THE MOSAIC COMPANY The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the material under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Annual Report on Form 10-K ofThe Mosaic Company filed with theSecurities and Exchange Commission for the year endedDecember 31, 2020 (the "10-K Report") and the material under Item 1 of Part I of this report. Throughout the discussion below, we measure units of production, sales and raw materials in metric tonnes, which are the equivalent of 2,205 pounds, unless we specifically state we mean long ton(s), which are the equivalent of 2,240 pounds. In the following tables, there are certain percentages that are not considered to be meaningful and are represented by "NM." Results of Operations The following table shows the results of operations for the three and six months endedJune 30, 2021 andJune 30, 2020 : Three months ended Six months ended June 30, 2021-2020 June 30, 2021-2020 (in millions, except per share data) 2021 2020 Change Percent 2021 2020 Change Percent Net sales$ 2,800.7 $ 2,044.7 $ 756.0 37 %$ 5,097.8 $ 3,842.8 $ 1,255.0 33 % Cost of goods sold 2,048.4 1,787.7 260.7 15 % 3,910.6 3,544.4 366.2 10 % Gross margin 752.3 257.0 495.3 193 % 1,187.2 298.4 888.8 NM Gross margin percentage 27 % 13 % 23 % 8 % Selling, general and administrative expenses 107.6 95.1 12.5 13 % 209.3 163.0 46.3 28 % Mine closure costs 158.1 - 158.1 NM 158.1 - 158.1 NM Other operating expense 2.6 76.1 (73.5) (97) % 22.6 115.8 (93.2) (80) % Operating earnings 484.0 85.8 398.2 NM 797.2 19.6 777.6 NM Interest expense, net (37.3) (49.3) 12.0 (24) % (82.3) (90.4) 8.1 (9) % Foreign currency transaction gain (loss) 111.1 34.1 77.0 NM 65.3 (180.1) 245.4 (136) % Other income 1.4 2.4 (1.0) (42) % 4.4 6.9 (2.5) (36) % Earnings (loss) from consolidated companies before income taxes 559.2 73.0 486.2 NM 784.6 (244.0) 1,028.6 NM Provision for (benefit from) income taxes 115.9 (2.7) 118.6 NM 175.6 (135.7) 311.3 NM Earnings (loss) from consolidated companies 443.3 75.7 367.6 NM 609.0 (108.3) 717.3 NM Equity in net (loss) of nonconsolidated companies (4.5) (29.8) 25.3 (85) % (12.0) (49.8) 37.8 (76) % Net earnings (loss) including noncontrolling interests 438.8 45.9 392.9 NM 597.0 (158.1) 755.1 NM Less: Net earnings (loss) attributable to noncontrolling interests 1.6 (1.5) 3.1 NM 3.1 (2.5) 5.6 NM Net earnings (loss) attributable to Mosaic$ 437.2 $ 47.4 $ 389.8 NM$ 593.9 $ (155.6) $ 749.5 NM
Diluted net earnings (loss) per
share attributable to Mosaic
NM $ 1.55 $ (0.41) $ 1.96 NM
Diluted weighted average number of
shares outstanding 383.3 381.3 383.0 378.9
Overview of Consolidated Results for the three months ended June 30, 2021 and
2020
For the three months ended June 30, 2021 , Mosaic had net income of $437.2
million , or $1.14 per diluted share, compared to net income of $47.4 million , or
$0.12 per diluted share, for the prior year period.
