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August 30, 2016

Timing of Input Purchases Critical for Brazilian Farmers

While most Brazilian farmers are busy preparing for the 2016/17 growing season, a few farmers in southern Brazil have already started to plant their 2016/17 full-season corn crop. Many farmers though are still deciding when is the right time to purchase their inputs.

According to the National Association of Fertilizer Distributors (Anda), fertilizer sales in Brazil from January through July of this year registered 16.5 million tons or 10% more than during the same period in 2015. If Brazilian farmers purchased their fertilizers during July, they probably paid about 14% more than during July of 2015. If they waited to purchase their fertilizer during the month of August, it turned out to be a wise decision because fertilizer prices in western Parana for example declined about 10% during August.

Seed sales in western Parana are estimated at 85% of last year's level and chemical sales are estimated at 60% of last year. Many farmers in the state have indicated that they may wait to make additional purchases until it is closer to when the product is needed in the hope that prices will decline.

Brazilian farmers generally don't have the luxury to wait to purchase their fertilizers due to the bulk nature of the product. Most of Brazil's fertilizers are imported and there is a time lag between when the product arrives at the ports and when it can be delivered to farmers in the interior of the country, so farmers must order and pay for the fertilizers well in advance of when it is needed. Chemicals and seed on the other hand, can be purchased closer to when they are needed due to lower logistical requirements.

In fact, there have been recent reports of a lack of trucks to transport fertilizers to the center-west region of Brazil. Normally at this time of the year, trucks carry corn from the interior of Brazil to the ports and then they back-haul fertilizers. The problem this year has been fewer trucks carrying corn due to the very low corn production caused by the hot and dry weather last growing season. The fertilizer company Heringer is reporting that freight rates to haul fertilizer in Brazil are 15% to 20% higher this year due to a shortage of trucks.

During the January through July period, farmers in Mato Grosso purchased the most fertilizers at 3.68 million tons followed by Parana at 2.28 million, Sao Paulo at 1.83 million, Rio Grande do Sul at 1.68 million, and Goias at 1.64 million.