Good morning, ladies and gentlemen and welcome to The Mosaic Company’s Third Quarter 2020 Earnings Fireside Chat. At this time, all participants have been placed in a listen-only mode. After the Company completes their prepared remarks, the lines will be open to take your questions. Your host for today’s call is Laura Gagnon, Vice President, Investor Relations of The Mosaic Company. Ms. Gagnon, you may begin.

Thank you and welcome to our third quarter 2020 earnings call. Presenting today will be Joc O’Rourke, President and Chief Executive Officer; Clint Freeland, Senior Vice President and Chief Financial Officer; and Rick McLellan, Senior Vice President, Commercial. We will host a prepared question-and-answer session addressing the questions received last night, followed by a short live Q&A session, time permitting. All of our earnings materials released yesterday after market closed are available on our website at mosaicco.com. We will be making forward-looking statements during this conference call. The statements include, but are not limited to statements about future financial and operating results. They are based on management’s beliefs and expectations as of today’s date and are subject to significant risks and uncertainties. Actual results may differ materially from projected results. Factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release issued yesterday and in our reports filed with the Securities and Exchange Commission. We will also be presenting certain non-GAAP financial measures. Our third quarter press release and performance data attached as exhibits to yesterday’s Form 8-K filing, as well as our commentary on the quarter posted to our website also contain information important on these non-GAAP measures. Now, I’d like to turn the call over to Joc. Joc O’Rourke: Thanks for joining us today for our quarter three 2020 question-and-answer session. Before we get started, I would like to emphasize our key points from our quarterly earnings report. First, we’re realizing the benefits of our extensive cost transformation work. Gross margin for the quarter was 27% compared with a year ago, despite essentially flat fertilizer prices. Secondly, agriculture and fertilizer markets around the globe are strong and improving. Phosphate prices are up substantially, while potash prices are stable. We expect global supply and demand to remain tight in all of 2021. And third, our balance sheet continues to strengthen. We have repaid all the short-term debt we borrowed to be prepared for COVID impacts, and the business is generating substantial cash. Now, we’ll get to your questions. Laura?

Joc, I’m going to try to go through the most frequently asked questions fairly rapidly to allow time for follow-up questions after. The largest number of questions we received last night related to phosphates markets and the countervailing duty petition. PJ Juvekar from Citi, Joel Jackson from BMO, and Adam Samuelson from Goldman Sachs are all asking about the impact of trade flow shift. How much premium has been built into the U.S. phosphate prices from the absence of Moroccan and Russian imports? And how will a reduction in the NOLA global parity premium affect your margins? In other words, what would the $50 price increase you expect to realize in the fourth quarter be if the U.S. was at parity today? Joc O’Rourke: Thank you, gentlemen. Prices are up globally. Our realizations reflect India prices up over 20% and Brazil prices up 30%, despite increasing imports in both those jurisdictions from Morocco and Russia. While global parity may be less than where NOLA is trading today, it would be significantly higher than where it was trading in June. There seems to be an increasing common misconception somehow that CVD petition is impacting global supply. Market prices are driven by strong supply and demand, not the CVD, which is expected to change trade flows, not overall market. Our petition was aimed at leveling the playing field for all producers selling in U.S., not to eliminate competition. Moroccan and Russian producers chose to pull back completely from the U.S. market, likely leaving their customers short of product. And they did it to make a political point and express their dissatisfaction over this being considered at all. We are doing all we can to best serve our customers. We have even begun importing tons from Ma’aden, simply to meet our customers’ needs. Longer term, it is not our intention to replace Moroccan and Russian tons with products from Saudi for several reasons, not least of which is from a global logistics perspective. It makes more sense for us to send that product into Asia rather than bring it here, but we’re doing that to help our customers. Longer term, we would expect NOLA to trade at global parity. Recognize that global parity prices today are significantly above where they were in June.

Another trade full question comes from PJ. If exports from Morocco and Russia are ending up in India and Brazil, why are prices up there? Joc O’Rourke: Thank you. The global supply and demand is stronger than many realized a few months ago. Economic tightness in the market is driving global prices up. Supply has tightened. China exports are down, and we started 2020 with curtailments, including COVID-driven outages. On the demand side, the agricultural economy globally is strong. Food security has become a great priority around the world, and fertilizers are very affordable.