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Significant factors affecting our results of operations and financial condition are listed below. Certain of these factors are discussed in more detail in the following sections of this Management's Discussion and Analysis of Financial Condition and Results of Operations. Our operating results for the three months endedJune 30, 2021 were favorably impacted in our Phosphates segment by significantly higher average selling prices than the prior year period. Sales prices have continued to rise, after reaching a low in the first quarter of 2020, driven by tightness in global supply and demand, strong farmer economics and improved grain prices. The benefit from higher sales prices was partially offset by higher raw material costs in the current year period compared to the prior year period. Availability of molten sulfur has been impacted by refinery closures in 2020 and 2021, due to lower fuel demand and extreme cold weather in the first quarter of 2021 in the southernUnited States , where several refineries are located. The low sulfur availability constrained our production in the current year period and along with a lack of inventory, unfavorably impacted sales volumes in the current period. We do not expect sulfur availability to impact our phosphate production for the remainder of the year, as refinery performance improves. Our operating results during the three months endedJune 30, 2021 , were favorably impacted in our Potash segment by higher average sales prices compared to the prior year period. Prices began to strengthen inNorth America andBrazil in the fourth quarter of 2020, due to increased demand and tight supply. Prices have continued to increase in 2021. Logistical challenges atCanpotex resulted in lower sales volumes in the current year period compared to the prior year period. Operating results were also unfavorably impacted by expenses related to the closure of our K1 and K2 mine shafts at ourEsterhazy, Saskatchewan potash mine, further discussed below. For the three months endedJune 30, 2021 , our operating results were favorably impacted by our Mosaic Fertilizantes segment. Sales prices increased compared to the same period in the prior year due to tight global supply and demand. The favorable results were partially offset by lower sales volumes due to lower product availability, low inventory and increased raw materials costs, as global prices of sulfur and ammonia were higher in the current year period. In addition to the items noted above, our current period results were negatively impacted by a total of$27 million pre-tax, or$0.03 per diluted share, related to the following notable items: •Expense related to the closure of our K1 and K2 mine shafts at ourEsterhazy, Saskatchewan potash mine of$158 million , or$(0.30) per diluted share •Depreciation expense of$15 million , or$(0.04) per diluted share, related to the acceleration of the closure of our K1 and K2 mine shafts at ourEsterhazy, Saskatchewan mine as we ramp up K3 •Other operating expenses of$18 million , or$(0.02) per diluted share, related to maintaining closed and indefinitely idled facilities and asset retirement obligations •Functional currency impact in cost of goods sold of$6 million , or$(0.01) per diluted share •Foreign currency transaction gain of$111 million , or$0.21 per diluted share •Unrealized gain on derivatives of$38 million , or$0.08 per diluted share •Other operating income of$20 million , or$0.04 per diluted share, related to the sale of our warehouse inHouston, Texas •Discrete income tax benefit of$6 million , or$0.01 per diluted share •Other non-operating income of$1 million related to a realized gain on RCRA trust securities Other Highlights •Due to increased brine inflows, onJune 4, 2021 , the Company made the decision to accelerate the timing of the shutdown of our K1 and K2 mine shafts at ourEsterhazy, Saskatchewan potash mine. Closing the K1 and K2 shafts are key pieces of the transition to the K3 shaft, but the timeline for the closure was accelerated by approximately nine months. For the three months endedJune 30, 2021 , we recognized pre-tax costs of$158.1 million related to the permanent closure of these facilities. We have begun the process to resume production at our previously idledColonsay potash mine to offset a portion of the production lost by the early closure of the K1 and K2 shafts atEsterhazy . We have recalled approximately 160 workers at the site and expect production to begin in the third quarter 31
-------------------------------------------------------------------------------- of 2021. We expect the K1 and K2 closures, as partially offset by the reopening of theColonsay mine and ramp up of the K3 shaft, will result in lower net sales volumes of approximately 500,000 tonnes of potash in 2021. •OnJune 24, 2021 , we announced that we submitted an early redemption notice to the trustee of our$450 million 3.75 percent senior notes. The notes, which mature onNovember 15, 2021 , are expected to be called at par onAugust 15, 2021 . Overview of Consolidated Results for the six months endedJune 30, 2021 and 2020 Net earnings attributable to Mosaic for the six months endedJune 30, 2021 was$593.9 million , or$1.55 per diluted share, compared to a net loss of$(155.6) million , or$(0.41) per diluted share, for the same period a year ago. : Results for the six months endedJune 30, 2021 and 2020 reflected the factors discussed above in the discussion for the three months endedJune 30, 2021 and 2020, in addition to those noted below. Certain of these factors are discussed in more detail in the following sections of this Management's Discussion and Analysis of Financial Condition and Results of Operations. Operating results in our Phosphates segment for the six months endedJune 30, 2021 were favorably impacted by higher phosphate average selling prices compared to the prior year period. These results were driven by the factors mentioned above in the three-month discussion. Operating results in the current year period were unfavorably impacted by lower finished product sales volumes, and higher raw material costs in the current year period, as discussed above in the three-month discussion. Current year operating