October 6, 2011
Fertilizer Prices Spike in Brazil Caused by Weaker Currency
While the recent weakening of the Brazilian currency in relationship to the U.S. dollar is good news for farmers when they sell their crops, its bad news for them when they want to purchase imported items such as fertilizers. Approximately 60% of the fertilizers utilized in Brazil are imported and the price of imported goods has spiked as the Brazilian currency has weakened. In the state of Parana, the price of some fertilizers has increased 20% just in the last two weeks. The price of urea in Parana went from R$ 950 per ton two weeks ago to R$ 1,200 per ton. For farmers who put off purchasing their fertilizers, these price increases could significantly reduce the profitability for their 2011/12 crops.
Fortunately for Brazilian farmers, most of their fertilizers were purchased before the recent price increases. According the National Association of Fertilizer Distributors (Anda), during the first eight months of 2011 (January through August) farmers in Parana purchased 2.38 million tons of fertilizers, which was 26% more than the 1.89 million tons purchased during the same period in 2010. Producers in Parana purchase approximately 14% of all the fertilizers in Brazil.
For all of Brazil, 17.05 million tons of fertilizers were purchased during the first eight months of 2011 compared to 13.5 million in 2010 or an increase of 25%. The total amount of fertilizers purchased by Brazilian farmers in 2011 is expected to be in the range of 26.0 to 26.5 million tons compared to 24.5 million tons purchased in 2010.
The sudden weakening of the Brazilian currency means that the price of fertilizers may continue to increase and that could negatively impact future fertilizer purchases in the country.
Farmers in Brazil have not been as aggressive in forward purchasing their chemical needs for the 2011/12 growing season (herbicides, insecticides, fungicides). Chemical costs are expected to increase 8% to 10% in the coming days.