August 28, 2013

Fertilizers Remain Affordable in Brazil in Spite of Weaker Real

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

The Brazilian currency has weakened 17% compared to the dollar since early May, which is generally good for Brazilian farmers because that is the same as a price increase when they sell their commodities, but the down side of a devalued currency is that imported fertilizers become more expensive. Brazil imports approximately 70% of its fertilizer needs and it consumes 6% of the world's fertilizer placing it fourth behind China at 33%, India at 17%, and the United States at 12%.

During the period from January to July this year, fertilizer sales in Brazil have totaled 15.1 million tons, which is a 5.5% increase over the same period last year. Total fertilizer sales in Brazil for 2013 are expected to set a new record at 30.5 million tons.

Many farmers in Brazil purchase their fertilizers by committing some of their anticipated soybean production in exchange for their needed fertilizer. According to the Brazilian National Fertilizer Association (Anda), earlier this year when soybean prices were lower, it took 20 sacks of soybeans (17.4 bushels) to purchase a ton of fertilizers. Now that soybean prices have strengthened, it takes an average of 17 sacks (14.8 bushels) to purchase a ton of fertilizer, even though the Brazilian currency is now weaker.

If you factor in the price of fertilizer, the price of soybeans, and the value of the Brazilian currency, fertilizer for Brazilian farmers is now a little more affordable than it was several months ago.

The fertilizer market is in flux especially for potassium since the breakup of the joint venture earlier this year between two of the largest producers. After the breakup, it was expected that potassium prices would decline significantly, but they have only fallen modestly and have now stabilized. Brazil imports 90% of its potassium needs, but much of it had already been purchased earlier in the year before the breakup of the joint venture and the weakening of the currency.