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April 19, 2012

Brazil Cooperatives Joining Together to Reduce Fertilizer Costs

Grain producers in Brazil do not like the fact that the vast majority of their fertilizer needs must be imported and that they are at the mercy of the volatile international fertilizer market. The Brazilian government has committed to becoming self-sufficient in fertilizer production by the year 2020, but that is still many years away. In the meantime, as a way to partially compensate for the high cost of imported fertilizers, a group of agricultural cooperatives in the state of Parana have banded together in order to purchase the fertilizer needs of their members at a cheaper price.

A group of 21 cooperatives from the state of Parana joined together in 2009 under the name of Conagro to jointly purchase and distribute fertilizers. Four of the original members have withdrawn from the venture leaving 17 cooperatives.

The remaining members have recently announced that they are going to invest R$ 22 million in the construction of a fertilizer warehouse at the Port of Paranagua with the capacity to store 150,000 tons of fertilizers. They are also going to invest R$ 2 million to acquire a machine capable of mixing the imported raw ingredients at the warehouse. The entire operation is expected to be up and running for the 2013/14 growing season. Not only will Conagro be able to offer lower prices for fertilizers due to economies of scale, they will also be able to purchase and store the fertilizers during the off-season when prices are lower.

In 2011, Conagro handled 110,000 tons of fertilizers or approximately 10% of the 1.2 million tons of fertilizers used by the 17 member cooperatives. The long term goal of the organization is to be able to supply 50% of its members'M fertilizer needs. In addition to fertilizers, Conagro has plans to expand into machinery, tires, and other agricultural inputs needed by its members.

They chose the Port of Paranagua for their new warehouse because the port handles the largest volume of imported fertilizers. The port is continually plagued by chronic congestion problems due to the tremendous amount of trucks bring grain to the port and back-hauling fertilizers to the interior of Brazil. The largest grain producing state in Brazil and the state that uses the most fertilizers is Mato Grosso, yet it is located the furthest from the port resulting in extremely high transportation costs both for the movement of grain to the export markets and the importation of inputs such as fertilizers.

The member cooperatives of Conagro include: Agraria, Batavo, Bon Jesus, C. Vale, Capal, Castrolanda, Cocari, Codepa, Cofercatu, Coopagricola, Cooperval, Copacol, Copagril, Lar, Nova Produtiva, and Unicastro. Conagro officials stated that they are receptive to new members and the cooperatives that withdrew from the organization are welcomed to return.