管理層發言
Greetings, and welcome to Nutrien's 2026 Second Quarter Earnings Call. The operator will now provide instructions. As a reminder, this conference call is being recorded. And I would now like to turn the conference call over to Jeff Holzman, Senior Vice President of Investor Relations and FP&A. Please go ahead.
Thank you, operator. Good morning, and welcome to Nutrien's Second Quarter 2026 Earnings Call. As we conduct this call, various statements that we make about future expectations, plans and prospects contain forward-looking information. Certain assumptions were applied in making these conclusions and forecasts. Therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions is contained in our quarterly report to shareholders as well as our most recent annual report, MD&A and annual information form. I will now turn the call over to Kenneth Seitz, Nutrien's President and CEO; and Mark Thompson, our CFO, for opening comments.
Good morning, and thank you for joining us today to review our first half performance, progress on our strategic priorities and the outlook for our business. In the first half of 2026, Nutrien delivered record potash sales volumes, strong growth in proprietary products margins and further enhanced the reliability and cost position of our nitrogen assets in a dynamic global operating environment. We raised the bottom end of our 2026 potash sales volumes guidance, lowered our capital expenditures guidance range and increased the pace of share repurchases. Our results demonstrated strong performance against our strategic priorities that are strengthening our business, driving structural growth in free cash flow and increasing cash returns to shareholders. In potash, we increased production from our low-cost 6-mine network and utilized the capabilities of our extensive global supply chain to meet strong customer demand. In the first half, we mined 53% of ore tonnes using automation, exceeding the top end of our 2024 Investor Day target. This result reflects the strong execution of our automation strategy while also highlighting additional opportunities to further enhance deployment and performance across the network. These investments are delivering wide-ranging benefits beyond improvements in safety and productivity. Increased automation enables us to mine more ore with the assets already in place, helping to optimize capital expenditures and maximize returns on existing investments. In nitrogen, our low-cost North American assets remain well positioned with advantaged natural gas costs and a continued focus on initiatives that increase upgraded product volumes and margins. Our first half production was consistent with our previous expectations, including a planned turnaround at our Carseland facility that demonstrated operational excellence in action. The turnaround was the largest in the facility's history and included a debottlenecking project that increased the site's annual production capacity. Despite a much larger scope than the last turnaround 4 years ago, we achieved higher productivity and contractor efficiency through improved planning and execution. The work was completed safely with 0 lost-time injuries ahead of schedule and under budget. Turning to our downstream retail business. Adjusted EBITDA increased by 4% in the first half of 2026, underpinned by execution of key growth initiatives that enhance our ability to serve growers with a broader set of products and services integrated through our network. Our Proprietary Products business delivered strong growth in the first half, including a 10% increase in proprietary crop nutrients gross margin despite softer fertilizer demand as growers continue to prioritize solutions that enhance productivity. Our performance reflects targeted investments we made to expand capacity and meet increasing customer demand with sales volumes for certain nutritional products increasing nearly tenfold compared to the prior year. Together, these results demonstrate how customer insights, targeted investments and disciplined execution are driving earnings growth. Over the last 2 years, we have taken purposeful steps to optimize our portfolio following a comprehensive review of each asset's free cash flow contribution and returns on invested capital. Since June 2026, we completed agreements to sell non-core assets for gross proceeds of approximately $90 million. Including these agreements and prior divestments, we have generated approximately $1 billion in gross proceeds since the fourth quarter of 2024. These actions are strengthening our portfolio quality while creating additional flexibility to reduce debt, increase shareholder returns and allocate capital to businesses with superior long-term growth opportunities. As previously announced, we are reviewing strategic alternatives for our phosphate business and are encouraged to have received numerous nonbinding bids as part of the process. We also continue to review strategic options for our Trinidad nitrogen operations and each component of the Brazilian retail business. We remain on track to solidify the optimal path for these businesses in 2026. Overall, our first half results demonstrate progress on our strategic priorities and disciplined execution to enhance earnings quality and free cash flow per share. Across each of our businesses, we continue to focus on areas within our control, namely operational excellence, cost management and capital efficiency. While the external environment remains dynamic, we believe Nutrien is well positioned to create long-term value for our shareholders. Now turning to the market outlook. Global agricultural markets are supported by robust grain and oilseed demand. Risks to crop production and trade have increased due to geopolitical uncertainty and forecasts indicating El Niño conditions, which are expected to place upside pressure on crop prices. Potash margins remain constructive due to favorable affordability, healthy demand in all major global markets and stable supply relative to other commodities. We've maintained our forecast for global potash shipments of 74 million to 77 million tonnes in 2026 as projected shipment levels are expected to be consistent with consumption. Global urea prices declined in the latter half of the second quarter during a seasonal low for demand that was exacerbated this year due to evolving geopolitical developments. Global urea fundamentals firmed in the third quarter, driven by ongoing trade flow disruptions, production outages, elevated energy prices and increased demand. We expect these factors will continue to shape the outlook for nitrogen markets over the remainder of 2026. In this environment, Nutrien's North American nitrogen assets are well positioned to benefit from secure low-cost feedstock supply and dependable market access. With that overview, I'll now turn it over to Mark to provide more detail on our second quarter financial performance, guidance assumptions and capital allocation priorities.