We have a question from Ben Isaacson from Scotia; and John Roberts from UBS. They’re both asking about phosphate pricing momentum. September realized prices improved 11% from August. Did that momentum continue? And how much more upside do you see for the phosphate market? Joc O’Rourke: Thank you. We’ve continued to see prices increase into October and November, and seeing good demand as we move into of 2021. We expect to end this fall with very low inventories, which bodes well for the spring season and winter. So, we are seeing a normal seasonal slowdown, but we expect strong markets to continue into 2021. And as we mentioned in our written remarks, we expect prices in the fourth quarter to be up $50 per ton over the third quarter.

Joc, both Chris Parkinson of Credit Suisse, and Joel Jackson of BMO, and others are asking for potential impacts following the ITC DOC determinations. In particular, how will no, low and high duties impact our strategy, and who will fill the void if U.S. imports? Joc O’Rourke: Thank you, gentlemen. Remember, the November determination is simply if there are subsidies. In the first quarter, the decision is the determination of harm and the identification of duty, if anything. If it is determined that there is going to be a high duty, we would expect the trade flows to change to account for that. As such, we would expect the Russians and the Moroccans to continue to ship to other markets, like India and Brazil. If there is no subsidy, we would expect the trade flows to return to what they were pre-CVD filing. Remember, the Russians and the Moroccans made the decision to pull out of these markets altogether when petition was filed. So, we will continue to serve our customers. If there is more product required for Brazil and India, we will redirect tons to those markets. If we continue to see a deficiency in the North American market, we will divert tons to that market.

Joc, we’ve received a number of questions related to the broader phosphate market supply and demand, in particular with respect to the Chinese phosphate industry. PJ Juvekar from Citi asks, what are your estimates of phosphate exports out of China in 2020? Joc O’Rourke: Thank you, PJ. We’ve said and we continue to believe that Chinese exports will be down by more than 500,000 tons this year. Our latest estimate is that they will actually be down by more like 700,000 tons. From January to September, exports were down by nearly 1 million tons. Now, it’s important to remember that DAP MAP production in China continues to trend lower. Quarter one to quarter three, it was down by, call it 1.4 million tons, while domestic demand now appears to be stabilizing. That means Chinese exports are going to be constrained in the future.

Jonas Oxgaard asks, how confident are you that the three facilities closed in China are permanently closed? Joc O’Rourke: Thank you, Jonas. For the three facilities closed in 2019, we are confident they are not coming back to DAP map production. One was permanently closed; one was in the process of relocation to a different place and is planned to be built as a water-soluble fertilizer production facility; and the third shifted its production to industrial-grade purified phosphoric acid. Purified phosphoric acid from the wet process is replacing the highly-polluting thermal process, which is also the outcome of the stringent environmental protection measurements and is ongoing. According to China phosphate industry association, 5 million tons of DAP MAP production capacity has been lost since the environmental protection measures have been implemented. This includes permanent closure, relocation for different production and strategic production shifts to a higher-value products, like purified phosphoric acid.

Joc, in a related question, Chris Parkinson would also like an update on the projections for Chinese production costs. Joc O’Rourke: Thank you, Chris. The estimation to a typical southwest phosphate producers production cost is still around $300 per metric ton, ex plant, and probably an fob equivalent of $335 per metric ton at a Chinese export port.

Joc, the second most popular area of questions was Mosaic Fertilizantes. Mark Connelly specifically addressed this question to you. After you acquired Fertilizantes, you told us that there were no really big cost reduction projects, but rather a large number of small to midsized projects, many of which were suggested by local employees. Are the sort of projects you are doing today materially different in expected returns? And among these, has the transfer of best practices between and among your Brazil plants proceeded as well as the early projects did? Joc O’Rourke: Thank you, Mark. Let me say, we continue to see a number of small to medium-sized, high-benefit projects, and transformation continues to drive benefits with very little capital and very high returns for Mosaic Fertilizantes. Now, as we go forward, some of these will require incremental growth capital, mostly technology-related, and much of that is like our next-gen mining investment in Florida. Now, what I would ask is, we’re going to go into depth of this, and our transformation growth objectives for Mosaic Fertilizantes next Monday, November 9th. So please, stay tuned then, and we’ll give you a lot more detail of where we believe this business is going and the potential for our growth in South America.

