The fertilizer market is always a topic on the agenda when it comes to summer or the second harvest. Since the beginning of the war between Russia and Ukraine, in 2022, this has been a factor that has raised major concerns regarding issues such as product availability, market prices, exchange rates, among other measures. Today, Brazil is one of the largest importers of fertilizers, relying on 85% of what is required for production in the field. When we observe the climatic conditions and the impact of fires, which broke out during a long period of drought, there is a need to better understand the availability of inputs and price variation compared to the international market, as we have producers operating in more stringent ways. Profitability with low commodity prices.
Watch an interview with agronomist, fertilizer specialist and consultant at Safras & Mercado, Maísa Romanello. With her extensive experience monitoring indicators, prices and trends, she brings a unique and valuable perspective to the fertilizer sector.
1-What is your assessment of the fertilizer market for rural producers? Is there a suitable situation to buy this input?
It is necessary to evaluate the peculiarities of each market, analyzing nitrogen (urea, ammonium nitrate, ammonium sulphate), phosphates (MAP, super simplex, super simplex) and potassium (potassium chloride) separately. In the case of nitrogen, we currently have lower prices than a year ago. The same is true for potassium chloride, which is very affordable, at its lowest levels in years. Phosphate prices are rising due to international market problems, mainly due to reduced supply from China. But, overall, the situation is favorable for rural producers to invest in fertilizers to obtain good yields, with formulation prices falling compared to 2023 and 2022. It is worth recalling that fertilizer prices in 2022 reached record historical events due to the consequences of the beginning of the war between Russia and Ukraine, which raised major concerns about supply, considering Russia our main supplier, and other factors, such as high prices for raw materials and sea freight. These problems were overcome, and the year 2023 was the year to return to normal life, with the year 2024 at levels within the average, with the exception of phosphate, whose prices are rising.
2-Is it expected a market with lower prices than last year but a crop with higher costs? Did this factor deter producers from the pre-purchasing process?
The concern about the 2024/2025 season is the narrow profitability of some commodities, most notably soybeans, due to the decline in grain prices, which has affected the purchasing power of inputs and postponed decision-making. Moreover, in the case of phosphate, better prices were expected, which did not happen. Currently, we are low on MAP inventory and it is difficult to find immediately available quantities. .
3- How are fertilizers purchased during this period at the beginning of the next harvest? And in the off season?
For the 2024/2025 season, the majority of quantities have already been obtained, and now it is time to focus on the logistics of delivery. This year, fertilizer purchases have been postponed, with the main demand moment occurring in July and August, with some specific deals left until the last minute. Farmers postponed purchasing decisions precisely because they were waiting for better prices for their commodities and lower fertilizer prices. However, this was not the most decisive decision, as the accumulation of demand is causing prices to rise, in addition to logistical risks and the usual increase in land freight in the third quarter, due to the large demand for the second harvest flow. And to deliver summer harvest inputs. Thinking about the second harvest, purchasing decisions are also being postponed, with negotiations delayed compared to previous years. Climate is another concern, as prolonged drought poses risks to the corn growing window.
4-In the case of the macronutrients nitrogen, phosphorus and potassium, is the exchange ratio appropriate for the soybean and corn product?
Currently, the exchange ratio for soybeans for phosphorus is declining, with the exchange ratio being worse for MAP compared to the same period last year. In the case of potash, the decline in potassium chloride prices this year favors the purchasing power of inputs. For corn, improved prices during September contributed to strengthening trade relations, providing good opportunities to obtain urea and especially potassium chloride. As for the Maghreb Arab Press, the rise in input prices continues to harm the exchange rate, with its index rising compared to last year and higher than average. Over the next few weeks, the climate issue and progress in planting the 2024/2025 crop will be key to the pricing of agricultural commodities and thus to trade relations.
5-We know that Brazil is a large importer of fertilizers, and depends on supplies from other countries. Do we have security in supplying fertilizers for the 2024/2025 season?
