Richard Downey - Vice President of Investor & Corporate Relations and Market Research Michael M. Wilson - Chief Executive Officer, President and Director Ronald A. Wilkinson - Senior Vice President and President of Wholesale Business Unit Richard L. Gearheard - Senior Vice President and President of Retail Business Unit David J. Tretter - Executive Vice President of Procurement and Executive Vice President of wholesale sales of UAP Holding corp Thomas E. Warner - Vice President of Retail Distribution and President of Crop Production Services Inc

Jacob Bout - CIBC World Markets Inc., Research Division Ben Isaacson - Scotiabank Global Banking and Markets, Research Division Joel Jackson - BMO Capital Markets Canada Edlain S. Rodriguez - Lazard Capital Markets LLC, Research Division P.J. Juvekar - Citigroup Inc, Research Division Paul D'Amico - TD Securities Equity Research Donald Carson - Susquehanna Financial Group, LLLP, Research Division Darren R. Wiebe - Macquarie Research Christopher Perrella Matthew Korn - Barclays Capital, Research Division John Chu - AltaCorp Capital Inc., Research Division Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division Charles N. Neivert - Dahlman Rose & Company, LLC, Research Division John Hughes - Desjardins Securities Inc., Research Division Ian Horowitz - Topeka Capital Markets Inc., Research Division

Good day, everyone, and welcome to Agrium's Third Quarter Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the conference over to Mr. Richard Downey, Vice President, Investor Corporate Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and welcome to Agrium's 2012 Third Quarter Conference Call. On the phone today to review and discuss our results is Agrium's leadership team, including Mr. Mike Wilson, President and CEO of Agrium. As we conduct this conference call, various statements that we make about future expectations, plans and prospects contain forward-looking information. Certain material assumptions were applied in making these conclusions and forecasts. Therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions are contained in our current quarterly report to our shareholders, as well as our most recent Annual Report, MD&A and Annual Information Form filed with the Canadian and U.S. securities commissions, to which we direct you. I will now turn the call over to Mr. Mike Wilson.

Thank you, Richard, and welcome to everyone joining us today to review Agrium's third quarter results. This quarter, we reported net earnings of $0.80 per diluted share, which reflected the impact of a large share-based payment expense, resulting from the strong performance in our stock price during the third quarter, as well as nonrecurring charges, primarily related to environmental remediation. After backing out these items, net earnings would have been $1.34 per diluted share this quarter. This figure is lower than the net earnings reported last year, largely as a result of the cost and volume impact from the major turnaround at our Vanscoy potash mine and a longer-than-expected restart of this facility, as well as lower potash and phosphate prices. Although the necessary turnaround had a short-term impact on our earnings this quarter, it represents an important step in ensuring that Agrium is strategically positioned for the long term, with both expanded production capacity and a lower cost profile. Our results this quarter once again reflected our strong competitive advantages in nitrogen, as well as the ability of our Retail business to deliver solid earnings even during one of the worst droughts in U.S. history. Gross profit from nitrogen business was the highest on record for third quarter. Additionally, Retail EBITDA nearly matched the outstanding results reported in the same quarter last year despite the drought and early end of the spring season this year, particularly relative to the late spring last year. We have also continued to provide further returns of capital of our shareholders. Our recently completed $900 million substantial issuer bid allowed us to successfully return the proceeds of the sale to our shareholders in a prompt and attractive manner. We also announced that our board intends to double Agrium's dividend to $2 per share on…

[Operator Instructions] Our first question comes from the line of Jacob Bout of CIBC.

Maybe, just give us some thoughts on the timing of the Glencore approval, and maybe talk a little bit about, if perchance we don't get this Chinese approval, could this deal still go ahead?

Well, 2 comments. First of all, it's Glencore that's dealing with the Chinese, so we don't have specific information. The latest report they gave is they'd expect to have something in November, and I haven't seen an update since then. Do I expect the project to go forward? Yes, and that will be for Glencore to sort out with the Chinese.

Maybe as a follow-up here, give us some thoughts on building greenfield nitrogen plant in the Corn Belt. We've heard a number of announcements that's been made there most recently. Are you still looking at doing this?

