Nutrien Ltd. (NTR) Q4 2011 Earnings Report, Transcript and Summary

Denita C. Stann - Vice President of Investor and Public Relations David Delaney - President William J. Doyle - Chief Executive Officer, President, Non-Independent Director, Chief Executive Officer of Potash Corporation and President of Potash Corporation Wayne R. Brownlee - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer Garth William Moore - President of PCS Potash Stephen Francis Dowdle - President of PCS Sales

Michael Picken - Cleveland Research Company Elaine Yip - Crédit Suisse AG, Research Division P.J. Juvekar - Citigroup Inc, Research Division Lindsay Mann - Goldman Sachs Group Inc., Research Division Donald Carson - Susquehanna Financial Group, LLLP, Research Division Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division Jacob Bout - CIBC World Markets Inc., Research Division Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division Kevin W. McCarthy - BofA Merrill Lynch, Research Division Vincent Andrews - Morgan Stanley, Research Division Ben Isaacson - Scotia Capital Inc., Research Division

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the PotashCorp Fourth Quarter and Year-End Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded on Thursday, January 26 at 1:00 p.m. Eastern. I will now turn the conference over to Denita Stann, Vice President, Investor and Public Relations. Please go ahead.

Thanks, Brock. Good afternoon. Thank you for joining us, and welcome to our fourth quarter and year-end earnings call. In the room with us today, we have Bill Doyle, our President and CEO; Wayne Brownlee, our Executive Vice President and Chief Financial Officer; David Delaney, Executive Vice President and Chief Operating Officer; Joe Podwika, Senior Vice President and General Counsel; Garth Moore, President of PCS Potash; Brent Heimann, President of PCS Phosphate and PCS Nitrogen; and Stephen Dowdle, President of PCS Sales. I'd like to welcome the media who are listening in and remind people that we are live on our website. This morning, we posted an investor presentation on our website. And during Bill's remarks, we'll be highlighting some information from this presentation. I would like to remind everyone that today's call may include forward-looking statements. Such statements are given as of the date of this call and involve risks and uncertainties. A number of factors and assumptions were applied in the formulation of such statements, and actual results could differ materially. For additional information with respect to forward-looking statements, factors and assumptions, we direct you to our news release and our most recent Form 10-K. Also, today's news release, which is posted on our website, includes a reconciliation of certain non-IFRS financial measures to their most directly comparable IFRS measures. I'd like to turn the call over now to Bill Doyle for some comments, and then we'll go to questions.

