Companies delay fertilizer sales, prices soar

Brazilian producers are apprehensive about the supply of fertilizers. Since Russia, an important supplier of this input, invaded Ukraine and began to suffer an escalation of sanctions, the market has become unstable. About 85% of the fertilizers consumed in Brazil are imported. With regard to potash, the dependence is 95%, with almost half of that being supplied by Russia and Belarus, a country allied to Vladimir Putin.

An indicator of the turmoil is the coming and going of the so-called price list, which depicts purchases and sales values ​​between the producer, on the one hand, and a distributor or even importer, on the other. When companies suspend the list, there is no way to buy, either in cash or for orders, within periods of up to six months.

In recent weeks, price lists consulted by producers across the country have fluctuated – they were suspended, resubmitted with values ​​considered very high, and are suspended again, in a constant instability that disturbs those who plant.

“With each movement of the war, the price lists go back and forth, with values ​​always high, even with the dollar falling; the market is volatile”, says Décio Teixeira, president of Aprosoja-RS, which also grows wheat since 1970. “How can a country like Brazil, a power in agribusiness, have this international dependence? We are left with the yay, leaving things to do in the future, and the future arrived quickly to demand us.”

What worries me most is the rise in price. According to Argus, one of the largest price agencies in the world, the values ​​of fertilizers have registered significant increases since the beginning of the conflict involving Eastern Europe. At the port, the import price of MAP, a phosphate widely used in Brazil, rose by 35% between February 10 and March 10. In the same period, the price of MAP in the Rondonópolis market, in Mato Grosso, rose by around 30%. Urea, in turn, had an average increase of 50%.

“There is a lot of speculation in the market, and the price is out of reach”, says Alexandre Velho, president of Federarroz, an entity in the sector. “We are advising the producer not to buy at these levels, but, if it doesn’t go down, it will make much of the rice crop in the South unfeasible, and the supply will fall.” The state is the largest national producer of rice, accounting for 70% of the domestic supply.

The same feeling occurs among producers in Mato Grosso do Sul. According to Aprosoja-MS, the price increase compared to the second half of 2021 has already reached 39%.

In an illustrative exercise, the entity calculated expenses with fertilizer in the planting of the off-season corn in this first semester. Considering the price of the input in the second half of 2021, the cost of fertilizer is equivalent to 32 bags per hectare. At the current price level, however, the cost rises to 45 bags.

The projection is that the producer in the state will be able to harvest an average of 78 bags per hectare, so spending on fertilizer now consumes more than half of the crop, which would make production unfeasible on many properties. In detail, in the 2020/2021 crop, fertilizers accounted for 23% of production costs.

According to the organization’s president, André Dobashi, about 20% of the fertilizer in Mato Grosso do Sul comes from Russia. The state needs quick alternatives to plug the hole, as the vast majority of rural producers have not yet closed the purchase of fertilizers for soy cultivation at the end of the year, partly due to prices, but also because there is already a shortage of supply.

The shortage was also identified by producer Renata Salatini, who grows soybeans in Paragominas, Pará. According to her, not even those who accept the high price can guarantee the fertilizer in the future. She is already going to plant the safrinha sorghum with a residue of fertilizer left over from last year, but she has started looking and is unable to place orders for the cultivation of soybeans in the second semester.

“They even make the quotation, but you can’t close the order because in practice sales are suspended”, he says. “Minister Teresa Cristina [da Agricultura] said that we have stock, but did not explain the flow for this stock to reach us.”

The ideal for soybean producers is to have the fertilizer on the farm by August, so the deadline for placing an order is April. Last year, the peak of deliveries occurred even earlier, in July.

Small producers are also being affected. In the green belt that grows vegetables for the metropolitan region of São Paulo, resellers have already alerted producers such as Simone Silotti, president of CAQ (Cooperative Agrícola de Quatinga) and founder of #FaçaumBemINCRível, which organizes food donations for needy communities.

According to Simone, the information is that the stocks are low, the replacement is slow, the price has gone up and there is a risk of shortage. Producer of hydroponic lettuce, which needs almost daily fertilization, she usually has stocks of 45 days, but after what she has heard, she will try to buy enough to keep the culture for 60 days.

Thinking about the limit, there are already producers evaluating domestic alternatives, such as using organic fertilizers, reducing the volume of chemical fertilizers or, in the case of properties with enriched soils for more than ten years, planting without fertilizers. The strategy, however, would be a last resort, as it tends to reduce productivity and demand a greater volume of fertilizers in the subsequent harvest.

According to Anda (National Association for the Diffusion of Fertilizers), companies have stocks for three months of sales, until May, counting what is already in the country. There is an effort by the government to act in the search for alternatives. The Minister of Agriculture, Tereza Cristina, traveled on a diplomatic mission to Canada, the world’s largest producer of potash, to reinforce Brazil’s interest in guaranteeing the input.

So, the instability in supply and prices would not come from the lack of product, but from the uncertain scenario: no one knows when and for how much it will be possible to replace the lack of products from Eastern Europe. Sought to comment on the situation in the sector, Anda did not respond until the conclusion of this text.

“The market is stupefied, waiting,” says former Agriculture Minister Roberto Rodrigues. “There is no guarantee of transport in the war region, and if you manage to remove the fertilizer, you don’t know how to finalize the payment.” He recalls that the fertilizer market has been suffering since the beginning of the pandemic, when there was a break in the maritime logistics chain. War is a second blow.

“In the last two years, during the pandemic, the price has gone up almost 250%”, says Marcos Jank, professor of Global Agribusiness at Insper. “We are receiving fertilizers at the ports, normalization is a matter of time, but the cost of production has already increased.”

The list of products whose planting depends on more expensive fertilizers in the second half of the year includes essential items for agribusiness exports, for the national economy and for Brazilian dishes: soy, rice, beans and part of the corn, raw material also for chicken and swine feed. Jank recalls that there are also perennial crops, which also require periodic fertilization, such as coffee and oranges.​

Agronomist Xico Graziano, who has held several public positions linked to agriculture and the environment, recalls that the fertilizer market is private. “Companies are the ones who buy and sell fertilizers, and they are the ones who are going to reorganize the global supply,” he says. “But the price of the product goes up, and we will have more expensive food.”

The financial market is already counting the effects of the war on basic foodstuffs, not only because of the issue of input, but also because of the risk of a shortage in the supply of some of them. Russia and Ukraine are important wheat and maize producers. On the Chicago Stock Exchange, the raw material of bread and pasta, for example, has already accumulated a high of 42% this year.

collaborated Clayton Castelani