results were also unfavorably impacted by higher idle plant and maintenance turnaround costs compared to the prior year. Operating results in our Potash segment for the six months endedJune 30, 2021 were favorably impacted by an increase in the average selling price of potash compared to the prior year period, partially offset by lower sales volumes. These results were driven by the factors mentioned above in the three-month discussion. For the six months endedJune 30, 2021 , operating results in our Mosaic Fertilizantes segment were favorably impacted by an increase in average sales prices in the current year compared to the prior year period, driven by strong market demand and tight supply. These results were partially offset by the unfavorable impact of lower sales volumes and increased raw materials costs, as discussed above in the three-month discussion. In addition to the items noted above, the results for the six months endedJune 30, 2021 were negatively impacted by$104 million pre-tax, or$0.19 per share due to the following notable items: •Expense related to the closure of our K1 and K2 mine shafts at ourEsterhazy, Saskatchewan potash mine of$158 million , or$(0.30) per diluted share •Depreciation expense of$37 million , or$(0.08) per diluted share, related to the acceleration of the closure of our K1 and K2 mine shafts at ourEsterhazy, Saskatchewan mine as we ramp up K3 •Other operating expenses of$33 million , or$(0.05) per diluted share, related to maintaining closed and indefinitely idled facilities and asset retirement obligations •Functional currency impact in cost of goods sold of$6 million , or$(0.01) per diluted share •Other operating income of$20 million , or$0.04 per diluted share, related to the sale of our warehouse inHouston, Texas •Foreign currency transaction gain of$65 million , or$0.12 per diluted share •Unrealized gain on derivatives of$30 million , or$0.06 per diluted share •Other operating income of$11 million , or$0.02 per diluted share, for recovery of a reserve related to the acquisition ofVale Fertilizantes S.A. (now known asMosaic Fetilizantes P&K S.A. or the "Acquired Business") •Other non-operating income of$4 million , or$0.01 per diluted share, related to a realized gain on RCRA trust securities 32
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Table of Contents Other Highlights •In 2020, we filed petitions with theU.S. Department of Commerce ("DOC") and theU.S. International Trade Commission ("ITC") that requested the initiation of countervailing duty investigations into imports of phosphate fertilizers fromMorocco andRussia . The purpose of the petitions was to remedy the distortions that we believe foreign subsidies have caused or are causing in the U.S. market for phosphate fertilizers, and thereby restore fair competition. OnFebruary 16, 2021 , the DOC made final affirmative determinations that countervailable subsidies were being provided by those governments. OnMarch 11, 2021 , the ITC made final affirmative determinations that theU.S. phosphate fertilizer industry is materially injured by reason of subsidized phosphate fertilizer imports fromMorocco andRussia . As a result of these determinations, the DOC issued countervailing duty orders on phosphate fertilizer imports fromRussia andMorocco , which are scheduled to remain in place for at least five years. Currently, the cash deposit rates for such imports are approximately 20 percent for Moroccan producer OCP, 9 percent and 47 percent for Russian producers PhosAgro andEurochem , respectively, and 17 percent for all other Russian producers. The final determinations in the DOC and ITC investigations are subject to challenge beforeU.S. federal courts and theWorld Trade Organization . Mosaic has initiated actions at theU.S. Court of International Trade contesting certain aspects of the DOC's final determinations that, we believe, failed to capture the full extent of Moroccan and Russian phosphate fertilizer subsidies. Moroccan and Russian producers have also initiatedU.S. Court of International Trade actions, seeking lower cash deposit rates and revocation of the countervailing duty orders. Further, the cash deposit rates and the amount of countervailing duties owed by importers on such imports could change based on the results of the litigation as well as DOC's annual administrative review proceedings. •InMarch 2021 , we announced an increase in our annual dividend target to$0.30 from$0.20 per share. 33
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PhosphatesNet Sales and Gross Margin The following table summarizes the Phosphates segment's net sales, gross margin, sales volume, selling prices and raw material prices: Three months ended Six months ended June 30, 2021-2020 June 30, 2021-2020 (in millions, except price per tonne or unit) 2021 2020 Change Percent 2021 2020 Change Percent Net sales: North America$ 746.5 $ 383.0 $ 363.5 95 %$ 1,472.2 $ 764.7 $ 707.5 93 % International 428.3 379.4 48.9 13 % 703.6 617.1 86.5 14 % Total 1,174.8 762.4 412.4 54 % 2,175.8 1,381.8 794.0 57 % Cost of goods sold 866.3 744.7 121.6 16 % 1,694.7 1,447.0 247.7 17 % Gross margin$ 308.5 $ 17.7 $ 290.8 NM$ 481.1 $ (65.2) $ 546.3 NM Gross margin as a percentage of net sales 26 % 2 % 22 % (5) % Sales volumes(a) (in thousands of metric tonnes) DAP/MAP 880 1,166 (286) (25) % 2,090 2,498 (408) (16) % Performance and Other(b) 1,102 1,069 33 3 % 1,954 1,656 298 18 % Total finished product tonnes 1,982 2,235 (253) (11) % 4,044 4,154 (110) (3) % Rock 274 119 155 130 % 539 288 251 87 % Total Phosphates Segment Tonnes(a) 2,256 2,354 (98) (4) % 4,583 4,442 141 3 % Realized prices ($/tonne) Average finished product selling price (destination)(a)$ 584 $ 338 $ 246 73 %$ 530 $ 328 $ 202 62 %
DAP selling price (fob plant)
90 % $ 474 $ 281 $ 193 69 %
Average cost per unit consumed in
cost of goods sold:
Ammonia (metric tonne) $ 382 $ 289 $ 93 32 % $ 348 $ 298 $ 50 17 %
Sulfur (long ton) $ 172 $ 76 $ 96 126 % $ 145 $ 77 $ 68 88 %
Blended rock (metric tonne) $ 60 $ 61 $ (1) (2) % $ 60 $ 61 $ (1) (2) %
Production volume (in thousands of
metric tonnes) - North America 1,827 2,117 (290) (14) % 3,737 3,978 (241) (6) %
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(a) Includes intersegment sales volumes.