All right, thank you very much, Denita, and good afternoon, everyone, and thank you for joining us for this discussion of PotashCorp's fourth quarter and full year 2011 results. We always appreciate the opportunity to discuss the conditions that shaped our performance as well as look back at 2011 and then on to 2012 and beyond. While the need to increase food production is relatively constant, the past few months have reinforced that fertilizer buying can, at times, happen in waves. For the first 9 months of 2011, buyers made a strong push to meet rising global fertilizer demand. As we entered the fourth quarter, a typically slower period, we expected the pace of buying would ease although the seas were more still than we predicted. With continuing macroeconomic uncertainty, fertilizer dealers moved cautiously in an effort to reduce their inventory positions at year end. As purchasing slowed, prices for urea and phosphate products backed off from annual highs, and buyers became even more hesitant to make commitments for all 3 nutrients. This behavior was most prevalent in North America and certain markets in Latin America and Southeast Asia. While potash pricing remained relatively stable in most key markets, our average realized price declined slightly from the trailing quarter. This reflected greater pressure from offshore imports in certain regions of the United States and higher fix per tonne in transportation and distribution costs due to a reduction in domestic volumes. In addition, we sold a larger percentage of tonnes to lower netback offshore contract markets. Still, our earnings of $0.78 per share for the fourth quarter were 39% higher than in the same quarter of 2010, reflecting the pricing gains established for all 3 nutrients over the course of the year. Looking at 2011 as a whole, we once again achieved significant earnings growth. As you can see on Slide 5 in our presentation, our 2011 earnings of $3.51 per share were the second highest in the history of this company, 80% above 2010. We sold 9 million tonnes of potash, a 5% increase over the previous year, and ended 2011 with average potash prices up $108 per tonne compared to the fourth quarter of 2010. Our cash flow from operations rose to a record $3.5 billion. We spent $1.6 billion in our potash expansion program and have now completed more than 70% of the capital spending on multi-year projects that are expected to make a lasting contribution to future earnings. In 2011, we took a number of steps to enhance our transportation and distribution system, which is a critical component of our business that is often overlooked. We purchased 1,000 new high-capacity rail cars and announced plans to build a major potash distribution center in the U.S. Midwest. With a goal to reduce our domestic rail cycle times by 10% over the next 3 years, these and other initiatives are expected to improve efficiency and lower our costs, creating value for our company and our customers. In simple terms, the past year demonstrated our ability to generate earnings growth while we continued to position our company to deliver greater value in the years ahead. While we are optimistic about the future, we recognize that the short-term challenges faced in the fourth quarter are likely to linger through part of the first quarter. However, we believe this does not change the powerful drivers of our business. World farmers need to grow more food, and our products have an essential role in improving crop yields. In North America, we know that spring is right around the corner, and we expect record combined acres of corn and soybeans will be planted this year. U.S. farmers are looking at December corn prices above $5.50 per bushel, which holds the promise of exceptional returns. Even though buying is slow today, we are confident that farmers will not pass on this opportunity, and we anticipate a strong spring application season. Similar to North America, demand in Latin America is expected to pick up later in the first quarter. Our sales team has just returned from Buenos Aires from the Latin American fertilizer conference there, and I can tell you the mood is very positive about agriculture in this region. Farmers have strong agronomic needs and are keen to capitalize on highly supportive prices for key crops like soybeans, corn and sugar cane. The same holds true in spot markets in Southeast Asia. Buying slowed in the fourth quarter as dealers worked through higher inventories built on record purchases through the first 9 months of 2011, but we expect shipments to accelerate by the end of the first quarter. The significant potassium requirements and palm oil prices above MYR 3,000 per tonne, the incentive to apply potash is tremendous. Some people have suggested that inventories in China are currently at elevated levels. Our contacts on the ground there tell us that inventories across the country are at normal levels and that port inventories remain well below peak levels set in 2009. Preliminary discussions for first half contract have taken place with more extensive negotiations expected to begin after the Chinese New Year, which is being celebrated this week. We do not expect for a long negotiation period and anticipate exports to this country will be in line with 2011 levels. While the long-term need for potash is significant in India, near-term demand is being impacted by uncertainty over government subsidy levels, a weakened rupee, higher retail prices for potash and congestion at port facilities. Canpotex shipments are expected to continue to this market based on previously contracted volumes and pricing, although deliveries will likely be extended into the second quarter. While this year is starting slowly, we believe 2012 is likely to be the mirror image of last year, with a slow start to the first quarter, followed by increasing demand as the year progresses. We expect a record year for global potash shipments and project PotashCorp sales of 9.2 million to 10 million tonnes. Based on this environment, we forecast first quarter net income to be in the range of $0.55 to $0.75 per share and earnings for the full year between $3.40 and $4 per share. It is important to remember that fertilizer and food production are long-term industries, and our success is a product of making decisions and managing resources by looking beyond monthly or quarterly trends. We initiated our potash expansion program in 2003, not because of demand at that time but in anticipation of the world's future needs. Although we will not utilize our full capability in 2012, we will continue building with confidence in the long-term drivers of demand and a view that our projects will provide a tremendous competitive advantage both in terms of time and cost. The simple fact is you cannot build potash capacity by flipping a switch or just talking about it. It takes a significant investment of time, know-how and capital to have capacity available when it is needed. As we look ahead, we see continued pressure on global food supply and a real need to increase crop yields. We live at a time when many people expect problems can be resolved instantly, that answers are just a Google search away. But addressing the long-term pressures on global food production requires a more sustained approach. Crops take time to grow. They develop over the course of months, not days. And market development in emerging countries unfolds over years, not quarters. Short-term fluctuations in markets like India and China do not alter the reality that there is tremendous pressure on their food supply. Crop productivity in these countries is well below many other regions of the world, in large part because of a history of underapplication of key nutrients, especially potash. As a result, India's food security is ranked among the lowest in the world, and China has become increasingly reliant on food imports. Improving crop yields in these and other developing countries is imperative. There is little margin for error. And that is why we believe any near-term issues related to fertilizer buying are short term and will be resolved. Proper fertilization is vital to feeding people, to political stability, and ultimately, to human development. We believe the strength of agricultural fundamentals will soon overpower the macroeconomic issues that are affecting fertilizer movement today. The decision by our board yesterday to double the dividend for the second time in the past year reflects our confidence in the drivers of our business and our commitment to delivering superior returns to our shareholders. With the majority of our potash capital expenditures complete, we believe we are in the best competitive position to serve the needs of our customers, investors and other stakeholders. I'm joined on this call by our senior management team, and we look forward to answering your questions.

