Agricultural Retailers Association 2008 ARA Conference Presentation

2008 ARA Conference and Exposition

December 3, 2008

Safe Harbor Statement

Certain statements contained herein constitute “forward-looking statements”

as that term is defined

under the Private Securities Litigation Reform Act of 1995. Although we believe the assumptions

made in connection with the forward-looking statements are reasonable, they do involve known

and unknown risks, uncertainties and other factors that may cause the actual results, performance

or achievements of The Mosaic Company, or industry results generally, to be materially different

from those contemplated or projected, forecasted, estimated or budgeted (whether express or

implied) by such statements.

These risks and uncertainties include but are not limited to the

predictability of fertilizer, raw

material, energy and transportation markets subject to competitive market pressures; changes in

foreign currency and exchange rates; international trade risks; changes in governmental policy,

including but not limited to governmental activities to address rising food and crop nutrient prices;

changes in environmental and other governmental regulation; adverse weather conditions affecting

operations in central Florida or the Gulf Coast of the United States, including potential hurricanes or

excess rainfall; actual costs of asset retirement, environmental

remediation, reclamation and other

environmental regulation differing from management’s current estimates; accidents and other

disruptions involving our operations, including brine inflows at

our Esterhazy, Saskatchewan

potash mine and other potential mine fires, floods, explosions, seismic

events or releases of

hazardous or volatile chemicals, as well as other risks and uncertainties reported from time to time

in The Mosaic Company’s reports filed with the Securities and Exchange Commission. Actual

results may differ from those set forth in the forward-looking statements.

2008 ARA Conference and Exposition

December 3, 2008

Topics

The race for global resources: long term opportunities

Strong grain and oilseed demand prospects

Traditional food demand drivers

The expected impact of biofuels

Implications for grain and oilseed production

Positive long term crop nutrient demand forecasts

Pit stops along the way: short term challenges

The perfect storm this fall/winter

Global financial crisis

Crop nutrient market recalibration

Late U.S. harvest

A perfect storm next spring?

Risk management lessons

Market conditions no doubt have changed since the planning committee selected “The Race for Global

Resources”

as the theme of this year’s conference. I suspect the committee might chose a different theme

today given the volatility in financial and commodity markets during the last few months.

However,

think

“The

Race

for

Global

Resources,”

still

appropriate

choice

because

the

reason

why

believe

there

are

tremendous

opportunities

for

global

agriculture

and

for

U.S.

agricultural

retailers

over the long term. The first part of this presentation will focus on those long term opportunities.

Every race requires a number of pit stops for re-fueling, new tires and mechanical adjustments. The

unprecedented volatility in financial and commodity markets has forced us into the pit. Crop nutrient

producers and retail distributors face serious challenges today.

I will address those challenges in the last

part of the presentation.

But make no mistake, we also believe the race for global resources is still on and that agriculture has not

crashed or blown its engine. We are very much in this race and believe there are great opportunities ahead

of us --

once we make a few adjustments, exit the pit and get back on track.

2008 ARA Conference and Exposition

December 3, 2008

Grain and oilseed demand growth has accelerated

World Grain and Oilseed Use

1,700

1,800

1,900

2,000

2,100

2,200

2,300

2,400

2,500

2,600

Mil Tonnes

Food/Feed/Other

U.S. Ethanol

U.S. Ethanol Percent of Total

Source: USDA

2008 ARA Conference and Exposition

December 3, 2008

The 500 million tonne challenge

World Grain and Oilseed Use

1,000

1,250

1,500

1,750

2,000

2,250

2,500

2,750

3,000

3,250

Source: USDA and Mosaic

Mil Tonnes

Actual

Actual for US Ethanol

Forecast

Forecast for U.S. Ethanol

Compound Annual Growth Rates

1990-03

2003-2008

2003-20

1.3%

2.6%

1.8%

More importantly, we forecast that world grain and oilseed use will continue to increase at a faster pace

than historical trends due to steady population growth, higher per capita incomes and further increases in

biofuels

production. We project that global grain and oilseed production will increase about 20% or more

than

500

million

tonnes

between

now

and

2020.

