EXHIBIT 99.2
 AGRIUM INC.
 2008
 MANAGEMENTS DISCUSSION & ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION




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12   Agrium / 2008 Annual Report  Inside the MD&A
 12 Forward-looking Statements
    
    67 Financial Condition14 Executive Summary
    
    68 Liquidity & Capital Resources15 Vision, Strategy & Key Business Drivers
    
    75 Outstanding Shares18 Retail Business Unit
    
    75 Off-Balance Sheet Arrangements30 Wholesale Business Unit
    
    75 Financial Instruments50 Advanced Technologies Business Unit
    
    78 2008 Fourth Quarter Managements Discussion & Analysis57 Other Business Unit
    
    81 Accounting Estimates & New Accounting Standards58 Outlook
    
    85 Business Risks62 Key Business Sensitivities
    
    90 Environmental Protection Requirements63 Consolidated Performance
    
    92 Controls & Procedures
     Forward-looking Statements
  
    
    Disclosures made under the heading Outlook;
    
    Our 2009 key corporate goals, including expansion and growth of our business and operations;
    
    Key drivers for our business and industry trends;
    
    The amount and type of future capital expenditures and capital resources;
    
    Future cash requirements and long-term obligations;
    
    Business strategies and plans for implementing them;
    
    Future crop input volumes, prices and sales;
    
    Availability of raw materials, particularly gas availability or gas price relative to nitrogen
prices;
    
    Risk mitigation activities; and,




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2008 Annual Report / Agrium   13 
    
    Our future results and plans, including our recent and proposed acquisitions.
  
    
    General economic, market, business and weather conditions, including global agricultural
supply/demand factors and crop price levels; global and regional supply/demand factors
impacting the price of crop nutrients and raw materials/feedstock; availability of credit; and
access to capital markets;
    
    Changes in government policies and legislation regarding agriculture, safety, environment,
greenhouse gas and others, including potential imposition of changes to price controls on
fertilizers in certain markets;
    
    Actions by competitors and others that include changes to industry capacity, utilization rates
and product pricing; performance by customers, suppliers and counterparties to financial
instruments; and ability to transport or deliver production to markets;
    
    Changes in margins and/or levels of supplier rebates for major crop inputs such as crop
protection products, nutrients and seed;
    
    General operating risks associated with investment in foreign jurisdictions; the level and
effectiveness of future capital expenditures; reliability of performance of existing capital
assets; changes in capital markets and availability of credit; and fluctuations in foreign
exchange and tax rates in the jurisdictions in which we operate;
    
    Future operating rates, production costs and sustaining capital of our facilities, including
the availability of skilled labor; unexpected costs from present and discontinued mining
operations and/or labor disruptions; changes to timing, construction cost and performance
of other parties; and political risks associated with our interest in the Egyptian MISR Oil
Processing Company, S.A.E. (MOPCO) and Argentine Profertil nitrogen project; and,
    
    Strategic risks including our ability to effectively implement our business strategy and our
risk mitigation strategies, including hedging and insurance; our ability to close pending and
proposed acquisitions as anticipated, integrate and achieve synergies from any assets we may
acquire within the time expected or the performance of those assets; technological changes;
and other factors.
  
    
    Grain and nutrient benchmark prices in 2009 are expected to remain above historic
levels and show improvement relative to fourth quarter 2008 levels.
    
    High operating rates for the majority of our facilities in 2009, with the exception of
routinely scheduled turnarounds at several plants. Our Profertil facility may again be
impacted by reduced gas deliverability during the Argentine winter.
   Non-GAAP Financial Measures




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14   Agrium / 2008 Annual Report  Executive Summary | The Fundamentals of Growth
 2008 | Consolidated Financial Performance
   1
    Despite the global financial forces that impacted virtually every industry during the third and
fourth quarters of 2008, Agrium ended the year with results that reflect the quality of our assets
and the benefits of diversifying across the agricultural value chain. In 2009, we anticipate
continued strong demand for our products and services, which help farmers around the world improve
crop quality and yield.Mike Wilson, Agrium President & CEO
 2008 | Key Results
 
    
    Agrium Inc. | EBITDA reached $2.3-billion due to higher realized prices on nutrients, crop
protection products and seed through the first two quarters of 2008, supported by strong
Wholesale production and sales for all major products, improved Retail margins and
increased ESN® volumes and margins.
    
    Retail Unit | EBITDA more than doubled to $560-million compared with 2007. Our legacy Retail
operations reported a 67 percent increase in EBITDA year-over-year and UAP operations also
contributed significantly to EBITDA.
    
    Wholesale Unit | EBITDA also more than doubled, reaching $1.7-billion compared to $786-million
in 2007 due to excellent crop nutrient pricing and margins for all three major nutrients.
    
    Advanced Technologies Unit | achieved an EBITDA of $50-million  72 percent ($21-million)
higher than 2007  due primarily to increased ESN® sales margins and volumes.
 2008 | Key Developments
 
    
    Spring 2008 | Agrium acquires UAP Holding Corp.
Agrium nearly doubled the size and scope of our Retail business for the second time within
three years through the acquisition of UAP a large distributor of crop protection products,
nutrients, seeds and services to growers across North America  in May of 2008. The
 
 1
    See disclosures under the heading Forward-Looking Statements on page 92 of this MD&A.




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2008 Annual Report / Agrium   15 acquisition resulted in significantly higher earnings potential from our stable Retail
earnings base. The addition of approximately 365 retail outlets and eight distribution centers
through the UAP acquisition significantly increased our Retail net sales and gross profit in
2008.
    
    Summer 2008| Agrium acquires European distribution networkAgrium purchased a 70 percent equity position in Common Market Fertilizers S.A. (CMF), one of
Western Europes largest fertilizer distribution companies  an acquisition that now gives
Agrium an entrance into markets in France, Germany, Italy and the U.K.
    
    Early 2009| Agrium acquires interest in Egyptian Nitrogen facilityAgrium finalized the share swap for a 26 percent equity position in an existing Egyptian
nitrogen production facility on January 26, 2009. The 675,000 tonne urea facility started
commercial production in the summer of 2008 and it is owned by MOPCO. Two additional
production trains are planned. Agriums entry into Egypt is consistent with our strategy of
investing across the agricultural value chain, establishing positions of low cost-to-serve
wholesale assets and diversifying geographically.
 2008 | Impact of Global Economic Downturn
 
    
    Commodity markets declined at a rapid rate in the fourth quarter of 2008, in response to
the significant downturn in the global economy and tight credit availability
internationally. This had a significant impact on crop prices and on the demand and price
of crop nutrients. Benchmark urea and phosphate prices both declined by more than 70 percent
between the start and the end of the fourth quarter of 2008. International demand for crop
nutrients was impacted by reduced credit availability and uncertainty over future price
levels. North American demand in the fall of 2008 was further impacted by a shortened fall
fertilizer application window, as a result of harvest delays and the deferral of crop
nutrient purchases in the fall of 2008 in the anticipation of lower prices in 2009.
    
    We anticipate strong demand for seed, crop protection products and most crop nutrient
products in 2009, as current crop prices provide economic incentives for farmers to
fertilize and protect their crops. We have a favorable outlook for grain fundamentals
and expect growers will attempt to make up some of their crop input purchase deferrals from
last fall. We expect nitrogen demand to be strong because reductions in nitrogen application
rates have immediate impacts on crop yields, while phosphate and potash applications can
only be deferred slightly longer before negatively affecting crop yields. We also
anticipate strong demand for crop protection products due to higher than average crop prices
supporting preventive chemical applications.
 The Fundamentals of Growth | Vision, Strategy & Key Business Drivers
       1.
    
    To invest and grow across the agricultural value chain.2.
    
    To establish and/or maintain a low cost-to-serve wholesale position.3.
    
    To diversify geographically.




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16   Agrium / 2008 Annual Report  Retail
| 2008 net sales of $5.5-billion
  Wholesale | 2008 net sales of $4.7-billion
   Advanced Technologies | 2008 net sales of $352-million
 ®
  Net Sales & Gross Profit by Business Unit and Product
 Year Ended December 31
    
    
    2008
    
    
    
    2007(millions of U.S. dollars)
    
    
    Net Sales
    
    
    Gross Profit
    
    
    
    Net Sales
    
    
    Gross ProfitRetailCrop nutrients
    
    
    
    2,718
    
    
    
    627
    
    
    
    
    1,453
    
    
    
    335Crop protection products
    
    
    
    2,115
    
    
    
    576
    
    
    
    
    619
    
    
    
    181Seed, services and other
    
    
    
    683
    
    
    
    223
    
    
    
    
    394
    
    
    
    160Total Retail
    
    
    
    5,516
    
    
    
    1,426
    
    
    
    
    2,466
    
    
    
    676WholesaleNitrogen
    
    
    
    1,815
    
    
    
    712
    
    
    
    
    1,535
    
    
    
    508Potash
    
    
    
    816
    
    
    
    632
    
    
    
    
    305
    
    
    
    167Phosphate
    
    
    
    847
    
    
    
    421
    
    
    
    
    466
    
    
    
    118Other
    
    
    
    237
    
    
    
    68
    
    
    
    
    200
    
    
    
    53Product purchased for resale
    
    
    
    971
    
    
    
    (42
    )
    
    
    
    339
    
    
    
    28Total Wholesale
    
    
    
    4,686
    
    
    
    1,791
    
    
    
    
    2,845
    
    
    
    874Advanced Technologies
    
    
    
    352
    
    
    
    79
    
    
    
    
    249
    
    
    
    55Other (inter-segment eliminations)
    
    
    
    (523
    )
    
    
    (73
    )
    
    
    
    (290
    )
    
    
    (7
    )TOTAL
    
    
    
    10,031
    
    
    
    3,223
    
    
    
    
    5,270
    
    
    
    1,598




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2008 Annual Report / Agrium   17 Key Business Drivers
   1.
    
    Global grain prices:
 
    
    Higher grain prices typically motivate growers to both expand seeded acreage and increase crop
input applications to optimize yields outcomes that benefit all of Agriums business units.
    
    Growing populations, rising global GDP, leads to improving diets among the rapidly growing
Asian middle-class and expanded bio-fuel production all apply upward pressure to grain
consumption and prices, which helps support demand for all crop inputs (crop protection
products,nutrients, seed and related services).
 2.
    
    Supply and demand balance for the major crop inputs:
 
    
    When crop acreage and crop prices increase, crop input application rates and overall demand is
supported.
    
    New production facilities and/or facility closures can influence global production capacity
and, by extension, the global supply of each nutrient and/or input product.
    
    Supply is also tied to global operating rates, which can be affected by the price of the crop
nutrient relative to the cost of production. Cost of production is influenced by the price and
availability of key raw materials (particularly North American natural gas prices or the cost
of sulfur for phosphate production), including the impact of changes in currency valuation, as
well as strikes or government actions.
 3.
    
    Government policies or actions:
 
    
    Changes in tax structure, environmental compliance and other interventions can positively or
negatively impact the cost of doing business in a given region of the world.
    
    Government actions that support a countrys agriculture sector (for example, introducing a
program that provides additional credit to growers) can have a positive impact on nutrient
demand.
    
    A change in government policy pertaining to imports, exports or regulated pricing of crop
inputs can influence supply, demand and pricing for these products. For example, China
temporarily lowered their export tax on nitrogen and phosphate products in late 2008,
which increased export availability from China and negatively impacted international prices.
 4.
    
    Global and regional GDP:
The rate of growth in GDP impacts demand for our Wholesale industrial products. On a longer
term basis, the rate of growth in global GDP can also influence the rate of growth in demand for
high protein diets, which in turn raises demand for animal feed and crop inputs.
 5.
    
    Environmental, sustainable and economic imperatives:
The increased global emphasis on environmentally, socially and economically sustainable
products continues to influence the development and demand for new products, services and practices.




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18   Agrium / 2008 Annual Report  In 2008, our Retail operations accounted for over half of Agriums consolidated net sales, 44
percent of our gross profit and 24 percent of total EBITDA.




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2008 Annual Report / Agrium   19 Retail | Snapshot 2008
 
    
    Net Sales | $5.5-billion in 2008, more than double the $2.5-billion in 2007 and $2.0-billion in 2006
    
    Gross Profit | $1.4-billion in 2008, also more than
double the gross profit of $676-million in 2007 and $495-million in 2006
    
    EBIT | $480-million, compared with $177-million in 2007 and $95-million in 2006
    
    EBITDA | $560-million compared with $210-million in 2007 and $125-million in 2006
  1
    See disclosures under the heading Forward-Looking Statements on page 92 of this MD&A




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20   Agrium / 2008 Annual Report  Retail | Operational Geography
  Crop Production Services (CPS)
  Agroservicios Pampeanos S.A. (ASP)




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2008 Annual Report / Agrium   21




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22   Agrium / 2008 Annual Report  Retail | Strategy
   1.
    
    Commitment to a strict program of performance management with detailed attention to
customers and employees.2.
    
    Growing the business in general and the seed business in particular.3.
    