[Operator Instructions] The first question today comes from Lindsay Drucker Mann of Goldman Sachs.

Just wanted to ask about your revised outlook for global potash shipments and triangulate that with your expectation for your own shipments. So essentially, what's the delta between your expectation before for, I think, 58 million to 60 million tonnes of shipments versus now? And then the implied guidance, it seems like for you to hit your 9.2 million to 10 million tonne objective for this year suggests some pretty exceptional shipments in the back half. So how do you envision your market share or your share of total shipments playing out for this year? And then just maybe walking us through going from a very slow start to Q1 into a really strong finish?

All right, Lindsay, I'm going to ask Stephen to address that question.

Yes, Lindsay, on the global potash shipments, we are estimating that what we saw in 2011, approximately 55 million tonnes. And going into our expectations for 2012, we're expecting that range may be between 55 million and 58 million tonnes. And really the one market that we -- prior to when we had given an earlier estimate of -- it could be as high as 60 million tonnes, our expectations was that we would see the continued growth in India. But recent events in India have led us to believe that our expectations for 2012 in India will be that, that market will be more or less flat due to the issues that the government is dealing with in terms of subsidies and retail prices and infrastructure constraints. However, that will likely rectify itself in the following year because the need there is very compelling. But in other markets -- in other major international markets like China, like Brazil, like Southeast Asia, we expect the year to present either flat or increasing demand in those markets as the fundamentals of the commodity prices are very, very supportive of increased fertilizer consumption.

Lindsay, I'll tell you, this business turns on a dime, and when you look at what happened in the fourth quarter of 2011, we were short potash in the middle of the year, in July. When India finally came back in the market at that time, we didn't have the potash that they needed. And then the fourth quarter, October came and it just dropped off the edge of the table because of these macro issues that we all know about. And yet, the agricultural fundamentals are so positive, are so strong. I mean, we're sitting here this morning with $6.40 March corn and $12.20 beans and cotton up at $0.95 and sugar at almost $0.25 a pound and palm oil, we talked about that in the call. I mean, across the board, the returns for farmers are so exceptional, and these same farmers, many of them have record income coming off of 2011. So we're starting to see the signs of it. Spring is right around the corner in North America. We think this market is going to get going all at once and turn on a dime again and that you're going to have a very strong 2012 second quarter movement to be followed by strong second half of the year. And yes, we think it's a mirror image. As I said, last year we got off to a fast start, very strong second and third quarter, then a very slow fourth quarter. This year, slow first quarter but then strong second, third, fourth quarters. So we look for 2012 to be another really good year for the company, and we think that 2013 is also going to be an exceptional year. And it's just driven by the need -- worldwide need for increased grain production, oilseed production to meet demand. We have at least a 2-year period in front of us. If we had record world crops, we have at least 2 years of dramatic increases in yields ahead of us to be able to start to address the critical food security issues.