This chart also sheds some light on the impact of the current financial crisis on grain and oilseed demand.

If you look closely at the graph, you will note that global grain and oilseed use has declined in only two

years

since

1980.

And

the

decline

each

those

years

–

namely

the

1988/89

and

the

1995/96

crop

years –

was largely the result of a poor harvest and a rise in prices needed to allocate short supplies to

their highest valued uses.

You will also notice that grain and oilseed use continued to increase during the severe global recession of

the early 1980s. Real GDP per capita declined 0.7% in 1981 and another 1.4% in 1982, but global grain

and oilseed use still registered steady increases during the most serious downturn of the global economy

since the Great Depression. As I like to say, people still eat during economic downturns.

These long term demand forecasts were derived from a model that predicts use based on population and

real GDP per capita. The amount of corn ground into ethanol in the United States was excluded from the

statistical analysis and then added back based on actual and future mandated use.

This

chart

shows

the

drivers

grain

and

oilseed

demand

between

2008

and

2020.

Our

model

projects

that increases in population will account for about 39% of projected growth while increases in per capita

GDP

will

account

for

48%

the

500

million

tonne

increase

global

grain

and

oilseed

use

between

now

and

2020.

Biofuels

projected

account

for

the

remaining

13%

with

most

that

coming

during

the

few years.

Let’s look at each of these drivers in more detail.

Increases in population are steady and predictable. Global population is projected to increase from 6.6

billion today to 7.5 billion in 2020.

The world sets the dinner table for 73 million more people each year. That is the equivalent of adding

another Thailand and Laos to global population year after year.

The

increase

population

alone

boosts

expected

grain

and

oilseed

demand

about

million

tonnes

per

year.

Most models predict that population growth rates will slow due to economic and demographic factors. In

fact, annual growth rates are projected to slow modestly from about 1.1% today to 0.9% in 2020, but that

means

the

world

still

will

add

about

million

people

each

year

the

end

the

forecast

period.

2008 ARA Conference and Exposition

December 3, 2008

0.30

0.37

Asia and Africa projected to account for more than

80% of the growth in world population

World Population

in Billions

Asia & Oceania

Middle East

Source: Global Insight

6.65

7.52

2008

2020

3.69

4.14

Latin

America

0.58

0.65

Former Soviet

Union

0.29

Europe

0.52

Africa

0.93

1.18

North

America

0.34

0.37

Income growth is the second driver of grain and oilseed demand.

Statistics show that people upgrade their diets to include more protein-rich foods as incomes increase,

especially from very low to moderate levels.

For example, this analysis indicates that, on average, per capita meat consumption increases from about 7

to 20 kilograms per year as income increases from $250 to $500 per year. Meat consumption climbs

further from 20 to 32 kilograms per year as income grows from $500 to $1000 per year.

2008 ARA Conference and Exposition

December 3, 2008

Increases have occurred during the last 10 years

due to income growth in many countries

UAE 44.4

Brazil 16.1

Mexico 10.9

Russia 8.3

Australia 7.9

USA 7.4

Argentina 7.2

S Korea 3.7

EU27 3.1

Vietnam 2.9

China 2.7

Japan 1.6

India 1.4

Indonesia 0.9

Philippines 0.9

Thailand 0.6

Malaysia 6.9

kg per capita

Change in Per Capita Broiler Consumption

1997 - 2007

Source: USDA and Global Insight

Let’s take a closer look at recent trends for a couple of protein-rich foods.

This

chart

shows

the

change

per

capita

broiler

consumption

countries

during

the

last

years.

Many developing countries such as the big three Latin American countries registered impressive gains.

Other gains may look modest, but the impact of the three most populous developing countries in the world

–

namely

China,

India

and

Indonesia

–

increasing

broiler

consumption

2.7,

1.4

and

0.9

kilograms

per

person during the last 10 years is significant.

