August 24, 2012

Increased Fertilizer Prices Drive up Costs for Brazilian Farmers

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazilian farmers who have delayed purchasing their 2012/13 fertilizer needs will be forced to pay higher prices for their fertilizers if they are even able to find fertilizers to buy. Fertilizer prices in the state of Goias for example have already risen 14% during the first half of 2012 and they are expected to rise even further before the planting is complete. Early full-season corn planting is expected to start in September followed by soybeans and then the second crop of corn in early 2013.

Fertilizer prices in Brazil are being driven up not only by increased demand due to increased acreage, but also due to congestion at the Port of Paranagua, which is the main entry point for most of Brazil's imported fertilizers. Currently, there are approximately 150 vessels waiting to berth at Brazil's southern ports and about one third of those vessels contain imported fertilizers. Collectively, it is costing approximately R$ 12 million per day in extra fees for those vessels to wait 35-40 days to unload. These extra costs must be passed on to the end consumer, which of course is the Brazilian farmer.

According to the Agriculture and Livestock Federation of Goias, fertilizers already account for about 25% of the total agricultural production costs and it is expected to be even higher in 2012/13.

The president of the Brazilian Soybean Producers Association has requested that the Brazilian Minister of Agriculture intervene at the Port of Paranagua to increase the pace of fertilizer unloading. The port is operated by the state of Parana and it is unclear what the Minister could do to help resolve the situation. Brazil imports 70% of its fertilizer needs and delays at the port could result in the fertilizer not arriving in the countryside in time for planting the 2012/13 crop.

Port officials blame the delays on a number of factors including: increased exports of soybeans and corn, strikes by custom officials, and work slowdowns by federal sanitary inspectors. These labor issues at the port are part of a larger labor action including all federal workers in Brazil including university professors, federal police, and many other agencies. Additionally, the port is just not large enough to accommodate the increased demand for the export of agricultural commodities such as soybeans, corn, and sugar and the imports of fertilizers and containers.