The next question comes from Jeff Zekauskas of JPMorgan. Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division: I know that Canpotex doesn't ship potash to Europe. But is the European demand relevant in overall potash demand in 2012? I think Europe consumes maybe 5 million tonnes of KCl. And I was wondering whether you thought that, that would grow or whether that would shrink. And if it did shrink, say 1 million tonnes, whether that would mean more product coming into the export markets.

Okay, Jeff, first of all, Canpotex does ship to Europe, not a great deal of tonnage but it does ship tonnage to Europe. The European market, of course, is important. France is one of the great agricultural countries in the world. We think that potash demand in Europe will most likely be flat with 2011, and we don't see more pressure coming from producers in that region that might impact the U.S. No, we don't see any additional pressure there.

The next question comes from P.J. Juvekar of Citi.

You're working on these new potash expansions while taking downtime currently. So what flexibility do you have to delay some of these expansions and send a signal to the market? And just related to these capacity expansions, do you have any latest intelligence on the EuroChem project?

I'll answer the first part, and I'll ask Garth to talk about what he knows about EuroChem. These expansions -- as I tried to say in my remarks, you have to have a long-term view in this area. This is -- it's not something that you build overnight. We started this in 2003 because we saw the need for potash expanding. And while there's short-term issues here in the fourth quarter of 2011 and the first quarter of 2012, we're very confident that this -- new expansions that we have coming online are going to be very, very well-timed. When you think we have over 50% of all the expansions between now and 2015 in our hands and then you look at the growth and the pressure on food production, which I just talked about with Lindsay's question, it's not something that you put the brakes on or deviate from because these are long-term projects. I mean, they're multi-year projects and you have to appraise where you think you are going to need to be when that time comes because, as I said, it's not like flipping on a switch. And despite the fact that some people talk about it being such an easy thing to do, I find it curious that none of those people are actually in the business. And so those of us that are in the business, we know that it does take longer and it takes dedication and as I said in my formal remarks, a sustained effort.

P.J., as part of the European expansions goal, from the information we've been able to gather, that the EuroChem has been having some rather severe shaft-sinking problems in their project near the Black Sea. And they're talking about going back in and freezing and the information also that I read that they're talking about getting the freeze pipe going by 2013. So if you add another 2 to 3 years to finish sinking that shaft, add about 2 to 3 years to start ramping up production because they have absolutely 0 infrastructure underground, so you're still looking at 2019, 2020 before any significant production comes out of there. And the only other action we have going right now in that neck of woods is Uralkali. They've announced the development of a new mine there as well, but they're also a little more realistic on their time and they're talking about 2018, 2019 before they get those underway as well.

I'd just say, P.J., that we know from experience that these things just take longer. And so when you listen to people talk about it and the buy-in that people give them, immediate credibility, I find quite remarkable when they have no experience in the business. You really need to know what you're doing. It's not just a science. There's art behind it. And you have to have some know-how. So it's not just the shaft sinking, although you've got to do the shaft sinking right. And obviously, if you have problems with it, it's going to cost you a lot more money and take a lot more time. But it's not easy. And the unfortunate thing is that too many people have bought in to the premise that it is easy.

The next question comes from Ben Isaacson of Scotia Capital.

I'm really trying to put this demand pause into context. If we look back in 2008, fertilizer prices were really out of whack with corn that had dropped to below $3, but today we have fertilizer prices of less than half of what they were back then and grain prices that are double, yet there is still weak demand. So really I'm concerned about 2 things, which maybe you can comment on: First, have dealers now realized that they have significant power in this market and therefore future price increases could be limited? And second, potash consumption appears to have peaked about 5 years ago at 57 million tonnes. And so is the historical growth rate of 3% to 3.5% broken? And I guess the question on that one is whether or not we're really seeing any improvement in the historical underapplication of potash in developing markets.