Annual

broiler

consumption

these

three

countries

today

70%

almost

6.0

million

tonnes

greater

than

10 years ago. By comparison, annual consumption in Argentina, Brazil and Mexico today is about 84% or

5.3

million

tonnes

greater

than

1997.

2008 ARA Conference and Exposition

December 3, 2008

Large gains have occurred during the last 10 years

in many large developing countries

China 9.3

Brazil 6.1

Mexico 5.4

India 5.1

Indonesia 0.4

USA 0.2

Australia -0.8

Malaysia -0.9

Japan -5.3

EU27 -7.2

Russia -12.5

Argentina -14.3

Philippines -0.1

Thailand -0.6

-30

-20

-10

kg per capita

Change in Per Capita Dairy Consumption

1997 - 2007

Source: USDA and Global Insight

Meat obviously is not the only way to upgrade one’s diet. People also consume more fish, eggs and dairy

products as incomes increase.

This chart shows the change in per capita consumption of dairy products for 14 countries during the last 10

years.

Consumption of dairy products is on the rise in many of the large and rapidly developing countries around

the world.

Consumption of dairy products has increased more than 9 kilograms per person

China and more than 5

kilograms

per

person

India

during

the

last

years.

That

impressive.

2008 ARA Conference and Exposition

December 3, 2008

One billion people are projected to join the middle

class in China and India by 2025

McKinsey studies

China and India --

1.1 billion people are projected to join the middle

class between 2005 and 2025

China

Middle class is projected to grow from 130 million in 2005 to 690

million in 2025

Lower middle class: annual income of 25,000

–

40,000 RMB

Upper middle class: annual income of 40,000

–

100,000 RMB

India

Middle class is projected to grow from 50 million in 2005 to 580

million

in 2025

Middle class: annual income of 200,000 –

1,000,000 Rupees

The last several slides showed some pretty impressive growth in the consumption of protein-rich and grain-

intensive foods in the developing world. But that is history.

Despite the current downturn in the global economy, what really excites us is demand prospects during the

next 10 to 20 years.

Studies

McKinsey

Company

project

that

than

one

billion

people

will

join

the

ranks

the

middle

class

China

and

India

between

2005

and

2025.

This

burgeoning

middle

class

should

continue

to upgrade

diets to include more meat, fish, dairy and eggs.

The steady increases in population coupled with strong income growth, especially in the developing world,

are projected to continue to power grain and oilseed demand at the faster clip than in the past.

And that, obviously, is good for crop nutrient demand prospects.

addition

these

traditional

demand

drivers,

biofuels

has

emerged

significant

component

grain

and oilseed demand growth.

According to the latest information compiled by the Renewable Fuels Association, 181 ethanol plants with

combined capacity of 11.2 billion gallons were operating in the United States last month.

In addition, 21 new plants were under construction and expansions at five existing plants were in process

that will add almost 2.2 billion gallons of new capacity.

result,

U.S.

ethanol

capacity

projected

increase

from

11.2

billion

gallons

today

13.4

billion

gallons within the next year or so.

De-bottlenecking of these facilities likely will enable the U.S. industry to expand to meet the 15 billion gallon

mandate by 2015. In other words, the U.S. ethanol industry already has sunk most of the capital needed to

meet the renewable fuel standard for corn-based ethanol in 2015.

2008 ARA Conference and Exposition

December 3, 2008

Ethanol accounts for almost 7% of gasoline supplies

and is projected to account for 10% by 2015

U.S. Ethanol Production

Source: EIA and Mosaic

Bil Gal

10%

12%

14%

16%

Percent

Actual

Forecast

Percent of Gasoline Use

This chart shows the exponential increase in U.S. ethanol production. Production totaled 6.5 billion gallons

in 2007 and we estimate that production will climb to approximately 9.3 billion gallons in 2008.