    Building relationships with leading growers in each of our markets, allowing us to grow
along with our customers.4.
    
    Focusing expansion in the prime agricultural regions.5.
    
    Optimizing returns from economies of scale across all products, systems and services.




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2008 Annual Report / Agrium   23 Retail | Key Developments in 2008
 The addition of UAPs business to our own Retail operations is an excellent strategic fit for
Agrium and a significant step in our strategy of continuing to grow and transform the Company. The
acquisition will significantly expand our geographic base and our product diversity, and it will
offer an opportunity to leverage strengths of both companies. It increases the scale, size and
diversity of our business, further enhances stability of our earnings profile and strengthens
Agriums ability to serve and grow its customer base. A key factor to our success will be drawing
from the extensive experience of employees from both organizations.
Mike Wilson, Agrium President & CEO




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24 Agrium
 Agriums Acquisition of UAP
   1
  
 1
    See disclosures under the heading Forward-Looking Statements on page 92 of this MD&A.




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Agrium 25
  Retail | Financial Results
    Retail Performance
 Year Ended December 31
    
    
    
    
    
    
    
    
    Variance Analysis(millions of U.S. dollars)
    
    
    2008
    
    
    
    2007
    
    
    2006
    
    
    
    2008 vs 2007
    
    
    
    2007 vs 2006Net sales
    
    
    
    5,516
    
    
    
    
    2,466
    
    
    
    1,975
    
    
    
    
    3,050
    
    
    
    
    491Cost of product
    
    
    
    3,997
    
    
    
    
    1,790
    
    
    
    1,480
    
    
    
    
    2,207
    
    
    
    
    310Inventory and purchase
commitment write-down
    
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    
    Gross profit
    
    
    
    1,426
    
    
    
    
    676
    
    
    
    495
    
    
    
    
    750
    
    
    
    
    181Selling expenses
    
    
    
    788
    
    
    
    
    442
    
    
    
    361
    
    
    
    
    346
    
    
    
    
    81General and administrative
    
    
    
    59
    
    
    
    
    21
    
    
    
    23
    
    
    
    
    38
    
    
    
    
    (2
    )Depreciation and amortization
    
    
    
    80
    
    
    
    
    33
    
    
    
    30
    
    
    
    
    47
    
    
    
    
    3Other expenses (income)
    
    
    
    19
    
    
    
    
    3
    
    
    
    (14
    )
    
    
    
    16
    
    
    
    
    17EBIT
    
    
    
    480
    
    
    
    
    177
    
    
    
    95
    
    
    
    
    303
    
    
    
    
    82EBITDA
    
    
    
    560
    
    
    
    
    210
    
    
    
    125
    
    
    
    
    350
    
    
    
    
    85EBITDA as percent of net sales
    
    
    
    10
    
    
    
    
    9
    
    
    
    6
 Retail | Expenses




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26 Agrium
  Retail | Products & Services
 Crop Nutrients | Products & Services
   The Forces of Demand
    |
    Growers apply nutrients to their croplands to optimize yields.
Crops naturally utilize and draw nutrients from the soil as they grow, and Agrium is in the
business of helping growers replenish these soil nutrients to maintain soil fertility for
generations to come.
 Crop Nutrients | Financial Results




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Agrium 27
  Year Ended December 31
    
    
    
    
    
    
    
    
    Variance Analysis(millions of U.S. dollars)
    
    
    2008
    
    
    
    2007
    
    
    2006
    
    
    
    2008 vs 2007
    
    
    
    2007 vs 2006Crop nutrientsNet sales
    
    
    
    2,718
    
    
    
    
    1,453
    
    
    
    1,065
    
    
    
    
    1,265
    
    
    
    
    388Cost of product
    
    
    
    1,998
    
    
    
    
    1,118
    
    
    
    848
    
    
    
    
    880
    
    
    
    
    270Inventory and purchase
commitment write-down
    
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    
    Gross profit
    
    
    
    627
    
    
    
    
    335
    
    
    
    217
    
    
    
    
    292
    
    
    
    
    118Gross profit (%)
    
    
    
    23.1
    
    
    
    
    23.1
    
    
    
    20.4Crop protection productsNet sales
    
    
    
    2,115
    
    
    
    
    619
    
    
    
    591
    
    
    
    
    1,496
    
    
    
    
    28Cost of product
    
    
    
    1,539
    
    
    
    
    438
    
    
    
    437
    
    
    
    
    1,101
    
    
    
    
    1Gross profit
    
    
    
    576
    
    
    
    
    181
    
    
    
    154
    
    
    
    
    395
    
    
    
    
    27Gross profit (%)
    
    
    
    27.2
    
    
    
    
    29.2
    
    
    
    26.1Seed, services and otherNet sales
    
    
    
    683
    
    
    
    
    394
    
    
    
    319
    
    
    
    
    289
    
    
    
    
    75Cost of product
    
    
    
    460
    
    
    
    
    234
    
    
    
    195
    
    
    
    
    226
    
    
    
    
    39Gross profit
    
    
    
    223
    
    
    
    
    160
    
    
    
    124
    
    
    
    
    63
    
    
    
    
    36Gross profit (%)
    
    
    
    32.7
    
    
    
    
    40.6
    
    
    
    38.9Total net sales
    
    
    
    5,516
    
    
    
    
    2,466
    
    
    
    1,975
    
    
    
    
    3,050
    
    
    
    
    491Total cost of product
    
    
    
    3,997
    
    
    
    
    1,790
    
    
    
    1,480
    
    
    
    
    2,207
    
    
    
    
    310Total inventory and purchase
commitment write-down
    
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    
    Total gross profit
    
    
    
    1,426
    
    
    
    
    676
    
    
    
    495
    
    
    
    
    750
    
    
    
    
    181
 Crop Protection Products | Products & Services
    The Forces of Demand
    |
    As crop prices rise, growers increasingly embrace the use of crop protection
products to maintain and improve plant health. These products can increase crop yields by countering
crop disease pressures. Demand for crop protection products can be contingent on weather conditions,
which affect the degree of pest pressure in a particular region or crop. The cyclical nature of
insect infestations and crop diseases also influences demand.




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28 Agrium
 Crop Protection Products | Financial Results
   Seed, Services and Other Products | Products & Services
  The Forces of Demand
    |
    We market most of our branded seed products in the Corn Belt and cotton
markets. Corn, wheat, soybean and cotton seeds account for over 80 percent of our total seed sales.
We have seen a rapid increase in our seed sales, and our goal is to continue to grow this area of
our business.
   Seed, Services and Other Products | Financial Results




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Agrium 29
  Retail | Quarterly Results
   2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2006(millions of U.S. dollars)
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Net sales  Domestic
    
    
    
    916
    
    
    
    1,482
    
    
    
    2,422
    
    
    
    365
    
    
    
    
    454
    
    
    
    345
    
    
    
    1,087
    
    
    
    320
    
    
    
    326
    
    
    
    291
    
    
    
    927
    
    
    
    266Net sales  International
    
    
    
    106
    
    
    
    112
    
    
    
    84
    
    
    
    29
    
    
    
    
    101
    
    
    
    82
    
    
    
    60
    
    
    
    17
    
    
    
    58
    
    
    
    51
    
    
    
    42
    
    
    
    14Total net sales
    
    
    
    1,022
    
    
    
    1,594
    
    
    
    2,506
    
    
    
    394
    
    
    
    
    555
    
    
    
    427
    
    
    
    1,147
    
    
    
    337
    
    
    
    384
    
    
    
    342
    
    
    
    969
    
    
    
    280Cost of product
    
    
    
    701
    
    
    
    1,178
    
    
    
    1,839
    
    
    
    279
    
    
    
    
    376
    
    
    
    293
    
    
    
    869
    
    
    
    252
    
    
    
    259
    
    
    
    252
    
    
    
    755
    
    
    
    214Inventory and purchase
commitment write-down
    
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    
    228
    
    
    
    416
    
    
    
    667
    
    
    
    115
    
    
    
    
    179
    
    
    
    134
    
    
    
    278
    
    
    
    85
    
    
    
    125
    
    
    
    90
    
    
    
    214
    
    
    
    66Gross profit (%)
    
    
    
    22
    
    
    
    26
    
    
    
    27
    
    
    
    29
    
    
    
    
    32
    
    
    
    31
    
    
    
    24
    
    
    
    25
    
    
    
    33
    
    
    
    26
    
    
    
    22
    
    
    
    24Gross profit by productCrop nutrients
    
    
    
    60
    
    
    
    160
    
    
    
    335
    
    
    
    72
    
    
    
    
    83
    
    
    
    48
    
    
    
    159
    
    
    
    45
    
    
    
    47
    
    
    
    29
    
    
    
    109
    
    
    
    32Crop protection products
    
    
    
    133
    
    
    
    191
    
    
    
    223
    
    
    
    29
    
    
    
    
    56
    
    
    
    50
    
    
    
    52
    
    
    
    23
    
    
    
    49
    
    
    
    34
    
    
    
    47
    
    
    
    24Seed, services and other
    
    
    
    35
    
    
    
    65
    
    
    
    109
    
    
    
    14
    
    
    
    
    40
    
    
    
    36
    
    
    
    67
    
    
    
    17
    
    
    
    29
    
    
    
    27
    
    
    
    58
    
    
    
    10EBIT
    
    
    
    (54
    )
    
    
    121
    
    
    
    409
    
    
    
    4
    
    
    
    
    39
    
    
    
    17
    
    
    
    142
    
    
    
    (21
    )
    
    
    20
    
    
    
    (9
    )
    
    
    98
    
    
    
    (14
    )EBITDA
    
    
    
    (32
    )
    
    
    148
    
    
    
    431
    
    
    
    13
    
    
    
    
    47
    
    
    
    26
    
    
    
    150
    
    
    
    (13
    )
    
    
    28
    
    
    
    
    
    
    
    106
    
    
    
    (9
    )




---



##### 



30 Agrium
  
 By investing and growing across the value chain, Agriums Wholesale unit has assembled a
substantial, diversified and increasingly global network of assets.




---



##### 



Agrium 31
  Wholesale | Snapshot 2008
 
    
    Net Sales| $4.7-billion  a 65 percent increase compared with $2.8-billion in 2007 and
$2.3-billion in 2006
 
    
    Gross Profit| $1.8-billion  double our gross profit of $874-million in 2007 and
more than four times the $435-million in 2006
 
    
    EBIT | $1.5-billion compared with $667-million in 2007 and $91-million in 2006
 
    
    EBITDA| $ 1.7-billion  a 112 percent increase over $786-million in 2007 and 374
percent over $352-million in 2006




---



##### 



32 Agrium
  
 Wholesale | Operational Geography









---



##### 



Agrium 33




---



##### 



34 Agrium
  (thousands of product tonnes

    
    
    
    
    
    Nitrogen Volumes
    
    
    
    
    
    
    Potash Volumes
    
    
    
    
    
    
    Phosphate Volumesas of December 31, 2008)
    
    Capacity
    
    
    Production
    
    
    Sales
    
    
    Capacity
    
    
    Production
    
    
    Sales
    
    
    Capacity
    
    
    Production
    
    
    SalesNorth AmericaCanada
    
    
    3,345
    
    
    
    2,642
    
    
    
    1,456
    
    
    
    2,050
    
    
    
    1,763
    
    
    
    108
    
    
    
    660
    
    
    
    598
    
    
    
    529U.S.
    
    
    1,273
    
    
    
    924
    
    
    
    1,733
    
    
    
    
    
    
    
    
    
    
    
    800
    
    
    
    555
    
    
    
    436
    
    
    
    377International
    
    
    635
    
    
    
    399
    
    
    
    362
    
    
    
    
    
    
    
    
    
    
    
    778
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    5,253
    
    
    
    3,965
    
    
    
    3,551
    
    
    
    2,050
    
    
    
    1,763
    
    
    
    1,686
    
    
    
    1,215
    
    
    
    1,034
    
    
    
    906




---



##### 



Agrium 35
 Wholesale | Strategy
  
    
    Optimization and incremental expansions of existing facilities and distribution assets;
 
    
    Value-added growth through building new greenfield facilities;
 
    
    Acquisitions in both our manufacturing and distribution functions; and,
 
    
    Global diversification.