All right, I am going to just comment on the first part. And I'm going to have Stephen talk about the development of potash demand in developing markets. But if you think about this demand pause, I get the biggest kick -- I was at a chemical conference in New York in the middle of November. And I told Jeff Holzman, who was with me from our IR Team, I said, Jeff, the #1 question we're going to get -- because these are all half-hour, one-on-one sessions, or actually 15 on 1 or 13 on 1, but half-hour sessions. And I told Jeff, I said, "The -- you watch, the first question we're going to get is what's going to happen in potash prices over the next 6 weeks?" This was the middle of November. We get into the meeting, and I think there were 8 meetings in a row. And the first question was, "Can you tell me what's going to happen between now and the end of the year in potash prices? Can you tell me what's going to happen between now and the year, end of the year or 6 weeks from now in potash prices?" And Jeff actually starts shaking his head at the end of like the eighth time the question was asked. And then we actually broke after one of the meetings, and a fellow said, "You know, I appreciate your answer on the 6 weeks, but he says, "Can you -- I'm really more concerned about what's going to happen over the next 2 weeks." And I shook my head because we got 100 years of reserves from current shafts. And we manage this business -- this is a -- food production is the long-term fundamental business that takes enormous sustained effort, as I said. And so people say, "Oh, God, you got this fourth quarter slowdown and a first quarter slowdown, we're sitting here 4 months out of a 5-, 5.5-month slowdown." And the short-term investor focus is just unbelievable. And so if you think about where the business is going and the -- this is science. This is a product that the world can't live without. Potassium is essential nutrient for all human life, for all animal life and for all crop life, and it has been historically underapplied. So we know that the trend line growth, which we've seen since 1960 is absolutely without question, and it moves in the 3% to 3.5% time period. Any quarterly time period or a 3-month, 5-month period, there might be a little bit of a swing, but there's no question that the trend line is going to maintain itself and that there is tremendous growth ahead of us. Now to answer specifically about corn economics, if you think about fertilizer pricing today, fertilizer pricing represents 14% of corn revenue. The average for 10 years is 18%. In 2008, which you referred to, it was 22%. So it's very affordable, and farmers are not going to pass this opportunity, and that's why we know that we're going to have a big second quarter. And just stay tuned because the second quarter is going to be really great and the rest of this year is going to be good because of these farm -- compelling farm economics and the dramatic need for food -- for yield increase and the demand for food production. So Stephen, you want to talk about the developing world?

In the international markets and in the developing world, we've seen the growth of potash demand. It certainly comes at different rates. And in the markets that are really best positioned to capitalize on this increasing demand for food crops, markets like Brazil or markets like Indonesia, Malaysia, these markets are very well-positioned to grow crops for the export market whether they be soy beans or corn or producing palm oil. They're providing these crops and exporting them to respond to this growing demand for food. And in other markets that are less well-positioned to participate in the export -- in the increased export demand, and these would be markets like China, like India that are producing food primarily to supply the demand inside their country, that growth of demand for potash, for example, in those markets is coming about more slowly. But there's no question that the countries recognize the need to improve their fertilizer consumption and particularly improve the balance of fertilizer use. When you look at a country like India, for example, where corn yields are about -- they're less than 30% of what they are in the United States. In China, they're about 60% of what they are in the United States. And then you see that the demand for importing corn in a country like China is growing. This year, it'll be 4 million to 5 million tonnes. This has the attention of the government and the governments then will make policy decisions to try and adjust so that they can correct the problem. And in the case of China, we've seen new export tax policies to try and make sure that they have enough nitrogen and phosphate fertilizers available for their own farmers. And that's why we believe that the potash demand in China in 2012 is going to be very strong because there is a recognition of the government policy people that they need to start improving their own domestic production of food. And if you have any doubt about where this is leading and where this is leading in the future, I would look to Africa, and you see how much interest there is in developing agricultural production in Africa. Because people understand that there is a compelling need to improve the production of food in markets where it's being consumed. And this trend is -- not only is it not going to go away, but it is going to intensify as we move forward.