Thanks, Ken. Nutrien delivered adjusted EBITDA of $2.4 billion in the second quarter of 2026, and first half adjusted EBITDA was $3.5 billion, up 6% from the prior year. Cash provided by operating activities rose by 12% in the first half, providing opportunity to further advance our capital allocation priorities. In potash, we generated adjusted EBITDA of $658 million in the second quarter, reflecting higher global benchmarks and strong operational and supply chain execution. Our second quarter and first half potash controllable cash cost of product manufactured was flat compared to the prior year due to cost control measures and the benefits of our automation program that Ken articulated. We continue to target our controllable cash cost below $60 per tonne on a full year basis for 2026. We raised the bottom end of our 2026 potash sales volumes guidance to 14.2 million to 14.8 million tonnes due to the strength of first half sales and increased visibility on the second half order book. Canpotex is fully committed for third quarter sales volumes, and we had a favorable response to our domestic summer fill program. We anticipate a similar split between offshore and domestic sales volumes in the third quarter compared to the prior year. Our nitrogen operating segment generated adjusted EBITDA of $635 million in the second quarter. Net selling prices were in line with higher global benchmarks and the timing of order book sales with approximately 35% of total segment volumes sold prior to the onset of the Middle East conflict. Nitrogen sales volumes were down from the prior year, reflecting no production from Trinidad and New Madrid, planned maintenance at Carseland and some deferred customer purchases late in the quarter during a period of increased market volatility. Looking ahead, the majority of our Q3 nitrogen fertilizer sales volumes are now committed and aligned with summer fill values set in late June and early July. We maintained our 2026 nitrogen sales volume guidance of 9.2 million to 9.7 million tonnes, with planned turnarounds scheduled at our Lima and Redwater nitrogen facilities in the third quarter and higher ammonia operating rates expected in the fourth quarter. In phosphate, adjusted EBITDA declined in the second quarter due to elevated sulfur costs, which have placed unsustainable pressure on global phosphate producer margins. We maintained our 2026 phosphate sales volume guidance, supported by reliability improvements achieved in the first half, while we continue to closely monitor customer demand and sulfur input costs in the second half of the year. Our downstream retail business delivered adjusted EBITDA of $1.24 billion in the first half, up 4% compared to the prior year. Following a strong start to the application season in the first quarter, North American retail crop nutrient volumes declined in the second quarter, in particular for phosphate and nitrogen. The reduction in commodity fertilizer volumes was offset by strong proprietary products performance. We maintained our full year retail adjusted EBITDA guidance of $1.75 billion to $1.95 billion, with the midpoint of the range underpinned by 3 key items. First, we continue to project high single-digit growth in our proprietary products gross margin in 2026, supported by organic growth in our core retail geographies. Second, we expect higher crop nutrient margins per tonne to offset a reduction in sales volumes compared to the prior year. We anticipate firming crop prices and an earlier start to the North American fall application season will support nitrogen and potash applications similar to historical average levels with phosphate demand expected to remain below historical levels. Third, we anticipate recent favorable weather to improve winter planting prospects in Australia and continued strength in livestock markets through the second half. As we look toward the remainder of 2026, we expect free cash flow to be supported by constructive fertilizer market fundamentals, strong operational execution, capital discipline as well as ongoing portfolio optimization efforts. Reflecting this focus on capital efficiency and returns, we have reduced our capital expenditures guidance by $50 million to a range of $1.95 billion to $2.05 billion. We increased share repurchases in the first half of 2026 by 26% compared to the prior year and have stepped up our repurchase pace in the third quarter to approximately $75 million per month. This is consistent with our capital allocation approach of increasing cash returns to shareholders and maintaining a strong balance sheet as we structurally grow free cash flow. I'll now turn it back to Ken for final comments.