---



##### 



36 Agrium
 1
 Wholesale | Key Developments In 2008
 We are extremely pleased
that we have been able to reach an agreement with the Egyptian Government
that allows us to establish an immediate presence and long-term strategic position in Egypt while
providing additional earnings and cash flow almost immediately. Mike Wilson, President & CEO
 Egypt Nitrogen Facility Developments
  
 1
    See disclosures under the heading Forward-Looking Statements on page 92 of this MD&A.




---



##### 



Agrium 37
 1
     The CMF acquisition is a key step in our global wholesale distribution strategy and provides us
with entranceinto markets in Europe as well as one of
Europes most experienced teams in purchasing, sales, anddistribution. Mike Wilson, President & CEO
 Wholesale | Financial Results
  Wholesale | Expenses
  
 1
    See disclosures under the heading Forward-Looking Statements on page 92 of this MD&A.




---



##### 



38 Agrium
 Year Ended December 31
    
    
    
    
    
    
    
    
    Variance Analysis(millions of U.S. dollars)
    
    
    2008
    
    
    

2007
    
    
    2006
    
    
    
    2008 vs 2007
    
    
    
    2007 vs 2006NitrogenNet sales
    
    
    
    1,815
    
    
    
    
    1,535
    
    
    
    1,280
    
    
    
    
    280
    
    
    
    
    255Gross profit
    
    
    
    712
    
    
    
    
    508
    
    
    
    264
    
    
    
    
    204
    
    
    
    
    244PotashNet sales
    
    
    
    816
    
    
    
    
    305
    
    
    
    213
    
    
    
    
    511
    
    
    
    
    92Gross profit
    
    
    
    632
    
    
    
    
    167
    
    
    
    98
    
    
    
    
    465
    
    
    
    
    69PhosphateNet sales
    
    
    
    847
    
    
    
    
    466
    
    
    
    298
    
    
    
    
    381
    
    
    
    
    168Gross profit
    
    
    
    421
    
    
    
    
    118
    
    
    
    27
    
    
    
    
    303
    
    
    
    
    91OtherNet sales
    
    
    
    237
    
    
    
    
    200
    
    
    
    96
    
    
    
    
    37
    
    
    
    
    104Gross profit
    
    
    
    68
    
    
    
    
    53
    
    
    
    27
    
    
    
    
    15
    
    
    
    
    26Product purchased for resaleNet sales
    
    
    
    971
    
    
    
    
    339
    
    
    
    382
    
    
    
    
    632
    
    
    
    
    (43
    )Gross profit
    
    
    
    (42
    )
    
    
    
    28
    
    
    
    19
    
    
    
    
    (70
    )
    
    
    
    9Total net sales
    
    
    
    4,686
    
    
    
    
    2,845
    
    
    
    2,269
    
    
    
    
    1,841
    
    
    
    
    576Total gross profit
    
    
    
    1,791
    
    
    
    
    874
    
    
    
    435
    
    
    
    
    917
    
    
    
    
    439Selling expenses
    
    
    
    29
    
    
    
    
    27
    
    
    
    30
    
    
    
    
    2
    
    
    
    
    (3
    )General and administrative
    
    
    
    24
    
    
    
    
    22
    
    
    
    29
    
    
    
    
    2
    
    
    
    
    (7
    )Depreciation and amortization
    
    
    
    4
    
    
    
    
    119
    
    
    
    125
    
    
    
    
    (115
    )
    
    
    
    (6
    )Potash profit and capital taxes
    
    
    
    162
    
    
    
    
    28
    
    
    
    8
    
    
    
    
    134
    
    
    
    
    20Asset impairment
    
    
    
    87
    
    
    
    
    
    
    
    
    136
    
    
    
    
    87
    
    
    
    
    (136
    )Other expenses
    
    
    
    37
    
    
    
    
    11
    
    
    
    16
    
    
    
    
    26
    
    
    
    
    (5
    )1,448
    
    
    
    
    667
    
    
    
    91
    
    
    
    
    781
    
    
    
    
    576Non-controlling interest
    
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    EBIT
    
    
    
    1,478
    
    
    
    
    667
    
    
    
    91
    
    
    
    
    811
    
    
    
    
    576EBITDA
    
    
    
    1,670
    
    
    
    
    786
    
    
    
    352
    
    
    
    
    884
    
    
    
    
    434EBITDA as percent of net sales
    
    
    
    36
    
    
    
    
    28
    
    
    
    16
 Wholesale Products & Services | Nitrogen (N)




---



##### 



Agrium 39
 Nitrogen | Financial Results




---



##### 



40 Agrium
 Year Ended December 31
    
    
    
    
    
    
    
    
    Variance Analysis(millions of U.S. dollars, except as noted)
    
    

    2008
    
    
    
    2007
    
    
    2006
    
    
    
    2008 vs 2007
    
    
    
    2007 vs 2006Nitrogen DomesticNet sales
    
    
    
    1,662
    
    
    
    
    1,284
    
    
    
    962
    
    
    
    
    378
    
    
    
    
    322Cost of product
    
    
    
    1,025
    
    
    
    
    892
    
    
    
    845
    
    
    
    
    133
    
    
    
    
    47Gross profit
    
    
    
    637
    
    
    
    
    392
    
    
    
    117
    
    
    
    
    245
    
    
    
    
    275Tonnes sold (000)
    
    
    
    3,189
    
    
    
    
    3,595
    
    
    
    3,274
    
    
    
    
    (406
    )
    
    
    
    321Margin per tonne
    
    
    
    200
    
    
    
    
    109
    
    
    
    36Nitrogen InternationalNet sales
    
    
    
    153
    
    
    
    
    251
    
    
    
    318
    
    
    
    
    (98
    )
    
    
    
    (67
    )Cost of product
    
    
    
    78
    
    
    
    
    135
    
    
    
    171
    
    
    
    
    (57
    )
    
    
    
    (36
    )Gross profit
    
    
    
    75
    
    
    
    
    116
    
    
    
    147
    
    
    
    
    (41
    )
    
    
    
    (31
    )Tonnes sold (000)
    
    
    
    362
    
    
    
    
    827
    
    
    
    1,275
    
    
    
    
    (465
    )
    
    
    
    (448
    )Margin per tonne
    
    
    
    207
    
    
    
    
    140
    
    
    
    115Total NitrogenNet sales
    
    
    
    1,815
    
    
    
    
    1,535
    
    
    
    1,280
    
    
    
    
    280
    
    
    
    
    255Cost of product
    
    
    
    1,103
    
    
    
    
    1,027
    
    
    
    1,016
    
    
    
    
    76
    
    
    
    
    11Total gross profit
    
    
    
    712
    
    
    
    
    508
    
    
    
    264
    
    
    
    
    204
    
    
    
    
    244Tonnes sold (000)
    
    
    
    3,551
    
    
    
    
    4,422
    
    
    
    4,549
    
    
    
    
    (871
    )
    
    
    
    (127
    )Margin per tonne
    
    
    
    201
    
    
    
    
    115
    
    
    
    58Selling price per tonne
    
    
    
    511
    
    
    
    
    347
    
    
    
    281Cost of product per tonne
    
    
    
    310
    
    
    
    
    232
    
    
    
    223
   
 Source: Blue, Johnson & Associates, The Market, Green Markets




---



##### 



Agrium 41
  (U.S. dollars per MMBtu)
    
    
    2008
    
    
    
    2007
    
    
    2006NYMEX
    
    
    
    8.94
    
    
    
    
    6.92
    
    
    
    7.26AECO
    
    
    
    7.80
    
    
    
    
    6.11
    
    
    
    6.17Basis
    
    
    
    1.14
    
    
    
    
    0.81
    
    
    
    1.09WholesaleAverage unhedged
    
    
    
    7.49
    
    
    
    
    5.76
    
    
    
    5.34Hedging impact
    
    
    
    (0.05
    )
    
    
    
    0.02
    
    
    
    (0.08
    )Overall weighted average(a)
    
    
    
    7.44
    
    
    
    
    5.78
    
    
    
    5.26
 
 (a)
    Weighted average gas price of all gas purchases, including our 50 percent share of the
Profertil facility.
  Western
    
    
    United States
    
    
    International(a)
    
    
    Potash
    
    
    TotalCanada
    
    
    (Borger, TX)
    
    
    
    
    
    
    & Other2008
    
    
    73
    
    
    
    16
    
    
    
    12
    
    
    
    4
    
    
    
    1052007
    
    
    68
    
    
    
    16
    
    
    
    23
    
    
    
    3
    
    
    
    110
 
 (a)
    Our Kenai facility gas purchases totaled 10 BCF in 2007 but was permanently closed in late
2007.




---



##### 



42 Agrium
 Wholesale Products & Services | Potash (K)




---



##### 



Agrium 43
 Potash | Financial Results
   
  Year Ended December 31
    
    
    
    
    
    
    
    
    Variance Analysis(millions of U.S. dollars, except as noted)
    
    
    2008
    
    
    
    2007
    
    
    2006
    
    
    
    2008 vs 2007
    
    
    
    2007 vs 2006Potash DomesticNet sales
    
    
    
    476
    
    
    
    
    185
    
    
    
    143
    
    
    
    
    291
    
    
    
    
    42Cost of product
    
    
    
    112
    
    
    
    
    84
    
    
    
    80
    
    
    
    
    28
    
    
    
    
    4Gross profit
    
    
    
    364
    
    
    
    
    101
    
    
    
    63
    
    
    
    
    263
    
    
    
    
    38Tonnes sold (000)
    
    
    
    907
    
    
    
    
    865
    
    
    
    731
    
    
    
    
    42
    
    
    
    
    134Selling price per tonne
    
    
    
    525
    
    
    
    
    214
    
    
    
    196Margin per tonne
    
    
    
    401
    
    
    
    
    117
    
    
    
    86Potash InternationalNet sales
    
    
    
    340
    
    
    
    
    120
    
    
    
    70
    
    
    
    
    220
    
    
    
    
    50Cost of product
    
    
    
    72
    
    
    
    
    54
    
    
    
    35
    
    
    
    
    18
    
    
    
    
    19Gross profit
    
    
    
    268
    
    
    
    
    66
    
    
    
    35
    
    
    
    
    202
    
    
    
    
    31Tonnes sold (000)
    
    
    
    779
    
    
    
    
    819
    
    
    
    548
    
    
    
    
    (40
    )
    
    
    
    271Selling price per tonne
    
    
    
    437
    
    
    
    
    146
    
    
    
    128Margin per tonne
    
    
    
    345
    
    
    
    
    81
    
    
    
    64Total PotashNet sales
    
    
    
    816
    
    
    
    
    305
    
    
    
    213
    
    
    
    
    511
    
    
    
    
    92Cost of product
    
    
    
    184
    
    
    
    
    138
    
    
    
    115
    
    
    
    
    46
    
    
    
    
    23Gross profit
    
    
    
    632
    
    
    
    
    167
    
    
    
    98
    
    
    
    
    465
    
    
    
    
    69Tonnes sold (000)
    
    
    
    1,686
    
    
    
    
    1,684
    
    
    
    1,279
    
    
    
    
    2
    
    
    
    
    405Margin per tonne
    
    
    
    375
    
    
    
    
    99
    
    
    
    77Selling price per tonne
    
    
    
    484
    
    
    
    
    181
    
    
    
    167Cost of product per tonne
    
    
    
    109
    
    
    
    
    82
    
    
    
    90




---



##### 



44 Agrium
 1
  
 1
    See disclosures under the heading Forward-Looking Statements on page 92 of this MD&A.




---



##### 



Agrium 45
 Wholesale Products & Services | Phosphate (P)
     Phosphate | Financial Results
    Year Ended December 31
    
    
    
    
    
    
    
    
    Variance Analysis(millions of U.S. dollars, except as noted)
    
    
    2008
    
    
    
    2007
    
    
    2006
    
    
    
    2008 vs 2007
    
    
    
    2007 vs 2006PhosphateNet sales
    
    
    
    847
    
    
    
    
    466
    
    
    
    298
    
    
    
    
    381
    
    
    
    
    168Cost of product
    
    
    
    426
    
    
    
    
    348
    
    
    
    271
    
    
    
    
    78
    
    
    
    
    77Gross profit
    
    
    
    421
    
    
    
    
    118
    
    
    
    27
    
    
    
    
    303
    
    
    
    
    91Tonnes sold (000)
    
    
    
    906
    
    
    
    
    1,021
    
    
    
    906
    
    
    
    
    (115
    )
    
    
    
    115Selling price per tonne
    
    
    
    935
    
    
    
    
    456
    
    
    
    329Cost of product per tonne
    
    
    
    470
    
    
    
    
    340
    
    
    
    299Margin per tonne
    
    
    
    465
    
    
    
    
    116
    
    
    
    30




---



##### 



46 Agrium




---



##### 



Agrium 47
 1
 
   Wholesale Products & Services | Other
 ® ®
  Other | Financial Results
    1
    See disclosures under the heading Forward-Looking Statements on page 92 of this MD&A.




