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Dear Fellow Shareholders,

2014 taught us a lesson we at Mosaic have known for decades: Agriculture is cyclical.

The early years of this decade lulled many of our industry’s participants and observers into a false sense of perpetual prosperity. Now, after two consecutive record global harvests have sent grain prices sharply lower, the agriculture business has been shaken awake and reminded that ups and downs are as inevitable in our business as changes in the weather. 

We built Mosaic to thrive across these cycles—and Mosaic is thriving. We developed a franchise that is exceptionally resilient to challenging times, and, in 2014, we made bold decisions to position the company for standout performance in better markets. Supply and demand rules—and over the coming years, demand on agriculture, and for our products, will flourish. Mosaic is ideally situated to flourish along with it.

Phosphate dragline machine at sunset

In 2014 we made bold decisions to position the company for standout performance in better markets.

Leading with Purpose

Our task is to make Mosaic the world’s leading crop nutrition company, and our many recent moves are moving us toward market leadership.

In total, Mosaic has deployed or committed $10 billion of capital—about half of the company’s market capitalization at this writing—to growth initiatives and shareholder returns over the last two years. As the business cycle improves, we believe these moves will generate significant opportunity for Mosaic and our investors; in fact, we expect Mosaic’s earnings to show significant growth—even in the absence of higher market prices for our products. 

  • We acquired the phosphate business of CF Industries, Inc., expanding our phosphate production capacity by approximately 2 million tonnes per year. The acquisition made good business and financial sense: The proximity of the former CF facilities to Mosaic’s Florida mines and processing facilities provided many opportunities for efficiencies, and we are on track to achieve the synergies we targeted. In addition, we reached a long-term ammonia supply agreement with CF Industries that enabled Mosaic to table construction of a new $1 billion ammonia plant. The business integration, including the addition of approximately 500 employees, has proceeded well, and the cultures of the two organizations have blended seamlessly.
  • Just before year’s end, we completed the acquisition of Archer Daniels Midland Company’s fertilizer distribution business in Brazil and Paraguay, significantly expanding our presence in the world’s fastest-growing agricultural region. We expect to have the ability to distribute 6 million tonnes of crop nutrients in South America, up from 4 million tonnes.
  • Our potash expansion projects in Saskatchewan, Canada, are proceeding toward completion, with highly successful capacity proving runs completed at Esterhazy and Colonsay, and with the K3 mine shafts at Esterhazy nearing their final depth. New potash capacity projects are enormous undertakings; we are proud that they have exceeded their original capacity designs. The complex Esterhazy K3 project is on schedule and on budget despite significant inflationary pressures in Saskatchewan.
Acquisition of CF Industries’ phosphate business K3 Expansion on schedule and on budget Riverview phosphate employee Increasing MicroEssentials® production capacity to 3.5 million tonnes
  • Our joint venture with Saudi Arabian Mining Company (Ma'aden) and Saudi Basic Industries Corporation (SABIC) to build a 3-million-tonne-per-year integrated phosphate mining and production facility in Saudi Arabia is also proceeding well, with initial production expected around the end of 2016. Mosaic owns 25 percent of the project, and we will receive an equal amount of the product generated there, giving us increased and more efficient access to the Southern Hemisphere, especially India.
  • We began a project to expand production of MicroEssentials®, our premium micronutrient product. Global demand for MicroEssentials continues to grow and exceed our current production capacity. When the current expansion is complete, we will have capacity to produce 3.5 million tonnes of the product.
  • We took steps to optimize our business portfolio by executing some difficult decisions in 2014. Mosaic exited the fertilizer distribution business in Chile and Argentina; sold our mine in Hersey, Michigan; and stopped muriate of potash production at our Carlsbad, New Mexico, mine. The current and potential profitability of each of these businesses did not meet our shareholder return objectives.