Thanks, Mark. The results we shared today demonstrate the progress towards strengthening the business and positioning Nutrien for long-term growth and resilience. Across Nutrien, our teams continue to identify initiatives to further improve performance, unlock value from existing platforms, efficiently serve our customers and advance future growth. Together, these efforts are expected to structurally increase free cash flow per share and enhance long-term shareholder returns. To that end, we intend to host an Investor Day on November 30 in Toronto, where we will outline the next phase of opportunities to create additional value across the business. To close, I'm encouraged by the team's execution in the first half of 2026 and the momentum we continue to build across Nutrien. With that, we'd be happy to take your questions.
分析師問答
The first question comes from Chris Parkinson of Wolfe Research.
Just want to circle around the second half outlook for potash. It seems like demand has been pretty stable across Asia, Southeast Asia, some of your core markets. So I'd love to hear your perspectives there versus your initial January 1 expectations, run through the Americas. And then in terms of your order books, do you feel pretty comfortable where you are now heading into December, especially that Uralkali's taking some maintenance downtime and some other stuff. Would just love to hear the puts and takes, how you're thinking about that.
Great. Thank you, Chris. Yes, we are certainly constructive on potash for the second half and for the year. We continue to say 74 million to 77 million tonnes of shipments this year. And you will have seen that we raised the bottom end of our own guidance now at 14.2 million to 14.8 million tonnes. And this is, I think, largely owing to favorable affordability, of course, and to your question, healthy demand in all major global markets. We started the year with low inventories that are being replenished. And here we are in the second half, we've had a favorable response to our summer fill program. We're now heavily committed through Q3. And of course, Canpotex fully committed to Q3 and expecting year-over-year growth in offshore markets. So yes, constructive on the setup, but maybe I'll have — to your question, Chris, I'll hand it over to Chris Reynolds to just talk about region by region.
Chris, thanks for the question. And as Ken said, we are feeling good about demand for potash for the balance of the year. As you know, it's still globally the most affordable nutrient out there, and we're seeing that in our major markets. And so as you suggest, as we go around the world here, North America, we had a good response to our summer fill program. And then subsequent to that, a price increase we took where we've taken some orders against that already and also a fairly slim import lineup as we look out over the next couple of months. Brazil, Q3 is always a little seasonally quiet in Brazil. But despite that, prices have been holding pretty steady around that $400 mark. And the uptick in ag commodity prices we've witnessed has also helped sentiment down there. We estimate there's still a lot of buying to be done yet in Brazil for the balance of the year, somewhere around 4 million tonnes. And so feeling good about things there. We actually just got back from a trip to China talking to customers there. And although port inventories have grown a little bit year-over-year in China, what we heard from our customers is that in-country channels are reasonably slim. So when you think about 20 million tonnes of consumption as the expectation there for China and port inventory is around 3 million to 3.3 million tonnes, certainly not overbearing in terms of supply/demand. And the other message we got loud and clear while we were there is that the government and the buyers there are prioritizing security of supply. And they also like the outcome of an early settlement for this 2026 contract. Southeast Asia demand continues to be underpinned by really good palm oil prices, but also a little bit of concern in terms of the potential El Niño impact in that region. So overall, Chris, feeling good about demand for potash for the balance of the year and the continuing stable market.