---



##### 



48 Agrium
 Wholesale Products & Services | Product Purchased For Resale
   Distribution and Storage




---



##### 



Agrium 49
  Wholesale | Quarterly Results
  Wholesale Quarterly Results
 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2006(millions of U.S. dollars,except as noted)
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Net sales  external
    
    
    
    857
    
    
    
    1,445
    
    
    
    1,279
    
    
    
    646
    
    
    
    
    814
    
    
    
    524
    
    
    
    819
    
    
    
    438
    
    
    
    485
    
    
    
    457
    
    
    
    823
    
    
    
    361Net sales  inter-segment
    
    
    
    125
    
    
    
    154
    
    
    
    118
    
    
    
    62
    
    
    
    
    94
    
    
    
    39
    
    
    
    71
    
    
    
    46
    
    
    
    51
    
    
    
    36
    
    
    
    38
    
    
    
    18Total net sales
    
    
    
    982
    
    
    
    1,599
    
    
    
    1,397
    
    
    
    708
    
    
    
    
    908
    
    
    
    563
    
    
    
    890
    
    
    
    484
    
    
    
    536
    
    
    
    493
    
    
    
    861
    
    
    
    379Cost of product
    
    
    
    578
    
    
    
    946
    
    
    
    815
    
    
    
    435
    
    
    
    
    565
    
    
    
    405
    
    
    
    613
    
    
    
    388
    
    
    
    439
    
    
    
    391
    
    
    
    687
    
    
    
    317Inventory and purchase commitment write-down
    
    
    
    121
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    
    283
    
    
    
    653
    
    
    
    582
    
    
    
    273
    
    
    
    
    343
    
    
    
    158
    
    
    
    277
    
    
    
    96
    
    
    
    97
    
    
    
    102
    
    
    
    174
    
    
    
    62Gross profit (%)
    
    
    
    29
    
    
    
    41
    
    
    
    42
    
    
    
    39
    
    
    
    
    38
    
    
    
    28
    
    
    
    31
    
    
    
    20
    
    
    
    18
    
    
    
    21
    
    
    
    20
    
    
    
    16NitrogenNet sales
    
    
    
    355
    
    
    
    498
    
    
    
    635
    
    
    
    327
    
    
    
    
    503
    
    
    
    311
    
    
    
    488
    
    
    
    233
    
    
    
    312
    
    
    
    306
    
    
    
    459
    
    
    
    203Cost of product
    
    
    
    219
    
    
    
    294
    
    
    
    389
    
    
    
    201
    
    
    
    
    292
    
    
    
    227
    
    
    
    324
    
    
    
    184
    
    
    
    254
    
    
    
    232
    
    
    
    357
    
    
    
    173Gross profit
    
    
    
    136
    
    
    
    204
    
    
    
    246
    
    
    
    126
    
    
    
    
    211
    
    
    
    84
    
    
    
    164
    
    
    
    49
    
    
    
    58
    
    
    
    74
    
    
    
    102
    
    
    
    30Tonnes sold (000)
    
    
    
    691
    
    
    
    838
    
    
    
    1,254
    
    
    
    768
    
    
    
    
    1,303
    
    
    
    932
    
    
    
    1,395
    
    
    
    792
    
    
    
    1,148
    
    
    
    1,234
    
    
    
    1,513
    
    
    
    654Selling price (per tonne)
    
    
    
    514
    
    
    
    594
    
    
    
    506
    
    
    
    426
    
    
    
    
    386
    
    
    
    334
    
    
    
    350
    
    
    
    294
    
    
    
    272
    
    
    
    248
    
    
    
    303
    
    
    
    310Margin (per tonne)
    
    
    
    197
    
    
    
    243
    
    
    
    196
    
    
    
    164
    
    
    
    
    162
    
    
    
    90
    
    
    
    118
    
    
    
    62
    
    
    
    51
    
    
    
    60
    
    
    
    67
    
    
    
    46PotashNet sales
    
    
    
    192
    
    
    
    249
    
    
    
    244
    
    
    
    131
    
    
    
    
    93
    
    
    
    65
    
    
    
    95
    
    
    
    52
    
    
    
    49
    
    
    
    51
    
    
    
    67
    
    
    
    46Cost of product
    
    
    
    33
    
    
    
    47
    
    
    
    60
    
    
    
    44
    
    
    
    
    36
    
    
    
    32
    
    
    
    44
    
    
    
    26
    
    
    
    25
    
    
    
    34
    
    
    
    31
    
    
    
    25Gross profit
    
    
    
    159
    
    
    
    202
    
    
    
    184
    
    
    
    87
    
    
    
    
    57
    
    
    
    33
    
    
    
    51
    
    
    
    26
    
    
    
    24
    
    
    
    17
    
    
    
    36
    
    
    
    21Tonnes sold (000)
    
    
    
    283
    
    
    
    380
    
    
    
    574
    
    
    
    449
    
    
    
    
    462
    
    
    
    354
    
    
    
    535
    
    
    
    333
    
    
    
    311
    
    
    
    325
    
    
    
    377
    
    
    
    266Selling price (per tonne)
    
    
    
    678
    
    
    
    655
    
    
    
    425
    
    
    
    292
    
    
    
    
    201
    
    
    
    184
    
    
    
    178
    
    
    
    156
    
    
    
    158
    
    
    
    157
    
    
    
    178
    
    
    
    173Margin (per tonne)
    
    
    
    562
    
    
    
    532
    
    
    
    321
    
    
    
    194
    
    
    
    
    123
    
    
    
    93
    
    
    
    95
    
    
    
    78
    
    
    
    77
    
    
    
    52
    
    
    
    95
    
    
    
    79PhosphateNet sales
    
    
    
    153
    
    
    
    317
    
    
    
    235
    
    
    
    142
    
    
    
    
    139
    
    
    
    108
    
    
    
    145
    
    
    
    74
    
    
    
    61
    
    
    
    67
    
    
    
    122
    
    
    
    48Cost of product
    
    
    
    67
    
    
    
    122
    
    
    
    139
    
    
    
    98
    
    
    
    
    92
    
    
    
    82
    
    
    
    110
    
    
    
    64
    
    
    
    57
    
    
    
    63
    
    
    
    108
    
    
    
    43Gross profit
    
    
    
    86
    
    
    
    195
    
    
    
    96
    
    
    
    44
    
    
    
    
    47
    
    
    
    26
    
    
    
    35
    
    
    
    10
    
    
    
    4
    
    
    
    4
    
    
    
    14
    
    
    
    5Tonnes sold (000)
    
    
    
    137
    
    
    
    240
    
    
    
    297
    
    
    
    232
    
    
    
    
    266
    
    
    
    223
    
    
    
    335
    
    
    
    197
    
    
    
    180
    
    
    
    204
    
    
    
    377
    
    
    
    145Selling price (per tonne)
    
    
    
    1,117
    
    
    
    1,321
    
    
    
    791
    
    
    
    612
    
    
    
    
    523
    
    
    
    484
    
    
    
    433
    
    
    
    376
    
    
    
    339
    
    
    
    328
    
    
    
    324
    
    
    
    331Margin (per tonne)
    
    
    
    628
    
    
    
    813
    
    
    
    323
    
    
    
    190
    
    
    
    
    177
    
    
    
    117
    
    
    
    104
    
    
    
    51
    
    
    
    22
    
    
    
    20
    
    
    
    37
    
    
    
    34OtherNet sales
    
    
    
    31
    
    
    
    67
    
    
    
    82
    
    
    
    57
    
    
    
    
    52
    
    
    
    34
    
    
    
    68
    
    
    
    46
    
    
    
    32
    
    
    
    17
    
    
    
    35
    
    
    
    12Cost of product
    
    
    
    21
    
    
    
    46
    
    
    
    55
    
    
    
    47
    
    
    
    
    38
    
    
    
    21
    
    
    
    47
    
    
    
    41
    
    
    
    25
    
    
    
    13
    
    
    
    21
    
    
    
    10Gross profit
    
    
    
    10
    
    
    
    21
    
    
    
    27
    
    
    
    10
    
    
    
    
    14
    
    
    
    13
    
    
    
    21
    
    
    
    5
    
    
    
    7
    
    
    
    4
    
    
    
    14
    
    
    
    2Tonnes sold (000)
    
    
    
    69
    
    
    
    144
    
    
    
    202
    
    
    
    168
    
    
    
    
    185
    
    
    
    132
    
    
    
    236
    
    
    
    219
    
    
    
    247
    
    
    
    81
    
    
    
    138
    
    
    
    45Product purchased for resaleNet sales
    
    
    
    251
    
    
    
    468
    
    
    
    201
    
    
    
    51
    
    
    
    
    121
    
    
    
    45
    
    
    
    94
    
    
    
    79
    
    
    
    83
    
    
    
    51
    
    
    
    178
    
    
    
    70Cost of product
    
    
    
    238
    
    
    
    437
    
    
    
    172
    
    
    
    45
    
    
    
    
    107
    
    
    
    43
    
    
    
    88
    
    
    
    73
    
    
    
    79
    
    
    
    48
    
    
    
    170
    
    
    
    66Inventory and purchase commitment write-down
    
    
    
    121
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    
    (108
    )
    
    
    31
    
    
    
    29
    
    
    
    6
    
    
    
    
    14
    
    
    
    2
    
    
    
    6
    
    
    
    6
    
    
    
    4
    
    
    
    3
    
    
    
    8
    
    
    
    4Tonnes sold (000)
    
    
    
    388
    
    
    
    905
    
    
    
    376
    
    
    
    112
    
    
    
    
    276
    
    
    
    121
    
    
    
    310
    
    
    
    261
    
    
    
    329
    
    
    
    242
    
    
    
    699
    
    
    
    254Selling price (per tonne)
    
    
    
    647
    
    
    
    517
    
    
    
    535
    
    
    
    455
    
    
    
    
    438
    
    
    
    372
    
    
    
    303
    
    
    
    303
    
    
    
    252
    
    
    
    211
    
    
    
    255
    
    
    
    276Margin (per tonne)
    
    
    
    (278
    )
    
    
    34
    
    
    
    77
    
    
    
    54
    
    
    
    
    51
    
    
    
    17
    
    
    
    19
    
    
    
    23
    
    
    
    12
    
    
    
    12
    
    
    
    11
    
    
    
    16EBIT
    
    
    
    106
    
    
    
    412
    
    
    
    647
    
    
    
    313
    
    
    
    
    277
    
    
    
    96
    
    
    
    232
    
    
    
    62
    
    
    
    (64
    )
    
    
    47
    
    
    
    132
    
    
    
    (24
    )EBITDA
    
    
    
    214
    
    
    
    439
    
    
    
    682
    
    
    
    335
    
    
    
    
    307
    
    
    
    126
    
    
    
    261
    
    
    
    92
    
    
    
    99
    
    
    
    78
    
    
    
    167
    
    
    
    8




---



##### 



50
    
    Agrium / 2008 Annual Report
  
 Agrium Advanced Technologies delivers crop nutrient solutions to customers around the world,
including high-value products to specialty end markets and crop nutrient technology to
high-volume agriculture markets.




---



##### 



Agrium 51
  
 ®
 Advanced Technologies | Snapshot 2008
 
    
    Net Sales| $352-million, compared with $249-million in 2007 and $101-million in 2006
 
    
    Gross Profit| $79-million  $24-million more than our gross profit
of $55-million in 2007 and$60-million more than our $19-million in 2006
 
    
    EBIT| $33-million, compared with $13-million in 2007 and a loss of $1-million in 2006
 
    
    EBITDA| $50-million  compared with $29-million in 2007 and $7-million in 2006




---



##### 



52
    
    Agrium / 2008 Annual Report
  Advanced Technologies | Strategy And Key Developments
 
  1. Grow the base North American business.
 2. Develop new products to support existing and new market opportunities.
 3. Expand internationally with current and future technologies.
 ® ® ® ® ® ® ® 1
  
 1
    See disclosures under the heading Forward-Looking Statements on page 92 of this MD&A.




---



##### 



Agrium 53
  Advanced Technologies | Products & Services




---



##### 



54
    
    Agrium / 2008 Annual Report
  
    
    Agriculture: a polymer-coated, environmentally sensitive, controlled-release fertilizer
available for broad acre crops (ESN®) that provides economic benefits by increasing crop yield
potential;
 
    
    Specialty Agriculture: Products designed specifically for high value crops such as
strawberries and other food crops (Polyon® and Duration®);
 
    
    Professional Turf: Branded specialty fertilizer products with slow-release or
controlled-release technologies suitable for golf course turf, lawn care and sport field
applications (XCUTM, Polyon®, Duration®, Nutralene®, Nitroform®, IB Nitrogen®) and associated
branded professional products (ProTurf®, Nu-Gro®) in Canada;
 
    
    Horticulture: Products and blends designed specifically for the nursery market (Polyon®,
Nitroform®, and IB Nitrogen®); and,
 
    
    Consumer Lawn and Garden: (Polyon® and Nutralene®).
  1.
    Controlled-release products, including ESN®ESN® encapsulates urea inside a specially designed polymer coating that releases nitrogen
depending on temperature and moisture  the same factors that drive plant growth and need for
nitrogen. Therefore, the release of nitrogen is better matched to the needs of the growing plant
increasing the proportion of the nutrient uptake by the plant and reducing nutrient losses to the
environment. As a result, ESN® has the ability to increase crop yields, improve nutrient
efficiency, allow a wider window of nutrient application, reduce fuel costs and save growers time
by lowering the number of passes over a field. ESN® is targeted at broad acre agricultural crops
such as corn, potatoes and wheat.




