Oct 23, 2014
Executives
Denita Stann - VP, Investor and Public Relations Jochen Tilk - President & CEO Wayne Brownlee - EVP & CFO David Delaney - EVP & COO Stephen Dowdle - President, PCS Sales Joe Podwika - SVP & General Counsel Mark Fracchia - President, PCS Potash Paul De Kock - President, PCS Phosphate
Analysts
Joel Jackson - BMO Capital Markets Vincent Andrews - Morgan Stanley Mark Connelly - CLSA P.J. Juvekar - Citi Jacob Bout - CIBC Matthew Kom - Barclays Ben Isaacson - Scotiabank Jeff Zekauskas - JPMorgan Chris Parkinson - Credit Suisse Jonah Weisz - HSBC Bank Adam Samuelson - Goldman Sachs Kevin McCarthy - Bank of America-Merrill Lynch Brian MacArthur - UBS Mark Gulley - BGC Partners Andrew Wong - RBC Capital Markets Greg Barnes - TD Securities Steve Hansen - Raymond James Mike Henry - Cleveland Research Don Carson - Susquehanna Financial Tim Tiberio - Miller Tabak
Operator
[Technical Difficulty] I will now turn the conference over to Denita Stann, Vice President, Investor and Public Relations. Please go ahead.
Denita Stann
Thank you, Barrack. Good afternoon everyone and thank you for joining us.
Welcome to our third quarter earnings call. In the room with us today we have Jochen Tilk our President and CEO; Wayne Brownlee, our Executive Vice President and Chief Financial Officer; David Delaney, Executive Vice President and Chief Operating Officer; Stephen Dowdle, President of PCS Sales, Joe Podwika, Senior Vice President and General Counsel; Mark Fracchia, President of PCS Potash; and Paul De Kock, President of PCS Phosphate.
I’d like to welcome those who are listening in and remind people that we are live on our website. I would also like to also remind everyone that today’s call may include forward-looking statements.
These statements are given as of this date of this call and involve risks and uncertainties. A number of factors and assumptions were applied in the formulation of these 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. Today’s news release also is posted on our website, and includes a reconciliation of certain non-IFRS financial measures to their most directly comparable IFRS measures.
I’ll now turn the call over to Jochen for some comments and then we’ll go to questions.
Jochen Tilk
Thank you, Denita. Good afternoon and thank you for joining our call.
Today, we’ll recap our performance during the quarter, discuss what we see ahead for our company and most importantly talk about areas of focus for our management team over recent months. First to our performance in the third quarter, the most measures our third quarter results came in as expected.
We delivered earnings of $0.38 per share placing within our guidance range of $0.35 to $0.45 per share. This total slightly trailed last years with the key shift coming from weaker contribution from our offshore investments, higher financing cost and increased tax expense.
On a gross margin basis results improved with greater contributions from both potash and nitrogen. Our sales volumes and lower costs were the key drivers in potash.
Given stronger global demand, our volumes for the quarter surpasses last year’s total more significantly in the offshore market. It was a quarter constrained by availability of product and summer shutdown as opposed to market demand.
This environment contrasted sharply with last year’s third quarter when customers pulled in the range due to extreme market uncertainty. In terms of cost we continue to track favourably and remain on pace to achieve our targeted production of approximately $15 to $20 per ton from 2013 levels.
In nitrogen, all three margin variables contributed to our performance during the quarter, pricing improved as markets reflected healthy demand and in the case of ammonia constraint supply from the key exporting countries. From a volume stand point our strong operating performance resulted in additional available tonnage and lower operating cost.
This increase came despite gas interruptions at our Trinidad facility during the quarter which were greater than previously anticipated. Despite an improved pricing back drop our phosphate gross margin declined relative to 2013.
We face challenges on both volume and cost standpoint. Decreased volumes were largely attributed to the closure of our Suwannee River chemical plant in late July.
Our input cost were a factor but the biggest impact came from $20 million and other notable charges including adjustments to asset retirement obligations, higher water treatment cost and accelerated depreciation at Suwannee. We’re working diligently to improve our cost in phosphate and expect them to trend lower as we move forward.
The third quarter offered few surprises and as we look to the remainder of this year we believe the landscape is largely unfolded in potash. Global shipments were well underway to record levels anticipate to reach between 58 million and 60 million tons with both Canpotex and Potash Corp’s order books nearly full to the balance of the year.
As a result we have narrowed our 2014 potash shipment range to 9 million to 9.2 million tons with variability largely dependent on the timing and ability to ship product. Reflecting tighter supply demand dynamics, pricing in recent months has improved in all key spot markets providing us with a stronger base in 2015.
Despite this positive trend a heavier waiting of shipments to lower price contract markets will likely result in our average realized price moving lower to the fourth quarter. For nitrogen and phosphate our outlook is largely unchanged.
In nitrogen, we believe that a robust ammonia environment will be sustained through the fourth quarter and anticipate recorded nitrogen gross margin for full year 2014. And then phosphate the year has been challenging from both the production earnings perspective.
That said through the final quarter we see the potential for margin expansion as we benefit from higher realized prices and an improving cost position. Due to the combination of these factors we are raising the lower end of our full year 2014 earnings guidance range now anticipated to be $1.75 to $1.85 per share.
