Dec 22, 2009
Fertilizer Dealers In South America Hoping For A Better Year In 2010
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Farmers and fertilizer dealers in Brazil both agree that 2009 has been a difficult year. For the farmers, 2009 started with very high fertilizer prices, which fell substantially as the 2009-10 planting season approached. For the farmers who booked and paid for their fertilizers early in the year fearing a shortage of fertilizers and even higher prices, it turned out to be the wrong decision because prices fell substantially later in the year. For those farmers who waited for the last minute to purchase their fertilizers, they were able to secure their supplies at substantial discounts.
As the year comes to an end, the Brazilian National Fertilizer Dealers Association reported that fertilizer sales volume for the year were nearly equal to 2008, but total receipts were down 31% or about US$ 3 billion. Fertilizer dealers were caught in the same dilemma as the farmers, they imported their products at inflated prices and they sold their products at deflated prices.
Fertilizer dealers are looking forward to a better year in 2010. Soybeans, corn, and sugarcane account for 67% of the fertilizers used in Brazil. Sugar and ethanol prices are very strong and it is anticipated that sugarcane expansion will continue in 2010. Soybean prices are relatively good and baring a collapse of the soybean market, soybean acreage is expected to continue expanding in 2010. The corn situation is a little more problematic. Brazilian farmers cut back on their corn acreage in 2009-10 because of low domestic prices caused by weak exports and burdensome carryover supplies. Once the excess supplies are worked down, it is hoped that Brazilian corn acreage will expand in 2010, but its not guaranteed.
While the volume of fertilizer sales may increase in 2010, the total receipts will be dependant on the prices of imported fertilizers and the currency exchange rates. Brazil imports 70% of its ammonia and urea as well as 91% of its potassium needs and the prices of these products is dependant on the exchange rates between the Brazilian real and the U.S. dollar. The real has appreciated in value approximately 30% since the beginning of 2009, but the trend has started to reverse itself slightly in recent days.
Argentina
Fertilizer sales receipts in Argentina also fell significantly in 2009. Total receipts fell 75% between January and October 2009 compared to the same period in 2008. The biggest decline was in the use of nitrogen fertilizers, which fell 57% during the first 10 months of 2009. Nitrogen usage in Argentina declined for various reasons. First of all, the 2009 Argentine wheat acreage fell approximately 40% compared to 2008. Less wheat required less fertilizer usage. Additionally, Argentina farmers cut back on the 2009-10 corn and sunflowers acreage. Corn is the biggest user of nitrogen fertilizers and with reduced corn acreage; there was less need for nitrogen fertilizers. The only crop in Argentina that increased in acreage in 2009-10 was soybeans and soybeans require much less fertilizers and no nitrogen. The Argentine crops were also suffering from a severe drought for most of 2009 and as a result, the farmers were very cautious in their expenditures.