(b) Includes sales volumes of MicroEssentials® and animal feed ingredients.
Three months ended June 30, 2021 and June 30, 2020
The Phosphates segment's net sales were $1.2 billion for the three months ended
June 30, 2021 , compared to $0.8 billion for the three months ended June 30,
2020 . The increase in net sales in the current year period was primarily due to
favorable sales prices, which had an impact of approximately $470 million
compared to the prior year period. This was partially offset by lower sales
volumes, which had an unfavorable impact on net sales of approximately $60
million compared to the prior year period.
Our average finished product selling price increased 73% to $584 per tonne for
the three months ended June 30, 2021 , compared to $338 per tonne in the prior
year period, due to the factors discussed in the Overview.
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The Phosphates segment's sales volumes of finished products decreased by 11% for the three months endedJune 30, 2021 , compared to the same period in the prior year, due to the factors discussed in the Overview. Gross margin for the Phosphates segment increased to$308.5 million for the three months endedJune 30, 2021 , from$17.7 million for the three months endedJune 30, 2020 . The increase in gross margin in the current year period was primarily due to significantly higher sales prices, which favorably impacted gross margin by approximately$430 million compared to the prior year period. This was partially offset by an unfavorable impact of approximately$110 million from increased raw material prices, largely driven by sulfur as discussed in the Overview. The increase in gross margin was also partially offset by the unfavorable impact of approximately$20 million due to the timing of turnarounds, and approximately$10 million due to increased conversion costs caused by lower production volumes due to sulfur availability issues. The average consumed price for ammonia for our North American operations increased to$382 per tonne for the three months endedJune 30, 2021 , from$289 in the same period a year ago. We typically purchase approximately one-third of our ammonia from various suppliers in the spot market, with the remaining two-thirds either purchased through an ammonia supply agreement or produced internally at our Faustina,Louisiana location. The average consumed sulfur price for our North American operations increased by more than 100% to$172 per long ton for the three months endedJune 30, 2021 , from$76 in the same period a year ago. The purchase prices of these raw materials are driven by global supply and demand. The consumed ammonia and sulfur prices also include transportation, transformation, and storage costs. The average consumed cost of purchased and produced phosphate rock decreased slightly to$60 per tonne for the three months endedJune 30, 2021 , compared to$61 per tonne for the three months endedJune 30, 2020 . For the three months endedJune 30, 2021 , our North American phosphate rock production decreased to 2.8 million tonnes from 3.3 million tonnes for the same period of the prior year, due to operational challenges as we transition into new mining areas. Production at ourMiski Mayo mine inPeru has returned to more normal levels compared to the prior year period, when operations were suspended for a portion of the quarter due to a government mandate shut-down related to Covid-19 restrictions. The Phosphates segment's production of crop nutrient dry concentrates and animal feed ingredients decreased to 1.8 million tonnes for the three months endedJune 30, 2021 , compared to 2.1 million for the three months endedJune 30, 2020 . Production volume reflects sulfur availability issues experienced in the current period. Our operating rate for processed phosphate production decreased to 73% for the three months endedJune 30, 2021 , from 85% for the same period in 2020. Six months endedJune 30, 2021 andJune 30, 2020 The Phosphates segment's net sales were$2.2 billion for the six months endedJune 30, 2021 , compared to$1.4 billion for the six months endedJune 30, 2020 . The increase in net sales was primarily due to higher selling prices in the current year period, which favorably impacted net sales by approximately$760 million compared to the prior year period. Net sales was also favorably impacted by approximately$30 million due to sales of excess ammonia in the current year period. Our average finished product selling price was$530 per tonne for the six months endedJune 30, 2021 , an increase of 62% per tonne from the same period a year ago, due to the factors discussed in the Overview. The Phosphates segment's sales volumes of finished products