As we move into the fall, I think it’s clear that investors has shifted their focus beyond the current year and are now looking to weatherways (ph) in 2015 and beyond. The questions I get from our shareholder suggest likewise with the main questions being what will happen to your business at today’s crop process, what is the outlook for potash in 2015 and where do you see the greatest opportunities for potash.
While we don’t provide formal earning guidance for 2015 until January I’ll provide you with some context as we look ahead. The crop price environment has received no shortage of attention lately.
There is no disagreement that crop prices are an important factor in farmer’s decisions and recent weakness can create headwinds for all agricultural products but it’s important to remember that farm fertility is rooted in science and three tremendous geographic and crop diversity throughout our customer base. We believe these factors help to insulate the fertilizer business to a degree.
But we expect lower farm profitability still has the potential to impact demand in certain regions. We also believe crop pricing remains with a band within the band that is supportive of farmer economics and fertilization.
As a result, we anticipate the global potash demand will be similar to 2014 levels. After big year North America for planting some potash demand we expect a modest decline in 2015 given the potential loss of some marginal acres and application rate reductions.
In Brazil, we believe growers unlikely to significantly change potash application rates given the nutrient efficient soils. What could hint a growth in 2015 is the possibility of less acreage expansion which has supported year-after-year of record Brazilian consumption.
Even though these challenges are real farmers in these regions generally strong balance sheet after number of years of robust earnings. Importantly, we believe this provides stability to maintain the productivity of their land even in a lower crop price environment.
In terms of markets where we anticipate improvement we look to China and India. In China, our confidence is rooted in encouraging consumption trends particular from compound fertilizer which is what we've seen throughout this year.
While India certainly remains a difficult market to forecast we believe the country’s consumption is more likely to improve then take a step back ward. Similar to China our views are grounded in encouraging consumption trends through the recent months even with no changes in its fertilizer subsidy.
With the government sensitized nutrient use in balance we could see upside in the years ahead. When we consider the likely scenarios for 2015 we believe 2014 provides important context.
I only need to rewind back when I was first being considered for the CEO role early in this year. At that time I asked a number of people what could 2014 look like for the potash industry.
There was a common theme in their responses demand of approximately 56 million in a significantly over supplied market leading to a higher level of price uncertainty. Fast forward today and while these constraining factors remain valid it’s interesting to see how the year is actually unfolding.
First even with a weaker crop pricing environment observed in prior years potash demand has been more responsive than anyone anticipated. While nutrient requirements (inaudible) this outcome we also believe that improved nutrient affordability played a role.
Second, industry operation and capability has been below what could have been expected; it’s a reminder that mining can be a challenging business as we saw in the third quarter. And finally, these factors contributed to potash prices quickly finding a bottom to the early part of the year and subsequently improving in nearly all major spot markets.
While admittedly the synopsis does not provide a crystal ball for 2015 it does give us improved confidence the potash fundamentals remain supportive. Importantly, we think it plays well into potash’s crop strength.
Part of our strategy is to ensure we can respond if the potash market has greater depth, while maintaining an optimized cost profile. Given our flexibility, we believe Potash Corp is best able to do this.
You should expect that our operation capability will move higher next year. This does not mean that we are going to push volumes into market without the demand to support it.
We are, however, focused on ensuring that we can better respond to our customer's need, which to be honest posed some challenges for us in 2014. This optimization process is more than just a year-to-year exercise that you would expect our management team’s focus, as you would expect our management team’s focus is on the long-term.
We are committed to finding ways to better leverage our strengths, continually improve our competitive position and explore opportunities that maximum long-term share and value is created. While this might sound a bit generic, I can assure you that it's backed up by many specific projects.
Now, management team has an active agenda to update or bid a concrete plans in each area to move the company forward. And the time you make sense.
For the last 10 years this company has been building a platform for tomorrow. Today, we are focused in optimizing our position to best deliver on our potential.
First and foremost, this is a competitive market and we need to ensure we have the right plans in place to balance flexibility and cost at each of our sites. This involves continuous improvement, making smart decisions about how we position our assets and the potential operational capability waiting under wings.
But it's also about proactively looking at opportunities across our entire business, whether it's finding ways to better serve our customers or how we return free cash flow to our shareholders that is all included. With that, you can see well retention is focused, and we look forward to speaking more to these points as we move forward.
I thank you for your time and attention today. Our management team will be happy to address any question you may have.
Thank you.
Operator
Thank you. Ladies and gentlemen, we will now conduct the question and answer session.
(Operator Instructions). Your first question today comes from Joel Jackson of BMO Capital Markets.
Please go ahead.
Joel Jackson - BMO Capital Markets
Thank you. So give me some commentary that you do expect similar Potash demand in 2015 as 2014?
You also had some commentary recently that you would increase production by may be a couple million tons next year. So do you envision on gaining market share in next year or do you envision prices going down?
Some of these issues we saw this year from Agram and others, they're going to have probably more capacity next year. So just wanted your thoughts on all that please?
Jochen Tilk
Yes. Just thanks for the question.
Just want to differentiate between operation capability and production. And what we said is, that our operations capability has gone up and that doesn't mean production will go up, so just wanted to clarify that.
And to your second part -- or the second part of the question, whether I believe that's an increasing global consumption or whether market share, I think that's kind of incorporated in the response of the first answer.
