South America Calling

The latest figures indicate Brazil will plant the same or slightly more soybeans and corn in 2015-16, despite depressed international prices.

But analysts believe the application of fertilizer will drop for the first time in six years as farmers strive to cut costs.

Fertilizer sales in the first four months of 2015 were 8.7% down on last year, according to the Brazilian Fertilizer Distributors Association (ANDA).

Sales are expected to pick up in the third quarter but won't offset the poor first-half performance. A rough consensus among analysts pegs sales to fall around 5% in 2015.

"Farmers will buy less fertilizers this year. That could mean crops are more susceptible to dry weather," said Fernando Muraro, grains analyst at the AgRural farm consultancy.

The level of exposure depends on how sophisticated farmers have really become with precision farming, the analyst noted.

After four years of good returns and heavy fertilization, many producers will feel they can get away with one year of light NPK application.

Growers have chosen to delay fertilizer purchases this season, reversing the trend in recent years, as imported fertilizer prices surged following a weakening of the Brazilian real. Uncertainty over the availability of credit has also played a part.

The Brazilian real has fallen 30% against the dollar since September, while austerity measures caused average fertilizer prices to rise to their highest average level since 2008-09, according to Rabobank analysis. As a result, fertilizer imports were 20% down, year-on-year, in the first four months of the year.

Meanwhile, banks are restricting available farm credit amid sluggish economic growth and government austerity measures.

Overall, fertilizer representatives estimate that farmers have bought just 40% of necessary inputs compared with 60% in recent years. Soy accounts for approximately 40% of demand.

However, producers will have to buy those imported fertilizers between June and September, which will put strain on port capacity, warns INTL FCStone, an ag consultancy.

Brazil will have to import around 10 and 11.8 million metric tons of fertilizer between June and September to satisfy demand, which is very close to total import capacity, the consultancy says.

"If we consider that stock, production and import capacity aren't distributed in the same way as demand, there is a big chance that some regions will encounter difficulties in obtaining products in time," said Natalia Orlovicin, an INTL FCStone analyst.

The bottleneck will also inevitably lead to a surge in fertilizer prices in the second half of the year, unwelcome news at a time when margins are so tight.

Alastair Stewart can be reached at Alastair.stewart@dtn.com

(ES)

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