Yara International ASA (YAR) Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to Yara's First Quarter Results 2022. [Operator Instructions] Please be advised that today's conference is being recorded. I now like to hand the conference over to your first speaker today, Ms. Silje Nygaard. Thank you and Please go ahead.

I assume that you have all maybe had the chance to view our webcast today. So we are not planning to repeat any messages from there, but rather go straight into the Q&A. My name is Silje Nygaard. I'm with Investor Relations and I'm here together with our CEO, Svein Tore Holsether; our CFO, Thor Giaever; our Head of Market Intelligence, Dag Tore Mo; and our Deputy CEO, sorry, Lars. So with that, operator, if you can please open up the line for questions.

[Operator Instructions] We do have now our first question and it comes from the line of Mubasher Chaudhry.

It's Mubasher from Citi. Just a couple to start with, please. With regards to the low volumes that you talked about or that was seen in the first quarter, is that because the farmers are unable to get out to the field and apply or is that due to demand destruction due to high prices? And if it's the latter, can you square that with your comments around the improving farmer economics on the slide -- on Slide 15? And second question is little bit more medium term. We've seen a lot of commentary around energy transition and acceleration. Are you seeing that acceleration on your side as well with regards to the few pilot projects that you've got going on from a green ammonia perspective? Are you seeing an acceleration from governments willing to give you financing or grants to help those private projects move along a little bit faster? Just some comments around that would be helpful.

So perhaps it's -- I could start it and Svein Tore and others will join in. When it comes to reduced volume, that's mainly what we've seen in Europe and we're comparing to a fairly strong first quarter last year. Still we see that there is quite some reduction in the volume especially for premium fertilizer, also a result of farmers opting not to apply as much P&K. Still when we look at the farmer economics and, as Thor went through in the financial presentation as well, the farmer economics are actually supportive for having same or even more than last season as a result of farm profitability. But we have to keep in mind that these are volatile times and there are huge swings in commodity prices as well that probably has an impact on farmer behavior and the risk that they are faced with and that is something to also keep in mind in terms of food production and the level of food production. So that's actually working against what needs to be done now to grow more food for -- both for a growing population, but also because there is significant reduction in exports and production especially out of Ukraine. So it's a bit counter intuitive, but probably driven by a very high price level. When it comes to the transition or the green transition, what we've seen now is the -- how vulnerable both the energy system -- but also the energy system in Europe and also the global food system and how linked that is to Russia. And there's a clear drive now within the European Union of course and elsewhere as well to become more independent of fossil fuels from Russia. And since fertilizer industry is a key consumer of natural gas in Europe, it's one of these industries that can be transitioned over to new ways of producing hydrogen ammonia and into nitrogen fertilizer and one of these would be electrolyzers to that. We've launched our first demonstration plant in Porsgrunn a few months ago to convert part of that plant to green hydrogen and then we're embarking on a full conversion of it. And in order to do that, there are some things that need to be in place. One is the full value chain approach to how we look at fertilizer and its impact to the food system also on the emission side. And we have entered into our first contract for the sale of green fertilizer to Swedish Lantmännen and it's a very interesting example of what is possible when you take the full value chain approach from farmer all the way to consumer-facing brands that this is possible. And we need to take the learnings with us now from what we've seen in recent weeks on how urgent it is to make that transition much broader than what we have started with. It also requires a massive investment in renewable energy across all of Europe to enable this because you need electricity and that's our call to governments both in Europe and also here in Norway to accelerate that to make more renewable power available and then also to go into the sectors that can be converted into renewable energy rather than fossil fuel and there a lot of those and we're taking a pioneer role in that. The size of the project we are looking at for the full conversion of Porsgrunn is if you look at the capacity, the capacity of that project is more than the combined installed electrolyzer capacity in the world to-date. So that in itself will drive volume and innovation in the electrolyzer industry. And we're not asking to have first mover's advantage here, but we do need to be at least held first neutral that this is a joint effort together with governments as well to drive that transaction. So that's the European side. We're working on a project in Netherlands as well and then also in Australia together with ENGIE and the Australian government to do a conversion or of part of the production and industrialize it. It's ongoing. It was ongoing before the war. The war has highlighted how vulnerable the system is and I really do hope that it accelerates the transition. It certainly is at the top of our agenda.