decreased by 3% for the six months endedJune 30, 2021 , compared to the same period in the prior year ago, due to the factors discussed in the Overview. Gross margin for the Phosphates segment increased to$481.1 million for the six months endedJune 30, 2021 , from$(65.2) million for the six months endedJune 30, 2020 . The increase in gross margin in the current year period was primarily due to the impact of higher finished product prices of approximately$730 million compared to the prior year. This was partially offset by higher raw material costs as discussed below, impacting gross margin by approximately$140 million , and higher costs of approximately$30 million which related to the timing of idle plant and turnaround costs in the current year period. Gross margin was also unfavorably impacted by approximately$10 million , due to lower sales volumes. The average consumed price for ammonia for our North American operations was$348 per tonne for the six months endedJune 30, 2021 , compared to$298 in the same period a year ago. The average consumed price for sulfur for our North American operations increased to$145 per long ton for the six months endedJune 30, 2021 , from$77 in the same period a year ago. The purchase prices of these raw materials are driven by global supply and demand. 35
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The average consumed cost of purchased and produced phosphate rock decreased slightly to$60 per tonne for the six months endedJune 30, 2021 , compared to$61 per tonne for the prior year period. Our North American phosphate rock production decreased to 5.8 million tonnes for the six months endedJune 30, 2021 , compared to 6.7 million for the six months endedJune 30, 2020 . The decrease from the prior year is due to operational challenges as we transition into new mining areas. The Phosphate segment's production of crop nutrient dry concentrates and animal feed ingredients decreased to 3.7 million tonnes for the six months endedJune 30, 2021 , compared to 4.0 million tonnes in the prior year period, due to sulfur availability issues in the current year. For the six months endedJune 30, 2021 , our operating rate for processed phosphate production decreased to 75%, compared to 80% in the same period of the prior year. PotashNet Sales and Gross Margin The following table summarizes the Potash segment's net sales, gross margin, sales volume and selling price: Three months ended Six months ended June 30, 2021-2020 June 30, 2021-2020 (in millions, except price per tonne or unit) 2021 2020 Change Percent 2021 2020 Change Percent Net sales: North America$ 456.6 $ 315.2 $ 141.4 45 %$ 770.4 $ 597.7 $ 172.7 29 % International 206.4 240.2 (33.8) (14) % 370.0 399.3 (29.3) (7) % Total 663.0 555.4 107.6 19 % 1,140.4 997.0 143.4 14 % Cost of goods sold 445.8 423.8 22.0 5 % 783.0 756.3 26.7 4 % Gross margin$ 217.2 $ 131.6 $ 85.6 65 %$ 357.4 $ 240.7 $ 116.7 48 % Gross margin as a percentage of net sales 33 % 24 % 31 % 24 % Sales volume(a) (in thousands of metric tonnes) MOP 2,064 2,282 (218) (10) % 3,811 3,991 (180) (5) % Performance and Other(b) 262 277 (15) (5) % 495 467 28 6 % Total Potash Segment Tonnes 2,326 2,559 (233) (9) % 4,306 4,458 (152) (3) % Realized prices ($/tonne) Average finished product selling price (destination)$ 285 $ 217 $ 68 31 %$ 265 $ 224 $ 41 18 % MOP selling price (fob mine)$ 243 $ 182 $ 61 34 %$ 223 $ 188 $ 35 19 % Production volume (in thousands of metric tonnes) 2,131 2,198 (67) (3) % 4,416 4,266 150 4 %
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(a) Includes intersegment sales volumes. (b) Includes sales volumes of K-mag, Aspire and animal feed ingredients. Three months endedJune 30, 2021 andJune 30, 2020 The Potash segment's net sales increased to$663.0 million for the three months endedJune 30, 2021 , compared to$555.4 million in the same period a year ago. The increase was due to higher selling prices which had a favorable impact on net sales of approximately$145 million compared to the same period in the prior year. This was partially offset by lower sales volumes compared to the prior year, which unfavorably impacted net sales by approximately$40 million . Our average finished product selling price was$285 per tonne for the three months endedJune 30, 2021 , compared to$217 per tonne for the same period a year ago, as a result of the factors described in the Overview. The Potash segment's sales volumes of finished products decreased to 2.3 million tonnes for the three months endedJune 30, 2021 , compared to 2.6 million tonnes in the same period a year ago, due to the factors discussed in the Overview. Gross margin for the Potash segment increased to$217.2 million for the three months endedJune 30, 2021 , from$131.6 million in the same period of the prior year. The increase in gross margin in the current year period is primarily due to an increase in selling prices, which contributed approximately$145 million to gross margin, compared to the prior year period. 36