Operator
The next question comes from Vincent Andrews of Morgan Stanley. Please go ahead.
Vincent Andrews - Morgan Stanley
Thanks. And sort of really follow-up on that.
Could you just talk about in the flexibility you have between operational capacity and in production, what's the lee time as we think about 2015 where you sort of have to pull the trigger to sort of increase your production in a meaningful way to take advantage of opportunities in the market in 15'? So is it a decision you have to make in the first half of the year or is it something that you could even do with a quarter advance notice?
Jochen Tilk
Yes. No.
We obviously, think about that all the time and we certainly think about in planning ahead for 2015. And I can tell you part of the -- and when we came back, even the first question is about incremental operations capacity or capability is really to address that.
We have looked at the lee time and cost would take to bring that capacity on line. And for a certain amount we certainly want to be ready to go, if the market provides that opportunity.
Beyond that there might be a long lee time, but this is a longer term proposition. And so, what we have done, we looked at what we expect 2015 to be.
We looked at our capacity and flexibility that we would like to have, we looked at that in a context of a best and optimized cost portfolio and we're prepared for that. And then, production is another issue.
And then, we'll see what happens next year. But we have that flexibility incorporated.
Operator
The next question comes from Mark Connelly of CLSA. Please go ahead.
Mark Connelly - CLSA
Thanks, Jochen. I wasn't really sure what you were saying about U.S.
dealer activity. On the one hand, they see new buying but on the other they want to keep inventories low and we have got late applications.
So I wonder if you could sort of walk us through the next six months rather than just next three.
Jochen Tilk
In the next six months, the lie heading terms of what the markets deliver Mark? Just to clarify your question.
Mark Connelly - CLSA
What dealers are doing and how quickly you expect product to move? And are they going to move into the beginning of the year with inventory or where are they trying to stay short?
Jochen Tilk
Well, I'm -- absolutely. I'll turn it over to Stephen and say, I just want to make the one point that, in terms of inventory even though clearly there is ups and downs in adjustments for the peak into going forward.
And in 2015, we wouldn't anticipate inventory moves adjusting, but be a major factor so that as a broader statement, but in terms of the next six months and some of the detail, Stephen?
Stephen Dowdle
Okay. Yes, Mark.
Right now, the mood in the market is really one of securing supply. We are -- just finishing the harvest.
Should make a lot of good progress this week on harvest and we'll immediately get into our fall application period. And the supply chain is still very, very empty.
And dealers are very focused on getting the suppliers what they needs for this application window. We did come out with our winter fill price and we have had very good response to that price, because as we look forward into the New Year and into the spring given the experiences that we've had with some of the logistics challenges that we've had, the dealers understand that they can't sit on the side lines and inventory, whether they have an inventory or not have an inventory, that's not really the discussion right now.
The discussion is to ensure that they were going to have the supplies in place, in time for the application window.
Mark Connelly - CLSA
Okay. That's very helpful.
Thank you.
Operator
The next question comes from P.J. Juvekar of Citi.
Please go ahead.
P.J. Juvekar - Citi
Yes. Hi.
You focused a lot on Potash, but your nitrogen gross profits are now approaching that of Potash. So was wondering, if you can talk about your nitrogen strategy and how do you want to grow that business?
Jochen
Yes. You, thanks for the question.
And we pointed out that nitrogen is currently anyways (inaudible) about a third of our gross margin, most of that is margin related. In terms of our strategy going forward obviously, we are very pleased where the nitrogen and ammonium market has been heading.
And we are looking at our assets; we're looking at running them well. We're ensuring that we've got maintain on geographic advantages that we have, we clearly have in terms of market accessibility.
We're looking at maintaining our cost profile. We are some of the most competitive producers.
And we are looking at possibilities of organic growth, which means the lowest dollar per ammonia production goes then, you can look at because obviously you already have a plant to work with. And those are the three areas that we are looking at and trying to really maintain our current portfolio with those potential improvements and this is not just a forward looking thing, this is something that our team has been doing for quite some time.
I'll turn it over also to David Delaney our Chief Operating Officer and you can put a bit more color on that.
Tilk
Yes. You, thanks for the question.
And we pointed out that nitrogen is currently anyways (inaudible) about a third of our gross margin, most of that is margin related. In terms of our strategy going forward obviously, we are very pleased where the nitrogen and ammonium market has been heading.
And we are looking at our assets; we're looking at running them well. We're ensuring that we've got maintain on geographic advantages that we have, we clearly have in terms of market accessibility.
We're looking at maintaining our cost profile. We are some of the most competitive producers.
And we are looking at possibilities of organic growth, which means the lowest dollar per ammonia production goes then, you can look at because obviously you already have a plant to work with. And those are the three areas that we are looking at and trying to really maintain our current portfolio with those potential improvements and this is not just a forward looking thing, this is something that our team has been doing for quite some time.
I'll turn it over also to David Delaney our Chief Operating Officer and you can put a bit more color on that.
David Delaney
Operator
The next question comes from Jacob Bout of CIBC. Please go ahead.
Jacob Bout - CIBC
Good afternoon. Just maybe give us some comments on balancing growth and returning cash to your shareholders.
You got your CapEx rolling off in 2015. We should be seeing some better free cash flow.
