January 3, 2011

Brazilian Farmers Could Set Record for Fertilizer Consumption in 2011

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

Farmers in Brazil are expecting to see fertilizer prices follow grain prices higher in 2011. Strong grain prices are incentives for Brazilian farmers to increase their grain production and as a result, also increase their fertilizer consumption as well. According to the National Fertilizer Distribution Association of Brazil (Anda), the Brazilian consumption of fertilizers rose approximately 8.9% in 2010 compared to 2009 to 24.5 million tons. Fertilizer consumption in Brazil is expected to hit a new record in 2011 surpassing the old record of 25 million tons set three years ago.

The increased demand for fertilizers could cause problems at the ports since approximately 70% of the NPK used in Brazil is imported. The two ports that handle most of Brazil's imported fertilizers are the Port of Santos in the state of Sao Paulo and the Port of Paranagua in the state of Parana. Unfortunately, capacity increases at the ports have not kept pace with the increased demand for fertilizers in Brazil. Complicating the situation even more is the fact that the soybean harvest in Brazil is going to be more concentrated than normal due to the delayed start of planting. More grain and more fertilizers trying to move through the same ports could result in bottlenecks and congestion at these two ports in 2011.

The Port of Paranagua handles approximately 45% of Brazil's imported fertilizers. From this port, the fertilizers are transported to the states of Parana, Mato Grosso, Mato Grosso do Sul, Goias, Sao Paulo, and Minas Gerais. Jose Carlos de Godoi, president of the Syndicate of Fertilizer Industries of the state of Parana (Sindiadubos) stated that the problem is not poor efficiency at the port, but that the port is just too small to handle the volume of imports and exports expected in 2011.

Farmers are already starting to purchase their fertilizer needs for the next safrinha corn crop which they will start planted later in January and the winter wheat crop which will be planted in May.

The Brazilian government has set of goal of being self sufficient in fertilizer production within ten years, but it will take many years to develop new mineral resources and to build nitrogen fertilizer plants. In the mean time, Brazilian farmers will be subject to higher prices for their fertilizers and high freight costs due to inadequate infrastructure.