Just to follow up on the first part around kind of the P&K prices. Can you provide some comments around the availability of potash in the second quarter and whether you're able to get a hold of enough for your own production and just availability of potash in the second quarter with some comments on it? That would be helpful.

Yes. Mubasher, this is Thor here. I mean just as an overall comment, we are -- as you know, of course a lot of supply chains on raw materials having to be sort of reset these days. But at the same time, there is this P&K demand destruction in the market. So I would say as an overall comment for Yara, we are managing this situation quite well for now. So we don't as of now anticipate, let's say, having to curtail our production for example due to lack of raw materials.

And our next question comes from the line of Truls Engene.

Truls Engene from SEB. 2 questions from my side. It's a bit of follow-up from the first question here. On the volume side, you're showing deliveries in Europe being down 24% year-on-year. Are some of these volumes for the season being delayed into Q2? So kind of overall, what are your delivery expectations year-on-year for the second quarter based on what you're currently experiencing here? Start with that.

Truls, this is Thor again. As we touched on in the report and presentation, we are behind 17% for the season to-date as of now. We also showed in connection with the farmer economics topic that we also touched on earlier in this call is that yes, the profitability per hectare if you look at wheat is significantly higher than a year ago, but the optimum application rate has shifted down a bit. In this example, it indicates about 10% lower. So now your question is specifically about the second quarter, which I would say in any given year is a tough one to call because that as you know is also when you tend to have the reset in prices and it depends on the dynamics at the time then, what global urea markets are doing. And all that adds up to okay, are farmers and distributors more or less willing than a normal year to take positions into the new season because to be clear, the deliveries in second quarter are very much a mix of current application and new season positions. So when you -- let's say in any given year, this one is a bit tricky. But I think in the current environment, you're certainly not going to get a forecast from us on how the deliveries will be. But going back to the farmer incentives, what looks like -- it looks like the optimum application amount may be a bit lower this year. And adding on to that, also referencing Mubasher's first question earlier. On top of this, Europe is the region that has been the most volatile. So both the farmers and producers look at the gas price volatility on top of the -- also the global fertilizer price volatility. I mean it's -- I don't think it would be surprising if in addition to the sort of agronomical optimum point, there are some risk impact here. And when you have that high volatility, it's perhaps not encouraging extra position taking in the short term, let's put it that way. I don't know if that sort of answers...

So just a quick follow-up then. The recent decline we've seen in markets and urea prices so far in Q2, has that kind of triggered or incentivized any new demand or are you seeing any shift from the farmer side here?

I would rather put it the opposite way that it's not unusual to see some softness in pricing at this point of the season because the main application in most markets is done. And so you're very much into the phase now where the further into the quarter we get, the more this is about willingness to take positions for the new season.

Understood. And then if I may on the -- your report is you stopped all sourcing from Russia related to Russia. Could you please elaborate on how this is affecting your sourcing costs? In the previous question, you said you will -- you manage the kind of sourcing related to potash well. But will it have any impact short to medium term on for instance your NPK deliveries?

Yes. I can start on this one as well. I mean, I think also reference to the previous question -- the last question before you asked yours is that we are -- you have 2 effects at the moment. You have both some demand destruction for P&K and you also have supply disruption for NPK producers including ourselves. But we do have and have always had a number of other suppliers, some not as big obviously as the Russian ones. But the net of this for the time being for us is that we are able to manage the totality here and that we can operate. So right now, this is more probably a question of demand than our own product availability.

Yes. And on the sourcing cost when switching from Russia to other sources, does that have any effect on transportation or just general higher price levels there?