How do you view growth in the potash division?
Jochen
Yes, Jacob, thanks. That’s obviously top of our minds as we look at that.
And consistent with analysis that you would expect we’re looking at exactly how hard that will look like in the coming years. And then we’ll look at the opportunity.
So it is on top of our minds and you should expect updates going forward on that matter. When that is (inaudible) I really don’t want to comment on it but we look at that as an opportunity to return capital and allocate capital to shareholders.
Tilk
Yes, Jacob, thanks. That’s obviously top of our minds as we look at that.
And consistent with analysis that you would expect we’re looking at exactly how hard that will look like in the coming years. And then we’ll look at the opportunity.
So it is on top of our minds and you should expect updates going forward on that matter. When that is (inaudible) I really don’t want to comment on it but we look at that as an opportunity to return capital and allocate capital to shareholders.
Operator
The next question comes from Matthew Kom of Barclays. Please go ahead.
Matthew Kom - Barclays
Good day everyone, thanks for taking my question. I’m interested what would be your position as far as Canpotex parallels your position.
Is there primary reason why there should be an increase in Asian benchmark contract pricing this next year particularly China or would it be reference spot price, inventories, what would be the brunt of your argument today?
Jochen
Stephen, you want to take that question?
Tilk
Stephen, you want to take that question?
Stephen Dowdle
Yes, Matthew, the way we look at our prospects going forward we have experience now particularly through this year and with the recovery in demand and the growth in demand. We saw potash prices really bottom out and we’ve seen quite a bit of price momentum in the markets and particularly in the spot markets.
So as we look forward to new contract settlements whether they be in China or India or Japan or Korea, the expectation is that that price momentum that we’ve seen in the spot markets would also flow through into the contract market.
Operator
The next question comes from Ben Isaacson of Scotiabank. Please go ahead.
Ben Isaacson - Scotiabank
To the best of your ability can you give a one or two-year outlook for these logistics constraints that we’re seeing in North America? How are you planning for it?
How are distributors planning for it? What is difference with respect to PotashCorp and Canpotex?
And then just maybe a quick clarification on a previous answer you gave. If PotashCorp raises operational capability to let’s say 11 million tons but you only produce 9 million, which would be in line with this year, how would that impact your cost profile?
Thank you.
Jochen
Yes, I will take second part first and then we can elaborate on that one. Obviously the objective is that it has the least or minimum impact.
So that’s the outcome. And if you look for a quantification how that would have impacted I don’t think we’ll give you that guidance or we can’t give that to you but the objective is to have as much operational capability with a minimum impact on our cost.
Second question on logistics, the question was the constraints that we anticipate. So clearly there are challenges that we’ve experienced and the railroad companies experience bottlenecks weather conditions and just to kind of frame the outlook, we do anticipate some of those constraints will continue.
We don’t believe that will be entirely resolved in the coming years because some of them are systemic, they are related to congestions, they’re related to bottlenecks. But just to give you an outlook of what we’re doing to deal with that, I mean, first of all recognize that and as a first step we’re working with the rail companies that we do business with obviously two Canadian ones and the ones in United States.
We spend a lot of time with the working through those issues. We made clear that what we can do in terms of addressing it.
There’s a couple of things we can do at the operations. There are things the way trains are moved as unit trains.
We have the ability to store, we’ve got our hubs. Some of you are aware that we’re now in construction building a hub Hammond and that will give us further operational flexibility.
It will actually accomplish two things; it’s a switch for the trains. So it’s a debottlenecking opportunity and then secondly it has some storage capacity for us.
So it’s a possibility for us to move material through that and store it in the interim. So those are the things that we have done.
We’ve also put additional railcars which is a significant order. We realized that the potential shortage of hopper cars could be an issue, so we have made clear and sure that we at PotashCorp, also Canpotex has sufficient railcars hopper cars that can move our product and we’re not running any issues there.
So overall I would qualify that we’ve done as much as we can to mitigate that and we continue doing more things and working with railroads to ensure that those constraints for movements are mitigated. Stephen, I don’t know if you wanted to add anything more to that?
Tilk
Yes, I will take second part first and then we can elaborate on that one. Obviously the objective is that it has the least or minimum impact.
So that’s the outcome. And if you look for a quantification how that would have impacted I don’t think we’ll give you that guidance or we can’t give that to you but the objective is to have as much operational capability with a minimum impact on our cost.
Second question on logistics, the question was the constraints that we anticipate. So clearly there are challenges that we’ve experienced and the railroad companies experience bottlenecks weather conditions and just to kind of frame the outlook, we do anticipate some of those constraints will continue.
We don’t believe that will be entirely resolved in the coming years because some of them are systemic, they are related to congestions, they’re related to bottlenecks. But just to give you an outlook of what we’re doing to deal with that, I mean, first of all recognize that and as a first step we’re working with the rail companies that we do business with obviously two Canadian ones and the ones in United States.
We spend a lot of time with the working through those issues. We made clear that what we can do in terms of addressing it.
There’s a couple of things we can do at the operations. There are things the way trains are moved as unit trains.
We have the ability to store, we’ve got our hubs. Some of you are aware that we’re now in construction building a hub Hammond and that will give us further operational flexibility.
It will actually accomplish two things; it’s a switch for the trains. So it’s a debottlenecking opportunity and then secondly it has some storage capacity for us.