The next question comes from Vincent Andrews of Morgan Stanley.

I think I'm going to shift the questioning over to your cash flow. In one of your slides in the presentation, it shows very clearly that your growth CapEx is going to start to come down pretty substantially coming out of this year into next and I think even a little more going down, which is obviously going to increase your free cash flow regardless of what happened to earnings. So my question is just you raised the dividend yesterday, there have been things in the press about Israel Chemicals, and in the past you've been a repurchaser of your own shares. So how should we be thinking about those 3 dynamics going forward and any sort of timeline for use of capital?

All right, Vincent, thank you for the question. I'll ask Wayne to address that. Wayne?

Vincent, well, no surprise that we are going to continue to look at all 3 of those options as to which way we'll increase shareholder value on a long-term sustained basis. We have some additional organic capital spending that we can do in terms of potash capacity. We could bring on some additional capacity over and above what we've announced, and that will get some attention. The possibility for transaction is always out there, and the possibility for share repurchases is also out there. We probably have been the most aggressive in our sector over the last 5 years at doing share repurchase programs. So we look at all those opportunities as competing in a way that will generate the highest sustaining shareholder value going forward.

And I would say, Vincent, that the doubling of the dividend yesterday and then not quite a year earlier should give the investors out there a little sign of the confidence we have in our earnings generation capability. We're going to generate an enormous amount of earnings, and our growth potential for our earnings is just phenomenal. And you're going to see it here over this next few years as these expansions are going to be perfectly timed for the demand that Stephen just talked about.

The next question comes from Kevin McCarthy of Bank of America Merrill Lynch.

Bill, natural gas costs continue to move lower. Just wondering if you could update us on your strategic disposition regarding for potential incremental investment in nitrogen, either organically or via acquisition perhaps?

All right, Kevin, I'm going to ask David Delaney, who's our Chief Operating Officer, to respond to that one. David?

Yes, Kevin, this summer, we're restarting our Geismar ammonia plant and UAN plant. It's a $158 million investment. That plant's been down since '03. We also have a 70,000 tonne ammonia expansion at Augusta that starts up this fall. And in addition, we're looking at further debottlenecks at our Lima, Ohio, facility as well as relooking at Augusta.

The next question comes from Mark Connelly of CLSA. Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division: Bill, you've said that you're happy with the shift from annual to twice-yearly contracts. But from a practical perspective, hasn't India effectively moved to spot? And doesn't that mean that the discounts that they're getting aren't justified? I'm just curious how we justify the discounts that both India and China are getting when over the last several years they've become probably your most unreliable customers. So it's not just a short-term issue. It's been going on for years now.

Yes, it's a good question, Mark. I think the move from annual to semiannual was a good one. I think it's helped us in China to have a more normal course negotiations. India is a little more complicated. And I have sympathy with some of the things that they're going through. It's ironic that they would subsidize the nutrient in greatest supply and take away the subsidies for the nutrients that they need most. But I think they're going to address that problem. I'm not sure that part of that isn't negotiations. But if you would have this, some people say, unreliable then that would mean eventually you could move to spot. And I wouldn't -- I think maybe spot might make it easier, and that might be the next evolutionary move. So I think your question's a good one, and we do have actually a lot of spot markets that are very dependable. I mean, if you look at -- of course, the U.S. is a spot market. Brazil is a spot market. Indonesia, Malaysia, these are spot markets. They're very reliable. So I think that we thought a lot about the question you just asked and we'll continue to think about it and we'll see how this thing goes, but it wouldn't be beyond the realm of possibility.

The next question comes from Jacob Bout of CIBC.

Just a question on the transportation side. So you saw, I guess, CN and CP announcing a long-term contract with Canpotex. Perhaps you can talk a little bit about the strategy of diversifying away from Vancouver. Your thoughts on potential savings of moving potash through Rupert and maybe some of the difficulties out there.