Adam Samuelson from Goldman Sachs; and Andrew Wong from RBC both asked about the demand outlook. How does the interplay of current farmer economics and La Nina weather forecasts impact the Brazilian demand outlook? And did the very high Q3 phosphates demand pull volumes from Q4? Joc O’Rourke: Thank you, both. Look, current farmer economics are very strong, particularly in Brazil, and are expected to push Brazilian demand grow higher again in 2021, probably in the 2% to 3% year-over-year. This is the fundamental driver. As for La Nina, it’s not something that we’re overly concerned with, unless it were persistent through mid-2021. The reason for this is, the strong growth signals from La Nina for Argentina and Southern Brazil is typical from June to August. And what we saw in recent months could have been a signal persisting a bit longer than is typical or it may have been simply dry weather patterns in South Americas at large. Importantly for Brazil though, rains have improved and planting is progressing. The delays were a couple of weeks. So, we do expect to see no impact on total demand. Demand is expected to remain very strong, aligned with good farmer profitability. In terms of your question of moving Q3 phosphates from Q4, we do expect to see continued strong demand in Q4 as the season has been extended by the dry weather that we’ve already seen.

Joc, Steve Byrne of Bank of America asks, there has been significant productivity extracted from the legacy Vale assets. Are the earnings growth drivers longer-term going to be from geographic expansion, from production capacity expansions in phosphate and potash or from new products and services, such as selling other crop inputs? Joc O’Rourke: Thank you, Steve. Yes. The quick answer is yes. We see great potential in all three of those areas. We are and have a very strong first-mover advantage. We have a great platform in Brazil. And we hope over time to take greater advantage of that. Now today, our primary focus for growth in Mosaic Fertilizantes is organic. We continue to see transformation opportunity. We see increases in co-product sales and benefits from the deployment of technology. There are geographic areas where we feel we have a smaller distribution footprint than we would like, but we also have room to grow with our current distribution assets that we have. So, in summary, we see all areas having potential. We do think that both distribution and production will grow, and we’ll continue to strive our first-mover advantage in that great growing region.

Joel Jackson from BMO is asking about Fertilizantes’ per ton margins. Should we expect these margins to hold, expand or contract in 2021? And what are the main drivers of these? Joc O’Rourke: Thank you, Joel. When we’re thinking about our per ton margins, we really have to consider two components. First, production, where the price of finished goods, raw materials and cost to produce drive gross margins. Here, we are continuing to driving production costs down, and through transformation, continuing to improve that business. In distribution, where we earn a margin that is impacted by volume, economy of scale and pricing trends, we continue, as well as transformation and continued improvements in our performance product sales. That’s really how we’re going to drive long-term value. So, in distribution, we do see that holding up well as well as in production. So, on both sides, we expect we can not only hold those margins, but expand them as time goes by.

Joc, we also got a large number of questions on our phosphate segment. Steve Byrne and PJ Juvekar are both asking about the near-term performance and the expected profitability improvement into the fourth quarter. What portion of the phosphate fourth quarter volumes are already locked in? And will this impact your ability to realize the $50 per ton price increase? So, are we looking at a much better fourth quarter in phosphates? Joc O’Rourke: Thank you, gentlemen. As expected, a good portion of the tons we expect to recognize in the fourth quarter have already been sold and priced. We don’t expect our price realization increase to be below the $50 per ton in any scenario. We have assessed the impact on a potential announcement in CVD in November, and our expectation is the impact will only be a minor change to late December shipments, if that goes against us.

PJ Juvekar of Citi; and Adam Samuelson of Goldman Sachs, both asked about the ARO reserve increase. Can you elaborate on the drivers of the ARO increase and the remediation liability? What is the timing of the increased cash outlays? Joc O’Rourke: Thank you, gentlemen. I’m going to hand this one straight over to Clint to answer. I think, he has the details of our ARO that we just booked.

Thanks, Joc. As many of you may recall, the third quarter of each year is typically when we update and refresh the estimate to see to work related to ARO activity. And I would say that quite a bit of the amount that we booked this quarter is related to plant city as we’ve learned more about that site over the last year. Our ARO spend is typically spread out over an extended period of time, 40 to 50 years during the life of facilities and gypstack and so forth, so a very extended type of spend profile. But also, recall that against our existing AROs, we also have about a $700 million escrow account that will offset at least a portion of that spend in future years. Now, related to the environmental reserve that we booked this quarter, that’s really related to some subsurface work that we need to do at some of our facilities around some of our gypstacks. And I would say, specific to that that spend is probably going to be made over the next two to four years.

