March 8, 2011

2010 Agricultural Chemical Sales Set New Record in Brazil

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

Lost in the news about a record soybean production in Brazil is the fact that agricultural chemical sales have also had a banner year in Brazil for the 2010/11 growing season. In 2010, the agricultural chemical sector in Brazil had its best year ever due to a variety of factors including: the decline in the dollar compared to the Brazilian currency, the rise in commodity prices, and the increase in planted acreage especially cotton. Total agricultural chemical sales in Brazil in 2010 increased 9% to US$ 7.2 billion.

The United States and Brazil have been trading places in recent years as the number one country for agricultural chemical sales, but once Brazil resumes the lead, it's going to hold onto it moving forward for several reasons. First of all, Brazil has the available land resources to continue expanding production and secondly, tropical agriculture generally requires more chemical applications than does temperate agriculture. Brazilian soybean fields for example routinely receive several insecticide and fungicide applications during the course of a growing season, which is much more than what is applied to U.S. soybean fields. Brazilian farmers can also plant more than one crop per year which also increases chemical use.

Once the U.S. slips from the top spot, it's not going to regain it because future agricultural expansion in the U.S. is going to be limited by the unavailability of additional land resources. In the U.S., a couple tens of millions of acres could come out of the Conservation Reserve Program in future years, but Brazil has hundreds of millions of acres that could be put into row crop production in future years.

Probably the biggest factor in increased sales in 2010 was the increasing value of the Brazilian currency compared to the U.S. In early 2010, the Brazilian real was trading in the range of 1.8 per dollar and by late 2010; it had increased to 1.65 per dollar. As it got stronger, imported chemicals got cheaper. According to research conducted by the Sao Paulo Institute of Agriculture, 98.4% of the chemical products they looked at have gotten cheaper over the last 12 months.

Prices have also declined in Brazil due to the introduction of generic products and increased competition in the agricultural chemical sector. Today there are 129 companies selling agricultural chemicals in Brazil, which is double the number of just five years ago.