---



##### 



2008 Annual Report / Agrium
    
    55
  2.
    Other (Canadian Professional Business)Advanced Technologies Other product line includes products directed to the professional turf,
horticulture, structural pest control and contract manufacturing for Canadian consumer lawn and
garden businesses.Professional customers include golf courses, lawn care companies, horticulture and nurseries,
specialty agriculture and pest control operators. The creation of AAT has increased our product
offering to our professional customers. There are over 15,000 golf courses in the U.S. and an
estimated 2,000 golf courses in Canada. Golf courses  which spend an annual average of over
$40,000 each on fertilizer, seeds and pest control products  are key customers for our products.
 Advanced Technologies | Financial Results
 ®




---



##### 



56
    
    Agrium / 2008 Annual Report
  Advanced Technologies | Expenses
  Advanced Technologies Financial Results
 Year Ended December 31(millions of U.S. dollars)
    
    
    2008
    
    
    
    2007
    
    
    2006Controlled-release productNet sales
    
    
    
    294
    
    
    
    
    208
    
    
    
    68Cost of product
    
    
    
    227
    
    
    
    
    162
    
    
    
    56Inventory and purchase commitment write-down
    
    
    
    2
    
    
    
    
    
    
    
    
    Gross profit
    
    
    
    65
    
    
    
    
    46
    
    
    
    12OtherNet sales
    
    
    
    58
    
    
    
    
    41
    
    
    
    33Cost of product
    
    
    
    44
    
    
    
    
    32
    
    
    
    26Gross profit
    
    
    
    14
    
    
    
    
    9
    
    
    
    7Total net sales
    
    
    
    352
    
    
    
    
    249
    
    
    
    101Total cost of product
    
    
    
    271
    
    
    
    
    194
    
    
    
    82Total inventory and purchase commitment write-down
    
    
    
    2
    
    
    
    
    
    
    
    
    Total gross profit
    
    
    
    79
    
    
    
    
    55
    
    
    
    19Selling expenses
    
    
    
    6
    
    
    
    
    10
    
    
    
    5General and administrative
    
    
    
    31
    
    
    
    
    18
    
    
    
    7Depreciation and amortization
    
    
    
    10
    
    
    
    
    16
    
    
    
    8Other income
    
    
    
    (1
    )
    
    
    
    (2
    )
    
    
    EBIT
    
    
    
    33
    
    
    
    
    13
    
    
    
    (1
    )EBITDA
    
    
    
    50
    
    
    
    
    29
    
    
    
    7EBITDA as percent of net sales
    
    
    
    14
    
    
    
    
    12
    
    
    
    7
 Advanced Technologies Quarterly Earnings
 ® ® ®




---



##### 



2008 Annual Report / Agrium
    
    57
  Advanced Technologies Quarterly Results
 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2006(millions of U.S. dollars)
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Net sales  external
    
    
    
    63
    
    
    
    75
    
    
    
    87
    
    
    
    68
    
    
    
    
    58
    
    
    
    45
    
    
    
    68
    
    
    
    46
    
    
    
    30
    
    
    
    22
    
    
    
    24
    
    
    
    16Net sales  inter-segment
    
    
    
    13
    
    
    
    15
    
    
    
    20
    
    
    
    11
    
    
    
    
    12
    
    
    
    1
    
    
    
    13
    
    
    
    6
    
    
    
    6
    
    
    
    3
    
    
    
    
    
    
    
    Total net sales
    
    
    
    76
    
    
    
    90
    
    
    
    107
    
    
    
    79
    
    
    
    
    70
    
    
    
    46
    
    
    
    81
    
    
    
    52
    
    
    
    36
    
    
    
    25
    
    
    
    24
    
    
    
    16Cost of product
    
    
    
    57
    
    
    
    65
    
    
    
    87
    
    
    
    62
    
    
    
    
    55
    
    
    
    35
    
    
    
    63
    
    
    
    41
    
    
    
    29
    
    
    
    21
    
    
    
    19
    
    
    
    13Inventory and purchase commitment write-down
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    
    17
    
    
    
    25
    
    
    
    20
    
    
    
    17
    
    
    
    
    15
    
    
    
    11
    
    
    
    18
    
    
    
    11
    
    
    
    7
    
    
    
    4
    
    
    
    5
    
    
    
    3Gross profit (%)
    
    
    
    22
    
    
    
    28
    
    
    
    19
    
    
    
    22
    
    
    
    
    21
    
    
    
    24
    
    
    
    22
    
    
    
    21
    
    
    
    19
    
    
    
    16
    
    
    
    21
    
    
    
    19EBIT
    
    
    
    6
    
    
    
    10
    
    
    
    11
    
    
    
    6
    
    
    
    
    (2
    )
    
    
    3
    
    
    
    7
    
    
    
    5
    
    
    
    (2
    )
    
    
    (3
    )
    
    
    3
    
    
    
    1EBITDA
    
    
    
    8
    
    
    
    17
    
    
    
    15
    
    
    
    10
    
    
    
    
    4
    
    
    
    7
    
    
    
    10
    
    
    
    8
    
    
    
    1
    
    
    
    
    
    
    
    4
    
    
    
    2




---



##### 



58
    
    Agrium / 2008 Annual Report
  
 Agrium anticipates solid demand for most crop inputs in 2009 and price increases in most
crop protection products.




---



##### 



2008 Annual Report / Agrium
    
    59
  Agriculture Outlook




---



##### 



60
    
    Agrium / 2008 Annual Report
  Crop Protection Products
  Seed and Agricultural Services
  Crop Nutrients
  Nitrogen




---



##### 



2008 Annual Report / Agrium
    
    61
  Potash
    Phosphate
    Proposed Acquisition of CF Industries Holdings, Inc.




---



##### 



62
    
    Agrium / 2008 Annual Report
  Key Business Sensitivities
 
 Change
    
    
    Consolidated EBIT
    
    
    Consolidatedin Factor
    
    
    Impact
    
    
    Net Earnings Impact(f)(millions of U.S. dollars)Wholesale Margins(a)(b)Nitrogen(c)
    
    $
    10.00
    
    
    
    44
    
    
    
    31Potash(d)
    
    $
    10.00
    
    
    
    17
    
    
    
    12Phosphate
    
    $
    10.00
    
    
    
    10
    
    
    
    7Product purchased for resale
    
    $
    10.00
    
    
    
    30
    
    
    
    21Retail Margins(e)Crop Nutrients
    
    
    1.00%
    
    
    
    33
    
    
    
    24Crop Protection Products
    
    
    1.00%
    
    
    
    32
    
    
    
    23Seed
    
    
    1.00%
    
    
    
    9
    
    
    
    6Exchange Rate from CAD to USD
    
    $
    0.01
    
    
    
    8
    
    
    
    6Exchange Rate from Argentine Peso to USD
    
    
    0.3 Pesos
    
    
    
    1
    
    
    
    1
 
 (a)
    Change in factor is per metric tonne.(b)
    The sensitivity for natural gas price is excluded from this table as changes in gas price may
be offset by our pricing. However, without any offset in pricing, the sensitivity to earnings for a
$1.00/MMBtu change in NYMEX gas prices is $47-million in EBIT and $33-million in net earnings. The
sensitivity assumes no change to the price spread between U.S. and Alberta gas or nitrogen prices
and is before the impact of our natural gas economic hedge activity.(c)
    The sensitivity to nitrogen margins is exclusive of the natural
gas sensitivity described in footnote (b) above.(d)
    Potash
sensitivity does not include potash profit and capital tax.(e)
    Change in factor is gross profit as a percentage of net sales.(f)
    To convert impact to a fully diluted EPS basis, divide the net earnings impact by the
weighted-average number of outstanding shares (159-million shares as of December 31, 2008).
 Margins
 Wholesale
  Retail
  Advanced Technologies




---



##### 



2008 Annual Report / Agrium
    
    63
  Foreign Exchange
  Consolidated Performance
 Consolidated Results of Operations
 (millions of U.S. dollars, except per share amounts)
    
    
    2008
    
    
    
    2007
    
    
    2006Net sales
    
    
    
    10,031
    
    
    
    
    5,270
    
    
    
    4,193Cost of product
    
    
    
    6,592
    
    
    
    
    3,672
    
    
    
    3,237Inventory and purchase commitment write-down
    
    
    
    216
    
    
    
    
    
    
    
    
    Gross profit
    
    
    
    3,223
    
    
    
    
    1,598
    
    
    
    956ExpensesSelling
    
    
    
    815
    
    
    
    
    471
    
    
    
    390General and administrative
    
    
    
    192
    
    
    
    
    125
    
    
    
    96Depreciation and amortization
    
    
    
    110
    
    
    
    
    173
    
    
    
    169Potash profit and capital tax
    
    
    
    162
    
    
    
    
    28
    
    
    
    8Asset impairment
    
    
    
    87
    
    
    
    
    
    
    
    
    136Other expenses
    
    
    
    (129
    )
    
    
    
    89
    
    
    
    85Earnings before interest, income taxes and
    
    
    
    1,986
    
    
    
    
    712
    
    
    
    72non-controlling interestsInterest expense
    
    
    
    105
    
    
    
    
    70
    
    
    
    63Income taxes
    
    
    
    589
    
    
    
    
    204
    
    
    
    (24
    )Non-controlling interests
    
    
    
    (30
    )
    
    
    
    (3
    )
    
    
    Net earnings
    
    
    
    1,322
    
    
    
    
    441
    
    
    
    33Earnings per shareBasic
    
    
    
    8.39
    
    
    
    
    3.28
    
    
    
    0.25Diluted
    
    
    
    8.34
    
    
    
    
    3.25
    
    
    
    0.25
  Gross profit
  
    
    Significantly higher global nutrient prices and margins for nitrogen, potash and phosphate in
the first three quarters of 2008 reflecting a tight supply and demand balance for nutrients.
 
    
    Higher Retail gross profit due to the UAP acquisition and strong margins across all Retail
products, supported by strong grain prices in the first three quarters of 2008.




---



##### 



64
    
    Agrium / 2008 Annual Report
  Selling expenses
  General and administrative expenses
  Depreciation and amortization
  Asset impairment
  Potash profit and capital tax
  Other (income) expenses
 (millions of U.S. dollars)
    
    
    2008
    
    
    
    2007
    
    
    2006Interest income
    
    
    
    (57
    )
    
    
    
    (30
    )
    
    
    (16
    )Stock-based compensation (recovery) expense
    
    
    
    (25
    )
    
    
    
    113
    
    
    
    30Environmental remediation and accretion of asset retirement obligations
    
    
    
    15
    
    
    
    
    5
    
    
    
    12Realized and unrealized loss on derivative contracts
    
    
    
    
    
    
    
    
    20
    
    
    
    35Foreign exchange (gain) loss
    
    
    
    (119
    )
    
    
    
    (41
    )
    
    
    3Bad debt expense
    
    
    
    23
    
    
    
    
    7
    
    
    
    4Other taxes
    
    
    
    22
    
    
    
    
    15
    
    
    
    11Gain on disposal of property, plant, equipment and investments
    
    
    
    (8
    )
    
    
    
    (4
    )
    
    
    (14
    )Other
    
    
    
    20
    
    
    
    
    4
    
    
    
    20(129
    )
    
    
    
    89
    
    
    
    85




---



##### 



2008 Annual Report / Agrium
    
    65
  Interest expense
   Income taxes
   Quarterly Results of Operations
 (millions of U.S. dollars
    
    Net Sales
    
    
    Net Earnings
    
    
    Earnings Per Share
    
    
    Total Assets
    
    
    Cash & Cash
    
    
    Dividends
    
    
    Long-termexcept per share amounts)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equivalents
    
    
    Declared
    
    
    FinancialBasic
    
    
    Diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Liabilities2008Q1
    
    
    1,107
    
    
    
    195
    
    
    
    1.24
    
    
    
    1.23
    
    
    
    6,689
    
    
    
    1,762
    
    
    
    
    
    
    
    1,212Q2
    
    
    3,870
    
    
    
    636
    
    
    
    4.03
    
    
    
    4.00
    
    
    
    9,939
    
    
    
    178
    
    
    
    9
    
    
    
    1,964Q3
    
    
    3,113
    
    
    
    367
    
    
    
    2.32
    
    
    
    2.31
    
    
    
    10,355
    
    
    
    208
    
    
    
    
    
    
    
    1,994Q4
    
    
    1,941
    
    
    
    124
    
    
    
    0.79
    
    
    
    0.79
    
    
    
    9,818
    
    
    
    374
    
    
    
    8
    
    
    
    1,949Year
    
    
    10,031
    
    
    
    1,322
    
    
    
    8.39
    
    
    
    8.34
    
    
    
    9,818
    
    
    
    374
    
    
    
    17
    
    
    
    1,9492007Q1
    
    
    821
    
    
    
    (11
    )
    
    
    (0.08
    )
    
    
    (0.08
    )
    
    
    3,560
    
    
    
    45
    
    
    
    
    
    
    
    938Q2
    
    
    2,034
    
    
    
    229
    
    
    
    1.71
    
    
    
    1.70
    
    
    
    3,615
    
    
    
    55
    
    
    
    7
    
    
    
    952Q3
    
    
    989
    
    
    
    51
    
    
    
    0.38
    
    
    
    0.38
    
    
    
    4,022
    
    
    
    41
    
    
    
    
    
    
    
    980Q4
    
    
    1,426
    
    
    
    172
    
    
    
    1.25
    
    
    
    1.24
    
    
    
    5,832
    
    
    
    1,509
    
    
    
    9
    
    
    
    1,141Year
    
    
    5,270
    
    
    
    441
    
    
    
    3.28
    
    
    
    3.25
    
    
    
    5,832
    
    
    
    1,509
    
    
    
    16
    
    
    
    1,1412006Q1
    
    
    657
    
    
    
    (48
    )
    
    
    (0.37
    )
    
    
    (0.37
    )
    
    
    3,552
    
    
    
    49
    
    
    
    
    
    
    
    758Q2
    
    
    1,816
    
    
    
    142
    
    
    
    1.08
    
    
    
    1.06
    
    
    
    3,215
    
    
    
    69
    
    
    
    7
    
    
    
    960Q3
    
    
    821
    
    
    
    1
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    3,169
    
    
    
    39
    
    
    
    
    
    
    
    921Q4
    
    
    899
    
    
    
    (62
    )
    
    
    (0.47
    )
    
    
    (0.47
    )
    
    
    3,265
    
    
    
    109
    
    
    
    8
    
    
    
    951Year
    
    
    4,193
    
    
    
    33
    
    
    
    0.25
    
    
    
    0.25
    
    
    
    3,265
    
    
    
    109
    
    
    
    15
    
    
    
    951




---



##### 



66
    
    Agrium / 2008 Annual Report
  2008
 
    
    The UAP acquisition contributed $257-million, $191-million, and $57-million to our
gross profit in the second, third, and fourth quarter, respectively.
    