So it’s a possibility for us to move material through that and store it in the interim. So those are the things that we have done.
We’ve also put additional railcars which is a significant order. We realized that the potential shortage of hopper cars could be an issue, so we have made clear and sure that we at PotashCorp, also Canpotex has sufficient railcars hopper cars that can move our product and we’re not running any issues there.
So overall I would qualify that we’ve done as much as we can to mitigate that and we continue doing more things and working with railroads to ensure that those constraints for movements are mitigated. Stephen, I don’t know if you wanted to add anything more to that?
Stephen Dowdle
I think that really covers it. It’s really about communication and it’s both with the railroads obviously but it’s also with our customers.
Our customers do understand the need for planning and like I said previously we do believe they’re really now more focused on understanding that logistics is a huge part of their business and planning and communication is extremely important to make sure that the product is at the right place at the right time.
Operator
The next question comes from Jeff Zekauskas of JPMorgan. Please go ahead.
Jeff Zekauskas - JPMorgan
PotashCorp owns minority stakes in various potash companies throughout the world. Would it ever make sense to monetize any of those interests or is that something that you consider more now than you did in the past?
Jochen
Thanks for the question. I think again to qualify my response, I think PotashCorp has always looked at opportunities either to monetize those investments or even expand on that which was very much driven by the objective value creation.
And going forward is exactly the same process that we can essentially all the time look at them. Things change on any of those investments whether it’s the countries in which they operate, whether it’s a markets say and the access.
And as those changes are happening we’ll look at that what that might change in terms of our philosophy toward them. In principal we consider them as investments that over time have to create value for us.
If they are pure investments we’ll consider our options, if there is something that we can do to ensure that we get an expected return or can expand on them, we’ll look at those options. And I do that with a team now, the team has done it in the past, will continue doing that.
And if we ever make a decision in regards to any of them, of course then, we’ll communicate them in the right process.
Tilk
Thanks for the question. I think again to qualify my response, I think PotashCorp has always looked at opportunities either to monetize those investments or even expand on that which was very much driven by the objective value creation.
And going forward is exactly the same process that we can essentially all the time look at them. Things change on any of those investments whether it’s the countries in which they operate, whether it’s a markets say and the access.
And as those changes are happening we’ll look at that what that might change in terms of our philosophy toward them. In principal we consider them as investments that over time have to create value for us.
If they are pure investments we’ll consider our options, if there is something that we can do to ensure that we get an expected return or can expand on them, we’ll look at those options. And I do that with a team now, the team has done it in the past, will continue doing that.
And if we ever make a decision in regards to any of them, of course then, we’ll communicate them in the right process.
Operator
The next question comes from Chris Parkinson of Credit Suisse. Please go ahead.
Chris Parkinson - Credit Suisse
You mentioned in your release you expect potash demand in China and India to remain stronger in 4Q relative to some other areas. Can you just give us a little more color on what percent of the contracts plus options you filled year-to-date or are you expect in 4Q just any color there will be appreciated?
Thank you.
Jochen
Yes, thanks for the question, Stephen, I don’t know if you.
Tilk
Yes, thanks for the question, Stephen, I don’t know if you.
Stephen Dowdle
Yes, with regards to China we’ll complete the shipments against our contract to China during the fourth quarter; with regards to our shipments to India they are basically completed. So and with regards to the demand in both of those countries, the agriculture there is different than in a lot of other places in that both of these countries share the challenge of providing food and food security for a huge, huge population, and they don’t respond in the same way that other markets do to world commodity prices.
They’re really focused on the challenge that they have. We have seen in both countries really a resurgence in demand their growing demand for the compound fertilizers and in both cases they are addressing nutrient imbalance and in both cases this is going to the growth of compound fertilizers is going to benefit potash because it’s probably the most effective way to bring a balance to formula to the growers rather than relying on farmer education to understand the need for balanced fertilization.
So we see this trend continuing into 2015 and that's really the basis of our optimism for the growth in consumption that we've seen in 2014 to continue into 2015.
Operator
The next question comes from Jonah Weisz of HSBC Bank. Please go ahead.
Jonah Weisz - HSBC Bank
Yes, good afternoon. May I ask you about offshore spot markets, in Brazil after massive purchases this year can you discuss may be what the sentiment is there, are distributors there very and how much inventory they may be holding?
And in Southeast Asia, which I guess could be the last battle ground for potash prices in the world, there I think has been large tender activity during October. I’m wondering if you could relate how successful they were in terms of demand in the pricing terms of momentum in Malaysia and Indonesia.
Jochen Tilk
Yes, Jonah, with regards to Brazil right no w or in the planting season and it’s interesting that the current projection for planted areas to soybean are about 31.5 million hectares which is up about 5% compared to last year. So that's an indication that the growers there are still feeling quite confident about the prospects for agriculture and soybeans in particular.
We have seen potash imports from January through September of 7 million tons and if you look at the fourth quarter over the past three years the average volume of imports has been 1.6 million tons. So it’s pretty clear that we would expect that total imports in this 2014 will exceed 8 million tons.
We do, however, expect that this fourth quarter we may see something below what we've seen as an average in the last three years and that would be really concerning the outlook for the corn and the superior corn planting. Right now, the projections for superior corn is about 15 million hectares which is down about 5% from last year.