Yes. I mean this is -- I think that is something that even if I could give you a sort of precise answer on that isolated effect, I don't think -- I think that would kind of miss the point because we are in obviously a market environment now which is tighter and that means that both our selling prices and raw material costs are increasing and that I think goes for gas, for phosphate, for potash. But so far the net of this, as you've seen, has been positive for us.

And I just wanted to add that of course these are large changes in a very short time period of a system that is built up over decades. That said, we have a very strong sourcing team and we have a very strong network as well. We are and still will be one of the largest if not the largest industrial buyer of many of these raw materials. So utilizing that to optimize and we've seen tremendous efforts at our plants as well to adjust to new grades of raw materials in order to deal with the situation. But of course there are impacts. Nutrients are now or the access of it is restricted and we take potash at 40% of the exports, before this came from Belarus and Russia and it takes time to ramp up and roll out new sources of that. If it was something that could be done quickly, would have been done before this. As we've seen the prices go up, but there are a lot of initiatives to build this longer term and then we're also bringing with us the need to have a more resilient system also on these nutrients going forward to avoid coming into situations as the one that we're experiencing globally now. So in summary, this is a bigger crisis for world production of food than it is a crisis for Yara.

And just if I can add just a couple of comments also. One regarding Russia because you've probably seen this, but I just want to make sure it's clear that we don't have a general Russia ban in place. But as we've said in the report, we have stopped sourcing from entities -- companies that are linked to entities or persons hit by sanctions. So that's to be clear on that situation. The other thing I just wanted to comment on, I mean we've had a lot of this and this is to everyone on the line. So far the questions have been quite centered on Europe and the situation here, which is natural. But also hopefully as you've seen from the results, a big feature of that is that our -- we are showing very much the value of having a good global footprint and the fact that our operations outside Europe that have contributed the largest improvement this quarter. And more broadly if you sort of look at a scenario where Europe is perhaps fertilizing a bit less, potentially producing a bit less if that's the optimum for the farmer, then there are of course other regions. For example Brazil where there will be an even stronger incentive to make up the gap, if you like. And again, it's good to be positioned globally not only in Europe.

And the next question comes from the line of Lisa De Neve.

The first question I have is on the Yara improvement program and specifically the ammonia production targets. I just want to understand is it mainly some of the European ammonia curtailments and sort of the pull forward in last quarters as some of their turnarounds in Europe. Have those sort of prevented any sort of meaningful progress here or are there other variables that are sort of preventing meaningful improvements on sort of that target?

So yes, we're having a meaningful underlying improvement, but we've been more focused on optimizing our production in light of the profitability, which means that we had to run actually for nearly a year now to flex our production up and down depending on the margins and that has an operational cost in terms of energy efficiency and productivity. But from a profitability point of view, it's been the right thing to do and that's been our main focus through this period. And we are experiencing a lot of great work in productivity, continuous improvement in Yara and very systematic improvements on that, but it's not as visible in numbers because of the need to ramp up and down. And then we had some turnaround and maintenance that have taken longer time than we expected also because of the challenging operating environment that I'm thinking both availability of spare parts, but also availability of expertise to move those across countries and regions. That's been an issue throughout the pandemic as well, but it is still continuing with bottlenecks in several areas. So we're still working towards the same targets. We see it demonstrated in many plants and over time periods. But right now the main focus for us has been to run our plants optimally financially rather than production-wise.

That's super helpful. And then my second question, I'm so sorry for bringing this up again. But I would just like to unpack some of these lower deliveries and especially in the light of the coming quarters where the Southern Hemisphere comes into focus. So you mentioned that some farmers may not be willing to buy and apply some fertilizers because of the risk in crop prices and lot of volatility factors. I mean what do you see in South America and also how do we square that with yield risk when not applying fertilizers because not applying fertilizers can have a significant impact on your yield, but also when you have a very dry climate or so forth, it really could wipe out your yield which is a different form of risk. I'm just trying to understand here farmers may be applying less NPKs because there's still potash or phosphate banked into the soil. Just trying to see what's really driving that and if there's any structural element to that and also in the light of South America?

