Letter To Shareholders

Extraordinary. Exceptional. Essential. These three words describe Mosaic’s history – and our future. Unprecedented global demand for food, feed, fiber and fuel has led to an extraordinary environment in agricultural and commodity markets. Mosaic’s position as the world’s leading producer and supplier of phosphate and potash allows us the exceptional opportunity to help meet this global demand. Our assets, our products and our people are now more essential than ever to help the world grow the food it needs.

A Thriving Agribusiness Environment

Global population growth and rising incomes are stressing the capacity and resources of the world to produce ever more agricultural and industrial commodities. Just as we have seen energy security emerge as a challenge in recent decades, we are now seeing food security emerge as a new reality.

There are no overnight remedies to cure this food security challenge, but there are long-term, lasting solutions that can more closely bring supply into better balance with agricultural demand. Some of these solutions are complex, such as changes to economic and agricultural policies in countries around the world. Some solutions require innovation, such as technological breakthroughs that will result in improved crop varieties. And, some solutions are simple, such as applying a better balance of nutrients to soil in order to maximize crop yields.

Whether simple or complex, we are certain that economic and market forces will make many of these solutions a reality and, in combination, will produce a thriving agribusiness sector that sustains global demand for better crops and more food. Already, agriculture and food production have moved to the front pages of the international media and are now a top priority for governments and global institutions. New investment dollars are flowing into the agricultural sector, including funding initiatives from agronomic research to much-needed infrastructure modernization. Perhaps most importantly, farmers around the world are responding to market signals by increasing planted areas and farm yields. It is easy to understand their motivation.

Corn prices have soared from $3.87 to $7.25 per bushel during an 18-month period from January 2007 to July 2008 and other grain and oilseed crops have experienced similar pricing trends. As demand for crops has surged, so has the need for crop nutrients. This record demand for basic fertilizers has placed extraordinary pressure on available fertilizer production capacity and the raw materials used in its production. In turn, fertilizer prices have increased. The price of diammonium phosphate (DAP) rose significantly between the 2007 and 2008 planting seasons, driven by demand as well as increasing raw material costs for sulfur and ammonia, and phosphate rock for non-integrated producers. Potash has experienced a similar price trajectory, due to extremely tight supply and demand conditions.

Farm economics remain strong and are expected to stay so into the foreseeable future. Record crop prices have enabled farmers to offset record input costs. In fact, nutrient costs as a percentage of crop prices have remained largely in the same range of a farmer’s net revenue during the past five years. Given current high grain prices, farmers around the world want maximum yields from their farms. As farmers seek to maximize their yields, crop nutrients continue to provide them with a very attractive return on their investment.

Demand Into Performance

By every measure, Mosaic has successfully transformed strong demand into strong financial performance. Earnings per share soared to $4.67 in fiscal 2008 from $0.95 in fiscal 2007. EBITDA tripled to $3.2 billion. Return on invested capital, the metric we consider to be most meaningful, was an exemplary 30% in fiscal 2008 – one of the industry’s best. Cash flow from operations totaled $2.5 billion, up from $700 million in the prior year.

Our strong financial performance positioned us to achieve an important priority established at the formation of Mosaic. Since May 2007, we have prepaid $1 billion of long-term debt. We have now attained investment grade status as a result of our improved balance sheet and continued strong operational performance.

Investment grade designation was a major milestone for Mosaic and marks the beginning of a new phase in our growth. The removal of some restrictive debt covenants – and the prospect for removal of more – means that we are gaining the flexibility to accelerate reinvestment in our business and to further reward our shareholders through a quarterly dividend program which commenced in August 2008.

Re-Investing In High-Return Assets

With a strong industry environment and strengthened balance sheet in place, Mosaic is shifting into growth mode to meet global demand. We have completed a strategic planning assessment over the past year and plotted a road map for growth. With expectations for sustained crop nutrient demand into the foreseeable future, our potash, phosphate and offshore assets offer Mosaic and its shareholders outstanding investment opportunities. Investment in these existing assets is particularly attractive given the ever increasing costs and long lead times of greenfield projects. Within this environment, our objectives focus on three major growth priorities.

In Potash, we will increase capacity by more than an incremental 5 million tonnes. An additional 1.3 million tonnes of capacity will revert to Mosaic in the next few years once a tolling agreement at our Esterhazy, Saskatchewan mine expires. Our potash reserves are among the largest in the world and represent a readily available and costeffective asset base. Our expansion costs are significantly less than the cost of a greenfield mine. New capacity should be online as early as fiscal 2010 and this 12-year initiative will maintain Mosaic’s premiere competitive position in potash for years to come.

In our Phosphates segment, a series of investments will result in added efficiencies and higher productivity. These projects range from re-activating an indefinitely closed plant to new infrastructure that will result in energy savings. With phosphate rock mines, world-scale plants and a global supply chain, we already possess a sizeable cost advantage in the global marketplace compared to non-integrated producers. These investments will ensure that we continue to maximize operating leverage within our Phosphates business.

For Offshore, we are exploring initiatives to enhance our presence around the world to support current operations. Though we are a global supplier, agriculture remains one of the most local of businesses. Our success and that of our customers is dependent on having our products in the right field at the right time, whether in Iowa or India.

It is important to note that a strong fact base and marketplace insights have been a hallmark of our strategic planning process. Our on-the-ground market intelligence around the world equips us well to stay informed of changing customer needs, as well as regional supply and demand dynamics.

Recognizing Our Leadership Responsibilities

When we think about the extraordinary opportunities before Mosaic, we are mindful that these opportunities are accompanied by responsibility. We work hard to ensure that we are the enterprise we aspire to be – one that is performance-driven and accountable to our shareholders; one that is responsive to our customers; one that is vigilant about the safety of our people; one that is the steward of our environment and our communities; and one that is grounded in integrity and excellence.

I believe Mosaic is this enterprise today, thanks to the 7,400 men and women who have helped to create it. In just four short years, we have built Mosaic into a formidable global competitor and a principled company. I commend all members of our team for their contributions to this accomplishment.

Mosaic will continue to occupy a unique position in the global agricultural marketplace. As this past year has demonstrated, we possess the assets and talent, the expertise and the strategies to serve both our customers and our shareholders exceptionally well. We are the only company in the world with both world-scale potash and phosphate assets that are unmatched in operational breadth, global reach, depth and scale. Our growth strategies are well underway, supported by strong cash flow, an excellent balance sheet and a proven leadership team.

We are humbled and energized by the opportunity to help the world grow more of the food it needs and create value for our shareholders. We consider both to be essential.

Sincerely,

James T. Prokopanko
President and Chief Executive Officer
August, 2008