Adam Samuelson from Goldman Sachs; and Seth Goldstein from Morningstar are both asking about fourth quarter phosphate volumes. Is it reasonable to expect a notable uptick in volumes? As we move into 2021, should we expect higher year-over-year volumes or will you keep production lower to support higher prices? Joc O’Rourke: Thank you, gentlemen. As we look at the fourth quarter, we see great demand in all our markets right now. And so, with that, we do expect to have relatively good sales through the quarter and then low inventories as we enter next year. As we look to 2021, we do expect to see a good demand scenario, and we would expect to see good utilization of our assets, particularly, if you remember, in first quarter of 2020, we had bar go down for almost three months. So, now we expect that to come back and our facilities to run very much closer to full production in 2021.

Joc, lastly, I’d like to end with a couple of questions on our potash segment. Ben Isaacson from Scotia asked, how we think about Colonsay? And do we believe there may be a need for those tons in the market in the future? Joc O’Rourke: Thank you, Ben. Yes, we definitely look at Colonsay as something we would bring back if our customers needed the tons and if the price justified restarting it. This industry is ripe with examples of sudden but permanent supply disruptions. And in that case, this tonnage could be very valuable to us. And as our customers demand grows, Colonsay will be significantly cheaper to bring back than any greenfield operation.

The last question comes from Seth Goldstein at Morningstar. How much potash is coming out of K3 now? And how does that change as we move to 2022? Is the long-term plan to grow K3 production in line with potash demand growth, or will you try to increase market share? Joc O’Rourke: Thank you, Seth. In 2020, K3 is forecasted to produce about 4.4 million tons or the equivalent of about 1.5 million tons of finished product, which amounts to about 15%, 20% of our total production of potash in Canada. In June 2022, K3 or Esterhazy will be providing the ore for approximately 6 million tons of finished goods production, and this will completely replace K1 and K2 mines. So, our expectation is, we will not necessarily grow production, but rather replace K1 and K2. Longer term, our goal is to match production with demand, while also lowering our cost profile. K3 has already proven to lower our overall costs. Now, with our remaining time, I’d like to open it up for follow-up questions from our audience.

[Operator Instructions] We have our first question from the line of Steve Byrne from Bank of America. Your line is open. Please go ahead.

Hi. I’d like to drill a little more on this phosphate supply and demand outlook that seems to be highly contested today. So, you have a fair amount of information in your deck on the demand outlook for ‘21, somewhere between flat with 2020 or maybe up 2 million tons. But, if we look at your supply outlook and you have a breakdown of what we see as potentially the delta in supply from ‘21 to ‘20, there’s a few fairly large items in there, and just we’d like to hear your view as to the up and downside risk to some of those, the big ones being an inventory build is expected by the producers, the ramp-up at OCP, and then the recovery in supply, given the 2020 outages. Those three are the fairly large line items. Is there a potential risk that those are much bigger than that? Joc O’Rourke: Thank you, Steve. Well, let me start by saying, as we look into 2021, we do believe that the phosphate S&D is quite tight. So, first of all, we’ll end this year with relatively low inventories, and that’s relatively low inventories throughout the channel. Our proxy kind of indicates U.S. inventory will be down about 35%, which represents somewhere in that 600,000 tons mark. India will be down as much as 1.3 million tons and China down as much as 700,000 tons. So, as we look at how we enter this year, we do believe that some of the production will have to go into rebuilding distribution stocks to fully service this market. And then, if we look at the increases, there’s a couple of things that are important. First of all, with that level of inventory at the end of the year, we do expect that the -- will be a higher utilization of assets, which is where we have the million tons of recovered production, if you will. So, if we look at those two, they relatively offset themselves that we need to increase inventory just to supply basic needs and have a normally balanced market, but we also will have the opportunity to run assets harder. In terms of the go-forward, we’ve heard from OCP publicly that they will be relatively slower in bringing on new production. They’ve announced that publicly. So, we see modest increases to new productions coming from improvements in Ma’aden, as they continue to move their Wa’ad Al Shamal operation up to full production over the next year or two, and then modest increases from OCP. And I think the rest are fairly minor in nature. So, I wouldn’t really worry too much about those, one way or another. But overall, we do see a tightening market for next year.