    We had quarter-over-quarter increases of $93-million, $132-million, and
$115-million in Retails selling expense in the second, third, and fourth quarter,
respectively, primarily as a result of the addition of the UAP business.
    
    We had write-downs of $216-million to Wholesale inventory and Retail purchase
commitments in the fourth quarter.
    
    We recorded a $45-million impairment charge net of non-controlling interests to our
$295-million EAgrium investment in the fourth quarter of 2008 as a result of adjusting
the carrying value of Agriums Egypt operations to fair value.
    
    Given the significant changes in our share price throughout 2008, stock-based
compensation expense increased quarter over quarter by $103-million in the second
quarter, and decreased quarter over quarter by $34-million, $122-million and $86-million
in the first, third, and fourth quarter, respectively.
    
    We had gains on non-qualifying derivative contracts of $67-million and $191-million
in the first and second quarter, respectively, and losses of $171-million and $87-million
in the third and fourth quarter, respectively.
    
    We had quarter-over-quarter increases in Potash profit and capital tax of
$44-million, $51-million and $28-million in the second, third, and fourth quarter,
respectively, driven by increased potash profit margins.
    
    As a result of the weakening of the Canadian dollar during the fourth quarter, we
experienced significant foreign exchange gains of $98-million.
 2007
 
    
    Given the significant increase in our share price in 2007, stock-based compensation
expense increased quarter over quarter by $22-million, $9-million, $13-million and
$39-million in the first, second, third and fourth quarter, respectively.
    
    In the third quarter we had a loss on non-qualifying derivative contracts of
$20-million.
    
    As a result of the strengthening Canadian dollar, we experienced significant
foreign exchange gains in the second and third quarters of 2007 of $17-million and
$21-million, respectively.
 2006
 
    
    Fourth quarter earnings were negatively impacted by a pre-tax impairment charge on
our Canadian phosphate assets of $136-million.
    
    Net earnings in the second quarter were favorably impacted by an $18-million
non-cash future income tax recovery.
    
    In the first quarter of 2006, we had a loss on non-qualifying derivative contracts
of $43-million.
 Non-GAAP Disclosure




---



##### 



2008 Annual Report / Agrium
    
    67
  
 Advanced(millions of U.S. dollars except per share amounts)
    
    Retail
    
    
    Wholesale
    
    
    Technologies
    
    
    Other
    
    
    Consolidated2008EBITDA
    
    
    560
    
    
    
    1,670
    
    
    
    50
    
    
    
    41
    
    
    
    2,321Depreciation and amortization
    
    
    80
    
    
    
    105
    
    
    
    17
    
    
    
    16
    
    
    
    218Asset impairment
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    87EBIT
    
    
    480
    
    
    
    1,478
    
    
    
    33
    
    
    
    25
    
    
    
    2,016Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (589
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,322Diluted earnings per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.342007EBITDA
    
    
    210
    
    
    
    786
    
    
    
    29
    
    
    
    (137
    )
    
    
    888Depreciation and amortization
    
    
    33
    
    
    
    119
    
    
    
    16
    
    
    
    5
    
    
    
    173EBIT
    
    
    177
    
    
    
    667
    
    
    
    13
    
    
    
    (142
    )
    
    
    715Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (204
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    441Diluted earnings per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.252006EBITDA
    
    
    125
    
    
    
    352
    
    
    
    7
    
    
    
    (107
    )
    
    
    377Depreciation and amortization
    
    
    30
    
    
    
    125
    
    
    
    8
    
    
    
    6
    
    
    
    169Asset impairment
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    136EBIT
    
    
    95
    
    
    
    91
    
    
    
    (1
    )
    
    
    (113
    )
    
    
    72Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33Diluted earnings per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.25
 Financial Condition
 (millions of U.S. dollars)
    
    
    2008
    
    
    
    2007
    
    
    2008 vs. 2007Assets
    
    
    
    9,818
    
    
    
    
    5,832
    
    
    
    3,986Liabilities
    
    
    
    5,708
    
    
    
    
    2,744
    
    
    
    2,964Shareholders equity
    
    
    
    4,110
    
    
    
    
    3,088
    
    
    
    1,022
 Assets




---



##### 



68
    
    Agrium / 2008 Annual Report
  Liabilities
     Working Capital
  (millions of U.S. dollars)
    
    
    2008
    
    
    
    2007Current assets
    
    
    
    5,119
    
    
    
    
    3,588Current liabilities
    
    
    
    2,811
    
    
    
    
    1,267Working capital
    
    
    
    2,308
    
    
    
    
    2,321
 Shareholders Equity
  Liquidity and Capital Resources




---



##### 



2008 Annual Report / Agrium
    
    69
  Sources and Uses of Cash
 (millions of U.S. dollars)
    
    
    2008
    
    
    
    2007
    
    
    2006Cash provided by operating activities
    
    
    
    1,044
    
    
    
    
    494
    
    
    
    155Cash used in investing activities
    
    
    
    (3,375
    )
    
    
    
    (561
    )
    
    
    (739
    )Cash provided by financing activities
    
    
    
    1,196
    
    
    
    
    1,467
    
    
    
    393(Decrease) increase in cash and cash equivalents
    
    
    
    (1,135
    )
    
    
    
    1,400
    
    
    
    (191
    )
 Cash provided by operating activities
   Non-cash working capital
   Cash used in investing activities
  Business acquisitions
   Capital expenditures
 (millions of U.S. dollars)
    
    
    2008
    
    
    
    2007
    
    
    2006Sustaining capital
    
    
    
    145
    
    
    
    
    104
    
    
    
    91Investment capital
    
    
    
    361
    
    
    
    
    350
    
    
    
    118Total
    
    
    
    506
    
    
    
    
    454
    
    
    
    209




---



##### 



70
    
    Agrium / 2008 Annual Report
  Investments
  Cash provided by financing activities
  Common shares
    Bank indebtedness




---



##### 



2008 Annual Report / Agrium
    
    71
  Long-term debt
    Dividends
  Non-controlling interest
  Cash Position
  Proposed Acquisition of CF Industries Holdings, Inc.




---



##### 



72
    
    Agrium / 2008 Annual Report
  Debt Instruments, Capital Management and Ratings
 Debt instruments
 2008
    
    
    
    2007Total
    
    
    Unutilized
    
    
    Utilized
    
    
    
    UtilizedBank indebtednessRevolving credit facilities expiring 2012(a)(b)
    
    
    
    775
    
    
    
    475
    
    
    
    300
    
    
    
    
    82Accounts receivable securitization(c)
    
    
    
    200
    
    
    
    
    
    
    
    n/a
    
    
    
    
    n/aTotal domestic short-term credit facilities
    
    
    
    975
    
    
    
    475
    
    
    
    300
    
    
    
    
    82CMF credit facilities expiring 2009(d)
    
    
    
    264
    
    
    
    144
    
    
    
    120
    
    
    
    
    South American credit facilities expiring 2009 to 2012(e)
    
    
    
    226
    
    
    
    156
    
    
    
    70
    
    
    
    
    84EAgrium bridge loan(f)
    
    
    
    120
    
    
    
    
    
    
    
    120
    
    
    
    
    Total bank indebtedness
    
    
    
    1,585
    
    
    
    775
    
    
    
    610
    
    
    
    
    166
 Long-term debt
    
    2008
    
    
    
    2007RecourseUnsecuredFloating rate bank loans due May 5, 2013(g)
    
    
    460
    
    
    
    
    6.75% debentures due January 15, 2019(g)(h)
    
    
    500
    
    
    
    
    7.125% debentures due May 23, 2036(h)
    
    
    300
    
    
    
    
    3007.7% debentures due February 1, 2017(h)
    
    
    100
    
    
    
    
    1007.8% debentures due February 1, 2027(h)
    
    
    125
    
    
    
    
    1258.25% debentures due February 15, 2011(h)
    
    
    125
    
    
    
    
    125SecuredOther
    
    
    24
    
    
    
    
    221,634
    
    
    
    
    672Transaction costs
    
    
    (12
    )
    
    
    
    (7
    )Current portion of long-term debt
    
    
    (1
    )
    
    
    
    (1
    )1,621
    
    
    
    
    664Non-recourseEAgrium secured credit facilities
    
    
    
    
    
    
    
    132Transaction costs
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    1191,621
    
    
    
    
    783
 (a)
    In 2006 we increased our syndicated revolving credit facility to $600-million from
$450-million. In 2007 we renewed this facility for an additional five years. In addition, we
exercised a provision that allowed us to expand the facility by $175-million to $775-million, to
reflect the growth in our business and associated cash considered prudent for our operating needs.
As at December 31, 2008, we had $300-million utilized on this facility, leaving $475-million in
available credit.(b)
    We had issued letters of credit under our revolving credit facilities. Outstanding letters of
credit at December 31, 2008 of $66-million reduce credit available under the facilities to
$409-million.(c)
    The receivables are sold to an unrelated financial institution. We provide a security interest
to the financial institution in the form of accounts receivable in excess of the net cash proceeds
received. The agreement expires in December 2012. See discussion of Sale of Accounts Receivable on
page 75 of this MD&A.(d)
    CMF credit lines retained after the acquisition totaled $264-million and as at December 31,
2008, we had $120-million utilized on these facilities. Of the total, $207-million is secured.
Inventory, accounts receivable and other items with a total carrying value of $125-million are
pledged as security for the utilized balance.(e)
    Of the total, $130-million is uncommitted and $54-million of the uncommitted portion has been
utilized.(f)
    On August 25, 2008, EAgrium entered into a loan agreement for $120-million. Agrium has pledged
its interest in EAgrium as security for this loan. This loan is also guaranteed by MOPCO and by a
MOPCO shareholder. Effective January 26, 2009, MOPCO assumed this debt.(g)
    Pursuant to the UAP acquisition, we borrowed $1.0-billion in 2008. We issued $500-million of
6.75% debentures due January 15, 2019 under our Shelf Prospectus and used the net proceeds towards
the repayment of this loan. The net proceeds of $497-million were paid on September 11, 2008, and
cash of $58-million was paid in October 2008. The remaining balance of $460-million is repayable on May 5, 2013.(h)
    Debentures contain various provisions that allow us to redeem debt prior to maturity, at our
option, at specified prices.




---



##### 



2008 Annual Report / Agrium
    
    73
 Capital management
 2008
    
    
    
    2007
    
    
    2006Net debt to net debt plus equity (%)
    
    
    
    31
    
    
    
    
    (22
    )
    
    
    39EBITDA interest coverage (multiple)
    
    
    
    22.1
    
    
    
    
    12.7
    
    
    
    6.0
 Debt ratings
 Senior Unsecured Notes and DebenturesMoodys Investors Service
    
    (Baa2)
    
    on review for possible
downgrade 
under reviewDBRS
    
    (BBB)Standard & Poors
    
    (BBB)
 Future Cash Requirements
 Contractual obligations and other commitments
 Payment due by periodLess than
    
    
    One to
    
    
    Four to
    
    
    After(millions of U.S. dollars)
    
    one year
    
    
    three years
    
    
    five years
    
    
    five years
    
    
    TotalLong-term debt(a)
    
    
    91
    
    
    
    298
    
    
    
    618
    
    
    
    2,200
    
    
    
    3,207Operating leases
    
    
    151
    
    
    
    65
    
    
    
    39
    
    
    
    36
    
    
    
    291Purchase obligations
    
    
    596
    
    
    
    238
    
    
    
    153
    
    
    
    125
    
    
    
    1,112Asset retirement obligations
    
    
    8
    
    
    
    11
    
    
    
    8
    
    
    
    624
    
    
    
    651Environmental remediation liabilities
    
    
    16
    
    
    
    33
    
    
    
    16
    
    
    
    70
    
    
    
    135Total
    
    
    862
    
    
    
    645
    
    
    
    834
    
    
    
    3,055
    
    
    
    5,396
 
 (a)
    Figures include interest payments Long-term debt




---



##### 



74
    
    Agrium / 2008 Annual Report
  Operating leases
  Purchase obligations
   Asset retirement obligations
  Environmental remediation liabilities
  Future Capital Expenditures
 1
 
    
    Additional spending at our Wholesale plant sites in order to ensure efficient,
reliable and safe operations of facilities, including building replacement and
maintenance at various Wholesale operations.
    
