and I don't know if we get back. We don't know -- we know that in terms of operations that are not operating today are nitrogen plants. And that's Bahrain, Qatar, Iran. We don't know what's been, bomb. We don't know what LNG is available. I mean you got to think about -- it's not just urea coming out of the Gulf, it's LNG that goes to India, Bangladesh, Pakistan. Bangladesh has shut down their 4 plants because they don't have energy. India is operating their plants, they're 60% driven or their 60% of their gas needs are imported LNG. They're operating their nitrogen plants because of that lack of product at 70%. That's just adding more millions of tons of needs. We estimate that India last year imported 10 million tons of urea. We thought this year would be like maybe 7 million, 8 million, 9 million tons. We weren't sure. They're going to be 10 million to 13 million tons. So you're short, it's not available, but these countries that produce aren't producing, they need more. So the import demand goes up. And these people need -- we need these -- the Middle Eastern producers to be producing again. And then there's China come in. So there's so many questions about supply, where it's going to come from back to nationalistic moves and attitudes and thinking that when you look at the forward market, I don't think we untangle this, and I'm just going to project we're almost in June now. till August.

And I think what's interesting is -- and Martin, you probably hear this, like if we were going back 6 months, 12 months, 24 months, I think a very simplistic investor -- a very simplistic view by a lot of the buy side has been CF is a proxy stock to TTF or Henry Hub gas price. Like if you just have to explain someone in 5 seconds, right? And that was what people were just fixated on. And the last few months have definitely changed the story a bit, right, because it's much more complicated. I don't know if you have any views on what I'm getting at, but now it's not just about gas price, it's about so many other things.

Well, I think that's right. I think the world has changed, and we'll probably have a new normal that's different from where we were in the past and in the not too distant past, the world is running pretty smoothly in our industry and with not a lot of friction and barriers to overcome. And now you have a a very complicated global situation. It's affecting shipments. It's changing the risk profile of assets that we previously considered first quartile just based on the gas price alone. And now you have to factor in their ability to actually ship that product out.

Yes I think how the market valued nitrogen assets and again, where you're going to build new assets, that has a risk premium that wasn't, I don't think, incorporated. So if you're looking at a cost of capital of X or a return of Y, that needs to -- that calculus needs to change. And again, that's where CF is we're located in the best market with the best gas supply, the best ability to distribute the product, it all works very well.

Speaking of complicated, CBAM has been around now for fertilizer 4.5 months. There's a lot of political discussion about all the time. It seems like it's pretty much in place. Any views on CBAM has changed in the market?

CBAM, it's a difficult -- because you don't know until the end of the year what your actual cost is going to be, my European friends in our industry, it's a struggle to one, you've got older assets, you don't have gas or the price of gas is at $16. We're paying $2.60. It's a much different calculus. Where I go with that, though, is what -- again, how CF Industries is prepared and how we've thoughtfully worked through this with decarbonizing our footprint. So we've invested hundreds of millions of dollars in decarbonizing first at Donaldsonville, where we now have up to close to 2 million tons of decarbonized product. We're building the world-scale Blue Point project that will come on in 2029. We will be 95% decarbonized, and we have space for 4 more ammonia plants with our partners or independently. Our partners are JERA and Mitsui, which we're really pleased because they're taking some of that offtake to new applications in Japan for co-firing. And so CBAM, there's 2 different schools of thought. What the United States did or our government did was give the cart. So the 45 system of decarbonizing, we leaned into that, and we're partnering with Exxon for our decarbonization projects and as well as -- who's the other one? I can't remember. But -- so we are on that path.

[ Venanda ].

I know she's passed. So we are on that path of decarbonizing, one, because we're getting paid for it, but two, we believe it's the right thing to do. And so we're looking to supply some of the nitrogen needs to Europe and meet those CBAM goals.

Okay. Let's talk about that. Since a question just came in as well. You've been running some low-carbon ammonia out of diesel now since third quarter last year, third quarter, fourth quarter, third quarter. How is demand -- how is that going? What are customers saying? And how do you think demand is evolving for sustainable and low-carbon nitrogen?

It's evolving in multi different -- many facets. And so what we've been doing over the years in terms of this journey has been going on for almost 5 years of decarbonization. And so what have we done? We've gone out and worked with and talked to the retail sector, specifically the co-ops, the Land O’Lakes, CHS, Growmark. That's the connection with the farmer and working with them and one, explaining this is what's coming. This is what the uplift is. And then we've had project -- pilot projects with pilot or POET, the ethanol company, where we're supplying -- and this is where it's called the corn value chain, and we're really excited about this. And so it's -- because we play in -- you have the -- we're the fertilizer supplier that goes to the retailer, that goes to the farmer whose output goes to the processor. But that corn value chain, and that processor could be a feed for cattle and poultry and pork, but the processor we're looking at now is the industrial processor. And so low carbon fertilizer in that corn value chain can lower the carb score for ethanol by about 10%. So as these ethanol plants decarbonize themselves, you've got a full decarbonized value chain that we think adds what we believe it adds we're getting paid for that decarbonization and then what the value of that -- in that corn value chain that the farmer will benefit. The retailer has consistent movement and the processor as well. But so you've seen our announcements with Pepsi on low-carbon initiative with UAN. And then we have contracts for low-carbon products into Europe to industrials as well as farm or fertilizer companies.

