Nov 05, 2009
Fertilizer Sales In Brazil Down In 2009
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The Brazilian National Fertilization Association (Associacao Nacional para a Difusao de Abudos - Anda) reported earlier this week that the amount of fertilizers delivered to farmers during the first nine months of 2009 (January through September) fell 11.3% compared to the same period last year. In 2009, 16.16 million tons of fertilizers were delivered compared to 18.23 million tons delivered in 2008. The year isn't over yet, but no new orders are being taken for November or December deliveries.
The fertilizer companies carried over record supplies of products into 2009 (estimated at seven million tons) due to reduced demand last fall. Brazilian farmers were planting their 2008-09 crops at the same time the world's economies were in a steep downturn and as a result, they had to cut back on their fertilizer purchases. Deliveries during August and September of this year were encouraging (up approximately 25% compared to last year), but deliveries are expected to fall during the final quarter of 2009. Therefore, fertilizer deliveries for 2009 are probably going to end up disappointing compared to 2008.
Of the major agricultural states, Sao Paulo registered the largest decline in fertilizer deliveries of 16.7% due to weak demand from orange and coffee growers. In Mato Grosso, where the credit restrictions were the greatest, fertilizer delivers fell 13%. In the state of Parana, they fell 12.3% and 8.9% in Goias.
The reduced demand for fertilizers in central Brazil (Mato Grosso and Goias) could be due to several factors such as restricted credit and a slowed expansion of row crop production into new lands. For the last two years, farmers in central Brazil have been scrambling trying to secure enough credit to plant their crops. Their efforts were made more difficult by the credit crunch and record high fertilizer prices. Fertilizer prices have eased and credit is a little more available, but the damage had been done. Brazilian farmers applied fewer fertilizers to both their 2008-09 and 2009-10 crops.
The reduced fertilizer purchases could also be due to a slowed expansion of row crop production into new lands in central Brazil. During the 2000s, the amount of land being cleared for new row crop production has been greatly reduced compared to the decades of the 1990s or even the 1980s. The reduced expansion was due to lower soybean prices, a strengthening Brazilian currency, reduced credit, high interest rates, and high fertilizer prices.
When commodity prices are low, credit is tight and fertilizer prices are high, there is very little incentive to spend the time and money needed to bring new lands into production. It takes additional resources on the part of the farmer to clear the land and to apply the agricultural limestone and fertilizers needed to grow soybeans for example. Additionally, it usually takes a few years to build up the fertility in the soil for optimum soybean production. Therefore, the yields are less than optimum for the first couple of years of new soybean production.
It remains to be seen if farmers in central Brazil will resume clearing huge tracks of new land for additional soybean production or if future production increases come from improved yields or conversion of pastures to soybeans.