Corn-based ethanol accounted for 4.6% of U.S. gasoline supplies in 2007 and is projected to account for

6.6% of supplies in 2008. Based on current mandates, corn-based ethanol is projected to account for

approximately 10% of U.S. gasoline supplies by 2015.

Those are significant percentages. Ethanol is a renewable fuel that is having a market impact. By

comparison, wind-powered turbines generated 0.8% of total U.S. electricity in 2007.

2008 ARA Conference and Exposition

December 3, 2008

One-third of the U.S. corn crop now is used to

produce ethanol

U.S. Corn Used for Fuel Ethanol Production

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

Crop Year Beginning September 1

Bil Bu

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

Source: USDA and Mosaic

Pct of Crop

Actual/Estimate

Forecast

Percent of Crop

Ethanol

now

ranks

the

second

largest

use

U.S.

corn.

Feed

remains

the

largest

but

ethanol

has

eclipsed exports for the number two spot.

The

U.S.

industry

ground

3.0

billion

bushels

corn

into

ethanol

during

the

2007/08

crop

year

almost

23% of the record crop harvested in 2007. Corn used for ethanol

production is projected to climb to about

4.0 billion bushels in 2008/09 and to 5.0 billion by 2014/15.

About one out of three bushels of corn harvested this past fall is expected to end up at a ethanol plant in

2008/09. However, more than 30% of the corn that is fed into the front end of an ethanol plant comes out

the back end as distillers dried grain or DDG.

DDG

excellent

feed

for

ruminant

animals

such

cattle

and

feeders

are

using

increasingly

higher

percentages in swine and poultry rations. As a result, the net amount of corn actually utilized for ethanol

production is expected to total about 2.75 billion bushels in 2008/09 or about 23% of this year’s crop.

2008 ARA Conference and Exposition

December 3, 2008

Topics

The race for global resources: long term opportunities

Strong grain and oilseed demand prospects

Traditional food demand drivers

The expected impact of biofuels

Implications for grain and oilseed production

Positive long term crop nutrient demand forecasts

Pit stops along the way: short term challenges

The perfect storm this fall/winter

Global financial crisis

Crop nutrient market recalibration

Late U.S. harvest

A perfect storm next spring?

Risk management lessons

2008 ARA Conference and Exposition

December 3, 2008

The 500 million tonne challenge

World Grain and Oilseed Use

1,000

1,250

1,500

1,750

2,000

2,250

2,500

2,750

3,000

3,250

Source: USDA and Mosaic

Mil Tonnes

Actual

Actual for US Ethanol

Forecast

Forecast for U.S. Ethanol

Compound Annual Growth Rates

1990-03

2003-2008

2003-20

1.3%

2.6%

1.8%

2008 ARA Conference and Exposition

December 3, 2008

More area and higher yields are required to meet

projected grain and oilseed demand

World Harvested Area and Average Yield

750

775

800

825

850

875

900

925

Source: USDA and Mosaic

Mil Ha

1.75

2.00

2.25

2.50

2.75

3.00

3.25

3.50

MT Ha

Actual Area

Forecast Area

Actual Yield

Required Yield

Improved genetics and more intensive cropping practices are required to achieve the needed growth in

yields during this period.

Based

the

historical

relationship

between

yields

and

nutrient

application

rates,

this

chart

shows

the

application rates required to achieve the yields needed to meet projected grain and oilseed demand.

The average application rate is projected to increase to more than 250 kilogram per hectare in order to

achieve

yield

almost

3.4

tonnes

per

hectare

2020.

2008 ARA Conference and Exposition

December 3, 2008

Topics

The race for global resources: long term opportunities

Strong grain and oilseed demand prospects

Traditional food demand drivers

The expected impact of biofuels

Implications for grain and oilseed production

Positive long term crop nutrient demand forecasts

Pit stops along the way: short term challenges

The perfect storm this fall/winter

Global financial crisis

Crop nutrient market recalibration

Late U.S. harvest

A perfect storm next spring?

