Brazil’s fertilizer and pesticide outlooks remain critical: 2022 preview

Prices to remain high in first half of 2022 as low availability spills over from last year

field being sprayed with pesticides

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Fertilizers prices are expected to remain high in Brazil in the first half of 2022 as high demand and low supply availability from 2021 is expected to spill over into the new year.

As a key grain and oilseed producer, any changes in Brazil’s demand for inputs could affect global availability.

As prices escalated in 2021 amid supply availability, freight increases and high exchange rates, the crop/fertilizer ratio at the end of this year is much less advantageous than it was a year ago, National Association for Fertilizer Dissemination ANDA’s executive director Ricardo Tortorella told Fastmarkets Agricensus.

Since last August, the geopolitical and economic crisis, amid the energy crisis, increased concerns over the availability of inputs for Brazil’s 2021-2022 and 2022-2023 crops.

Fertilizer industries started to worry when China announced a restriction on exports after an increase in natural gas prices threatened domestic production and supply.

Russia, Brazil’s main supplier of fertilizers, followed the same path as China and announced that it would also restrict exports of its main fertilizers by establishing export quotas, which were put in place at the beginning of December for phosphates and nitrogen fertilizers.

The Brazilian government sought Russia’s assurance that the country’s demand would be met and the country’s agricultural minister, Tereza Cristina, flew to Moscow in November to assure that this was the case.

“We trust the work of our diplomacy,” said Tortorella.

But another piece in this puzzle is Belarus, the source of 24% of potash imports.

The country has been hit by increased sanctions imposed by the United States and European countries in a move to pressure Aleksander Lukashenko’s government.

The West has been reacting to a series of clampdowns on domestic protests within the country and an incident in which a European civilian passenger passing through Belarussian airspace was forced to land in the country to allow security forces to arrest a passenger.

Belarus is highly dependent on European ports to export its products, but in recent weeks it has been forbidden to use them.

Still, ANDA estimates that fertilizer deliveries will increase by double digits in percentage terms in 2021, versus 2020 when 40.5 million tonnes was imported, to a record volume.

Brazil imports 80% of its fertilizer supply and the imported volume is already the largest in its historical series, reaching 38.3 million tonnes from January to November.

That’s already well above Conab’s full-year 2021 forecast of 35 million tonnes and last year’s total 34.2 million tonnes.

2022 outlook

By 2022, domestic stocks of fertilizers are expected to drop to meet the demand for the new crop plantings.

“Producers are anticipating purchases, at a slower pace than last year because the exchange ratio is worse, but still, producer profitability is good,” Tortorella stated.

In this scenario, the Brazilian soybean and corn association Aprosoja is advising its associates to ration the usage of fertilizers to address the skyrocketing prices.

Farmers have already acquired fertilizers for the 2021-2022 crop, although there are producers who claim not to have received them yet, so the test will be to source the product for the next campaign in 2022.

However, there are other even bigger concerns regarding the financial viability of the 2022-2023 crop.

“If we use the ‘land stock’ we can get through the 2021-2022 crop,” Aprosoja’s president, Antonio Galvan, told Agricensus.

Galvan said the second corn crop – to be planted after the soybean harvest is complete – could face issues with fertilizer availability in case there is a delay in crop sowing.

Although this scenario is unlikely as weather conditions have been favorable to the soybean crop meaning harvest will be on track and the next corn crop could be planted without major delays, it is not something to be easily dismissed.

“This is not something that can be done by all producers,” argued Tortorella.

“Despite higher prices and profitability, it is worth the investment in more expensive inputs,” the executive added.

Galvan also warned that the most worrisome issue is the availability of pesticides for the 2021-2022 soybean harvest, which is about to start.

“There won’t be enough product available for everyone to use before harvesting and at more than 13.4 million hectares it will fall short,” Galvan stated.

According to the country’s food agency Conab, Brazil will sow 40.3 million hectares with soybeans in 2021-2022.

Aprosoja’s president stated that glyphosate and atrazine herbicides prices, which he considers indispensable for grain production in Brazil, have skyrocketed.

“For those who did not buy those inputs early, prices are high and commodity prices are lower, so the soybean crop will have tight margins or even no profit,” Galvan stated.

National Fertilizer Plan

ANDA’s executive director Ricardo Tortorella expects Brazil’s National Fertilizers Plan to be announced in 2022.

The Ministry of Agriculture aims to reduce Brazil’s dependency on imports, as only 15% of the country’s demand – 7 million tonnes – is met by local industries.

“This is not a short-term solution as even in 100 years the country won’t be self-sufficient, but it will make domestic production bigger and better and provide guidance for the sector to develop,” Tortorella stated.

The goal is to reduce foreigner share in this market from about 85% to close to 60% in the next 30 years.

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