You like Intel inside, like CF in size on the Pepsi bottle?

Everybody is going to buy that. No.

That's good for you. And you guys have talked about the premium pricing, you'd hope to get the blue -- I guess, we call it the blue premium. I think you talked about $25 to $50 a ton on blue ammonia diesel. And then as you get to Blue Point in a few years, maybe more than that. Is that right?

So where we are today is we are getting a premium, and it's on the lower side of that, that $20 to $30. And we're being very prescriptive to our customers and to the market of this is a new product and demand is going to build. Demand is going to build because of CBAM anyway. So as these penalties increase and we're able to produce under that, there's a value that's associated with that. There's also the CPG companies and their own scope emissions. And what we're finding is a lot of them want to partner with us to lower those emissions themselves or those that Scope 3. And so all of the above, but what we're investing for now is we're being paid for by the 45 system, and we see that market pricing being associated and increasing over time.

And Blue Point, things are on pace now. You kept your CapEx trajectory on earnings and release last week. Anything going on there? Talk about any concerns about inflation risk?

For me, I don't -- in terms of the inflation risk, we're out -- we've already partnered with and we know where we're going to be producing these modules. We're going to be bringing them in. So we're in the -- in terms of what we're doing with groundwork and pilings and building our -- the bridge that's going to go over the highway. And so it's infrastructure work today. We have a great team that's focused on that. And so the inflation risk in terms of the modules, I don't think that's a great risk to us.

So again, back to the U.S. government, which has had a little bit of a chatty these days about fertilizer supply and building more capacity in the states. You're building a new plant. It wasn't designed really to be sold to farmers. It could be, right? I mean in the end if some of the low carbon opportunities weren't as attractive. But I've already heard questions from people saying, with all the windfall fast, are you going to get what's going on in the war, could you guys build more nitro capacity? Could you build a Blue Point 2? We're only in the early days of Blue Point 1. What do you think about that?

Well, I think we have demonstrated in terms of we're the one company that has added capacity. Over the last 15 years, we spent -- well, we purchased Terra in 2010, so let's go back 16 years and then really revamped that system and invested hundreds of millions of dollars in bringing that capacity -- increasing that capacity through higher throughputs. Then in 2012, we announced the building of Donaldsonville and Port Neal. So that was $5.2 billion for 2 world-scale plants, one in Louisiana, one in Iowa. Then we purchased Waggaman a few years -- 2 years ago maybe, which was an ammonia plant run by Dyno Nobel, which was running about 800,000 tons a year. We took that to over 900,000. So when we have purchased, whether it's Terra or our own assets, we run them at 100 over nameplate. The new plants are running at 110% of capacity, of static capacity. So we're the company that is skilled. We have a great engineering team. We have, I think, a very focused staying within the things we're capable of doing and improving on. And we've demonstrated that. And that's our communication to our government, the U.S. government at least is we are committed to growing and investing in our United States. I'd say North America, we have 2 plants in Canada. Our North American asset base, but that includes plants and distribution capabilities. We have 20-plus ammonia terminals in the United States as well as UAN terminals. We have our own barges that move products -- and we have 5,000 railcars. So when you integrate all that together, we are about serving the American or the North American market, and we could invest. We look at projects all the time. And I think you're right, we're throwing off a lot of free cash. We're the free cash company. And that will be used for CapEx, for buybacks, for dividends and for new investments.

So I guess in the interim, I mean, as you're generating this extra free cash flow right now than you're expecting 3 months ago, I mean, I imagine you'd be going to the buyback. Is that fair? Or would you be trying to build a bit of cash balance for some dry powder?

If you look at our history, we've done both, right? We've built cash in times when we're generating very large amounts of free cash. And then -- but if you look over like last year, we bought back 10% of the outstanding shares. A year before that, we bought back 10% of the outstanding shares. And so we have a consistent track record of redeploying that capital either into our own network through accretive projects or through share repurchases.

I mean it's a bit -- now this year is a bit different. You got some more earnings, but you have a bigger CapEx profile because Blue Point starting with your partners are spending money on it. So does that change the calculus at all sort of both sides of the equation are moved up cost and inflow?

Well, we like to maintain a high degree of financial flexibility. So you've seen our balance sheet has a fair amount of cash on it. That enables us to do a lot of things that that are opportunistic, whether it's buying Waggaman where we had cash on the balance sheet, we just wrote a check for that entire plant or to have the dry powder to execute the share repurchase program.

I think something we've learned also is we've been through the tough times of 2016 when EBITDA was low and debt was high. We now have a wonderful balance sheet. We're well positioned and things happen in this industry and opportunities come, it's better to have cash on hand or opportunities with that and a good balance sheet to execute.