Your next question comes from the line of Ben Isaacson from Scotiabank.
Ken, my question is, can you please talk about Nutrien's road map to expanding potash capability towards 18 million tonnes from somewhere around 15 million today. It seems like you're getting close to your limit of capability. And given that supply is coming to market and given where demand growth is, what is the timing? What is the CapEx? And do you still want to be in a 19% to 20% market share range in 4 or 5 years from now?
Great. Thank you, Ben, for the question. And the short answer, just to start on the demand side and market share is, yes, 19% to 20% historically has been sort of the market share that we've had globally. And then that's owing to the fact that we've had customers in each of these regions for many decades, and those customers are growing in each of their regions as demand for potash continues to grow, and we grow along with them. We've become a reliable supplier of high-quality volumes around the world for those decades now. And like I say, our customers want to grow with us. So then when we look to our own network and to your question, we asked the question, well, how we're going to continue to meet demand and 19% to 20% market share. We do have our 6-mine network, low cost. It's very well on the cost curve. Mark just mentioned, we've been successful at keeping cash cost per tonne below $60. Part of that is the mine automation work that we've been doing. But that mining automation work means that the next tonne that we mine is also more efficient than the last. And so as we continue to deploy those automation efforts, we look to where we're going to unlock that next tonne. And it sort of happens in a way that we move from mine to mine depending on sort of the all-in lowest cost, CapEx, capital charge included, where we get that next tonne from. Today, that has meant Lanigan expansion, but we have options at 5 of those 6 mines to continue to expand production. And again, with mine automation, those options are growing for us. This year, we would say that we have about 15 million tonnes of production capacity. To your question, Ben, we like to think about sort of a year lead time to unlock additional volumes and maintain that 19% to 20% market share. So lead times are actually relatively short, and it's really getting mining machines in place and belting to the shaft given that our milling capacity and tailings management areas are built. It may require some loadout investment in some of our mines. But again, these are relatively shorter-term investments than something like a greenfield development. In terms of cost, we say that next increment of production, 15 million to 18 million tonnes, is sort of $200 to $300 a tonne. And that would be, as you know, an order of magnitude lower than a greenfield development. As we go from 18 million tonnes and beyond, we do experience a bit of a step change in capital. But again, we're talking about $700 or $800 a tonne, again, maybe 1/3 or less of what a greenfield development would be. So suffice it to say, Ben, we have these plans. We have this mapped out. We've done the math. We've talked to our customers. And every year, we just continue to demonstrate that we grow our volumes.
Your next question comes from the line of Andrew Wong from RBC Capital Markets.
I just wanted to ask about the pace on buybacks. The Q2 dollar amount was up pretty meaningfully versus Q1. And then when we look at Q3 to date, the repurchases and we, kind of, average out through the quarter, that puts you on another similar pace in terms of sequential increase. So is this your new regular buyback rate? Or was there something that was driving this increase more temporarily like because of cash flows or how you see the value in your shares?
Yes. Thanks, Andrew. And we do have, I would say, a pretty disciplined capital allocation structure and framework that we are at as we make these decisions. We talk about it quite a bit with our Board, but I will hand it over to Mark to just provide the color around that framework.