Yes. I'll start here and I'll hand to Dag Tore in a moment on South America. But I think there's also an element of getting used to a new situation as well here where this has been a rapid increase. And as we've shown the farmer economics are actually sound, but it's the uncertainty and whether they're able to secure these margins. These are high price levels when you look historically for farmers as well. So it's about the risk perception of this. But we've seen on crop prices how they have developed. They're staying at a higher level again incentivizing farmers. So it might be a matter of risk perception and getting used to new price levels here as well that could change going forward. So as we see probably an impact of that at the moment on how much risk the farmers are willing to take in Europe at this point. Dynamics are a bit and they have been a bit different in South America. So farmers also are significantly exposed to real prices on crops there where the response on the crops that they grow have been almost immediate.

Like Brazil doesn't have the luxury of curtailing P&K like what you could see in the more temperate climates from the soil status and so on. And I think that -- I mean the development in Brazil has been quite fantastic and I mean still is and there's been a very active -- very hectic activity on potash in light of what has happened logically with Atlanta as they are kind of up to 40% of global supply at some kind of rate [indiscernible] where Russians are still exporting potash. So -- but there has been so far this year a decline in both nitrogen and phosphate imports into Brazil. I think it's fairly logical from a pricing perspective and you know that the peak season in Brazil is during the second half of the year. So any kind of purchasing at this time of year is kind of -- it's position taking, it's not for direct application. So I don't think we can at this stage make any conclusions about how 2022 is going to kind of end when it comes to the Latin American fertilizer consumption. I mean as I said, the incentives to produce food in Brazil and Latin America is very strong.

Yes. And if I add a short comment to that. I think there is actually at least in the export-oriented ag sector in Brazil, there is I think a stronger practice of using forward markets buying inputs forward and, if you like, utilizing the full range of hedging and forward buying and selling options compared with Europe. So I think it's certainly not the case that all farmers in Europe will use those tools. And so from that point of view as well, you can probably be -- as Svein Tore said, this is probably an adjustment that will be sped up in Europe in particular now. But I think we're also allowed to be more optimistic on Brazil's part in that respect.

And the next question comes from the line of Chetan Udeshi.

Can you hear me?

Yes.

Chetan here from JPMorgan. So few questions from my side. First was Thor, maybe one for you. Can you clarify the gas cost guidance? Is that assuming a normal production, normal deliveries for you guys? I think the context being that the Q1 deliveries were down 11% so if you were to see a similar dynamic in Q2, should we be expecting maybe the gas cost increase to be lower than what the guidance you have provided? I think that was -- that is the first question. The second question is a more philosophical question, which is in this dynamic of high energy prices, I mean clearly the base case for most investors would be that the European fertilizer industry is structurally a loser in a way because of the high gas, I mean, cost and the cost curve being more against the European producers versus those in the U.S. and Middle East, et cetera. How would you address that question from a perspective of Yara as an investment case for investors?

Yes, I can -- I guess I can have a stab at both. The first one is on our guidance. Actually we base that on the historical quarter volumes so we don't guide on the new quarter. So specifically for the second quarter, the guidance is based on second quarter '21 production volumes. I would say at this stage that there isn't any reason to believe that it will be widely different in this quarter. But as I said, we don't guide on that. High energy prices, I mean, I would say partly look at our results and how things have worked out. So over the -- through the energy crisis last year, now adding the geopolitics this year and the extreme volatility we've had; we are experiencing both volatility and gas price level that are multiples above what we've ever seen before yet our results are improving. So another way of putting this I suppose is the logic of potential -- being a potential swing producing region. I think it's more -- it can't be a negative if you're in a very supply driven situation, right? But that seems a bit of a remote prospect these days as we have the opposite. We have a severe supply limitation that doesn't look to be going away anytime soon. And there to add on to that, as you may have seen, I mean there is some more capacity coming in the next couple of years globally. But after that, there is basically nothing in the probable category at least the way CRU defines it and I mean that's the pure energy perspective. I think there's also a lot around as we highlight in the presentation the fact that our setup is flexible that we can vary for most of our plants in Europe between sourcing gas and sourcing ammonia. The fact that we have the global footprint and can optimize also our product flows on the sales side and that our product portfolio is far from pure commodity. So there's -- they're upgrading margins above this, which again the situation is quite tight now with the high food prices. So I think they're the main -- my main shall we say discussion points in relation to that argument.