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This was partially offset by an unfavorable impact of approximately$25 million due to lower sales volumes in the current year period. In addition, the current year period was unfavorably impacted by approximately$35 million from higher fixed cost absorption, due to lower production and higher maintenance and turnaround costs, and foreign currency impacts, compared to the prior year period. We had expense of$54.3 million from Canadian resource taxes for the three months endedJune 30, 2021 , compared to$52.1 million in the same period a year ago. Canadian royalty expense increased to$10.0 million for the three months endedJune 30, 2021 , compared to$7.8 million for the three months endedJune 30, 2020 . The fluctuations in Canadian resource taxes and royalties are a result of an increase in sales revenue and margins. We incurred$19 million in brine inflow management expenses, including depreciation on brine assets, at ourEsterhazy mine during the three months endedJune 30, 2021 , compared to$26 million for the three months endedJune 30, 2020 . The reduced costs in 2021 are a reflection of the accelerated closure of the K1 and K2 shafts atEsterhazy . OnJune 4, 2021 , due to increased brine inflows, we made the decision to immediately close these shafts, which will eliminate future brine inflow management expenses at the K1 and K2 shafts. We remain on track in our development of the K3 shaft at ourEsterhazy mine, which is expected to reach full operational capacity in the second quarter of 2022. Our operating rate for potash production was 88% for the current year period, compared to 91% in the prior year period. The decreased operating rate in the current year period reflects the timing of maintenance turnarounds at our mines and the shutdown of our K1 and K2 shafts at ourEsterhazy mine. Six months endedJune 30, 2021 andJune 30, 2020 The Potash segment's net sales increased to$1.1 billion for the six months endedJune 30, 2021 , compared to$1.0 billion in the same period a year ago. The increase was due to higher selling prices, which had a favorable impact on net sales of approximately$150 million , partially offset by lower sales volumes, which had an unfavorable impact on net sales of approximately$5 million . Our average selling price was$265 per tonne for the six months endedJune 30, 2021 , compared to$224 per tonne for the same period a year ago, due to the factors discussed above in the Overview. The Potash segment's sales volumes decreased to 4.3 million tonnes for the six months endedJune 30, 2021 , compared to 4.5 million tonnes in the same period a year ago, due to the factors discussed in the Overview. Gross margin for the Potash segment increased to$357.4 million for the six months endedJune 30, 2021 , from$240.7 million for the same period in the prior year. Gross margin was favorably impacted by approximately$150 million , due to the increase in average selling prices, partially offset by approximately$5 million , due to the impact of lower sales volumes. Gross margin was unfavorably impacted by higher maintenance turnaround costs of approximately$15 million , due to the timing of when turnarounds occurred, and approximately$10 million of foreign currency impacts in the current year period compared to the prior year period. We incurred$89.2 million in Canadian resource taxes for the six months endedJune 30, 2021 , compared to$83.8 million in the same period a year ago. Canadian royalty expense increased to$18.5 million for the six months endedJune 30, 2021 , compared to$16.0 million for the six months endedJune 30, 2020 . The fluctuations in Canadian resource taxes and royalties are due to higher average selling prices and margins in the current year period compared to the prior year. We incurred expense of$42 million , including depreciation on brine assets, related to managing the brine inflows at ourEsterhazy mine during the six months endedJune 30, 2021 , compared to$59 million in the prior year period. Our operating rate was 91% for the current year period, compared to 88% in the prior year period, due to increased production in the first quarter of the current year period. 37
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Mosaic Fertilizantes Net Sales and Gross Margin
The following table summarizes the Mosaic Fertilizantes segment's net sales,
gross margin, sales volume and selling price.