I'll get Ron to comment on that.

Jacob, it's Ron. Yes, we're still considering a greenfield project in the Corn Belt. And like everybody else, it's driven by the fundamentals in the nitrogen market and low cost gas into North America. We are in the final stages of selecting a site, and we'll continue to develop the project in terms of engineering and developing a cost estimate, which will determine our decision as to whether to proceed or not.

Our next question comes from the line of Ben Isaacson of Scotia Bank.

Just a question on potash strategy, maybe a two-part question. You stated that domestic sales were constrained by supply, while international sales were met with purchased product. Now, was the purchased product sales profitable? Or was it simply made to keep Canpotex allocation? And if it was profitable, then why wasn't purchased potash increased or used for the domestic market, which is actually a higher return business?

The bottom line, Ben, is -- we didn't make a lot of money on it, I guess, is the best way to capture it. We certainly didn't lose on it. And we made the conscious decision as to whether to move it in domestic or international market. And in our case, we moved it to international. So we didn't make a lot of money, but we didn't lose on it.

Okay. And then maybe just as a follow-up to that question, you produced 151,000 tonnes, you sold 160,000. As you said, domestic sales were constrained by your limited supply. Does that mean that your inventory is quite low right now?

Ron?

Ben, it's Ron Wilkinson. We did enter the third quarter with very low inventory, and of course, we sold what we produced. So we did enter the fourth quarter with a pretty low inventory.

If you look at that versus last year, we entered with a reasonably high inventory, so we were able to capitalize on that year-over-year.

Our next question comes from the line of Joel Jackson of BMO Capital Markets.

Maybe just sticking with potash. Maybe you could talk about on some of the re-ramp here at Vanscoy, what the challenges were. As of early October, was it resolved? And if we look now to the middle of 2014, should we expect more of a 15- or 16-week virtual downtime as opposed to, say, a 13-week downtime?

Joel, it's Ron Wilkinson. The issues in this summer's turnaround were around the start-up and some quality control issues associated with the hoist upgrade that we're doing. We actually believe that by moving the turnaround into 2014 versus 2013 that we may be able to shorten it, but we're not committing to that at this time. But the extra period in between will allow us to do much more detailed planning. And when you do that detailed planning, usually you're able to optimize your schedule.

Okay. And just changing topics here, you did a very large dividend increase recently; you doubled your dividend. You do have a large -- you do have a lot of investments right now that you keep talking about, and you're going to pick up the Viterra retail assets next year. Should we expect that you've largely tapped out large dividend increases for some time now?

No, the bottom line is, we have made a lot of investments. We have returned a lot of money to our shareholders. But looking forward into 2013, we think it's going to be a great year, and we're going to generate a lot of cash. So we still have flexibility. We'll look at our dividends as we go forward. We haven't necessarily tapped out.

[Operator Instructions] Our next question comes from the line of Edlain Rodriguez of Lazard Capital Markets.

Just one quick question on the Retail business. I mean, you've had some issues this quarter with lower fungicide sales and seed sales. Do you expect to see those issues persisting, continuing to the quarters ahead? Or is this a onetime -- are those onetime issues?

We have our Retail guys on the line. Richard or Dave Tretter, do you want to comment on that?

Well, the third quarter was -- it had a major drought. I will say that this drought will have much more of a positive effect on our business and the business of our growers over the next 2-year period than if we hadn't had it. Now with that drought, we had lower fungicide sales, and with lower fungicide sales, we use that as a carrier in many cases to add foliar nutrients and add insecticides as well. So yes, we were hurt in the third quarter, but this is really good for both our customers and us over the fourth quarter and then into 2013.

And David on the seed. The seed really was pulled forward from quarter 3 into quarters 1 and 2. On a year-to-date basis, we're up. So it was really just a matter of the spring timing in the spring of 2012.

Okay. Another question on ammonia price. I mean, it seems like they were down quite a bit sequentially. I mean, other competitors report essentially flattish prices. I mean, yes, there were some industrial sales in the third quarter while we were bringing the price down. Is there anything else that kind of explained -- to explain the huge sequential price decline in ammonia?