Can I follow up on just one clarification? Would you happen to know what is your indirect exposure to Russian gas in Europe? So in other words, if Russia were to stop the supply of gas in Europe, like what percentage of your European footprint could be exposed to that dynamic? Because I guess in Norway, there's less dynamic on Russian imports. So I'm just curious if you have that number from top of your head just now.

There's maybe 2 steps to that one. One is sort of at the Europe level, it's 30% to 40% of gas supply that's from Russia. But then the next question is whether it's partly about our operations, but also what happens in that scenario. And of course number one, we're already seeing increased LNG imports and clearly that's a situation and that would only increase the incentives to import more LNG. And the other thing is the consumption side, what -- where do you curtail consumption? I don't think that curtailing fertilizer production is what -- it's not the first sector that Europe would want and choose to curtail gas supply to, probably rather the opposite. And then, as you say, there's also you can look at some of our plants and you mentioned in Norway, I mean we are not actually connected to the European grid in Norway. So there we are actually sourcing from the North Sea. I don't know if...

Yes. In a situation where straight consumption of natural gas needs to be reduced and your opportunity to also consider which sector we're in and this is about food security, food production in Europe and also central goods going into for instance, we're producing AdBlue and you won't be able to run large part of the truck fleet without AdBlue. So it's critical infrastructure as well. So I support what Tore said that our industry is probably not on top of the list of industries that need to be curtailed in that situation if you just look at the straight consumption part of this.

The next question comes from the line of Rikin Patel.

Rikin from Exane. Just 2 from me. Firstly on the market, could you maybe just give us your view on how you see Chinese exports developing for the rest of the year? I saw in the recent Indian tender there was a bit of Chinese participation. So any thoughts there would be helpful. And then sorry, just to follow up on the conversation around potash and the availability there. Have you guys signed any new long or mid-term contracts there and are those in MOP or in lower grades of potash?

On China, we of course don't know and the Chinese have -- they are not managing. They sell a bit kind of softly, it's not an export ban and it's not a stated export tax. There are kind of inspection routines in place so that our understanding is that it gives kind of the government a little bit flexibility depending on how the domestic market development is and of our global market as well. What we have seen recently is that they've exported quite a bit of phosphate, DAP in particular. They have exported very little nitrogen at least beyond the more political exports to some -- to source some industrial grade to neighboring countries, a little bit to Pakistan. So but if we -- let's say the consensus, if you read market publications or observe it here is that as long as the global market is around twice as high as domestic market and there is a feel that the government in China kind of thinks that local urea prices in China are close to maximum on where it should be. They have even increased a little bit over the last few months. There is a consensus that these kind of soft export restrictions will continue. I've not seen anybody with a contrary view to that as it now stands. But of course we know from history that the Chinese, they look at this on a dynamic and continuous basis with their own domestic farming a top priority.

Yes. And with regards to your question on potash, I'd say our team has done a very good job also in the sourcing and operational side to deal with a very demanding situation where a large portion of the global potash production is not available. So I'm sure you understand we cannot share the details of individual contracts short or long term at this moment both given our size and given the size of the production now being outside our reach. So we're doing what we can in order to optimize and I'm pleased to see what our team has been able to do in the first quarter.

And the next question comes from the line of [ Anahita Roy ].