Committed to leading

Employee Safety
Set a new record for safety performance for third consecutive year

Environmental Stewardship
Reducing greenhouse gas emissions, waste and energy use at our facilities

Responsible Operations
Overall carbon performance score highest in the materials sector—99 out of 100

  • Shareholders benefitted from substantial distributions in 2014, the first full year in which Mosaic had the ability to repurchase shares. We distributed $3.2 billion through class A and common share repurchases and dividends.
  • In addition, we executed the initial phases of a major cost-reduction exercise, to ensure Mosaic is a low-cost producer. We are ahead of schedule on our plans to remove $500 million in costs from our business units and our corporate support functions.
  • Further strategic moves are continuing in early 2015. We are evaluating the possibility of a project to debottleneck our Faustina, Louisiana, ammonia production facility, and we will have new barges to shuttle lower-cost ammonia across the Gulf of Mexico, between our Florida and Louisiana facilities. And we have submitted applications to secure additional mine permits in Central Florida, where the permitting process continues to advance.
  • While all these initiatives were progressing, Mosaic maintained its leading commitments to employee safety, environmental stewardship and responsible operations. For the third consecutive year we set a new record for safety performance, and we further reduced our number of reportable environmental incidents. Our work to reduce greenhouse gas emissions, waste and energy use at our facilities is succeeding—and we plan to publish new sustainability targets in our 2014 Sustainability Report. Mosaic’s dedication to responsible operations has received important recognition. For the fifth consecutive year, we were named to Corporate Responsibility Magazine’s 100 Best Corporate Citizens list of most responsible companies; Newsweek magazine named Mosaic to its list of America’s Greenest Companies; and we were included in the CDP’s Climate Disclosure Leadership Index and Global Climate Performance Leaders A List, with an overall carbon performance score of 99 out of 100—by far the highest in the materials sector.

We have achieved much, but Mosaic will not rest here. As opportunities arise, whether they are to build on our industry-leading product innovation, to acquire good assets or pursue greater efficiency, we will continue to pursue them, with our proven risk-return discipline.

Farmer in soybean field

Farmers grew the biggest crop ever in 2014, with production up roughly 9 percent compared to 2012.

Challenging Markets Across Agriculture

Our major investments came in the face of challenges in the global agriculture markets.

Farmers grew the biggest crop ever in 2013, and in the 2014 growing season they exceeded that record, with production up roughly 9 percent compared to 2012. The world’s growers produced over 3 billion tonnes of grain and oilseeds. The successive bin-busting crops created excess supply and drove prices for farm products down, with the much-watched U.S. corn crop selling for less than $4 per bushel through much of the fall, down nearly 50 percent from the record high prices of 2012.

Fertilizer prices fell significantly in 2013, and the weaker agriculture business conditions provided little impetus for a strong rebound in 2014—even with very strong global demand for our products. At-the-mine potash prices moved through the early part of the year in a range around $275 per tonne, while phosphate prices, which were somewhat more volatile, averaged $443 per tonne in the first half of the year. Prices and margins for both nutrients rebounded later in the year, as demand remained strong and many producers, including Mosaic, faced operational and logistics challenges.

Equity investors reacted to these conditions with a wait-and-see attitude. Mosaic’s stock traded in a relatively tight price range for most of the year, even as the broader markets enjoyed a significant rally. My colleagues on the Mosaic leadership team and I are unanimous in our view that investors, previously lulled by the recent long run of agricultural prosperity, over-reacted to the agriculture market conditions—and that the current environment presents a compelling opportunity.

At Mosaic, we have demonstrated our confidence with billions of dollars of investments for growth and efficiency—and with substantial returns to shareholders. This confidence comes from our many collective decades of keenly observing these markets, from talking to agriculture retailers and farmers around the globe, and from the world’s rapidly growing demand for more, and more nutritious, food.

In the short term, we believe 2015 will be another good year for Mosaic and our industry. Some observers have speculated that the low prevailing grain and oilseed prices will cause farmers to plant less and to use less fertilizer on the fields they sow.

Good outlook for 2015

Back-to-back huge crops have left the world’s soils sorely in need of nutrients which must be replenished  

Agricultural technology allows growers to identify nutrient need and achieve precision application

Farmers can succeed by maximizing the output of every acre and every field with good fertilization

We hold a contrarian view, for several reasons. First, farmers always farm. Certainly marginal acres of farmland will not be planted when profit potential declines; but even if corn sells for $3 a bushel and soybeans for $9 per bushel, farmers can succeed—and they can only succeed by maximizing the output of every acre and every field, and good fertilization is required to maximize yields.

Second, the back-to-back huge crops have left the world’s soils sorely in need of nutrients. Big crops consume a lot of fertilizer, which must be replenished. Farm balance sheets remain strong; farmers have the resources to use the right inputs to generate maximum yields.