Risk management lessons

Based on that analysis, the long term outlook for global agriculture continues to look rock solid to us. This

race for global resources will create great opportunities for both crop nutrient producers and agricultural

retailers over the long haul.

However, the unprecedented volatility in financial and commodity

markets during the last year has caused

serious challenges for all of us in the near term.

2008 ARA Conference and Exposition

December 3, 2008

A perfect storm hits crop nutrient markets

Impact of global financial crisis on nutrient markets

Credit constraints limit sales in some regions

Commodity sell-off erodes farm economics and nutrient demand

Slower economic growth prospects reduced energy demand and prices

Lower operating and raw materials costs

Lower biofuels prices

Lower freight rates

The re-calibration of crop nutrient markets

Large distribution pipeline stocks in some regions

Late North American fall season

Consequences

Customers step out of the market due to expectations of lower prices

Producers curtail production in response to stock builds

Inventory risk exposure along the supply chain

fact,

number

developments

have

created

“perfect

storm”

that

buffeting

crop

nutrient

markets

today.

The global financial crisis has impacted crop nutrient markets in several ways. First, reduced credit has

limited sales in some regions such as South America. Second, the commodity sell-off has lowered crop

prices, eroded farm economics and reduced nutrient demand prospects. Finally, slower economic growth

has reduced energy prices which in turn has lowered operating and raw materials costs as well as biofuels

prices.

As a result, crop nutrient markets are re-calibrating to a new equilibrium based on lower crop prices, lower

energy and raw materials costs and lower freight rates.

Other

factors

such

large

distribution

pipeline

stocks

and

the

late

fall

application

season

North

America

are part of this “perfect storm.”

As a consequence, customers have stepped out of the market due to expectations of lower prices.

Producers are curtailing output in response to stock builds. And sharply lower prices have increased

inventory risk all along the supply chain.

2008 ARA Conference and Exposition

December 3, 2008

New crop prices and corn vs. oil prices

New Crop Prices

Daily Close of 2009 New Crop Options Jan 1 to Nov 22

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

$ BU

Dec 09 Corn

Nov 09 Soybeans

Jul 09 Wheat

Source: CBOT and KCBOT

WTI Crude Oil vs. Corn Nearby Futures Prices

y = 0.0393x + 1.2791

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

100

120

140

160

$ BBL

Source: NYMEX and CBOT

= 0.8522

2008 ARA Conference and Exposition

December 3, 2008

Another bumper crop is required in 2009

World Grain and Oilseed Stocks

250

300

350

400

450

500

550

600

650

99/00

00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

Mil Tonnes

10%

13%

16%

19%

22%

25%

28%

31%

34%

Percent

Stocks

Percent of Use

Source: USDA and Mosaic (for 09/10 estimates)

2009/10 Scenario Assumptions

Low

Medium

High

Increase in Harvested Area (Mil HA)

6.7

Yield (Deviation from 10-Year Trend)

Largest Negative

Largest Positive

Demand Growth

1.0%

2.0%

3.0%

The market, of course, is always right, but we are concerned about the signals agricultural commodity

markets are sending to farmers right now.

Our analysis indicates that another bumper crop is required in 2009 to prevent global grain and oilseed

stocks from declining to dangerously low levels by the end of the 2009/10 crop year.

Trend yields are not good enough to maintain let alone rebuild stocks and below-trend yields would send

agricultural commodity markets into a panic similar to the one last June. The bottom line is the world needs

to produce another bin-buster crop in 2009.

We expect that agricultural prices will de-couple from energy prices at some point and markets will send

stronger signals to farmers between now and next spring.

Crop

nutrient

markets

are

re-calibrating

not

only

lower

grain

and

oilseed

prices,

but

also

free-fall

the costs of key raw materials.

This

chart

shows

the

rise

and

fall

the

sulphur

prices.