Three months ended Six months ended
June 30, 2021-2020 June 30, 2021-2020
(in millions, except price per tonne
or unit) 2021 2020 Change Percent 2021 2020 Change Percent
Net Sales $ 1,035.7 $ 787.0 $ 248.8 32 % $ 1,799.2 $ 1,518.1 $ 281.1 19 %
Cost of goods sold 850.7 686.3 164.4 24 % 1,511.0 1,350.9 160.1 12 %
Gross margin $ 185.1 $ 100.7 $ 84.4 84 % $ 288.2 $ 167.2 $ 121.0 72 %
Gross margin as a percent of net
sales 18 % 13 % 16 % 11 %
Sales volume (in thousands of metric tonnes)
Phosphate produced in Brazil 686 1,161 (475) (41) % 1,222 1,860 (638) (34) %
Potash produced in Brazil 66 71 (5) (7) % 129 146 (17) (12) %
Purchased nutrients for distribution 1,589 1,326 263 20 % 3,054 2,629 425 16 %
Total Mosaic Fertilizantes Segment
Tonnes 2,341 2,558 (217) (8) % 4,405 4,635 (230) (5) %
Realized prices ($/tonne)
Average finished product selling
price (destination) $ 442 $ 308 $ 134 44 % $ 408 $ 328 $ 80 24 %
Brazil MAP price (delivered price
to third party) $ 589 $ 314 $ 275 88 % $ 521 $ 322 $ 199 62 %
Purchases ('000 tonnes)
DAP/MAP from Mosaic 96 193 (97) (50) % 160 347 (187) (54) %
MicroEssentials® from Mosaic 418 407 11 3 % 621 524 97 19 %
Potash from Mosaic/Canpotex 473 708 (235) (33) % 962 1,001 (39) (4) %
Average cost per unit consumed in
cost of goods sold:
Ammonia (metric tonne) $ 527 $ 327 $ 200 61 % $ 453 $ 340 $ 113 33 %
Sulfur (long ton) $ 177 $ 100 $ 77 77 % $ 153 $ 106 $ 47 44 %
Blended rock (metric tonne)
13 19 % $ 77 $ 71 $ 6 8 %
Production volume (in thousands of
metric tonnes) 893 1,078 (185) (17) % 1,778 2,032 (254) (13) %
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Three months endedJune 30, 2021 andJune 30, 2020 The Mosaic Fertilizantes segment's net sales increased to$1.0 billion for the three months endedJune 30, 2021 , from$0.8 billion in the same period a year ago. The increase in net sales was due to higher finished product sales prices, which favorably impacted net sales by approximately$240 million . This was partially offset by lower finished goods sales volumes, which had an unfavorable impact of approximately$60 million . Net sales were also favorably impacted by increased sales prices and volumes of other products, primarily gypsum and sulfuric acid, of approximately$60 million . Our average finished product selling price was$442 per tonne for the three months endedJune 30, 2021 , compared to$308 per tonne for the same period a year ago, due to the increase in global sales prices, favorable market conditions and the mix of products sold. The Mosaic Fertilizantes segment's sales volumes of finished products decreased 8% for the three months endedJune 30, 2021 , compared to the same period a year ago. Sales volumes were impacted by limited available inventories combined with lower operating rates as well as the sale of produced product through our own distribution system. 38
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Gross margin for the Mosaic Fertilizantes segment increased to$185.1 million for the three months endedJune 30, 2021 , from$100.7 million in the same period of the prior year. The increase in gross margin was primarily due to a favorable impact of approximately$140 million related to the increase in selling prices during the current year period compared to the prior year period. Increased sales prices and volumes of other products, primarily gypsum and sulfuric acid, also favorably impacted gross margin by approximately$20 million . Lower finished goods sales volumes unfavorably impacted gross margin by approximately$10 million compared to the prior year period. An increase in raw material costs, primarily rock, ammonia and sulfur, had an unfavorable impact on gross margin of approximately$40 million , compared to the prior year period. The purchase prices of ammonia and sulfur are driven by global supply and demand. Gross margin was also negatively impacted by higher production costs of approximately$20 million in the current year period, due to inflationary pressure, higher maintenance costs and lower production volumes compared to the prior year period. The Mosaic Fertilizantes segment's production of crop nutrient dry concentrates and animal feed ingredients decreased 17%, to 0.9 million tonnes, for the three months endedJune 30, 2021 , from 1.1 million tonnes in the prior year period. For the three months endedJune 30, 2021 , our phosphate operating rate decreased to 72%, compared to 88% in the same period of the prior year. Current year production was impacted by unplanned maintenance downtime and processing lower quality ore compared to the prior year period. For the three months endedJune 30, 2021 , our Brazilian phosphate rock production decreased slightly to 1.0 million tonnes, from 1.1 million tonnes for the prior year period. Six months endedJune 30, 2021 and 2020 The Mosaic Fertilizantes segment's net sales were$1.8 billion for the six months endedJune 30, 2021 , compared to$1.5 billion in the prior year period. In the current period, net