Your next question comes from the line of Jonas Oxgaard from Bernstein. Your line is open. Please go ahead.

Hi. Thank you. I was wondering if you could touch a little bit on the phosphate rock supply demand as well. Basically, the same analysis you did for phosphate supply-demand, what does it look like on the rock side? Joc O’Rourke: Yes. Okay. We don’t -- sorry. Thanks, Jonas. We don’t really look at phosphate supply and demand, the rock supply and demand, for the reason that we’re not really involved in that market. Overall, where we -- where that comes about is domestic production in some of the nonintegrated markets like India and whatnot. In terms of our Miski Mayo operation, which we do have an outside production of rock, it’s really for our own use. So, we don’t -- again look at it from that perspective, we assume that really what matters is overall phosphoric acid usage in the global market, and that really drives us. So, when we talk about our DAP MAP, really it breaks down to what is produced from that rock and what we produce from our own rock. So, we don’t really look at it as a separate market.

Our next question comes from the line of Chris Parkinson from Credit Suisse. Your line is open. Please go ahead.

Quickly on the potash front. It appears, certain markets, ex-China are really beginning to churn throughout Asia, and you and some of your peers seem confident in the rebound in the Chinese market as well. So, just overall on your analysis heading into the next two years, and of course, hitting on course grain, oilseed and even S&D. [Ph] What are your thoughts of potential upside coming from the Asian market? And then, also if you could hit on the potential optionality from biodiesel, that would be incredibly helpful as well. Thank you very much. Joc O’Rourke: Okay. Thanks, Chris. Look, what we see today, and I think what we saw through the year, is not unlike what we’ve talked about previously, which is when the price in 2016 went low, we quickly saw a rebound in demand, and we’re seeing that this year as we predicted earlier in the year. So, first of all, I would say, there’s been a relative rebound in demand as was expected. Some of the highlights, though, I would like to put out is, as you mentioned, China has been a really good highlight, as has India in both of those markets for reasons of food security and probably trying to make sure that they produce as much in-country as they can. Demand for potash has been strong in both of those jurisdictions. And then, in the rest of Asia, the big thing there, of course, is Indonesia, Malaysia and the demand for palm oil, which has really bumped up. And just to touch on your piece there, biodiesel has been a part of that because where -- biodiesel is going to play a role in fuel as we go forward. And I would like to highlight that in markets like India and China, basic ethanol will also play a role in demand for commodities in those jurisdictions as well. So, yes, we do look at these playing a role in demand increase over time, and we are expecting good demand from Asia, India, China in the next year.

Our next question comes from the line of PJ Juvekar from Citigroup. Your line is open. Please go ahead.

Yes. Hi. Good morning, Joc. Thanks for your comments. Potash volumes year-to-date are up 6%, while phosphates are up only 1%. What is the -- why is there difference? And then, secondly, if China ag markets are really robust, I think that will continue into 2021, what are your expectations from the country in terms of imports of potash and exports of phosphates? Joc O’Rourke: Okay. Well, let me hit your first question first, PJ. Thank you for that. The big difference, I think, between potash and phosphate volumes in terms of deliveries, has probably been more than anything, just inventory moves. If you remember, we had a very big buildup of inventory as we moved into this year in phosphates. And for that reason, I think that was -- had to be consumed first and was consumed in the first quarter before you really got into -- starting to get real demand or real demand pull from production. So, I think that’s probably the reason for that. In terms of -- sorry, I got to get the second question, Laura. PJ? Can we ask PJ to reask his second question? Sorry, operator. I...

[Operator Instructions] Joc O’Rourke: Oh, I’m sorry. Yes. Sorry. The question I think from PJ was Chinese imports of potash and Chinese exports of phosphates next year. So, look, our expectation in China in potash, PJ, is that there is going to be continued focus, and we see this in their five-year plan in China. But, there’s continued focus on food security and ensuring that they have a robust agricultural industry to ensure the less reliance on outside places. So, for doing that, we expect that actually potash demand will increase internally, because the corn demand is so strong. But also, the other 1 is, their own internal production at Shanghai Lake is reaching its capacity and possibly even going down. So, we do expect China to be a, let’s call it, a growth engine for next year. In terms of phosphate exports, I think, as I said, there’s a couple of closures. So, there has been some structural changes in the phosphate market in China. And that coupled with what we believe is flat to increasing Chinese consumption of phosphates, means that our expectation is Chinese exports will be down maybe not year-over-year because COVID had a big impact to the start of this year, but certainly down from the 2019 levels.