This is [ Anahita ] from Sweden. I would like to hear your thoughts about the future and the coming years. What will be the results for the farmers? and then when we look at product availability, prices, demand; how will this affect the farmers? Do you think that they will start to use other farming methods if they can't afford to pay these high prices? How do you see on this? And then also how will this -- if farmers for instance in Europe start to use other methods, how would this affect the world production?

Well, what we've seen now in terms of global food supply and rather food supply insecurity. The availability and cost of food that's actually written to the agenda in all countries in the world that the role of the farmer as a result of that should be significantly changed and how important the work that farmers do. I don't think that's been given the credit it deserves in the last few years. Now I think that has been visualized how dependent we are on the work of the farmers. But the farmers are not being paid for the work that farmers do and it's much more than producing a crop of a certain product. It's about how efficient do the farmers do that. The water consumption, the greenhouse gas emissions, how much rate is the food that we buy, what about biodiversity and how about sequestration of carbon. The farmers aren't paid for any of that. And with all the weaknesses we see, now we need to reconstruct a more robust system where the farmer is being paid a fair amount for the work that they do and we get that fully into the value chain. I think this is also driven by consumers and that's being helped now. It's been seen by politicians. So I hope that now through regenerative farming practices that we now can see a very different future also with the role of fertilizer where Yara with our 1,000 agronomists, with our premium products, our competence where we also can develop new business models and look at in your own home country now in Sweden that Swedish men what they have been able to do in terms of productivity and embedding this into the value chain, visualizing that to the consumer with the green fertilizer now. How much that is also impacting a further reduction in CO2 footprint? So I see that this potentially could accelerate the much needed transformation of the whole food production system and where we need to put the farmer in the center. The farmers have been marginal wise now over decades. Let's work on behalf of visualizing what the farmers are doing both in terms of the hard work, but also what they can do on climate, health and nutrition. So this could be a catalyst for getting that done much sooner than what I would have thought if we go back a year from now.

Who did I get the -- who answered my question, please? I didn't hear your name.

It's Svein Tore, CEO.

And one last question. When you look at the future and the -- do you think that you will be able to supply the market the way the market -- the demand the market has for fertilizer? How do you look in the future? Or...

So we're of course working day and night throughout the whole organization to maintain production at the highest possible level given the challenging circumstances. So that's on the existing product portfolio in the way of producing right now. But we are also spending a great deal of our time in developing new markets and also embedding into the price of the crops that the farmers produce that they're being paid for more than a per kilo of crop regardless of the nutritional content or how it's produced and it's only through the whole value chain approach that we can develop markets where farmers are actually getting the right price that they can afford different kinds of fertilizer products as well. And just take one example and I'm sitting with a cup of coffee in front of me right now that would cost $3 at the local coffee store. And you break down the value, where is that money going. About $0.015 is going to the farmer of the coffee beans and this is quite representative for many crops where what we're paying to the farmer is actually quite a small price compared to the total retail price. So why can we then not change it? Well, we need to create transparency, traceability and if we get that done, there is a market and there will be a market for more complex fertilizer, also for green fertilizers. And that's something that we're spending a lot of time to bring on the agenda. So you see that changing and now you see it with the major food companies as well as they have made commitments to their reductions in their carbon footprint and they are realizing that a large part of the emissions in the value chains happen in the field of the farmers. So the role of the farmer will be even more important in order to reach these targets going forward. But then the incentives need to be put in place as well.

[Operator Instructions] Your next question comes from the line of Andrew Stott.

Can you hear me? It's Andrew Stott, UBS.

We hear you, Andrew.

Sorry, I didn't hear anything other than an automated voice. So couple of things. The first one is on producer stocks. I see on the slide you've put in the pack the usual data and I'm just surprised to see stocks not increase at the industry level. I look at your own balance sheet as well and I look at inventories to sales as a ratio and that's gone up quite materially. So how does stocks not go up when volumes are down so much? Is it just that every single producer is incredibly disciplined and calibrating pretty much daily to the market? That's the first question. Second question was a medium-term one on Porsgrunn center. I heard you mention that around the continued ambition obviously on the decarbonization project there. But I think I'm right in saying that the original consortium with yourselves, Aker and Statkraft has been dissolved and I just wondered why? What happened there and maybe you can talk about what happens next?

