filings.toolsItem 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to the impact of fluctuations in the relative value of currencies, the impact of interest rates, fluctuations in the purchase price of natural gas, ammonia and sulfur consumed in operations, and changes in freight costs, as well as changes in the market value of our financial instruments. We periodically enter into derivatives in order to mitigate our foreign currency risks, interest rate risks and the effects of changing commodity prices, but not for speculative purposes. See Note 16 to the Consolidated Financial Statements in our 10-K Report and Note 11 to the Condensed Consolidated Financial Statements in this report.
Foreign Currency Exchange Contracts
Due to the global nature of our operations, we are exposed to currency exchange rate changes which may cause fluctuations in our earnings and cash flows. Our primary foreign currency exposures are the Canadian dollar and Brazilian real. To reduce economic risk and volatility on expected cash flows that are denominated in the Canadian dollar and Brazilian real, we use financial instruments that may include forward contracts, zero-cost collars and/or futures. Mosaic hedges cash flows on a declining basis, up to 18 months for the Canadian dollar and up to 12 months for the Brazilian real. We may enter into hedges of up to 36 months for expected Canadian dollar capital expenditures related to our Esterhazy K3 expansion program.
As of September 30, 2021, and December 31, 2020, the fair value of our major foreign currency exchange contracts was ($0.5) million and $10.0 million, respectively. The table below provides information about Mosaic’s significant foreign exchange derivatives.
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| (in millions US$) | As of September 30, 2021 | As of December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Expected Maturity Date | Fair Value | Expected Maturity Date | Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Years ending December 31, | Years ending December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2022 | 2023 | 2024 | 2021 | 2022 | 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign Currency Exchange Forwards | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Canadian Dollar | $ | 3.1 | $ | 31.9 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Notional (million US$) - short Canadian dollars | $ | 168.3 | $ | 230.6 | $ | 57.2 | $ | 6.3 | $ | 170.0 | $ | 48.4 | $ | 6.0 | |||||||||||||||||||||||||||||||||||||||
| Weighted Average Rate - Canadian dollar to U.S. dollar | 1.2714 | 1.2703 | 1.2598 | 1.2794 | 1.3089 | 1.3285 | 1.3304 | ||||||||||||||||||||||||||||||||||||||||||||||
| Notional (million US$) - long Canadian dollars | $ | 307.9 | $ | 732.7 | $ | 121.7 | $ | 35.2 | $ | 670.5 | $ | 196.5 | $ | 59.4 | |||||||||||||||||||||||||||||||||||||||
| Weighted Average Rate - Canadian dollar to U.S. dollar | 1.2798 | 1.2685 | 1.2946 | 1.2346 | 1.3291 | 1.3153 | 1.3299 | ||||||||||||||||||||||||||||||||||||||||||||||
| Foreign Currency Exchange Collars | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Canadian Dollar | $ | 0.4 | $ | 0.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Notional (million US$) - long Canadian dollars | $ | — | $ | 15.5 | $ | — | $ | — | $ | — | $ | 30.3 | $ | — | |||||||||||||||||||||||||||||||||||||||
| Weighted Average Participation Rate - Canadian dollar to U.S. dollar | — | 1.2875 | — | — | — | 1.3432 | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Weighted Average Protection Rate - Canadian dollar to U.S. dollar | — | 1.3433 | — | — | — | 1.2874 | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Foreign Currency Exchange Non-Deliverable Forwards | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Brazilian Real | $ | (2.7) | $ | (19.4) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Notional (million US$) - short Brazilian real | $ | 455.1 | $ | 22.0 | $ | — | $ | — | $ | 582.4 | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Weighted Average Rate - Brazilian real to U.S. dollar | 5.3113 | 5.5367 | — | — | 5.2160 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Notional (million US$) - long Brazilian real | $ | 276.9 | $ | 325.2 | $ | — | $ | — | $ | 924.6 | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Weighted Average Rate - Brazilian real to U.S. dollar | 5.3473 | 5.4909 | — | — | 5.3068 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Indian Rupee | $ | (0.4) | $ | (2.1) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Notional (million US$) - short Indian rupee | $ | 111.0 | $ | 25.0 | $ | — | $ | — | $ | 146.0 | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Weighted Average Rate - Indian rupee to U.S. dollar | 75.0494 | 74.7212 | — | — | 74.5083 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| China Renminbi | $ | (0.9) | $ | (0.8) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Notional (million US$) - short China renminbi | $ | 81.0 | $ | 3.0 | $ | — | $ | — | $ | 78.0 | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Weighted Average Rate - China renminbi to U.S. dollar | 6.5895 | 6.6025 | — | — | 6.6211 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Total Fair Value | $ | (0.5) | $ | 10.0 |
Further information regarding foreign currency exchange rates and derivatives is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 10-K Report and Note 11 to the Condensed Consolidated
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Financial Statements in this report.
Commodities
As of September 30, 2021, and December 31, 2020, the fair value of our natural gas commodities contracts was $36.6 million and $5.3 million, respectively.
The table below provides information about our natural gas derivatives which are used to manage the risk related to significant price changes in natural gas.
| (in millions) | As of September 30, 2021 | As of December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Expected Maturity Date | Expected Maturity Date | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Years ending December 31, | Years ending December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2022 | 2023 | 2024 | Fair Value | 2021 | 2022 | 2023 | 2024 | Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Natural Gas Swaps | $ | 36.6 | $ | 5.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notional (million MMBtu) - long | 2.8 | 9.9 | 9.4 | 4.8 | 17.7 | 8.5 | 1.2 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted Average Rate (US$/MMBtu) | $ | 1.88 | $ | 2.23 | $ | 2.34 | $ | 2.72 | $ | 1.93 | $ | 2.16 | $ | 2.88 | $ | — | |||||||||||||||||||||||||||||||||||||||||||
| Total Fair Value | $ | 36.6 | $ | 5.3 |
Further information regarding commodities and derivatives is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 10-K Report and Note 11 to the Condensed Consolidated Financial Statements in this report.
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