This issue is very important to discuss. Brazil is one of the world’s largest food producers, where agriculture is increasingly advanced, breaking productivity records and forming the backbone of the Brazilian economy. To this end, fertilizers are a basic necessity, and therefore our dependence on imports makes us vulnerable. Fortunately, Brazil enjoys good trade relations with other countries, and our position as a food exporting country supports this exchange. The most troubling moment we have faced recently has been the start of the war between Russia and Ukraine, as sanctions imposed on Russia have jeopardized the country’s fertilizer exports, which supply us with more than 20% of our imports. However, United Nations [Organização das Nações Unidas] Brazil played an important role in preventing sanctions from affecting the food and agricultural input sectors, and Brazil sought to search for other suppliers to overcome the difficulties in negotiating with the country that is at war. Thus, there was no shortage of fertilizers, despite their high prices, and there was talk about the impact of our dependence on food. This year, the greatest difficulty was related to phosphate, especially the Maghreb, due to restrictions imposed on Chinese exports, which gave priority to its domestic supplies, which led to a reduction in the quantities allocated for export. This has kept MAP prices at high levels and reduced imports to Brazil, and from January to August we have a MAP volume of 2.9 million tons, 13.7% lower compared to the same period last year. Therefore, other sources of phosphate are needed, such as triple super and simple super, which ultimately raises its prices as well. As for other fertilizers, supply is comfortable, and in contrast to MAP, KCl breaks a record in imports, with a volume 12.9% higher than in 2023. In total, we have 25.7 million tons of fertilizer imported from January to August, an increase of 8.1 %. Compared to the previous year, ensuring supplies for the 2024/2025 season.
6- We are major importers of fertilizers and import 85% of production needs. There is a movement, as the National Fertilizer Scheme is trying to promote these markets, but are some factors still hindering progress in the production of these national fertilizers?
Yes, national fertilizer production is facing great difficulties, which has increased our dependence on imports in recent years. Petrobras stopped its nitrogen fertilizer production units and left the sector. This year, there are efforts on the part of the government to resume production, but the biggest difficulty facing Brazil is competitiveness, while countries such as Russia, China, Iran and Nigeria have lower production costs, especially with regard to obtaining natural gas, the main raw material. To produce nitrogen fertilizers. Another bottleneck is due to geographical issues. Phosphorus mines contain a low concentration of nutrients. As for potassium chloride, the situation is more complicated, as we need to import almost everything we consume. Brazil does not have enough mines for exploration, and there is an important reserve in the state of Amazonas, in areas with environmental, social and economic issues, which makes it difficult to launch existing production projects. Furthermore, we can mention the high costs of installation, labor, logistics, acquisition of raw materials, tax issues, legislation, bureaucracy and lack of incentives for the sector. Currently, the National Fertilizer Plan is moving at a snail’s pace, as it attempts to revitalize dormant units and bring in new investments in infrastructure, as well as strengthening state-owned enterprises in the sector and incentives for the production of bio-, bio- and organic-based fertilisers. Special fertilizers. However, we still have a long way to go, so we will continue to rely heavily on imports in the coming years.
7- Today, Brazil is considered the fourth largest consumer of fertilizers in the world. How are fertilizers produced from organic waste?
The organic fertilizer sector has grown significantly in recent years and has proven to be an alternative to reduce the need for mineral fertilizers, in addition to all the environmental concerns that have already become a reality and a trend for the coming years in global and Brazilian agriculture. According to Abisolo data for 2023, organic fertilizer sales grew by 25.5% in 2022 compared to 2021, for a total of R$1.77 billion. The trend is for this sector to continue to expand, with large agricultural companies investing in the production and use of inputs.
8 Is today’s delivery time worrying?
Every year, the logistics raise some concerns, with delays possible. This year, we shouldn’t have any major problems, as we already have a large amount of fertilizer. The biggest concern was with MAP, as our inventory is low and our prices are high, so those who left to buy last minute may have difficulty finding available quantities easily. However, with rain delays, logistics have a longer deadline, so deliveries should occur without major bottlenecks.
9- We know that the dollar can interfere in the formation of fertilizer prices. At this point, what are the expectations for the impact of the US currency and its effects on fertilizer prices?
The dollar directly affects the conversion of prices to the riyal, and indirectly the formation of agricultural commodity prices and thus the exchange relationship and demand for fertilizers. Currently, for the composition of fertilizer prices, dollar prices have had a greater influence than currency fluctuations. For example, the decline in the price of BCL on the international market offset increases in the dollar. The rise in the dollar MAP rate also hurts purchases in riyals at a time of devaluation of our currency. The most important thing regarding the acquisition of fertilizers is to maintain the circulation of the commodity and purchase inputs in the same currency and pay attention to exchange relationships, as although the rise in the dollar leads to an increase in the prices of fertilizers in riyals, it can also mean an increase in the prices of agricultural commodities and ends up compensating for purchasing power. vice versa.
10- What are your recommendations to our producers in the 2024/2025 season, especially with regard to fertilizers?
The main recommendation is for producers to look at their purchasing power, that is, to establish a correlation between the price of their commodity and the price of inputs, to ensure the best possible opportunity. In the case of coffee, for example, good prices have provided excellent opportunities to purchase inputs and invest in crop productivity. The fertilizer market is complex and volatile, with several factors affecting price formation, such as the dollar, global supply and demand, agricultural commodity prices, weather… So regular monitoring is necessary to make firm decisions the moment you buy fertilizer. This input represents a large portion of production costs. Faeg/Senar/Ifag communication system