Our next question comes from the line of Adam Davidson from Goldman Sachs. Your line is open. Please go ahead.

Yes. Hi. It’s Adam Samuelson. Good morning. I guess, there’s been a lot of detail today on the phosphate kind of market outlook and your own kind of expectations of your own performance in the market, yet, Joc, your stock is down 15%. And so, clearly, the market is taking a different view. What do you think the market is getting along today as it relates to your own kind of market outlook or the strategy or the operating performance that where you think the gap in understanding is? Joc O’Rourke: Well, I’m going to have to be fairly direct on this answer, Adam. And let me start by saying, I suspect the market has been impacted by statements made by one of our competitors and their impairment of their phosphate business. So, let me be relatively direct with this. First of all, an impairment needs to be driven by a triggering event, at least that’s my standing of general accounting practices or IFRS. When I look at the potential triggering events, the one thing I can say is that phosphate prices are up significantly quarter-over-quarter. And if I look at the outside consultants that we use like CRU, their long-term estimates are also up. So, it is very difficult for me to see how long-term phosphate outlook was the triggering event for this write-down. So, as such, you asked me what I -- what we’re getting wrong. I think, people are taking the idea that the triggering event was the phosphate market, where clearly it had to be something different than that, and they’re assuming that means we have a poor outlook. Now, what I will say is, if you compare the two businesses, we are very -- difficult to compare them one-to-one. First of all, we’re very different in scale, but we also sell very different products. They sell purified phosphoric acid, which is being highly impacted in the industrial sector by two things. One, the economy is slowing down; and the other, by external competition. Now if I look -- compare that to fertilizers, fertilizers is actually quite the opposite. We’ve seen an increase in demand, we’ve seen an increase in pricing, and we see a very good outlook. So, I don’t think you can compare the two businesses. And I certainly don’t think phosphate demand and supply, at least for fertilizers is a factor in that, so.

Our next question comes from the line of Andrew Wong from RBC Capital Markets. Your line is open. Please go ahead.

So, I mean, there’s been a lot of discussion around the CVD impact and we’ve covered that a lot. But, I do want to ask another one. So, like you said, it’s mostly about the trade flows, aren’t really -- that’s not really what’s driven the S&D. But, in terms of like -- on Mosaic, so Mosaic sells a lot of phosphate in both Brazil and the U.S. And if anything, it seems like Brazil is getting up there in terms of volume. So, I understand that if the trade flows were reversed, maybe the U.S. premium comes down, but what’s the actual impact on the company because then you would see less flows going to Brazil? I’d just be curious to hear your thoughts on that. Joc O’Rourke: Yes. Thank you, Andrew. Look, you’re absolutely right. This is about trade flows, not overall supply and demand. So today, what the Russians and the Moroccans have done is they have redirected tons that would have otherwise come to the U.S. to either Brazil, India or in some cases, Eastern Canada. So, they have moved a number of tons to different markets. They have not sold significantly different number of tons globally than they have in any other year. So, we know that their overall supply and demand balance in the world has been very similar. So, where they pull tons out of the U.S., we’ve had to bring more tons into the U.S. to serve it, but you’re also seeing tons come from places that haven’t historically set tons to the U.S., like Australia and Mexico or significant tonnage in terms of that. So, you do see a difference in trade flows. So, what would happen if that reversed, my expectation is the reversal would create exactly the opposite. We would see more tons going from Mosaic to our Brazil business. We would see more tons going to India from our Saudi tonnage, et cetera, and there would be other imports coming into the U.S. So overall, we don’t think that this is going to make a huge difference. The big difference today is demand is up, Chinese exports are down, and we’re seeing a growing market and a good demand scenario around the world.

Our next question comes from the line of Michael Piken from Cleveland Research. Your line is open. Please go ahead.