All right, jake, thank you. What we're seeing, of course, is -- and again, this is long-term planning because you don't build a greenfield port facility in a couple of days either. So we need to look at this Prince Rupert very carefully. We haven't made a decision there. But there is a potential opportunity to have a major new terminal there that we think could be very exciting, if all the conditions are right. And of course that property would be served by CN. Our business is growing despite short-term fluctuations. And we really think that as we go forward here over the next 5 years -- of course, these are 10-year contracts, but if you just look at the first half of those contracts, we see a lot of growth. And so you have to have some diversification in your supplier, which both the railroads are suppliers for us in terms of movement of our product. We just felt the diversification was warranted at this time. It's not that CP hasn't done a great job for us because they have. It's just that we're going to grow so fast that we're going to need both of them. And I will tell you I think most people know that CN handles our domestic business, and they just are a wonderful partner for us as well. So we have nothing but good things to say about both railroads, and we just think it's smart to diversify, and it's going to be done to accommodate our growth.

The next question comes from Elaine Yip of Credit Suisse. Elaine Yip - Crédit Suisse AG, Research Division: So a question on just the supply chain capabilities in the global potash market. You've talked about how you've enhanced your domestic capabilities, but can you touch on the global distribution system? It seems that one of the issues in India that we've seen is tied to just how late they settle the contracts and the ports' inability to handle too much product at once. How long can buyers in other regions wait? Or at what point is the volume kind of lost for the year and not simply deferred?

All right, Elaine, thank you very much. What I would tell you is that we're not that far away from movement, and that's why we're so confident here in where we're going with the rest of this year. If you think about -- I mean, just in a very sophisticated market like the U.S., spring starts in the second half of February. And so you're going to start to have to move product. We have our big domestic meeting coming up just at the end of that first week of February. And I can tell you already, our meeting book is full. People -- everybody's requesting meetings. So that gives you an indication that people are going to be moving here. Because to get the train sets organized and to get these movements underway, sometimes it could take a week and sometimes it takes 3 weeks or 4 weeks to get everything in place, and that's in a sophisticated market like North America. When you start thinking about export markets, if you think about moving from the mine site to Vancouver and then down to Brazil, you're talking 40 days. And so there is -- you can't play it too close especially if everybody does everything at the same time, and so we're not far away from seeing this movement. We do have customers around the world that need to improve their infrastructure. Brazil, obviously, port capability in Brazil and internal distribution in Brazil has been a continuing challenge for Brazil. India, I mean, by their very own admission, have said that they have insufficient port infrastructure. Those things are a hindrance to growth and the economy. I mean, if you -- and it's not just developing world. If you look at the Mississippi River system, look at the lock system in the Mississippi River, the Army Corps of Engineers will tell you that we have an antiquated system and it needs to have a lot of investment to able to keep it up to snuff. And so around the world, you're seeing a lot of pressure on infrastructure. We have, as part of our strategic effort, have decided that we are going to be ahead of that curve. And so the moves that we're making with this major distribution center in the U.S., the fact that we are increasing in our expansions at our potash mines, we are increasing all the load-out capabilities of each and every mine, reconfiguring loop tracks and just becoming a lot more efficient. The move at Vancouver, the expansion that we put in there, the Prince Rupert consideration, Portland. We've got great capability there and ability to expand in Portland. And so we're trying to do everything that we can. We've got a terminal in Brazil that we've built and has done very, very well for us. We're looking at other opportunities down there, but we want to be ahead of the curve because you can't sell what you can't deliver.

The next question comes from Don Carson of Susquehanna.

Bill, question on -- going back to domestic market and just trying to get a sense of difference between shipments and pounds in the ground. In Slide 11, you show or you forecast North American shipments being up this year to 9.5 million tonnes, 10 million tonnes, versus 9.3 million tonnes in 2011. But what's the delta in actual consumption that you've got here? And maybe if you just comment on the actual level of pipeline inventories. And the final question there would be are you sort of rescinding your recent $30 price increase to try and stimulate some movement in the North American market?