It's Ron Wilkinson. It is the heavy ag in Q2, heavy industrial in Q3, and you'll see our average pricing rebound for ammonia in Q4 with the heavier ag. And that's just the same year after year for us, that Q1 and Q3 are heavy industrial, and our realized ammonia pricing tends to trend down. Now we are working to -- very hard, to increase our industrial margins. And over time, you'll see those hopefully, come closer together. But you'll continue to see a lag on the industrial volumes.

Our next question comes from the line of P.J. Juvekar of Citigroup.

I appreciate your enhanced disclosure this quarter. Just talking about working capital in the Retail sector, how much of that increase was due to sort of leftover or unsold product due to the drought?

Richard, do you have any feel for that number?

Well, first of all, it wasn't an increase. We were down 4 percentage points as a percent of sales from last year. Our inventories are down. Our fertilizer inventories are down now. Our chemical inventories on fungicides were up slightly because of the drought. But for the most part, our inventories are not a problem whatsoever. And as I said, the percent of working capital total is down from the previous year.

And then, just a quick question on the fertilizer removal that took place in the last growing season. Do you have any idea on that? And how is the fall application going forward? If you can just talk about nitrogen and then for P and K.

Richard, Tom, can you handle that?

Sure. P.J., we got some moisture in the Western Corn Belt in the last 2 or 3 weeks. Of course, the Western Corn Belt is where a lot of ammonia goes down, and it's going down very rapidly now. The rates are good. The rates are also good on P and K as we go into the fall season. So right now, things look pretty good. Keep in mind as we go into 2013 that our corn crop does follow beans. We had an excellent bean crop despite the drought, which drew down the PK levels in the soil. So going into 2013, we expect pretty strong demand because corn acres most likely will still be in the mid-90 million range. And so -- drawdown was typical, rates should be good.

Our next question comes from the line of Paul D'Amico of TD Securities.

So most of my questions are for Ron. First, with respect to the Q4 guidance on the Wholesale realized selling prices. It says here, "except for selling prices and volumes already committed under programs." Can you quantify how much has been committed?

Sure, Paul. It's about -- we're about 90% committed on nitrogen, 80-ish on phosphate and 75% on potash.

Okay. Will the timing with those all be around the same, call it, September or so?

It varies a little bit by product, but it's been gradual, as we've moved out of, I'll say, the third quarter into the fourth quarter.

Our next question comes from the line of Don Carson of Susquehanna Financial.

A few questions on Retail and some of this new disclosure you have. So I notice you have pretty strong returns domestically, 21% return on operating capital. What would that be pro forma Viterra? And I guess the question is, so if you look at international, clearly, that's considerably lower. But is that just dragged down by Landmark or is that more of an issue that you just don't have the geographic density in most of your international retail locations?

First of all, pro forma Viterra, we can't really give you that data until we close the deal, which should be very soon. But the bottom line is, Viterra's going to be an excellent, excellent, excellent acquisition. As far as international go, you can see that our Landmark is up. I think it's like 91% year-over-year. Richard and the team are doing a great job of getting that under control, getting the synergies that we targeted. And so that international number will come up. But to some degree, you're right. We don't have the critical mass that we have in North America, so it will be always lagging North America to some degree. But given what we've seen in the past 9 months in Landmark, we should see a significant improvement.

So would that mean that strategically, you're going to be more focused on North America, and that there's no other offshore acquisitions in Retail?

No, I mean strategically, we'll obviously focus on where we've got low-hanging fruit. And we've got lots of growth opportunity in North America, both organic and tuck-ins, and we'll do that, but we will look international. We'll go in capital light likely going forward, but we will continue to look at international.

Our next question comes from the line of Kevin McCarthy of Bank of America Merrill Lynch.

This is Chris Perrella on for Kevin. Could you elaborate on the 4Q North American fertilizer volume guidance? You said slightly down. With expectations, good volumes going down now and what you sold forward, why the lower year-over-year guidance?

Chris, it's Ron Wilkinson. The biggest impact for us is, as Mike mentioned, we've had early snow in Western Canada. And that is going to impact our year-over-year ammonia sales in what for us is a very high return market.