Yes. Hi. I just wanted to get a sense on Fertilizantes of how much the real -- the movement in the real has been a tailwind this year. And basically, if the real were to stabilize, let’s say, from this point forward, and then we hold all your other forecast that you talked about in terms of Brazilian market growth constant, what type of impact would that have on your margins? So, basically, just trying to get a sense for how we should be thinking about that and if the real were to reverse itself a little bit and start to strengthen at some point next year, what that might do to margins. Joc O’Rourke: Yes. Thank you, Michael. Look, let me address that in two pieces of the business. First is our production business and the other piece is our distribution business. First of all, let me say, the weakening real, if it’s had a biggest impact, it has been on the profitability of the Brazilian farmer. So, that has really been what’s driving a great demand picture in Brazil. So, the Brazilian farmer is doing very well. If you look at it in terms of our business, what we would expect is our distribution business is relatively independent of the real pricing. And the reason for that is, we buy on U.S. dollars, we sell -- we then hedge that and convert to a Brazilian real number. So, really, it doesn’t have a huge effect on our overall margins. What it does is it makes a difference to the actual demand. In terms of our production business though, obviously, on the shorter term, wages and everything else, Brazil real-based costs go down fairly quickly. So, we do see an improvement in cost and a better margin for our production business. What I will say, though, is if I look at the last couple of quarters, the Brazilian real has been essentially flat. If I look at our statistics for the last two quarters, we’re 5.37% versus this quarter of 5.38%. So, essentially, they’ve been perfectly flat. So, you can assume or surmise from that that the improvements we’re seeing is actual solid improvements in how we’re running the business as opposed to a benefit from an exchange rate.

Our next question comes from the line of Joel Jackson from BMO Capital Markets. Your line is open. Please go ahead.

Hi. Good morning, Joc. Joc, one of the larger -- a large phosphate buyer -- as part of the countervailing duty investigation, a large U.S. phosphate buyer publicly has stated that OCP offers different specs than what Mosaic can offer. They mentioned things like solubility. Is this fact, fiction or something in between? And what can you do about it if it’s fact? Joc O’Rourke: This is the second time I’ve had to be relatively direct. No, quality is absolutely not an issue between the two commodity products. We do have very small differences in terms of some of the things that are in our product because of what’s in the ore. But recognize, this is a manufactured product that takes phosphoric acid, adds ammonia to it to form diammonium phosphate and monoammonium phosphate. These are chemically produced. We have been selling this commodity in the United States for over 50 years. In that whole time, we have seen great response on the field. And frankly, solubility isn’t even one of the specs that is measured for quality. So, it is simply a distraction, it is simply a way of taking the focus away from the real issue here and trying to turn a commodity into a specialty product. It just doesn’t work unless you’re doing with something like MicroEssentials, in which case, the actual agronomic aspects of it are significantly better than the agronomic aspects of commodity products. So, with that, I’ll leave it there.

[Operator Instructions] We have our next question comes from the line of Vincent Andrews from Morgan Stanley. Your line is open. Please go ahead.

I just wanted to follow-up on the ARO and the environmental charge. I don’t think I caught it earlier. I’m not sure if you mentioned it, but I know it was non-cash in the quarter. And you talked about it. There would be some cash liability in the future. I think you gave some dates. But could you actually quantify the amount of cash liability that you’ll actually have to pay out in the future? Thanks. Joc O’Rourke: Yes. Thanks, Vincent. I’m going to hand that over to Clint, but just let me give you -- Sorry, muted microphone. Thanks, Vincent. I’m going to hand it over to Clint, but let me just give you a little bit of a summary of this first, which is we do -- once a year we do ARO, it is over a 50-year period where we look at the overall asset retirement obligations that we would have to do. If we look at the asset retirement obligations themselves, their long-term water treatment at particularly plant city seems to be the biggest one here. In terms of the rest, it is work around our other gypstacks, which Clint can talk a little more about. But, I’d just say, these are long-term aspects of the business that we look at.

So, as we look at the ARO number in particular, first, recall that this is a typical process that we go through in the third quarter of every year, and we make adjustments based on the levels of work that we see. And part of that amount is just changing things like assumed inflation rates, assumed interest rates and things like that to actually bring that ARO back to current dollars to put on the balance sheet. I would say, the one notable item that’s embedded in that number is a reverse osmosis investment that we’ll need to make at one of the facilities in the future. I don’t think it’s imminent. But we’ll -- that’s something that’s been added as we’ve done more work on the – the work that needs to be done. And then part of the refinement of our future plans, order of magnitude, that’s probably about a $40 million investment when it needs to be made. Otherwise, I think, a lot of the adjustment is some of those assumptions that I mentioned a little bit earlier. And then, I think on the environmental remediation, I think, the ultimate cash cost is going to be right around the $35 million mark. But again, that will be over multiple years, based on the assessments today.