On the stocks, I think one thing you need to kind of specify maybe is that the stocks you see there are now great stocks and not that the other stocks are very different, but that's nice. So sales have not dropped that much as the total that we are showing that nitrate. We pointed out that P&K -- sales including P&K are down the most. So the comparison is not, I guess, not So you're correct that the nitrate part has gone relatively better.

And I guess there are a couple of other factors, I mean we can't speak for other producers. But well, one is probably general for everyone. I mean it is even though deliveries are down, first quarter is normally the peak season in Europe. So even if you're down, you can still be eating into your stocks. In our case of course we are exporting as well. Some of -- not all the producers are, but some of those are. So there's a few variables there. But perhaps the season part is the most important.

And just on that thought, can I just come back on that? I wasn't aware that you had a lot of export flow on nitrate other than maybe Brazil and even then I thought that was not significant. So where would you be now exporting nitrates?

Yes, Brazil is probably our most -- it is our biggest export market and it's directionally 0.5 million tonnes per annum. So it's not insignificant and we do have other opportunities too. The one other factor of course that we -- is there have been some curtailments of the industry.

And regards to Porsgrunn, if you look at the project itself, that's more relevant now than ever. We launched it in order to use 800,000 tonnes of CO2 emissions with one of the largest points of emission in Norway. And even though it has not gotten a lot of attention because of the UN Climate Panel report that was released at the end of February, it's -- the climate crisis is more urgent now than ever. So it's about converting industries with significant emissions to renewable energy. So from that point of view, it's important. Additionally, it's also about moving away from fossil fuel and dependency on Russian flow of energy and that has been even very well or very clearly demonstrated now in the last few months. So if you look at the overall fundamentals of the project, these are very strong and we've done the study to look into the project. We are very positive and we drive that forward and we're taking the first step in a partial conversion of the part. But as you pointed out, it was done originally as a partnership with Aker and Statkraft and we all have our strategic priorities that we need to look after and we came to the conclusion that in an industry that is changing so fast as green energy and green ammonia, what made sense at the launch with the 3-party cooperation in order to get that done had changed in that period and then it was better to dissolve the original structure. But we're moving ahead with the project at full speed from Yara and I believe it's even more relevant now than when it was launched.

The next question comes from the line of Magnus Rasmussen.

So this is Magnus Rasmussen from Kepler Cheuvreux. I think you have answered lot of questions about NPK volumes and sourcing. But I was wondering whether you can elaborate a bit on the potential financial impact of the lower NPK volumes given that that's a bit unclear at least to me in the current price environment? And second question is whether you see some changes in farmer behavior in this environment? Do you see them for example being willing to pay up for premium products? And do you also expect to see some switching between different crops to, let's say, reduce fertilizer needs?

This is Thor. I can take that. I mean on the NPK volumes, we commented in the presentation that all of the premiums are negative and that's a comparison in the market as the -- as you compare the market price of buying a mix of urea, DAP and MOP. At times the comparison with NPK prices can be negative. But simply because the prices have moved so fast in the spot market where for a lot of our NPK deliveries, we have a more -- what should we say -- more sticky prices really that over time are -- have a premium. But when prices are volatile, these can get negative or positive or should we say, "position effect." But the key point I'm getting to is that the premium and the margin are not the same. When you look at our margin for NPKs compared to a year ago, they are slightly up. So if you like in isolation you can -- I mean we don't publish these margins, but you can sort of model this to some extent based a bit of off the premium calculation and making some adjustments. But I would encourage you -- well, I'm not sure how much that will help you in your Yara modeling because more broadly we're in a situation now where there is some demand destruction not just for NPKs, also for nitrogen in Europe as we've touched on also in other markets. But then you have an effect of significantly higher prices and margins because there is a need to ration product in the market also for P&K. And then the reason why it's a forced rationing in a way because the supply isn't available more broadly in the market even though we see for ourselves we have enough to produce NPKs. So it's a bit of a long-winded answer, but hopefully that sheds some light. In terms of the changes in farmer behavior, I mean I think we've already touched on that in terms of the demand destruction. Crop switching is I think a big element in the U.S. for example, but not so much in Europe. I don't know, Dag, the issue.