Now we will make that up in 2013 obviously.

Right. So the Western Canada ammonia is what's driving the lower volume in the Retail?

That's Wholesale, Chris. And the other thing that's impacting Wholesale year-over-year will be international potash, it's expected to be lower.

Now from a Retail point of view, Tom, you can add if you feel appropriate, but we may see a slight decrease in phosphate and potash in Q4 in those areas that were affected by drought.

You could see it slight, but right now in the middle of the Corn Belt, where we've heard the PK is going on, this time of year, the rates are very good. But where we've been impacted by the drought -- that'd be Southern Illinois, Southern Indiana, it could be down some there.

Our next question comes from the line of Matthew Korn of Barclays Capital.

Just a question looking ahead. It looks like you're fairly constructive relatively in the nitrogen outlook versus that of phosphates and potash. I'm just wondering, what do you see is the major risks to nitrogen pricing going into 2013, whether that's a rebound in supply, whether you see there may be pockets of lackluster demand in Asia or elsewhere? Just looking for any color there.

Well, from a high-level perspective, if you look at China, we're expecting them to export about 5 million tonnes this year, which is up significantly versus last year. So I don't see a negative. I see more of a positive. They should be likely be flat, maybe a little down going into next year, but demand will continue to grow. And if you look at this industry year-over-year-over-year, demand goes up about 2.5%. So the demand-side looks strong, with corn prices it looks strong. From a supply point of view, there's not a huge amount of capacity coming up. So I don't really see a negative there from a supply-demand perspective.

All right. And then very quickly switching gears to the Retail side. For a 3Q, for like a normal third quarter without an exceptional drought, given the asset base as it currently is with Retail, what would total sales be? I mean, if there's any kind of normal target, would it be around a $2 billion, a $2.1 billion? I don't know if there's anything there you can give us.

Richard, can you give any sort of flavor on that?

Well, it does depend on what each quarter is like. And if people are looking at what we did last year, $2 billion in revenues, it was an extremely late spring. We had a lot of spillover into the third quarter. This year, obviously, we had a very early spring. So it's kind of tough, but $2 billion, with our today's assets, would probably be a normal third quarter; $1.9 billion to $2.0 billion would be a pretty good number.

Our next question comes from the line of John Chu of AltaCorp Capital.

Just on the nitrogen expansion plant, just want to elaborate there. On both the brownfield and greenfield, when do you formally expect to get board approval? And does that accelerate given the fact that CF Industries has formally announced their plans?

It's Ron Wilkinson, John. Certainly, CF won't accelerate or slow down our timeline. We said at our investor presentation in June that we would expect full project approval within 12 months, and we still are on that schedule.

Okay, perfect. And then the second question, it looks like on the crop insurance side, we've got now a bit of a harvest price that's going to be used for crop insurance payment payout. Any sense in terms of how that process works and what the impact is for farmers in terms of looking to start to reload on fertilizer application and whatnot? And any color on that as this process is starting to move forward, how that impacts the outlook for the next 3, 6 months?

Richard, Tom, can you comment on sort of the farmers' mindset and the financial situation?

Sure. John, as far as how it works, that's a pretty complicated process. But it's based on past yields and a decision on a February average future price in October. But the long and the short of it is, is today, if a farmer had insurance, which most of them did, probably 80%, 85%, maybe higher than that, they're sitting very well on returns. It was really a rev in [ph] insurance. So most of them have done very well. I think if you've seen reports, they're expecting farm receipts to be as high if not higher than last year. So overall, farmers have cash and they're in very good moods.

And that would also tie in to, they would like to spend money before the end of the year for tax purposes and fertilizer would be high on their list.

Our next question comes from the line of Tim Tiberio of Miller Tabak. Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division: A quick question on the crop chemical side of the Retail business. Did you see any measurable difference between your private label sales and some of the branded products that you sell? We've heard kind of a divergence between some of the product lines on the branded side and then what we're hearing from private labels and generics?

Richard, Dave Tretter, do you want to comment?