    Retail spending for North American and South American operations.
    
    Projects at our Vanscoy potash facility.
  1
 
    
    Projects to develop and increase capacity at our Vanscoy potash facility.
    
    Retail spending for expansion opportunities.
    
    Additional investment in Advanced Technologies, including an ESN in-market coating
facility.
    
    Costs related to development of a greenfield potash operation in western Canada.
  
 1
    See disclosures under the heading Forward-Looking Statements on page 92 of this
MD&A.




---



##### 



2008 Annual Report / Agrium
    
    75
  1
 Outstanding Share Data
 Number of Shares
    
    
    Market Value(millions)
    
    
    (millions of U.S. dollars)Common shares
    
    
    157
    
    
    
    5,248
 Off-Balance Sheet Arrangements
 Sale of accounts receivable
   Guarantees
  Financial Instruments
 Risk Management
 Derivative financial instruments
    
    RisksCurrency
    
    
    Commodity price
    
    
    Credit
    
    
    LiquidityForeign currency forward and option contracts
    
    
    X
    
    
    
    
    
    
    
    X
    
    
    
    XNatural gas forward, swap and option contracts,
nutrient swap contracts and heat rate swap contracts
    
    
    
    
    
    
    X
    
    
    
    X
    
    
    
    X
  
 1
    See disclosures under the heading Forward-Looking Statements on page 92 of this MD&A.




---



##### 



76
    
    Agrium / 2008 Annual Report
  Currency Risk
 Foreign exchange derivative
    
    
    2008
    
    
    
    2007financial instruments outstandingNotional
    
    
    
    
    
    
    Fair value
    
    
    
    Notional
    
    
    
    
    
    
    Fair valueSell/Buy
    
    
    (millions, buy
    
    
    Maturities
    
    
    assets
    
    
    
    (millions, buy
    
    
    
    
    
    
    assetscurrency)
    
    
    
    
    
    
    (liabilities)
    
    
    
    currency)
    
    
    Maturities
    
    
    (liabilities)CAD/EUR forwards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    EUR 1
    
    
    
    2008
    
    
    
    USD/EUR forwards
    
    
    
    EUR 15
    
    
    
    2009
    
    
    
    
    
    
    
    
    EUR 476
    
    
    
    2010
    
    
    
    47EUR/USD forwards
    
    
    
    USD 33
    
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    GBP/USD forwards
    
    
    
    USD 5
    
    
    
    2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    USD/CAD put options purchased
    
    
    
    CAD 195
    
    
    
    2009
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    USD/CAD call options sold
    
    
    
    CAD 206
    
    
    
    2009
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    
    47
 Commodity Price Risk
 2008
    
    
    
    
    
    
    
    
    
    
    
    2007Natural gas, power and nutrient
    
    
    
    
    
    
    
    
    
    
    Fair value
    
    
    
    
    
    
    
    
    
    
    
    Fair valuederivative financial instruments
    
    
    
    
    
    
    
    
    
    
    assets
    
    
    
    
    
    
    
    
    
    
    
    assetsoutstanding
    
    
    Notional
    
    
    Maturities
    
    
    (liabilities)
    
    
    
    Notional
    
    
    Maturities
    
    
    (liabilities)Natural gas (BCF)NYMEX contractsSwaps
    
    
    
    33
    
    
    2009 to 2013
    
    
    
    (61
    )
    
    
    
    41
    
    
    
    2008 to 2011
    
    
    
    (8
    )Collars (swap with options)
    
    
    
    25
    
    
    2009 to 2012
    
    
    
    13
    
    
    
    
    5
    
    
    
    2008 to 2009
    
    
    
    Call spreads
    
    
    
    4
    
    
    
    2009
    
    
    
    2
    
    
    
    
    9
    
    
    
    2008 to 2009
    
    
    
    11El Paso swaps
    
    
    
    2
    
    
    
    2009
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    AECO contractsSwaps
    
    
    
    1
    
    
    
    2009
    
    
    
    (1
    )
    
    
    
    7
    
    
    
    2008
    
    
    
    1Options
    
    
    
    13
    
    
    
    2009
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    (58
    )
    
    
    
    62
    
    
    
    
    
    
    
    4Power  Swaps (GWh)
    
    
    
    666
    
    
    2009 to 2012
    
    
    
    6
    
    
    
    
    141
    
    
    
    2008
    
    
    
    4Nutrient  Urea swaps (short tons)
    
    
    
    18,000
    
    
    
    2009
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    
    8




---



##### 



2008 Annual Report / Agrium
    
    77
  Credit Risk
   Liquidity Risk
  Fair Value
 Fair value of derivative financial instruments
    
    
    2008
    
    
    
    2007Foreign exchange contractsAccounts receivable
    
    
    
    
    
    
    
    
    28Other assets
    
    
    
    
    
    
    
    
    19Accounts payable and accrued liabilities
    
    
    
    (18
    )
    
    
    
    (18
    )
    
    
    
    47Interest rate contractsAccounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    (4
    )Other liabilities
    
    
    
    
    
    
    
    
    (26
    )
    
    
    
    
    (30
    )Natural gas, power and nutrient derivative contractsAccounts receivable
    
    
    
    5
    
    
    
    
    12Other assets
    
    
    
    16
    
    
    
    
    9Accounts payable and accrued liabilities
    
    
    
    (64
    )
    
    
    
    (10
    )Other liabilities
    
    
    
    (11
    )
    
    
    
    (3
    )(54
    )
    
    
    
    8




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##### 



78
    
    Agrium / 2008 Annual Report
  2008 Fourth Quarter Managements Discussion & Analysis
 2008 Fourth Quarter Operating Results Net Earnings
    
    
    $115-million increase in Retails selling expense resulting in Retails selling
expense of $242-million primarily as a result of the addition of the UAP business.
    
    $90-million increase in losses on non-qualifying derivative positions resulting in
a $87-million hedging loss.
    
    $87-million write-down in our EAgrium investment before non-controlling interests
of $42-million, resulting in a net write-down to Agrium of $45-million.
    
    $28-million increase in Potash profit and capital tax resulting in a $37-million
expense driven by increased potash sales margins.
    
    $86-million decrease in stock-based compensation expense resulting in a
$36-million recovery of stock-based compensation driven by a decrease in our share price.
    
    $96-million increase in foreign exchange gains primarily related to the weakening
of the Canadian dollar, resulting in $98-million of foreign exchange gain.
  Business Segment Performance
 Retail




---



##### 



2008 Annual Report / Agrium
    
    79
  Wholesale




---



##### 



80
    
    Agrium / 2008 Annual Report
  Advanced Technologies
 ® ® ®




---



##### 



2008 Annual Report / Agrium
    
    81
  Other
  Financial Position and Liquidity
  Inventories (millions of U.S. dollars)
    
    
    December 31, 2008Raw materials
    
    
    
    216Finished goods
    
    
    
    422Product for resale
    
    
    
    2,4093,047
    Short-term credit facilities available at December 31, 2008
    
    Total
    
    
    Unutilized
    
    
    Utilized(millions of U.S. dollars)Revolving credit facilities expiring 2012
    
    
    775
    
    
    
    475
    
    
    
    300Accounts receivable securitization(a)
    
    
    200
    
    
    
    
    
    
    
    n/a975
    
    
    
    475
    
    
    
    300CMF credit facilities expiring in 2009
    
    
    264
    
    
    
    144
    
    
    
    120South American credit facilities expiring 2009 to 2012
    
    
    226
    
    
    
    156
    
    
    
    70EAgrium bridge loan(b)
    
    
    120
    
    
    
    
    
    
    
    1201,585
    
    
    
    775
    
    
    
    610
 
 a)
    As of December 31, 2008, we had drawn $200-million on
our accounts receivable securitization facility.b)
    EAgrium loan is
guaranteed by MOPCO and a MOPCO shareholder. Accounting Estimates and New Accounting Standards




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##### 



82
    
    Agrium / 2008 Annual Report
  Critical Accounting Estimates
  
    
    It requires significant assumptions about matters that are highly uncertain at the
time the accounting estimate is made.
    
    Different estimates that we could have used in the current period, or changes in
accounting estimates that are reasonably likely to occur from period to period, would
have a material impact on our financial condition, changes in financial condition or
consolidated results of operations.
  Inventories
  Property, plant and equipment
  Depreciation
  Intangibles
   Impairment of long-lived assets
  Goodwill




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##### 



2008 Annual Report / Agrium
    
    83
  Environmental remediation liabilities
  Asset retirement obligations
  Employee future benefits
   Stock-based compensation




---



##### 



84
    
    Agrium / 2008 Annual Report
  New Accounting Standards
 Financial Instruments
 Capital Disclosures
 Inventories
 Pension
and Postretirement Benefits  Measurement Date
 Accounting Standards and Policy Changes Not Yet Implemented
   International
Financial Reporting Standards (IFRS)




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##### 



2008 Annual Report / Agrium
    
    85
  Unplanned Plant Downtime
   
    
    We have implemented an EMS (Environment, Health, Safety and Security (EHS&S) management
system) which includes defined expectations and policy for MOC (Management of Change) for
facilities and Risk Management processes / requirements 
(PHA  Process hazard analysis).
    
    We are committed to following sound project management processes to help ensure capital
projects are executed to the appropriate design standards and completed on schedule and
budget.
    
    We have implemented operation standards (PMS  Process Management System, RMP  Risk
Management Program, 
NAWOS  Wholesale Operating Standards).
    
    We have mandatory training programs for Operations, Maintenance, and Technical personnel to
ensure appropriate skills and training are in place to maintain and operate the facilities.
    
    Capital and Maintenance five year planning program.
    
    We have implemented and followed scheduled inspection programs of process equipment.
    
    We have established audit programs for EMS, EHS&S, RMP, and PMS for compliance and to
identify opportunities for continuous improvement.
 Product Price & Margin




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##### 



86
    
    Agrium / 2008 Annual Report
  
    
    The broad product diversity of our Wholesale business (nitrogen, potash, and
phosphate) reduces the impact of poor supply and demand fundamentals that can be
experienced by a particular product category.
    
    The geographic diversity of our Wholesale customer base (North America, South
America, and International) reduces the impact of poor economic, crop or weather
conditions in any one region.
    
    Our extensive distribution and storage capability can help reduce Wholesale
variability that may arise from a downturn in demand in a localized area.
    
    Our commitment to operational excellence helps ensure rigorous management of
operational risks that could compromise production efficiencies or increase operating
costs. This provides us with a relatively stable and predictable production/supply base
that helps to mitigate Wholesale earnings volatility.
    
    Our Wholesale customers have diverse end-uses for our products (agriculture and
industrial), with some of our industrial sales prices based on a cost of production plus
margin basis.
    
    Within the Wholesale business, we make prepaid forward sales, and we may lock in
nitrogen margins on manufactured product using forward gas price hedging.
    
    Within our Retail business, we have further mitigating factors including:
 
    
    Product and service diversity (fertilizer, chemical, seed and application
services).
    
    Geographic diversity that helps spread risk associated with regional weather and
crops (broad regional U.S. and South American markets).
 Raw Materials
     
    
    The Profertil nitrogen facility has gas contracts that are not tied to North
American gas prices.
    
    We use hedging tools and other contractual arrangements to manage the risk of gas
price volatility.
    
    We use a variety of tools in an effort to mitigate our risk and stabilize our
earnings, including hedging, swaps, forward sales, prepayments, 90 day rolling forecast,
and rigorous market analysis.
    
    Raw materials and energy are procured on a competitive basis employing a mix of
long-term, short-term and spot contracts with a variety of suppliers, consistent with the
Corporate Procurement Policy and Practices.
    
    Our practice of adjusting our production rates and sourcing supply for purchased
product when conditions dictate reduces our exposure to high natural gas costs.




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##### 



2008 Annual Report / Agrium
    
    87
  
    
    The majority of our nitrogen sold in North America is produced in Western Canada, which has
lower-cost gas than the average cost for our competitors who produce and sell elsewhere in
North America.
    
    In the long-term, our goal is to increase our nitrogen capacity in areas where long-term
supplies of lower-cost natural gas are available.
    
    For mining, we have medium-term highly competitive contracts in place with suppliers and
maintain high mining standards, employing the latest technologies and techniques to minimize
the risk of flooding.
    