Sulphur

key

raw

material

used

produce

phosphate fertilizer. Charts for other raw materials prices such as natural gas and anhydrous ammonia

look similar.

the

case

sulphur,

prices

swings

large

$800

per

tonne

during

the

last

months

have

caused

cost

swings

than

$300

per

tonne

DAP.

The sharp rise in raw materials costs pushed up prices earlier this year and the free-fall in these costs now

are pushing down crop nutrient prices today.

2008 ARA Conference and Exposition

December 3, 2008

Crop nutrient markets re-calibrate

DAP Prices

fob Tampa Vessel

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

$ MT

Source: Fertecon

Prilled Urea Prices

fob Yuzhnyy

150

250

350

450

550

650

750

850

$ MT

Source: Fertilizer Week America

2008 ARA Conference and Exposition

December 3, 2008

Buyers step out of the market

U.S. DAP/MAP Domestic Shipments 2008/09

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Mil Tons

MIN MAX Range (2003/04-2007/08)

2008/09 Actual

3-Yr Average

Source: TFI and Mosaic

North America MOP Domestic Shipments 2008/09

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

Jun

Mil Tons

KCL

MIN MAX Range (2003/04-2007/08)

2008/09 Actual

3-Yr Average

Source: IPNI and Mosaic

I noted earlier that customers have stepped out of the market due to the expectation of lower prices,

relatively high pipeline stocks and a late North American harvest.

These charts show domestic shipments of the leading phosphate and potash products during the first four

months of the 2008/09 fertilizer year (or from July through October).

U.S. DAP/MAP shipments were down 35% from high levels a year ago. North America MOP shipments

during the first four months of the fertilizer year were down 15% from levels last year.

2008 ARA Conference and Exposition

December 3, 2008

A perfect storm of another kind next spring?

Will the poor fall season result in a large spring season?

Will farm economics improve before spring planting?

Will grain prices decouple from energy prices?

Will input costs fall further?

How much were pipeline stocks drawn down?

Will financial markets stabilize and credit availability increase?

Can the supply chain move the volume needed next spring?

Is this the year the sky really

falls?

A key question is whether the perfect storm raging right now will spawn a perfect storm of another kind next

spring.

most

accounts,

the

North

American

fall

application

season

was

one

of,

not

the,

worst

modern

history. Will that result in an extraordinary spring season, especially if farm economics improve between

now and planting season?

How much of a drawdown will take place in global pipeline this fall and winter. Will financial markets

stabilize and credit availability increase any time soon?

A perfect storm could test the capacity of the supply chain to deliver the volume of crop nutrients needed by

farmers

spring.

But

that

not

new

scenario.

Producers

and

distributors

warn

retailers

about

transportation

and

logistical

bottlenecks

every

year.

this

the

year

that

the

sky

falls?

really

2008 ARA Conference and Exposition

December 3, 2008

Risk management issues

Volatile commodity business

Control what you can control

Save on the way up

Limited risk management tools

Financial instruments such as swaps

No price established (NPE) contracts

Mosaic’s FPD (future price determined) programs

Exclusive storage arrangements

Adjustments take time

Cost-plus retail pricing

Averaging-down retail inventory costs

Let

conclude

with

few

comments

about

risk

management

issues

from

producer’s

perspective.

First, we operate in markets that are global, cyclical and commodity based. Unpredictable events such as

a natural disaster or a political decision on the other side of the globe will impact the price of DAP in the

middle

Illinois.

one

has

crystal

ball

that

will

predict

those

events.

Second,

control

what

you

can

control.

That

typically

boils

down

cost.

For

example,

are

investing

number of projects to improve the energy efficiency and productivity of our mines and chemical plants.

Third, save on the way up to provide protection on the way down.

Fourth, our business has limited risk management tools. Programs

such as no-price-established contracts

or exclusive storage arrangements between producers and distributors are useful tools and Mosaic offers a

number of these programs.

Finally, adjustments take time, especially in a falling market at the retail level due to cost-plus pricing and

the averaging down of inventory costs. It may take more time than most people expect to work through the

current situation.