And third, agricultural technology has made remarkable strides over the past decade. Farmers rely on field mapping, soil testing and precision application to deliver ever-improving productivity and efficiency. Farmers know they need fertilizer, which accounts for half of all crop yields, and they know where it needs to go. Good technology does not guide a farmer to plant high-quality seed and then leave it unnourished.

In all, we expect 2015 to be another solid year for potash and phosphate shipments. Potash volumes will remain strong, and phosphate volumes will increase beyond the record-setting 2014 figures. And the longer term? That’s an even better story.

Potash employee in Colonsay underground mine

We expect global potash and phosphate shipments to be strong in 2015.

2015 and Beyond

Mosaic’s future is full of promise. We’ve built a resilient, responsible, financially strong, and innovative enterprise, capable of responding day by day, quarter by quarter and decade by decade to the ever-changing agriculture markets.

Our recent moves to grow and become more efficient enhance the promise Mosaic provides for all its stakeholders, regardless of market conditions.

However the markets change in the short term, though, it is undeniable that agriculture faces a daunting, and exceptionally compelling, future. This has become known as The Food Story—9 billion people on Earth by 2050, an increase of more people than the total population of the planet in 1950. We are all weary of over-told stories, and I know that many participants in the business of agriculture tell versions of this story. But this is more than a story; it’s the future of the planet.

I know of no one who believes agricultural production will extend to millions of additional acres in the coming decades. And it is evident that the world’s largest populations—in China and India, for example—are becoming more urbanized and less agrarian. Fewer farmers, farming roughly the same amount of land, must feed a fast-growing, more urban population. Compounding the challenge, rising quality of life in major population centers leads to rising demand for meats, and animals consume vast amounts of grain. Farmers have a lot to do.

Mosaic, the world’s largest combined producer of two of the three essential macro plant nutrients, sits at the nexus of this remarkable trend—arguably the greatest demand-growth potential in the world. Crop nutrients are essential to the sustainable agricultural intensification the world must deliver. From year to year, the supply and demand equation fluctuates; for the next century and beyond, demand for food only accelerates.

Crop nutrients are essential to the sustainable agricultural intensification the world must deliver
Regina office employees in a meeting

Thank You

2014 brought both challenges and opportunities, and I am proud of the accomplishments the Mosaic team delivered.

Despite all the challenges I have described, Mosaic delivered strong net earnings of $1.0 billion on net sales of $9.1 billion, compared to $1.1 billion and $9.0 billion in 2013, respectively. Our financial performance demonstrates the resilience of our company as a whole, and of the dedicated people who work here.

The year brought many changes, for me, for the leadership team and for the company.

I spent part of 2014 fighting cancer, and I took a planned medical leave for two months. I am grateful for many things, most of all that the treatment I received from remarkably talented medical professionals has had the desired result. I was overwhelmed by the many Mosaic and industry constituents who expressed their good wishes and positive thoughts, and I thank you all for your concern. In my absence, Larry Stranghoener, Mosaic’s CFO for the company’s first decade, served capably as interim CEO.

Larry was one of the very first Mosaic employees—our first outside hire—and he served this company and its shareholders with unwavering integrity, intelligence and excellent judgment. Larry retired in January 2015, and all my Mosaic colleagues join me in wishing him well and thanking him for his dedicated work on our behalf.

Larry’s impending retirement necessitated additional executive team changes. Rich Mack, for 10 years our general counsel, was appointed our CFO, and Mark Isaacson, a long-time colleague in our law department, joined the executive team as our General Counsel. In addition, Walt Precourt, who manages our Potash business, joined the company’s Senior Leadership Team. To become the world’s leading crop nutrition company, we must have great leaders, and I am confident that the company is in exceptionally capable hands for the years ahead.

I am thankful for the contributions of Mosaic people all over the world. With many new additions to the company—particularly in Brazil and Florida—preserving our distinctive culture could have been difficult; on the contrary, our new associates have assimilated well with our diverse and dedicated global team. I believe Mosaic has the best talent in the industry, and the company’s leaders are devoted to accelerating this critical competitive advantage.

To our customers, I offer thanks for your confidence and your ongoing partnership. As always, Mosaic stands ready to serve your needs large and small.

And to my fellow shareholders, I thank you for your patience and your continued trust. Mosaic has earned a remarkably strong position, and the market dynamics of the future hold great promise, for all of us.

Sincerely,

James T. Prokopanko
President and Chief Executive Officer
March 2015

Printable PDF
2014 CEO Review and Outlook

2014 CEO Review and Outlook cover