    As sulfur is a primary raw material used in manufacturing of phosphate fertilizers, the use
of long-term contracts and contract pricing based on less volatile market indexes have been
implemented to mitigate the market volatility.
 Foreign Exchange
   
    
    Exposure to currency fluctuations is partially offset through our currency hedging programs.
 Transportation
   
    
    We develop detailed forecasts of product movement needs for each facility and mode of
transport.
    
    We develop a strategic plan, with specific options, to help mitigate the potential for
increased cost or the reduced deliverability of ammonia and other products over the
medium-term, and continue to work with industry associations to address these issues.
    
    We continually develop and maintain mutually beneficial long-term relationships with major
carriers.
    
    Most of our production facilities are serviced through multiple carriers and modes of
transportation, providing us with important shipping options.
    
    We maintain multiple supply points through our extensive distribution network.
 Human Resources
   
    
    We have a structured annual Succession Planning process focused on actively accelerating the
development of leaders through targeted developmental opportunities.
    
    We are developing a company-wide Leadership Development Framework and tools to enhance
leadership capabilities.
    
    We conduct a continuous review and analysis of our Total Compensation program to ensure our
offering to employees is competitive in the markets in which we compete for talent.
    
    We track and monitor key workforce metrics to identify high risk areas. Examples include
voluntary resignation, key employee segments with higher attrition, workforce demographics to
forecast retirements and employee exit trends.
    
    We benchmark our HR programs, policies and practices externally to align with our business
strategies and ensure competitiveness.




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##### 



88
    
    Agrium / 2008 Annual Report
  Country
   
    
    We seek to partner with reputable firms with experience or significant presence in
foreign countries in which we operate or intend to operate.
    
    We hire personnel located in the foreign country or who have operating experience
in the foreign country.
    
    We obtain non-recourse project financing with consortiums of international banks
where appropriate.
    
    We maintain excess cash related to international operations in U.S. dollars to the
extent practicable.
    
    We increase our required investment return to reflect our perceived risk of
conducting business in specific countries.
 Integration of Acquisitions and Expansions
   
    
    We have developed a detailed and systematic project review process to analyze the
rewards/risks of all significant investment projects, including acquisitions and
development expansions. Each major investment project must pass a gate process where it
is reviewed by the Investment Strategy Committee to ensure it passes key criteria such as
strategic fit, economic return or our hurdle rate and various competitive factors. As
important is that all material risks are identified. For each risk, mitigants are
reviewed to ensure that all risks are appropriately defeased.
    
    As part of this process we assign specific areas of responsibility to our key
personnel with experience in those areas (subject matter
experts) who are then held
accountable for results.
    
    We conduct extensive due diligence reviews and financial modeling analyses.
    
    We complete periodic assessments of previous acquisitions to update and enhance
current and future strategies in the spirit of continuous improvement and to ensure we
remain a disciplined investor.
 Legislation
   
    
    Our tax department proactively participates in tax and industry organizations and
maintains contacts with an extensive network of local and international tax consultants.
    
    We have centralized oversight over the tax function in all the jurisdictions in
which we operate.
 Weather




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##### 



2008 Annual Report / Agrium
    
    89
  
    
    Our extensive distribution and storage system allows us to move products to locations where
demand is strongest. However, our ability to react is limited by the shortness of the peak
selling season and margins on these sales in markets further from our production facilities
will be lower due to higher transport costs and potentially lower sales prices.
    
    Geographic diversity of our Wholesale markets and our Retail facilities affords some
protection against regional weather patterns.
    
    We also mitigate our exposure to weather-related risk through our sales to industrial
customers, which are not dependent on regional weather factors. Industrial sales represent
approximately 15 percent of our Wholesale net sales.
 Credit and Liquidity
  Counterparty
   
    
    We have established credit procedures that include assessment
of a counterpartys
credit-worthiness and adherence to credit limits.
    
    For derivative hedging contracts, we have established counterparty trading limits and netting
agreements, and a policy of entering into derivative contracts with counterparties that have
investment grade or higher credit ratings.
    
    In our Retail business unit, we service customers in diverse geographic markets, reducing the
impact of poor economic or crop conditions in any particular region.
 Environment, Health, Safety, & Security (EHS&S)
   
    
    Agrium has well-defined EHS&S programs and processes, committed leadership, clear lines of
reporting and accountability, and a responsible workforce. In addition to an overall corporate
EHS&S group, it has established an EHS&S organization in each business unit. This has enabled
Agrium to focus on both oversight and governance as well as increasing management involvement
in all of its operations and activities.
    
    Agrium stewards to an integrated EHS&S management system which includes a policy and system
documenting minimum EHS&S management and performance expectations applicable to Agriums
facilities worldwide. Agriums business units and, where appropriate, individual facilities
augment these requirements with system controls necessary to manage the risks unique to those
operations. At the operations level, program best practices are in place to direct the desired
outcome.
    
    Agrium has an increasingly well-defined set of EHS&S Key Performance Indicators, annual goals
and systems that are cascaded from the Chief Executive Officer throughout the organization.




---



##### 



90
    
    Agrium / 2008 Annual Report
  
    
    Continuous improvement and performance monitoring are effected through four
technical committees, two management committees and the Board EHS&S Committee. These
committees meet at least quarterly to monitor performance against annual and longer-term
performance goals, to discuss plans and strategies for addressing weaknesses in our
processes, and to evaluate opportunities for improving our systems.
    
    Technical support and compliance assurance is managed at three levels within the
organization. Facilities are staffed with technical specialists necessary to support
day-to-day operations. The business units are staffed with broader technical expertise to
support business unit programs. Business unit personnel also conduct regular, rigorous
compliance and systems audits of all locations. The Corporate staff is responsible for
maintaining integrated systems, performance monitoring and business unit systems
compliance assurance.
    
    Ongoing, close working relationships with industry associations, government
agencies and law enforcement ensure best practices, other risk management strategies
and new regulations are known, understood and met in a timely fashion.
    
    Annually, we review our EHS&S Policy for relevancy and modify it as necessary.
    
    Our long-term goal is to phase out carrying agricultural-grade ammonium nitrate
entirely.
  Contingent environmental liabilities
 United States Environmental Protection Agency Phosphate Industry Initiative
    Environmental Remediation Activities in Idaho and Manitoba




---



##### 



2008 Annual Report / Agrium
    
    91
  Climate Change and Greenhouse Gas Issues




---



##### 



92
    
    Agrium / 2008 Annual Report
  
    
    We track our annual air emissions and have proactively undertaken projects designed
to improve plant energy efficiencies and reduce all emissions.
    
    We have taken, and will continue to take, a leadership role in the fertilizer
industrys negotiations with the government on fair and equitable air emission reduction
targets and a pragmatic and realistic compliance system that preserves the global
competitiveness of the industry.




---



##### 



2008 Annual Report / Agrium
    
    93
  Forward-looking information
    
    
    Key assumptions
    
    
    Most relevant risk factorsSynergies to be achieved on the UAP
acquisition 1
    
    
         Retail business conditions are assumed to be within normal parameters with respect to prices, margins product availability, and
supplier agreements for our major products.Plans for Retail to expand into Uruguay
in 2009
    
    
         Expansion plans are subject to risks associated with operating in a foreign country, such as uncertain government instability or
abrupt changes in economic conditions, government policies and regulations, particularly with respect to agriculture or macro-economic
policies.Brownfield expansion at our Vanscoy,
Saskatchewan potash mine, including
estimated capacity increase and capital
costs
    
    
         The expansion will proceed as planned.
    
    
         Potash prices fall to a point where the expansion is
uneconomic/base business profitability falls such that we
cannot fund the cost of the expansion from operating cash
flow.Start-up
of potential Greenfield potash project
    
    
         The expansion will proceed as planned.
    
    
         Potash prices fall to a point where the expansion is
uneconomic/base business profitability falls such that we
cannot fund the cost of the project from operating cash
flow/ internal/external human resources are not available.
     Quality of ore for properties we are considering.Construction of MOPCOs additional urea
trains
    
    
         The two new plants will be constructed as planned.
    
    
         Financing is not available to fund the new plants or urea
prices fall below where the plants are economical.
     Egypt political risk including approval of required
permits.Ability to sustain projected potash and
phosphate production with existing reserves
    
    
         Potash reserves are accessible and of sufficient quality to
provide the required ore for long term production.
     Phosphate (Conda) reserves are of sufficient quality to provide
the required ore for long term production and permits are granted
on a timely basis.
     Phosphate (Kapuskasing) reserves are sufficient to provide the
required ore until the projected end of economic life (2014).
     Crop prices remain at current levels.
    
    
         Potash  flooding and/or poor ground conditions limit
access to major sections of the ore body or results in poor ore quality.
     Phosphate (Conda)  poor ore quality, delays in acquiring
necessary permits, finished phosphate prices.
     Phosphate (Kapuskasing)  ore quality, depth, water
management as we go deeper, finished phosphate prices and
Canadian/U.S. foreign exchange rate.
     Major drop in grower demand or fertilizer prices drop from
current levels.AATs construction of a new ESN®
facility within the U.S. Corn Belt
    
    
         AAT will be able to purchase urea at or below NOLA prices.
     Location in the Corn Belt will provide logistical benefits.
     The increased yields and environmental benefits of ESN will
justify premium purchase price over other nitrogen sources.
    
    
         Introduction of new technology into the market.
     Impact of weather conditions on demand.
     Managing the commodity cycle of urea.AATs expansion of ESN capacity at
Sylacauga, Alabama
    
    
         Purchase urea at or below NOLA prices.
     In-market coating facility provides logistical benefits by being
close to the Corn Belt.
     Supplements/expands existing production and capitalizes on
existing infrastructure. Allocates fixed cost burden over
additional tonnage.
     ESN can provide increased yield, environmental benefits to
justify premium price over current nitrogen sources.
    
    
         Technological risk  risk of new superior technology
surpassing and entering the market.
     Commodity cycle of urea  managing the cycle of urea
purchases with production requirements and the sales cycle
to ensure we do not end up with high priced urea inventory
in a low urea cycle.
     Weather  as with all fertilizer nutrients, demand is
somewhat weather dependent.2009 capital spending program2
    
    
         We believe we will have sufficient financial resources to fund our expected capital program.
     The level of sustaining and investment capital may vary significantly depending on corporate priorities as the year progresses and
based on changes in the rate of inflation or engineering costs.Ability to finance announced projects
    
    
         We will be able to utilize
our available credit
facilities or access capital
markets for additional sources
of financing.
    
    
         There can be no assurance that we will be able to utilize our credit facilities or access
capital markets.
 1
    The purpose of this particular financial outlook is to communicate our current expectation of
the impact that the UAP acquisition may have on future results of operations. Readers are
cautioned that it may not be appropriate for other purposes.2
    The purpose of this particular financial outlook is to assist readers in assessing our
liquidity and capital resources. Readers are cautioned that it may not be appropriate for
other purposes.




---



##### 



94
    
    Agrium / 2008 Annual Report
  
    
    Grain and nutrient benchmark prices in 2009 are expected to remain above historic
levels and show improvement relative to fourth quarter levels.
    
    High operating rates for the majority of our facilities in 2009, with the exception
of routinely scheduled turnarounds at several plants. Our Profertil facility may again be
impacted by reduced gas deliverability during the Argentine winter.
  
    
    General economic, market, business and weather conditions, including: global
agricultural supply/demand factors and crop price levels; global and regional
supply/demand factors impacting the price and availability of gas, the price of crop
nutrients and raw materials/feedstocks.
    
    Changes in government policies and legislation regarding agriculture, safety,
environment, transportation/storage, climate change and others, including potential
imposition of or changes to price controls on fertilizers in certain markets, tariffs on
fertilizers and availability of subsidies or changes in their amounts.
    
    Actions by competitors and others that include: changes to industry capacity and
utilization rates and product pricing; performance by customers, suppliers, and
counterparties to financial instruments; and, ability to transport or deliver production
to markets.
    
    Changes in margins and/or levels of supplier rebates for major crop inputs such as
crop nutrients, crop protection products and seed.
    
    General operating risks associated with: investment in foreign jurisdictions; the
level and effectiveness of future capital expenditures and reliability of performance of
existing capital assets; changes in capital markets; and, fluctuations in foreign
exchange rates and tax rates in the jurisdictions in which we operate.
    
    Future operating rates, production costs and sustaining capital of our Wholesale
facilities, including: the rate of inflation and availability of skilled labor
particularly in Western Canada; unexpected costs from present and discontinued mining
operations and/or labor disruptions; and, changes to timing, construction cost,
performance of other parties and political risks associated with our Egyptian nitrogen
project.
    
    Potential inability for MOPCO to raise the required capital or the failure of the
Egyptian government to issue all necessary approvals to complete the MOPCO expansion as
planned.
    
    Strategic risks including: our ability to effectively implement our business
strategy and our risk mitigation strategies, including hedging and insurance; our ability
to close pending acquisitions as anticipated, integrate and achieve synergies from any
assets we may acquire within the time expected or the performance of those assets;
technological changes; and, other factors.
    
    Current global financial crisis and changes in credit markets.