Tim, this is Dave Tretter. In general, our private label sales for the year were up 25% over a year ago. So we saw them growing at a faster rate than we did our overall crop protection sales. And that's been our plan all along is to continue to increase the percentage of our overall sales in our private label. I'm not sure if you had other questions. Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division: Just one last question. In the Australia business, based on your comments of improvements there, is it fair to say that we're pretty close to capturing the full synergies that you had been targeting when you first purchased the company?

Richard Gearheard?

Yes, well, our economic model had us very close in year 2. We're on that model in year 2. So we're achieving what we thought we would. And there's a little bit more to go next year, but we see our forecasts for next year to show us achieving those full synergies in year 3.

And we continue to look at opportunities. Richard's looking at the IT systems and how we can leverage off of our North American position. So there are other opportunities for us.

Our next question comes from the line of Charles Neivert of Dahlman Rose. Charles N. Neivert - Dahlman Rose & Company, LLC, Research Division: Quick question. You guys are still -- or are you still contemplating a new potash mine at all, still, or where is that planning? I know it's still very early stage, but it was out there. Are you guys still looking at that or is that sort of off the table for the time being?

We have excellent reserves in Saskatchewan, likely some of the best reserves out there. And so we do have that option of building a greenfield facility, but we have tabled that. Our priority is to bring the brownfield up, get it up to capacity, and then take a look at the global supply-demand situation, and we'll make a decision then. So it's not taken totally off the table, but it has been tabled for a couple of years. Charles N. Neivert - Dahlman Rose & Company, LLC, Research Division: Okay. And also, I mean, something different. On the urea, this particular quarter was obviously very strong sales tonnages versus a year-ago when it was a lot of -- much weaker number. What's the reason for the big difference in year-over-year number in tonnes?

Charles, it's Ron Wilkinson. That was primarily international urea. Profertil had a higher operating rate. Also, they had lower sales in Q2, and some of their inventory carried into Q3. But as I mentioned, it's pretty much Profertil in Argentina.

Our next question comes from the line of John Hughes of Desjardins Securities.

Just a quick note. I'm just going to get a little bit granular, but in the fourth quarter, and we know what your discussion on the impact of the early winter on volume in terms of Canada. But what about price in Q4? How should we be modeling price in ammonia, urea and domestic pot -- all in the domestic side in Wholesale versus what you realized in -- like as an average selling price in the third quarter? Are we going to get anywhere sort of near the 2Q numbers?

It's Ron Wilkinson, John. On ammonia, yes, we'll get back towards Q2 numbers. So that's going to be a lot closer to Q2 than Q3. If we're looking at comparing against last year, I think you'll see urea prices down slightly. Phosphate prices are down year-over-year, and you'll see, I'll say, a minor unfavorable impact on potash prices.

Okay. And when we look at the midpoint of Q4 guidance at $1.70 in earnings versus your third quarter, at adjusted $1.34, can you just sort of, from a macro or a high level, just provide what's going to drive that move up, whether it be volume or price or whether it be the Retail side or the Wholesale side?

Ron, do you want to comment on Wholesale and then get Richard just to comment on his view on Q4 on Retail?

Okay. Versus Q3, obviously, ammonia volume is going to be up because of the fall season. And price will be up, as I mentioned. Urea volume will be down slightly because Profertil had such a great Q3. Phosphate, there's really no impact there. On potash, our volumes, of course, will be up. Prices again slightly unfavorable. So those are the big factors for us.

This is Richard. Our 2 big quarters, our biggest quarter is the second quarter for the spring season, and then the second largest quarter we have is the fourth quarter, and that is the fall fertilizer application season. And in recent years, there's even been more and more chemical application occurring in the fourth quarter. So historically, fourth quarter is always our second-largest quarter.

Our next question comes from the line of Ian Horwitz of Topeka Capital Markets.

A quick question. Do you guys have more outlook, more concrete outlook on the domestic corn acreage for 2013?

It's still early. But Tom, what's your guess?

I still think it's going to be 90s -- in the mid-90s. There's a long time between now and planting season, and we're going to plant more corn in the south part of the United States, because they had a good crop this year. You may see a little pullback in some areas of the Midwest, where it's been corn on corn for long -- for several years, with a disappointing yield. But I still think it's going to be mid -- 95 million, 96 million, somewhere in there. It's going to be awful hard to get a lot higher than that in my opinion.