Yes. Thanks, Ken. And just before touching on the specific buyback pace, I think it's important to provide some context on the overall capital allocation philosophy because the buybacks are but one component of a broader set of objectives that we have to add value for shareholders. As Ken has said and I've said numerous times, you look back at our 2024 Investor Day. And since that time, we've provided numerous avenues to grow structural free cash flow from the business. We've had the upstream fertilizer sales volume growth, we've demonstrated the retail earnings growth and the continued optimization of cost structure and capital expenditure structure, all of which have grown that structural base. As you heard Ken say this morning, we've now generated since the fourth quarter of 2024, about $1 billion in divestiture proceeds, which has put our balance sheet in a great spot. And as we've mentioned numerous times, the return of capital philosophy is anchored in the idea that at mid-cycle prices, we want to be around 1.5x net debt to EBITDA. And we're getting quite close to those levels today, and we're very comfortable with the balance sheet and feel like we're in a great spot on that front. So when it comes to being disciplined on capital allocation, we now have a very streamlined and targeted set of growth investments in the business where our core strengths exist. We really believe that we can demonstrate strong returns to shareholders by reinvesting in the company in those areas. But that also has allowed us to grow that stable cash base. And as demonstrated, and as you noted, this has allowed us to increase the pace of ratable share repurchase activity. That ratable share repurchase activity is also linked to the ability to grow dividends per share over time without growing dividend expense. So when you zoom in on the math framework and you look at this year specifically, we've gone from starting the year at a pace of around $50 million per month to around $55 million per month and now in the third quarter, $75 million per month. And what I'd say is with the second quarter behind us and the strong execution that we've outlined this morning and demonstrated in our results, there's confidence in cash generation for the year. I think as we zoom out even further and think about that buyback over time, there's certainly going to be the structural component to the buyback that as we grow free cash flow, the opportunity to increase that ratable buyback grows over time. Inevitably, with our business, there's also a cyclical component to that buyback as we move through cycles where we'll be looking at the balance sheet and looking at where we are in the cycle. But for the remainder of the year, we anticipate that we will remain in and around these levels. And as we get into 2027, we'll be looking at all the factors that I just talked about and that Ken has outlined as we continue to level set that ratable buyback. But the most important component of this is that shareholders can expect that Nutrien will continue to be a strong returner of capital and the share repurchase mechanism is our preferred avenue to do that.
Your next question comes from the line of Joel Jackson from BMO Capital Markets.
A little preamble to my question, but I've noticed in Q2 for retail, obviously, a quarter for retail, it was the lowest domestic fertilizer volumes like forever since 2013. We all know that Agrium and Nutrien been acquired in retail since then, volumes are down a lot year-over-year. We all know what happened with commodity prices across Q2. But I was wondering if you could talk about exactly what was happening in the domestic retail fertilizer market where — was there a buyer's holiday because of commodity prices, fertilizer prices? And what does that set up for the rest of the year in terms of inventories in the market?
Yes. Thanks, Joel. As the spring unfolded, at the start of the year, we were expecting lower fertilizer volumes in our downstream business, albeit maybe not to the extent that you described. What was going on is we did see phosphate volumes down about 10%, which reflects demand destruction. The reasons for that include elevated sulfur costs impacting phosphate producers and some facility shutdowns. Heading into the second half of the year, we expect continued demand pressure on phosphate. Nitrogen volumes were down about 7% in our downstream business, owing to a few things. Year-over-year corn acres are down, which plays a role in nitrogen applications. We did have a larger fall application season in 2025, so some volumes were pulled into last fall, and we had a delayed start to the Western Canadian planting season, which also had an impact. We also saw some demand deferral into the second half as growers watched volatile urea prices and delayed purchases. Potash was more as expected, with about 1% growth, reflecting its affordability relative to the other major nutrients. Heading into the second half, the crop is advancing well, which could lead to an open application season, so we continue to expect good volumes this fall. We could be down a bit on volumes overall, but we expect higher gross margin per tonne on crop nutrients in the second half that will offset those lower volumes. More broadly for our retail business, proprietary products performed very well in the first half. Crop protection is performing well and we saw strong demand in Q3 as farmers seek to maintain plant health. We maintained our guidance at $1.75 billion to $1.95 billion of retail adjusted EBITDA. That guidance is underpinned by ongoing high single-digit percentage growth in proprietary product gross margins, higher crop nutrient margins per tonne offsetting lower volumes, and positive factors in Australia, including improved winter planting prospects and strong livestock markets.
Your next question comes from the line of Vincent Andrews from Morgan Stanley.
Just sticking with retail, there was a call out in the retail section on the coverage about the strong Australian livestock season. I see that shows up in services and other, and it certainly helped the second quarter. Could you just give us a little more detail on that? It's not an area I particularly have a lot of expertise on. And will that carry forward into the balance of the year? And how will it play out?