sales were favorably impacted by approximately$250 million due to higher finished goods sales prices, partially offset by the impact of lower finished goods sales volumes of approximately$50 million . Net sales were also favorably impacted by higher sales prices and volumes of other product, primarily gypsum and sulfur acid, of approximately$80 million compared to the prior year period. The average finished product selling price increased$80 per tonne to$408 per tonne for the six months endedJune 30, 2021 , compared to$328 per tonne in the prior year period, primarily due to the increase in global prices mentioned in the Overview. The Mosaic Fertilizantes segment's sales volume decreased to 4.4 million tonnes for the six months endedJune 30, 2021 , from 4.6 million tonnes in the same period a year ago, due to factors discussed above in the three-month discussion. Total gross margin for the six months endedJune 30, 2021 , increased to$288.2 million from$167.2 million in the same period in the prior year. In the current year period, gross margin was favorably impacted by favorable sales prices of approximately$190 million . Gross margin was negatively impacted by lower sales volumes of approximately$10 million and higher raw materials costs of approximately$60 million in the current year period compared to the prior year. Higher production costs at our facilities due to lower production volumes and higher maintenance costs resulted in an unfavorable gross margin impact of approximately$20 million . Gross margin was also positively impacted by favorable foreign currency impacts of approximately$20 million . The Mosaic Fertilizantes segment's production of crop nutrient dry concentrates and animal feed ingredients decreased 13% to 1.8 million tonnes for the six months endedJune 30, 2021 , from 2.0 million tonnes in the prior year period. The lower production in the current year was due to the unplanned maintenance down time and lower quality ore compared to the prior year period. For the six months endedJune 30, 2021 , our phosphate operating rate was 74%, compared to 84% in the same period of the prior year. For the six month period endedJune 30, 2021 , our Brazilian phosphate rock production decreased slightly to 2.0 million tonnes, from 2.1 million tonnes in the prior year period. Corporate, Eliminations and Other In addition to our three operating segments, we assign certain costs to Corporate, Eliminations and Other, which is presented separately in Note 16 to our Notes to Condensed Consolidated Financial Statements. Corporate, Eliminations and Other includes the results of theChina andIndia distribution businesses, intersegment eliminations, including profit on intersegment sales, unrealized mark-to-market gains and losses on derivatives, debt expenses and Streamsong Resort® results of operations. 39
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For the three months endedJune 30, 2021 , gross margin for Corporate, Eliminations and Other was$41.5 million , compared to$7.0 million for the same period in the prior year. The change was driven by distribution operations inIndia andChina , which had revenue of$180.0 million and gross margin of$42.7 million in the current year period, compared to revenue of$161.5 million and gross margin of$20.0 million in the prior year period. The increases in revenue and gross margin were due to higher agriculture commodity prices and tight supply of phosphate and potash in the current year period. Gross margin was also positively impacted by a net unrealized gain of$38.0 million in the current year period, primarily on foreign currency derivatives, compared to a net unrealized gain of$9.2 million in the prior year period. Results were negatively impacted by a higher elimination of profit on intersegment sales in the current year period, which reduced the change from the prior year by approximately$26.2million . For the six months endedJune 30, 2021 , gross margin for Corporate, Eliminations and Other was$60.5 million , compared to a loss of$44.3 million for the same period in the prior year. The change was driven by distribution operations inIndia andChina , which had revenue of$339.6 million and gross margin of$72.9 million in the current year period, compared to revenue of$238.3 million and gross margin of$22.0 million in the prior year period. The increases in revenue and gross margin was due higher agriculture commodity prices and tight supply of phosphate and potash in the current year period. Gross margin was also positively impacted by a net unrealized gain of$29.9 million in the current year period, primarily on foreign currency derivatives, compared to a net unrealized loss of$41.6 million in the prior year period. Results were negatively impacted by a higher elimination of profit on intersegment sales in the current year period, which reduced the change from the prior year by approximately$31.0 million .
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