So there is an element of caution about corn and we would expect that that would be reflected in Q4 volumes for potash imports but it would also mean that the importers are managing their expectations and would not be expecting to accumulate yearend inventory as we go into 2015. With regards to Malaysia, yes, we are in the tender season right now, tenders have been called.
The results typically don’t come out until maybe the end of November, early December because there is whole process of negotiations that go on. So we really don’t have any price discovery with regards to the current tenders, but overall the demand for the, in the oil pump sector remains good, the CPL prices are still at very profitable levels.
So we don’t really anticipate any significant change in potash consumption in both Indonesia and Malaysia.
Jonah Weisz - HSBC Bank
Thank you.
Operator
The next question comes from Adam Samuelson of Goldman Sachs. Please go ahead.
Adam Samuelson - Goldman Sachs
Yes, thanks, good afternoon. Maybe following up on the last kind of discussion point the outlook for 2015 calls for maybe a bit more caution on demand growth in North America, a little bit more caution on the commentary in Brazil.
And I presume although this wasn’t explicit may be not expecting significant growth in Europe, and those have comprised the major granular markets in the world and wondering if you could comment on the outlook for granular demand growth versus standard in 2015 and how demand decline on the granular side would ease some of the tension that you saw in 2014 particularly in the first half?
Jochen Tilk
Yes, let me confirm that your assessment on U.S. Brazil and implicit Europe is right on and that we see being flat with some caution that Stephen pointed out and then the growth opportunity for next year modestly but somewhat improved in China and India.
Good question on the split on granular versus standard, and Stephen, if you just want to elaborate on that a bit more.
Stephen Dowdle
Yes, Adam, that would be a reasonable expectation to see a little higher growth rate in the standard grade compared to the granular, but that's not a difficult situation. The other situation is more difficult where you have higher growth in granular than standard because then you may be constrained by compaction capacity.
To meet the growth in standard is the much easier issue than the other way around. And you pointed out the three large granular markets Europe, North America and Brazil, but there is also other markets in Latin America, also in Asia where granular demand we – actually expect to see increases in granular demand in these markets.
So we don’t see any significant imbalance, if you will, between granular and standard but your assessment is likely correct we may see a little bit more robust standard demand next year.
Jochen Tilk
And I think, Stephen, it’s fair to say that over the long term we really look at our granular capacity and wanted to be sure that, that we’re well suited for us because there was another revelation of this year 2014 where we saw granular being short. And so operationally clearly looking forward in the long term we’re going to be sure that that's well addressed.
Adam Samuelson - Goldman Sachs
Thank you.
Operator
The next question comes from Kevin McCarthy of Bank of America-Merrill lynch. Please go ahead.
Kevin McCarthy - Bank of America-Merrill Lynch
Jochen, what are your thoughts regarding potential for M&A or lack thereof? There’s obviously been a fair amount of public discourse as it relates to potential for consolidation in the nitrogen fertilizer industry in recent weeks.
How do you think about buy versus build and is it -- there a meaningful chance that M&A would compete for capital versus returning cash to shareholder in your view?
Jochen Tilk
Yes, thanks. We generally wouldn’t and I am not going to for clarity comment on any specific M&A activity or something in that regard but philosophically happy to share some thoughts with you.
I mean first of all, on nitrogen I believe you are specific on that subject just given some of the past activity recent activity that had precipitated. I think really would like to echo David’s comments, his summary of all the activities that we’re doing and I think it was a clear reflection on our overall philosophy that's really looking our assets our expansions that we've gone through opportunities that we might have ahead and we got some incremental capacity that really has come to fruition under the current price and prices that we saw this year and it’s really a help to support our gross margin.
And philosophically can assume that's the path going forward. So rather than looking at a grand M&A philosophy its really more on a organic growth and building opportunities from within.
Operator
The next question comes from Brian MacArthur of UBS. Please go ahead.
Brian MacArthur - UBS
Good day. Can you just tell me when you foresee doing your Rocanville Canpotex run and just remind me when you do that do you actually have to demonstrate over what it is the 90 days that you can do the full 5.7 or 6 million tons or do you just have to do the incremental so that you could offset it with the other part of Rocanville?
Jochen Tilk
Yes, kind of missed the first spot I respond to the second part. And so we have to demonstrate the full capacity so we have to run the asset at its full capacity for that 90-day period to demonstrate our allotment and earn I guess our allotment in Canpotex.
As to the timing, we expect that to be sometime in 2016.
Brian MacArthur - UBS
Thank you.
Operator
The next question comes from Mart Mark Gulley of BGC Partners. Please go ahead.
Mark Gulley - BGC Partners
Hey, good afternoon. I want to go back to an earlier comment talking about the fact that China and India demand ought to be pretty solid next year.
You talked about the need for food security India did cut back significantly on both PNK for several years. So it looks like in that time period food security was trumped by something quite different.
So I'm wondering in that context why do you expect India will change and perhaps when, if they will, change when that might happen?
Jochen Tilk
Yes, really good point. I’ll say a few things about that and then Stephen jump in any time.
