What went down at the world’s largest fertilizer company Nutrien Ltd.?
I decided to write this story in response to a hot topic in global business news about Disney’s CEO transition. The Nutrien Ltd. CEO transition has received little-to-no attention in the USA, and that’s why most of the sources come from Canadian media and news outlets. If anything this story about the Nutrien CEO transition should shed light on how critical the global fertilizer industry has become for the global economy and overall international business environment since the outbreak of the Covid-19 global pandemic.
Pour another cup of coffee or tea for this one…
On March 19, 2022, it was reported on The Globe and Mail that former CEO Mayo Schmidt was asked to step down by the Board of Directors due to both cultural and strategic issues facing the future of Nutrien Ltd.’s leadership in the global fertilizer market.
This story comes at a time when Nutrien Ltd. had already announced that it would increase output of its potash fertilizer capabilities from approximately 14 million tonnes to 15 million tonnes in response to the ongoing global fertilizer shortage and supply crisis, which was further illustrated by farmers protesting in areas of Eastern Europe during the same week. If you need to get caught up with what’s happening with the broader global fertilizer industry’s shortage and supply crisis, here are two relevant articles about China and India.
In a press release on April 18, 2021, Nutrien officially announced Mayo Schmidt would become the new CEO of “the world’s largest provider of crop inputs and services” and that “Mr. Schmidt brings over 30 years of agricultural business experience to his leadership of Nutrien.”
https://www.youtube.com/watch?v=UUmWrXYE9v0
But as the piece from The Globe and Mail indicates Schmidt was only expected to serve as CEO for two years — an order that wasn’t fulfilled.
During the time of Schmidt’s transition to CEO there was high speculation among reporting agencies and commodity analysts about a Nutrien Ltd.-BHP Group partnership for the development of a potash mine in Jansen, Saskatchewan, Canada. It’s true that BHP has been divesting its oil and gas assets for “future facing commodities” such as potash. In a statement to The Financial Post the company said “Potash provides BHP with increased leverage to key global mega-trends, including rising population, changing diets, decarbonization and improving environmental stewardship.” However, most of the talk about a proposed partnership or joint-venture has died down since sanctions were targeted at Belarus’ potash industry and largest producer and exporter in December 2021. (Belaruskali is one of Nutrien’s biggest rivals in the potash fertilizer segment. It makes you wonder doesen’t it?)
This bring us back to the question: What went down at the world’s largest potash producer, Nutrien Ltd.? Even though the story is being thoroughly analyzed and reported on we still can’t be sure what actually caused the fall out.
According to Brian Madden, Senior Vice President of Goodreid Investment Council, “with the resources companies in particular…the leaders can’t add a single ounce, pound or tonne to the resource in the ground…they can only manage it more or less efficiently and effectively…” which means that the abrupt CEO transition announced for Nutrien “is very unusual” for these type of industries.
Although there was no specific reason given for Schmidt’s departure to date, a spokesperson for Nutrien told CBC on January 4, 2022, “This change will not impact the strategic direction of the company. We will continue to advance our strategy of helping growers sustainability feed a growing population by leveraging the competitive advantages of our integrated business model.” Thus Madden’s comments about the regularities facing resource companies, such as Nutrien in the fertilizer industry, holds true to their value as global suppliers of key crop inputs for modern agricultural production.
I already wrote about Africa’s issues with modern agricultural production and why fertilizer expansion is a key driver for many of those countries’ push to combat food insecurity with this story: https://medium.com/@44jmonroe91/fertilizer-africas-growth-and-development-81dcee91df75
In other words, leadership changes at these companies have generally been viewed as an issue of strategy and development for profitable natural resources — not value-creation over time. Companies such as Nutrien and BHP have led in their specific market segments based on this ethos. That’s why in hindsight a joint venture between Nutrien and BHP seems like a perfect fit.
But is it really?
No. It’s not. There’s already major pushback from American farmers about the fertilizer industry’s alleged consolidation and monopolistic tactics to make farmers pay more for fertilizer.
Read more about a legal analysis of The Mosaic Company’s investigation of Morocco’s OCP in the global phosphate fertilizer segment with this story: https://medium.com/@44jmonroe91/big-year-for-d-c-62a64978a5cf
On the International Fertilizer Association’s (IFA) new sustainability series “A Minute With A CEO” former Nutrien CEO Mayo Schmidt spoke on behalf of the company’s sustainability and ESG strategy. About the company’s purpose to ensure farmers around the world grow crops more sustainably, he noted that “intital pilot targets of 100,000 acres is now at more than 200,000 acres.”
https://www.youtube.com/watch?v=yJKopBVHhpo
The key to this interview came in at Question 3: Nutrien is moving toward low carbon fertilizers to create a low carbon process through the production of ammonia: What’s the opportunity here? In order to meet Nutrien’s 2030 strategy of reducing GHG emssions by 30%, Schmidt announced the building of a Department of Energy Partnership which aims to create a small-to-medium sclae Ammonia Plant. The plant is intended to increase energy-efficent production and eliminate carbon footprint — with less capital. As energy prices are skyrocketing, the new ammonia plant could be a boon or a disaster for Nutrien’s bottom line. Former CEO Chuck Magro told BNN Bloomberg on September 29, 2020 that Nutrien’s stance on climate change perspectives in agriculture is to be produce fertilizer more efficently and roll out new technologies such as Precision Rate Variable Technology.
Ivanov Igor @Ivanov Igor wrote an excellent piece on Medium about Variable Rate Application (VRA). Read more about the agricultral technology and its applications with his story: https://medium.com/remote-sensing-in-agriculture/variable-rate-application-in-precision-agriculture-70a8b2be871d#:~:text=Variable%20rate%20application%20(VRA)%20in,sensors%2C%20maps%2C%20and%20gps.
According to what both former Nutrien CEOs offered about sustainbility plans and climate change it’s plausible to view this latest CEO transition from two angles: 1.) Nutrien’s Board of Directors are looking for a leader to take on what Chuck Magro has been pushing for since 2020; or 2.) Due to recent international events Nutrien might be changing its direction on how to operate the company’s sustainability-oriented agenda under what appears to be a very capital-intensive fertilizer production scenario going foward.
I think there’s a bigger story behind all of the uncertainties over Mayo Schmidt’s resignation; this is a story about a search for a new leader who will not only lead on Nutrien’s strategy and development, but also create value in a global fertilizer market that is expanding more than ever before. Morocco is leading Africa’s push to apply more fertilizers, while Kazakhstan looks to become a more agile supplier in Europe, and USA’s Mosaic Company seeks to expand into the potash sector with its new K3 mine in Saskatechwan.
A novel approach to the market is needed for one of the global fertilizer industry’s biggest and most profitable companies. While searching for a new leader, the public should start looking to answers from interim CEO Ken Seitz.