Yes, there are some elements. So I think logically USDA in their intended plantings report issued a kind of like first stab at the 4% drop in the corn acreage versus a 4% increase in soybeans. And I see that some other private players are doubting those numbers a little bit on the margin that there is still some flexibility on the seed sourcing side and so on because the vendor price ratio then moves in favor of corn relative to that, maybe it turns around a little bit. So this is early days. We also hear in Southern Europe for instance that could be some French farmers that let's say put some corn acreage into sunflower with the Ukrainian situation in sunflower and so forth. So yes, of course they are business people so they are looking at this. So whether the shift will be so large that we can kind of see them on a global scale, I don't know yet. But of course on a micro level, there is evaluations around this when there are options.

And it comes from the line of Morten Normann.

This is Morten Normann from Carnegie. I have 2 questions for Dag Tore. One is on Russia and the other question is on the project list. Russia is a large, but probably also the largest urea exporter and have you seen lower Russian urea export lately? And how do you view the risk of potentially lower export from Russia going forward? And the question regarding the project list is that you have a chart in your presentation with fairly large new added capacity both in '21 and '22. Could you please shed some comments on that? How do you view that? Do you expect all that entering the market now or do you see these volumes being pushed forward?

Yes. On Russia, the latest information that we have received there is kind of a fairly low visibility on the Russian exports itself because of the bottlenecks are kind of ports availability given that Finland and the Baltic states are kind of winding down their activity with Russian product. So that limits the Russian access to ports so port capacity is an issue. To the extent shipping companies are willing to send their ships in there and get Russian product is also an issue. And then the other financing part with all kind of actions is a relatively blurred picture. What I just saw today was some view from Argus for instance that said that in April, they were thinking of maybe a reduction of 25% or thereabout or as a kind of also a little bit of speculative. So it seems like there is curtailed Russian exports, but they are still quite active in exporting quite significant volumes. And as you say, with 7 million tonnes a year urea exports at the largest contributor in the global market, these volumes makes quite a difference. So it's a good question in that sense. We also understand that there is some activity in the eastern part of Black Sea, but not very much. So -- but this is an area where also we are and it's high on our list as well to follow going forward to what extent to how large these volumes are. Now of course you may have seen that Russia has suspended the publications of trade statistics in general so it makes it even more complicated to follow it. So we'll do our best in trying to look at the import statistics on the other side as it develops to see how it goes. But a good question that we are also concerned with. And on the project list, our understanding is that both the Nigerian projects, Dangote and Indorama, are kind of have in principle started and are kind of ramping up. We see them quite actively present in Latin America for instance. There have been some hiccups and there has been some downtime and so forth, but that's quite normal. And also the Brunei plant is -- has started up. They have exported a couple of cargoes. They have one for sale now. We see that India is producing more than before. We don't have a split by plant, but that is kind of consistent with the 2 to 3 new plants that having been in India. So a lot of those bars are showing is actually producing. Of course there's a question mark also on the Russian part because there's quite a lot of activities in Russia and those are depending on life in international global licenses and technology equipment and so on. So it's also -- so it is our understanding that there is a kind of a risk that some of these expansions in Russia may not happen at least on plan. And then as was mentioned before, there is this kind of, let's say, small wafer project now in '22 and '23. But further on, there has hardly been any new announced projects over the last years there.

Okay. Thank you, everyone, for dialing in and for questions. Have a nice day.

Thank you, everyone. That does conclude our conference for today. Thank you all for participating. You may all disconnect. Speakers, please stand by.