So when you look at the dramatic change in 2007 which is really hard to explain on the way as you ask the question because on the basis of food security it would not have been a sensible one on the concept of subsidies and it is understandable why what happened why consumption went from 6 million to less than half. What has changed really is a bit of a evidence in more recent times we've seen and I said that in my introductory comments we've seen potash imports have gone up in the last three months it’s been higher than what we have seen.
Those are not in itself pieces of evidence where you could say things are fundamentally changing but we look at it as a small indicator of a trend, and I think the way we qualify it is in conjunction with a sensible approach in conjunction with some of the evidence that we have seen. And by the way sensible approach food security is part of that.
We are somewhat optimistic that going forward we see the trend in the right direction. And I think just repeating words I said rather than the step backward we see it as more of a trend an upwards trend going forward.
So Stephen, I don’t know if you’d like to add something to that.
Stephen Dowdle
Well in India the fact or the matter is that there is tens of millions, hundreds of millions of people that don’t have food security. We've been in last several years where there has been a significant deterioration the imbalanced use of nutrients.
We have the fertilizer industry themselves in India have been lobbying the government to address this problem. We have -- compared to yields that are achieved even in comparable countries like China, India is lagging far behind.
So the industry is aware that there is a problem with the imbalance use of nutrients. And of course potash is the number one nutrient that has suffered the most on this.
And as we look even this calendar year year-to-date we've seen urea imports decrease by 38% we've seen DAP imports decrease 28%, yet, we’re seeing potash imports increase by 36%, and we do believe that this is momentum. We believe that the deterioration of potash consumption has hit bottom and is now increasing as more and more people are discussing this issue.
And we do have a new government or there is a new government in India now. And as we look forward to the new fiscal year in India that begins in April there is a lot of speculation that fertilizer subsidies will be changed and there will be an effort to address this nutrient imbalance.
Operator
The next question comes from Andrew Wong of RBC Capital Markets. Please go ahead.
Andrew Wong - RBC Capital Markets
Hi, thanks for taking my question. So I just want to touch on the capital allocation and the dividend again.
With respect to the peer level and the timing could you just provide some insights into any criteria or benchmarks or maybe scenarios that you look at to guide your thinking?
Jochen Tilk
Yes, obviously and I don’t mean to be avoiding your and in the previous question but obviously we’re not in the position to speak specifically without any form how we return capital to shareholders. And what I'm suggesting is that we’re looking at it.
Just a couple of things we've raised the dividend 950% since 2011. So it’s been a massive increase in the dividend.
We are obviously expecting capital to line down our guidance for a sustaining capital going forward is $600 million to $800 million versus our current capital program somewhere in t neighborhood of $1.2 million. So clearly there is incremental cash that is available for our location.
How we do that most effectively is function of a number of things. Obviously, as you compare things like growing the dividend, share buybacks, one-time dividends and these things that all available to return capital we’re looking at that what makes more sense in the context of our expectation, how we look at our P&L and balance sheet, what our share prices at point in time and those are criteria and they’re relatively generic I mean it’s not rocket science to evaluate.
And as we finish that evaluation as we complete there is lots of internal discussions that will have take place and then we obviously will and seek to communicate what the outcome of that is.
Andrew Wong - RBC Capital Markets
Thanks.
Operator
The next question comes from Greg Barnes with TD Securities. Please go ahead.
Greg Barnes - TD Securities
I think you touched on the supply chain in North America being very tight and I think you said Brazil you don’t anticipate them to build inventories but what about elsewhere is this punching tight elsewhere in South East Asia or areas beyond that?
Jochen Tilk
Yes, Stephen, why don’t you talk about t supply chain?
Stephen Dowdle
We are certainly seeing the spot markets for a standard grade material which where markets that were under the most pressure as we began the year. We've seen those markets show some strength in terms of pricing.
We believe that that is a reflection of the tighter supply and demand situation. So as we look in the fourth quarter some producers are taking some maintenance shut downs.
There is nothing really that's visible to us that is indicating that we’re going to end the year with significant inventory build. And market-by-market there may be some changes but overall just judging from our own position, we know that as Potash Corporation we’re going to end the year with very low producer inventories and it wouldn’t surprise me if other producers that are in similar situation.
Operator
The next question comes from Steve Hansen of Raymond James. Please go ahead.
Steve Hansen - Raymond James
Yes good morning. If you could provide us with your outlook regarding the Trinidad gas supply into ‘15 and ’16?
And perhaps more specifically what kind of milestones you’re working toward there or at least looking for from the government in terms of future gas supply availability?
Jochen Tilk
Yes, we’ll do that obviously we've seen (inaudible) greater than this year what we had initially expected and that certainly shapes out beautiful next year as well. David (ph) you have some more detail on that situation.
David Delaney
Yes Stephen really what’s been driving the inadequate supply the last four years was the lack of exploration in ‘08, ‘09 and we’re still paying for that. The current government has been trying invigorate that and they’ve done a decent job in the last two years and we will see some new production.
The Starfish Field will open up in December and that's about 200 mcf a day 200 mcf a day. So depending well depletion we’re anticipating more availability in 2015 just to explain the requirements, the daily requirements for natural gas for all consumers in Trinidad is about 4.1 bcf a day.
In the last three or four years, they’ve lost any buffer and then ride around 3.8, 3.9. So the Starfish Field, if it does comes up in December and it does prove out to be 200 mcf a day that should and it does prove out to be 200 mcf a day.