Thanks, Vincent. Yes, livestock markets are very strong, not just in Australia, but certainly in our Australian business we have a combination of good weather in Australia and a strong livestock market. I'll hand it over to Chris Reynolds to provide some more color.
Yes. Vincent, thanks for the question. We were expecting livestock prices to come off a bit in Australia after a strong run-up in 2025, but export demand for both lamb and beef has remained strong and has kept prices elevated. For us, the revenue stream in Australia from livestock is primarily stock agent commissions, a percentage of the price of sheep and cattle that we help our growers sell. We also noted some Chinese import restrictions on certain Australian products, and we're monitoring that, but we haven't seen an impact to prices yet. Overall, we've been very pleased with the performance of that business year-to-date.
And your next question comes from the line of Kristen Owen from Oppenheimer.
While we're here in retail, let's stick with that. I wanted to ask about your proprietary products growth, up about 3% year-over-year here in the second quarter, but 16% gross margin growth, larger than that if we look on the first half. So two questions. First, can you help us unpack the drivers of that gross margin strength there? And then second, we've heard from some others in the space, maybe a bit of timing shift from here in North America from Q2 to Q3. Any color that you can provide on timing shifts that you may have seen and again, the drivers of that gross profit growth?
Thanks, Kristen. Proprietary products are performing very well and continue to demonstrate structural growth in gross margin contribution. We've launched 26 new products this year and are seeing strong demand in our core geographies. In the first half, that was a story of our crop nutritionals in light of volatile fertilizer markets, and we're constructive on the second half as well. Regarding timing shifts, the most significant timing shift relates to nitrogen: some demand was deferred from H1 into H2, and with the way the fall is shaping up, we're expecting good N and K applications in the fall. I'll hand it over to Chris to give more color on drivers of proprietary products growth.
Kristen, thanks. We've been pleased with the performance of our proprietary products range this year, underpinned by the introduction of a number of new products and a strong market response. Growers are focused on yield right now. Conversations in the field are about how to increase yield and preserve yield in the current crop. That drives interest in products that increase the efficacy of commodity fertilizers, particularly when a product like phosphate becomes expensive. We're also seeing some spill from Q2 to Q3, particularly in fungicide demand. Wet weather in parts of the Midwest has growers keen to protect against fungal disease, and we're helping them do that. So the underlying drivers are yield preservation and increasing the efficacy of inputs with proprietary solutions.
Your next question comes from the line of Edlain Rodriguez from Mizuho.
In the global potash shipments outlook of 74 million to 77 million that you have, given the affordability of potash and strong demand, what gets us to the low end and what gets us to the high end of that range?
Great, Edlain. Thank you. We've got a set of assumptions, as you might expect, on both ends, and I'll hand it over to Mark, just to walk through them.
Thanks, Edlain. And I think your question was about both the global supply construct, but I'll also make a few comments about our own range in that context. As Ken set up in his prepared remarks, and as Chris has alluded to today, demand for potash is robust globally and underpinned by affordability and stable prices. Inventories have not been building disproportionately in any part of the world. If we see those factors continue, demand can remain healthy and grow. At the upper end of the range, we are testing global supply chain capability. To reach the top end, effective capacity would need to be available to serve all markets across the world for the remainder of the year; that is the primary constraint. At the bottom end of the range, factors include potential impacts from El Niño on Southeast Asia, how inventories evolve for the rest of the year in global markets, and weather allowing potash to reach global markets and be applied. Regarding our own range, our potash production has been stable and consistent. For us to be at the high end of our guidance, global markets would need to trend to the top end of that range so we could capture that demand consistent with our target market share. At the lower end, the usual factors such as supply chain disruptions or poor fall application weather would be at play. As of today, we feel quite comfortable with the midpoint of our guidance, which is supported by raising the lower end of our range.
Your next question comes from the line of Jeff Zekauskas from JPMorgan.
I think in your retail segment for the quarter and for the first half, your SG&A costs are up about 6%. And I realized that last year, they were down. What's causing that level of inflation? And secondly, your seed gross profits were down about $20 million in the quarter. Was that a particular line of seeds or type of seeds that caused that shortfall? Or can you explain what's going on there as well?