The other thing about that too, is that we had some late season rains that really did help the soybean yield. And I think you're seeing a widening of the profitability gap between corn being more profitable than soybeans because the soybean side will be a little bit better than we expected. And then of course that is tempered with what Tom said on the experience of the corn after corn several years in a row.

Right. And any outlook, defining outlook on global potash demand?

Well, on global potash demand, it really comes down to negotiation with India and China. Brazil is going to be very strong, and we think Southeast Asia is strong. And so we're awaiting the negotiation, completion of negotiations with China and then followed by India, and they will settle, and we will be supplying them in 2013. So we see a recovery, but you likely won't see a huge recovery until the second half of '13.

Our next question comes from the line of Andrew O'Connor [ph] of Harris Investments [ph].

Mike, can you better characterize or quantify what you referred to as reduced pipeline inventories for nutrients at this point in time? And then how do you guys see inventories by nutrient trending over the next quarter or 2?

Well, I'll make a general comment and then maybe get Richard to comment on where his inventories are and where he sees things. It was interesting last year. We were sort of where we are this year, déjà vu. Nitrogen was under a little bit pressure. And everybody was trying to end the season with low inventories. We had an early spring. And surprise, surprise, we didn't have the product when the farmer needed and price spiked. We are seeing some hesitation by the Retail supply chain to take inventory going into next year. But when I look overall inventory, I think things are going to be quite good going into the spring of next year. Richard, what's your view on inventories and where do you see them heading over the next quarters?

Well, at the end of September, our volume, our tonnes in inventory were down about 19% from the previous year. This was by design. But we do have commitments for fourth quarter deliveries. We have prepayments for fourth quarter deliveries. And we're probably about 90% covered for what we anticipate our sales will be in the fourth quarter. If this is -- we normally like to be empty coming out of the fourth quarter. And so -- and by nutrient, it's pretty well spread out among all the nutrients that were down. Ammonia was probably the best covered, because we see very little, knock on wood, risk of a reduction in ammonia applications this fall.

Our final question is a follow-up question from the line of Paul D'Amico of TD Securities.

So Wholesale produced fertilizer sales volume; guidance, they were talking about approximating the same year-over-year. So on the potash segment, about 400,000 tonnes of last year in Q4. I mean, I'm looking at 200,000. Are you talking about as close to 400,000? Because some the language is a bit confusing on whether you see it's sequentially lower or not.

Paul, it's Ron Wilkinson. As far as Q4 sales go for potash, I'm just looking from my numbers here, so I can get them. We're looking around 350,000.

Does that help, Paul?

Yes. So you entered the quarter with low inventory and the operating rate for Q4 is normal?

Our operating rate for Q4 will be slightly below last year, largely because we expect standard demand to be lower.

Yes, we're not going to see the pull from India and China in Q4.

Got it. Okay, and in terms of the natural gas hedges. For Q4, I assume that's all done. How far are you into 2013, particularly Q1 at this point?

We're just starting, Paul, on 2013 Q1 as we start to sell forward. So I'll say we're negligible at this point but starting to build.

Thank you, operator, and thanks, everyone, for joining us today. I'll now turn it over to Mike for closing comments.

I just want to thank everyone. I realize that Q3 was impacted by our potash turnaround and the fact that fungicides were not as high as some of you may have expected. Q4 continues to be under pressure for potash sales, and Western Canadian snow has pushed us off the field. However, I want to be very clear with you on our view of 2013. The potash turnaround is behind us. Next turnaround is not until 2014, and we do not anticipate another drought. We expect we're going to have a great year on fungicide and chemicals. Given crop prices and stocks-to-use ratios, we think we're going to have strong volumes on all crop inputs in 2013. We will make up for the lost Western Canadian sales, they'll come in 2013. And we've got a Viterra acquisition that's coming towards us in 2013, which is going to help earnings. So overall, we're quite bullish looking into 2013, and we look forward to talking with you and dealing with you. Take care.