That should spell more gas supply. This year we were anticipating losses of probably 100,000 tons; it was 231 last year but it looks like the second half that will go up to about 220,000 tons on an annualized basis.
My best guess today is we’ll probably still lose 100,000 to 200,000 in 2015 and we fill with this increased exploration that 2016 should be better but we will wait and see. We’re very disappointed in how things had turned out here in the second half of 2014.
Steve Hansen - Raymond James
Thank you.
Operator
The next question comes from Mike Piken with Cleveland Research. Please go ahead.
Mike Henry - Cleveland Research
Hi this is Mike Henry in for Mike Piken. I was just, had a quick question on kind of where you guys are with respect to delivering product that was ordered during the summer fill season?
Thank you.
Jochen Tilk
On the summer fill, yes. Steve?
Stephen Dowdle
Yes, we expect that, that product will for the most part by the end of November will be completed.
Mike Henry - Cleveland Research
Okay. Thank you.
Operator
The next question comes from Don Carson of Susquehanna Financial. Please go ahead.
Don Carson - Susquehanna Financial
Yes, thank you. Want to go back to your potash outlook where you give us your volume outlook for next year.
Really two questions related to that, what are your price assumptions around getting flat volumes next year, and particularly the U.S. market where you’re talking about some down demand or have additional granular supplies if Agrium can get it together.
Do you see that North American premium declining somewhat versus off shore markets in order to give you a flattish to higher price globally?
Jochen Tilk
Yes, so we wouldn’t share our price assumptions for next year when we gave the outlook. So that detail we cannot give you.
In terms of the assessment of market and how the potentially incremental production of granular could have an impact on the U.S. market.
I don’t know Stephen if you wanted to give a bit of a perspective on that.
Stephen Dowdle
Sure, ultimately price developments during 2015 will be determined as they usually are by market supply and demand dynamics. As we look at 2015 and we look at what we can expect, we certainly don’t predict the future nor do we try to change the past.
But we do believe that we are in a much more let’s say positive environment than we were in the late ‘90s and early 2000s where corn prices were hovering around $2 a bushel and even during those days potash consumption was steady and we even saw some modest growth. We expect -- our expectations for 2015 are really primarily based on the affordability potash.
We expect that potash cost will be around 3.5% of projected corn revenue and this is assuming a corn price of around $3.50 a bushel and this is right in-line with the 10 year average. Today, framers can lock in December $15 corn above $4 a bushel.
And while we expect there may be a reduction in planted acres next spring for corn we believe that these will be more marginal acres and therefore the overall reduction in potash consumption will likely not be significant. We also believe that the demand response to lower corn prices is not fully factored into the market right now.
The bumper supply that we see today is fully factored into the market we believe. But the USDA is still projecting corn exports to decline 9% year-over-year, and we have seen no evidence of this in the new corn marketing year as exports have been quite firm compared to last year.
And so it would not surprise us if USDA revises their export expectations upwards. And then speaking about a bumper crop, farmers understand that this crop has removed a record amount of nutrients from the soil which need to be replenished, and they also understand that when crop prices are squeezing margins higher yields are even more critically important to their profitability.
Jochen Tilk
Thanks, Stephen. I just wanted to be sure there was another component to your question in terms of – potential increment on capacity coming in on the domestic market.
Just knowing the quantum talking about million tons and not wanted to discount it either but and I'm not going to comment on the certain to uncertainly or where or not that will actually happen. But we think really in the grand scheme of things it not significant enough to make a fundamental difference whether to hold market share or whatever price environment we expect.
So while we certainly are aware of it and don’t dismiss it but don’t think it makes a big difference in our look for market share and pricing.
Denita Stann
Rock, we’ll have time for just one more question.
Operator
Okay. Thank you.
Our last question today comes from Tim Tiberio of Miller Tabak. Please go ahead.
Tim Tiberio - Miller Tabak
Good afternoon, thanks for taking my question. Your phosphate volumes are down I guess almost 21% due partially to operational issues.
I guess just as a house keeping question, do you expect CCS to be back to full capacity in 2015 on the phosphate side?
Jochen Tilk
Yes, we’ll -- thanks for picking up on that and I already alluded to the activities that aren’t taken. You’re quite correct that we had a challenging year in phosphate in our mines and that had an impact on production in cost.
I’ll turn it over to David and he can talk a little bit more about where we expect to return to and the activities that we’re undertaking.
David Delaney
Yes, this has been kind of a turnaround year transformation year in phosphate group. We announced in December that we would be closing our Suwannee River chemical plant August 1; we completed that, that we are only running Swift Creek where we transition their low mag product which is our high quality liquid product for North America over to Swift Creek that is up and running these months.
So our plan next year at White Spring facility would be to run right around between 500,000 , 550,000 tons of P205; at Aurora we’ll likely run between 1.1 million ton and 1.2 million ton. So that would be our new run rate at both sides.
We taken out about between 200,000 and 300,000 P205 through this transition and that will be what we’re doing, going forward.
Denita Stann
Thank you very much everyone. We appreciate your time today.
And if you have any further questions don’t hesitate to give us a call at the office. Have a great day.
Operator
Ladies and gentlemen, this concludes the conference call for today. Thank you for participating.
Please disconnect your lines.