May 18, 2012

Congestion at Brazil Ports Resulting in Delays in Fertilizer Imports

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

Fertilizer sales in Brazil for the 2012/13 growing season are expected to set a new record surpassing the old record of 28.3 million tons set just last year. Since most of the fertilizers utilized in Brazil are imported and the increased demand for fertilizers is resulting in long lines of vessels waiting to unload at the Port of Paranagua, which handles 40% of Brazil'Mos fertilizer imports.

Currently there are approximately 45 vessels anchored in the bay at Paranagua and 18 of those vessels are waiting to unload fertilizers. Some of the vessels have already been waiting for three weeks and the wait time is expected to be even longer with the peak of the fertilizer imports over the next few months. Each day a vessel waits to unload it costs the owner of the vessel about US$ 30,000 in demurrage charges. These costs are eventually passed on to Brazilian farmers in the form of higher fertilizer costs which have risen 15% in just the past two months.

According to the National Association of Fertilizer Distributors (Anda), there are distributors in the interior of Brazil that have been out of the two most popular fertilizer blends, MAP and super-triple, for the last several months. The raw materials to make the blends are either waiting to be unloaded at the port or it will be arriving at the port over the next few months. Some distributors feel they will not be able to deliver fertilizer to their customers until sometime in August, provided there are no additional delays.

A big part of the problem at the port is the increased volume of soybean exports, which is highlighting the chronic under capacity of the port. Due to the strong demand for soybeans thus far in 2012, the soybean shipments out of the Port of Paranagua are running 70% above that of a year ago. The total Brazilian soybean crop is approximately 10 million tons smaller than last year, but much of the exports have been front-loaded, resulting in increased congestion at the port. Unfortunately, the port has not been able to increase its capacity to keep abreast of the increased demand for grain exports and fertilizer imports.

Several years ago, the Brazilian government embarked on a program to become self-sufficient in fertilizer production by the year 2020, but strong commodity prices are encouraging Brazilian farmers to increase their grain production at a much faster pace than what was expected. As each year passes, it seems less likely the government will achieve its goal.