All right, Don, I'll just comment on the last question and then I'm going to ask Stephen to comment on the delta that you requested. We never rescind a price increase. Whether we get it or not is another question. But we did not get that last $30 because of some of the pressures we talked about in the release, with the heavier importation of potash into some U.S. markets. So we're essentially at summer prices from 2011, and we'll see what happens with this year. But I would tell you that overall, strategically, we are going to be looking at price increases in the offshore markets to exceed those of North American markets. Stephen?

Yes, Don. As far as looking at the domestic market, our estimate for the total shipments in the domestic market for calendar year 2011 is up 9.3 million tonnes. And how much of that goes to the ground and how much is in inventory, it's kind of an impossible number to determine very precisely. But what we do know is that inventories are quite different in different parts of the Corn Belt right now. In the Western Corn Belt where they had a fall, inventories are quite skinny. And then in the Eastern Corn Belt where they didn't have a good fall because of weather and a delayed harvest, is that you've seen more inventories. So it's a little different situation. But -- and many people have asked the question of -- as we look at the first quarter and, well, look at the fourth quarter last year, look at the first quarter now and look at this demand deferral, and is this 2009 all over again. And one of the things that we saw in 2009, at the end of 2008, we saw a tremendous buildup of inventories and this was in anticipation of price increases and buyers trying to get ahead of price increases, and it was speculative in nature. We have not seen that at all. The only inventories that we have are really due to the fact that it wasn't due to any speculative anticipation. It was just due to weather events that delayed or prevented the fall application. So as we go into the year here in 2012, we expect to see those inventories disappear during the spring application. And we're not expecting any speculative anticipation of an inventory build during the year. And that's why we are forecasting that our North American demand will be in that range of 9.5 million to 10 million tonnes.

You're going to have, Don, 93 million acres, 94 million, I don't know. Again, it's -- I think we're going to be challenged to plan anything over 93 million, personally. But that's a big push, and you know what that means for potash demand, with corn being so intensive on the potash side. So we feel pretty good about that number, 9.5 million to 10 million.

Brock, we'll have time for just one more question.

The last question today comes from Michael Picken of Cleveland Research.

A couple of things. Number one, I just wanted to get an update on the Trinidad gas contract. And then secondly, I mean, I know you guys are in negotiations with China, but anything regarding -- is there any chance that the price might move lower? Or do you think that sort of the current $470 price is sort of a baseline to use?

Well, Michael, I'll comment on the second question. I'm going to turn it over to David for the Trinidad update. We'd never comment on negotiations beforehand. So what I'd say to you is we'll get on with negotiations through our Canpotex team in China right after the Chinese New Year. My best guess is we'll have something done by the end of March. As I said earlier, we don't expect a prolonged negotiation with China. The Chinese inventories, as we said, we think are normal. And it's interesting to see that the local price for potash, potash coming from Qinghai Salt Lake, other suppliers is actually increasing now in China, so that should give you some idea of what the inventory situation actually is. If it was extreme, as some people have pointed out, the price domestically wouldn't be moving up. So we think there are some good signs here for Chinese demand, and you saw our forecast for China for the year. But I don't want to get into what price we would conclude with China before we even sit down and talk to those guys. So David, you want to talk about Trinidad?

Yes, Michael. Our '03 contract expired last May. It is our smallest ammonia plant in Trinidad. It represents about 16% of our gas requirements. We have an extension on that contract. We are still in negotiations. And obviously, the NGC Trinidad is having to reflect more of what's going on here in North America and the impact on future negotiations, so we can't tell you when that negotiation will end, but we're hopefully we're going to be getting closer in the next month or 2. But we can't tell you the outcome of that at this point.

Thank you very much, everyone, for your time today. If you have any further questions, please don't hesitate to give us a call this afternoon. Take care.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.