Yes. Thanks for the question, Jeff. A number of moving parts on the SG&A front. I'll hand it over to Mark to discuss costs in more detail, and then Chris will address the seed question.
Jeff, when we step back and think about the structural changes we've made to the cost profile in our retail business and across Nutrien, we believe we've maintained structural cost savings. The single biggest factor driving higher retail expense in the first half is higher fuel and fleet costs, with fuel being the largest component. Global energy prices have increased, and given the size of our fleet and its importance to operations, fuel costs have meaningfully impacted SG&A. As we look to the second half, we continue to focus on the cost levers we can control in the retail business.
Jeff, regarding the seed gross profit reduction, the main driver was lower rice acres than expected, which impacted seed sales in that category.
Your next question comes from the line of Matthew DeYoe from Bank of America.
Not to beat up more on retail, but nutrient margins saw a nice tick up sequentially, but still running down year-over-year. Just wondering if that's mix. I would have assumed a better margin pull-through given what we saw on the price increases in the market in Q2. And then on crop protection, similarly strong performance. I'm just wondering where volumetrically that comes in because I would have assumed, given farmer profits, we might have seen weaker overall sales. I'm assuming that growth is not price.
Thanks, Matt. On crop protection, the first half played out largely as we expected and the demand pattern into the third quarter shows farmers protecting their crops, so crop protection movement has been strong. I'll hand it over to Mark on margins.
Matt, not a lot to add beyond our earlier comments. We expected fertilizer sales volumes to be down, and volumes in Q2 were a bit more suppressed than we had originally assumed, particularly phosphate and nitrogen. As we mentioned in May, we expect crop nutrient margins per tonne to be stronger year-over-year and that dynamic should continue into the remainder of the year, partially offsetting weaker volumes in the first half. In the second half, we expect phosphate volumes to be down, but nitrogen and potash sales volumes closer to historical average levels.
Your next question comes from the line of Ariana Milin from CIBC Capital Markets.
On nitrogen, do you still see some level of cautiousness among buyers given continued volatility in the market related to both the Middle East conflict and Russia and Ukraine? Or was lower prices all that was needed to sort of return to normal? And then on that note, do you expect to see to some degree a geopolitical risk premium in the nitrogen market over the medium term?
Thanks, Ariana. With respect to the first part of your question, we do not see persistent buyer cautiousness. There were some deferrals in H1 that should be made up in H2. We ran summer fill programs and saw a strong response on nitrogen, and we are 85% committed into the third quarter. With urea prices having come off and an open fall application season, we're constructive on N and K for the fall. Regarding a geopolitical risk premium, it's difficult to predict. The Middle East conflict has disrupted trade flows and some volumes upstream of the Strait of Hormuz. We may also see longer-term impacts if infrastructure or production facilities are damaged in the region. These factors have contributed to higher natural gas prices in Europe and elsewhere, but our assets sit in geographies that are advantaged for feedstock. In short, we're constructive on the fall and where our assets sit, but we continue to monitor geopolitical risks.
Your next question comes from the line of Benjamin Theurer from Barclays.
This is Rahi on for Ben. Sorry to bring it up again, but for potash. You mentioned the strong demand globally. But I guess just more color on what gives you confidence that farmers will not cut potash spend in order to save up for nitrogen. Maybe if you can point to other periods in the past that had a similar scenario like higher nitrogen pricing, lower potash, relatively low grain pricing, maybe higher inputs. I know there's been some debate in the industry about whether there will be growth or decline in potash global shipments this year. So just looking for your perspective on that.
Thank you, Rahi. What we're seeing from grower customers and wholesale channels is that growers adjust their mix of inputs when one nutrient becomes more expensive. With phosphate demand depressed, growers are reallocating spend and because potash is relatively affordable, potash applications have remained strong. Indicators include our successful summer fill program in North America, strong commitments into Q3, Canpotex being fully committed through Q3 and expectations of overall offshore volume growth. Taken together, we see support for the 74 million to 77 million tonnes global shipment range and the confidence to raise the lower end of our guidance.