That's a good part -- like I mean, I lived through the times when you guys are like, "Oh CF going bankrupt. " Like I remember those months, right? That was just after the OCI deal kind of broke and you had a bit of interesting debt on the balance sheet. What was your sort of biggest takeaways from that? And what takeaways have been from like the peak times?

Cash matters.

Yes.

And having -- in terms of how Martin manages our treasury book and the people we work with, a good balance sheet is something always to work for. We're a commodity business. And so the oscillations of the products that we make against the products our products make against the products that our products make and that's just the price of corn. If corn is $4, a farmer cannot afford it. If corn is $7, he's happy. He's going to go to AGCO and buy that new tractor. And so -- but it's the same thing as cattle. If your protein price is high, then that corn -- that feed value to your -- to the beef, pork or poultry is high. So that's another revenue source. And so in our industry, the oscillations of gas, the oscillations of price, the oscillations of the output can be punishing, and we learned that in 2016, and we don't want to live that.

So you're a nitrogen company, right? That's what you do. That's any ideas to want to get into other commodities, a little more downstream, I don't know, any ideas?

Nitrogen is pretty awesome right now. So I'm pretty happy to be in nitrogen. We've looked at a lot of different things over the years. We -- you talked about OCI. We almost partnered with them. We almost partnered with Yara. We did purchase Terra. We used to be in phosphate. We sold the phosphate business to Mosaic in 2014. And I think that was a very elegant solution for CF. It was something that we had an asset that they had the land surrounding our land. So our phosphate resources were limited. This is a good transaction for Mosaic. And then we had an ammonia supply contract. We make the ammonia. We did an ammonia supply contract with them. I think that demonstrates that they do what they do or different industries, but we're very satisfied being in the nitrogen space.

And then are you -- I mean, are you a North American nitrogen producer? I know you've got some assets in Trinidad or JV. But I mean, are you a North American nitrogen producer? Is that -- would you consider branching out? I mean you have in the past like you are and OCI some deals, but would you branch out?

So we have our U.K. asset that we produce ammonium nitrate there and we import ammonia. We have our Trinidadian asset that's a joint venture with Coke.

Like in U.K. it's small, smallish, right?

And we do some. We have the 2 plants in Canada.

[indiscernible].

That's right. So again, a lot of things come our way. So we look at things and we talk about things. I'm not going to say -- I would say, never say never. But we do enjoy the benefits of being a North American producer are substantial, and we do like our asset base.

What would it take for you to get conviction to look at another -- to look at another like greenfield or is there a greenfield opportunity? Is there a brownfield you have sitting in your portfolio that would make some sense? And what would you need to see to conviction to go down that road?

Yes. I think we're always -- I want to be thoughtful that we're always looking at things towards the future. And DEF is a very good example of that, diesel exhaust fluid. It's urea liquor. So urea liquor goes into make urea, which is a dry product. Urea liquor goes into make UAN, which is urea, ammonium nitrate. But it's substream now where we're the largest producer, I think, in the world, at least for sure in North America, and that diesel exhaust fluid as Class 8 trucks, power units have been dosing from, let's say, starting in 2010 as those new engines came in and dosing rates went from 2% to 4% and increasing up. That has been a very good business for us, but it's a good example of identifying something early, building capacity to need it, and we would look at other opportunities in the same way.

And are there any other -- like are there any other Waggaman out there like plants that are available or could be available to name them that you think you could maybe run a bit better on your radar?

I don't have anything specific to announce or to talk about.

But just things -- I'm not asking to announce a transaction right now live in you.

I think -- but our skill set is running these plants very well. And our safety record, I do want to give a shout out to our team, our engineering and management and production teams. Our safety record is the best in the industry. And we focus on that. And so we believe safe operations lead to better operations. And our do-it-right culture is something that if we were to take on another asset, we would embed that with that performance and as well as the investments to take an asset to max capacity.

Start to wrap this up, what is kind of your base case how -- like going back to we were talking me half an hour ago, but what is sort of your base case and how -- and you just reviewed, how the next 6 months are going to play out and how CF positioned for that to maximize it for CF?

So we're in, let's say, June 1. So the first half is over. We've had a very good first half. We've supplied the North American market. We've kept our customers supplied. They're happy. They're ending up with a good performance. We got Darren from the ARA and can speak for the retailers, but we believe we've done a very good job of partnering with our retail partners. Now it shifts to the farmer and yields. We're in an El Nino year. So the risk on climate and a severe El Nino with what that means for drought and for South America as well, we have to watch. But this goes to, I think, with the lack of nutrients that are available in the world, I think you're going to see underperformance in other areas of the world. That's going to move to lack of yield, price increases for those carbohydrate products, corn, wheat, cotton, soybeans -- corn, wheat, cotton, rice, sugar. So I would think that there'll be higher values to the farmer at the tail end of the year. And I think North America is very, very well positioned for that eventuality with serving the world with the food that is needed.

Gentlemen, thank you very much.

Thank you.