Market Talks: Brazil farmers to cut more MOP than N and P

Brazilian producers are likely to cut potash usage in the 2022-23 crop more than phosphates and nitrogen use, amid rising global fertilizer prices and tighter global supply.

The consensus is that deliveries may decrease by around 10-15pc over the 45.8 million metric tonnes delivered in 2021.

Join Camila Dias, Argus Brazil Country Manager, and Renata Cardarelli, reporter for the Argus Brazil Grains and Fertilizer publication. They talk about decreasing fertilizer use during Brazilian 2022-23 crop.

Stay in touch with the fertilizer market; find out more.

Transcript

Camila Dias: Hello and welcome to "Market Talks"- a series of podcasts presented by Argus addressing the events impacting commodities and the energy sector in Brazil and around the world. My name is Camila Dias, Argus Brazil Country Manager. In today's episode, I talk to Renata Cardarelli, reporter for the Argus Brazil Grains and Fertilizer publication, about discussions on decreasing fertilizer use during Brazilian 2022-23 crop. Welcome, Renata.

Renata Cardarelli: Hello, Camila, thank you. It is a pleasure to be here.

CD: Renata, Brazil is highly dependent on fertilizer imports. Considering the situation in Ukraine and the rise in fertilizer prices, what are the perspectives for Brazilian consumption for the 2022-23 crop?

RC: Brazil's fertilizer deliveries to growers and blenders totaled 45.8mn metric tonnes, an increase of 13pc over 2020, according to National Association for Fertilizer Diffusion, Anda, data. Fertilizer imports last year rose by almost 20pc to 39.2mn t, accounting for 85.5pc of total deliveries. Domestic fertilizer production rose by 7.3pc in 2021, but it is still a small part of total deliveries, totaling 6.9mn t. Before the conflict in Ukraine, the estimate was that Brazilian deliveries would reach from 46.5 to 47.5 million tonnes. But since then market participants estimate 2022 deliveries will decrease over 2021. The most pessimist estimates project a 20-25pc decrease. But the consensus is that deliveries may decrease by around 10-15pc to nearly 40 million t.

CD: Previously, you mentioned that before the situation in Russia-Ukraine the estimates pointed to an increase in 2022 fertilizer deliveries. What is the importance of the Russian origin for the Brazilian market?

RC: Russia is a huge fertilizer supplier to Brazil. Around 30pc of the 5.1mn t of phosphate MAP 11-52 Brazil imported in 2021 was delivered from Russia. Regarding granular urea, Russia accounted for nearly 18pc of Brazilian imports of the nitrogen product in 2021. On potash, Russian and Belarusian origins totaled almost 50pc of Brazilian imports in 2021. But with Russia cut off from the global Swift payments system and logistics from the Baltic turning increasingly expensive and uncertain, Brazilian farmers are rethinking their strategies - and cutting potash use is on the list.

CD: Regarding the 10-15pc estimate decrease, is there any nutrient that might be reduced the most?

RC: Actually, there is, Camila, potash usage is likely to be reduced more than phosphates and nitrogen during 2022-23 crop, largely because of its ability to remain in the soil for a prolonged period. Soybean farmers in Mato Grosso state, the main breadbasket state, may reduce around 30pc of their potash application in the 2022-23 soybean crop. The second nutrient that Brazilian farmers are likely to consider reducing is phosphates. In Mato Grosso state, farmers may reduce nearly 25pc of their phosphates application. Market participants say it would be possible to grow up to two seasons with less phosphates than usual with little effect on yields.

CD: Interesting, Renata, can this potash reduction be done in all acreage areas?

RC: Well, to be honest, no, Camila. Farmers are expected to carry out agronomy analyses to calculate the amount of potash available in the soil before making the decision over how much of the nutrient will be used in each area. Alternating crops is a way to optimize potash retention in the soil. To grow soybeans, Brazilian farmers usually need an average of 100kg/hectare of potash. When farmers plant corn and grasses in the same area, the soil produces around 200kg/ha of potash. This means that after a good corn crop, farmers can take advantage of favorable soil conditions and use less potash, while farmers that do not alternate crops will have less margin to reduce the application.

CD: It is very interesting to discuss fertilizer usage decrease in Brazil, considering its soil is poor in nutrients, Renata. Is this discussion in course in Argentina, for instance, which is the second South America's largest farming producer?

RC: You have a good point, Camila. That is interesting, indeed. The Brazilian experience of reducing fertilizer usage is different from its neighbor Argentina. Brazilian soil is historically poor, while Argentinian soil is historically rich in terms of nutrients. But, since we are talking about Argentina, I will take this opportunity to quote one of the greatest cultural Argentinian references, Mercedes Sosa, who used to sing: Todo cambia, which means, everything changes. Throughout the years, Brazilian farmers have used a large amount of fertilizers, while Argentinian farmers usually use around 50pc less fertilizer than the soil actually needs. That means their soils build up fewer reserves of nutrients, suggesting Argentina has less margin to cut its fertilizer imports than Brazil.

CD: We talked about phosphates and potash reduction for the Brazilian market. What about the nitrogen usage?

RC: Nitrogen is not needed to grow soybeans, but usually farmers use around 20kg/ha. For farmers not to use any nitrogen, the fertilizing would have to be done with TSP and SSP, which lack nitrogen nutrients. Farmers' purchasing decisions, though, are made according to market conditions and normally farmers opt to use MAP 11-52, NPs 12-46 or 11-40. Brazil still is in its offseason period regarding nitrogen purchases for the corn crop. Market participants say it will not be possible to reduce the amount of nitrogen used in the corn crop, as granular urea vaporizes and, therefore, the soil does not have any reserve of this nutrient.

CD: Thanks a lot, Renata.

This and other episodes of our podcast are available on the Argus website at www.argusmedia.com. Visit the page to follow the events that affect global commodity markets and understand their developments in Brazil and in Latin America. We'll be back soon with another edition of "Market Talks". See you soon!

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