Our next question comes from the line of Jeff Zekauskas from JP Morgan. Your line is open. Please go ahead.

Thanks very much. Your quarterly CapEx in potash is about $110 million and your depreciation is about $70 million. So, it’s about $40 million per quarter above D&A, $160 million per year. Does that incremental $160 million go away and your CapEx go to depreciation when your K3 project is done? Joc O’Rourke: Thanks, Jeff. Let me hand that straight to Clint. I’m not sure exactly.

Yes. Hi. Good morning, Jeff. So typically, outside of our K3 spend, the typical sustaining CapEx level can vary each year, but it’s in kind of $100 million to $200 million per year, midpoint of about $150 million. And that’s generally as an example what we’re seeing this year, from a sustaining level, it’s about $150 million. So, I think, that’s what we would expect as we go forward. And obviously, we’ll be migrating from K2 and K1 over to K3. We would expect that sustaining spend to migrate with it. And so, I think, longer term, you will see more alignment between sustaining CapEx spend and depreciation in potash.

Our next question comes from the line of Jeff Feinberg from Feinberg Investments. Your line is open. Please go ahead.

Thank you very much. Good morning. Just want to make sure that I’m understanding the big picture here with all the variables we’re talking about. When you talk about the $50 a ton in the fourth quarter off of the base that we just reported, it looks like we’re talking about a run rate of $0.5 billion of EBITDA, a lot of puts and takes. But, am I understanding this dynamic correct? And if so, they really have growth from that next year, that run rate of $2 billion, just to make sure I’m understanding these variables we’re describing here. Joc O’Rourke: Thanks, Jeff. Let me just do a quick in my head here. I think, you’re saying, if I’m getting your question right, is the $50 increase in Q4 going to lead to approximately a $50 million -- or $500 million quarter for EBITDA. And let me just do a quick math. I think, we sell some 2.2 million -- 2 million to 2.2 million tons a quarter. If you multiply that by $50, that would add $100 million to our on EBITDA for the quarter. So, if you took our today’s number and added $100 million, I guess, should be pretty close to a reasonable guess, although you do have to take into account Mosaic Fertilizantes’ seasonality and whatnot, and quarter-over-quarter there. But yes, I think that’s not unreasonable starting point. It’s the sensitivity would be about $100 million.

Perfect. I mean, there seems to be a lot of skepticism on the sustainability of this. But $2 billion run rate, it sounds like, given the end market drivers and demand is a very conservative approach to next year. I want to make sure I’m understanding the message being portrayed. Joc O’Rourke: Again, if the price holds for 2021, you would again be saying much the same thing. You’re looking at 9ish million tons at $50 over today. Again, the calculation is much the same. You would add $0.5 billion.

We have our next question comes from the line of John Roberts from UBS. Your line is open. Please go ahead.

Thank you. Maybe back to the capital spending question you got earlier. But, are we late enough in the year to have an outlook on 2021, at this point? And how many years do you think you can keep your overall CapEx relatively near the current level? Joc O’Rourke: Thanks, John. I’m going to hand it over to Clint for some clarification on this. But, I guess, overall, look, here is our big picture is our longer term and 2021 being no exception. Our longer-term is we would have $600 million to $700 million of sustaining capital. And then, today, what we’re seeing is other improvement capitals and whatnot, but the big one that starts dropping off after 2022 is of course the $300 million or so we’re spending on Esterhazy K3. So, that capital spending comes down, but there are other areas of improvement and high-return projects that we may want to put in there. So, how long can we maintain it flat? I think, certainly, it will go down over time. How much goes down depends on opportunity.

There are no questions in the queue. Joc O’Rourke: I think, we’ve come to a close now. And before I close, I’d like to invite you all to join us on November 9th at 9 am for our in-depth presentation on Mosaic Fertilizantes and our South American strategy. So with that, I want to wrap up today’s call. Mosaic continues to execute extremely well. We are increasing our global competitiveness by driving costs down. And we’re managing well through the challenges of COVID-19. With the tailwinds we’re seeing today from improving fertilizer and agricultural markets, we expect strong results to continue through the end of the year and well into 2021. So, thank you for joining us. And again, come back next week for our South American detail.

Ladies and gentlemen, this concludes today’s conference call. Thank you all for participating. And you may now disconnect. Have a great day.