Your next question comes from the line of Lucas Beaumont from UBS.
I just wanted to ask one on phosphate. You haven't had to reduce your phosphate segment volume outlook at all. It seems you haven't had to curtail production despite cost pressures coming from sulfur. How are you managing that compared with others in the industry? And then in terms of the strategic alternatives there, given the current market disruption, do you think you'd be able to get the value you want for that asset this year if you're looking at a sale? Or might it be better to come back in 12 to 24 months once things settle out?
Thanks, Lucas. On phosphate operations, we've diversified product mix, developed premium products and focused on cost reduction over recent years. Those efforts have been successful and operations are running safely and reliably. Elevated sulfur costs have pressured margins, but contribution margins remain positive and we can continue to operate today. That could change with volatility in sulfur, but given our product mix and the quality of the Aurora asset, we are running operations. On the strategic review process, we consider potential buyers will look through current volatility, recognizing the current phosphate environment is unsustainable and will change. We've seen encouraging interest in Aurora, White Springs and our feed plants. We've received numerous responses, are shortlisting, and expect to reach conclusions on strategic alternatives by the end of the year.
Your next question comes from the line of Steven Hansen from Raymond James.
I wanted to circle back on long-range potash outlook planning. I'm curious about your existing logistical network and how you feel about its ability to handle longer-term growth, considering major projects in Canada and nation-building efforts for additional West Coast infrastructure. You also mentioned exploring the Pacific Northwest for terminals. How is the network set up to handle longer-term planning?
Thanks, Steve. We're thoughtful about long-term logistics. Global demand growth averages around 2.5% per year and there is a long runway given underutilization of potash in many regions. We plan for long-term growth and have the customer base and underground volumes in Saskatchewan to support it. For North America, much of the infrastructure is built out to serve wholesale customers and farms, though we continuously scrutinize cost and efficiency in the network. We expect the majority of our potash volume growth to be overseas. Through Canpotex, we have sufficient port capacity to meet near- and medium-term growth, rail contracts in place to get to terminals, and load-out facilities sized for growth. For larger incremental steps beyond 18 million tonnes, some load-out facility expansion will be required; we plan for that with appropriate lead times. For terminal infrastructure, we like to diversify and not funnel all volumes through one location. That perspective led to our exploration of Longview as a potential long-term terminal option. Overall, we do not see impediments to continued growth in potash production to serve our global customers.
Your next question comes from the line of David Symonds from BNP Paribas.
A couple for me, please. First, how are you thinking about increasing biofuel mandates around the world in relation to the amount of fertilizer needed in the next five years? Second, your retail business has a lot of agronomists across the U.S. There's a lot of debate about weather conditions in the corn belt, particularly around having had quite a dry July. Do you have any view on U.S. corn yield this year?
Great questions, David. I'll hand it over to Jason Newton, our Chief Economist, who follows these topics closely.
Thanks, Ken. David, there are a number of expanding biofuel mandates globally that are already supporting grain demand and prices. In Southeast Asia, strong palm oil prices have been supported by expanding domestic biofuel mandates, such as Indonesia's move toward a B50 mandate, which expands domestic demand. In North America, potential expansion of year-round E15 and growth in renewable diesel production support demand, and recent announcements around additional soybean crushing capacity point to stronger domestic demand. As a result, we've seen stronger demand for grains and oilseeds tightening supply-demand balances versus earlier this year. Looking to the medium term, increased domestic demand in places like the U.S. should support grower economics and acreage. On weather, we've seen hot and dry conditions in multiple geographies, including Europe and parts of the U.S. Western Corn Belt. Consecutive weeks of reduced condition ratings in the U.S. provide potential downside to yields, and nutrient application rates were also down, which adds uncertainty because adequate nutrition matters for drought resistance. As we head into the fall, these tighter supply-demand balances and potential yield downside support a more optimistic view of agricultural economics and fundamentals.
There are no further questions at this time. I will now turn the call back to Jeff Holzman. Please go ahead.
Thank you for joining us today. The Investor Relations team is available if you have follow-up questions. Have a great day.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.