point: Southern Cone ferts activity remain muted

Import activity in the Southern Cone's fertilizer market is set to be minimal in early 2024, extending the trend of late 2023, as political uncertainty and alarming climate conditions hamper crop development.

Activityfor the 2023-24 crop cycle has been reduced in Argentina, where January-November granular urea imports totaled nearly 732,500 metric tonnes (t), a 16pc drop from a year earlier, while MAP imports were down by 6pc to 725,500t.

Political and economic issues snarled import activity in Argentina, amid ongoing problems with the country's import system SIRA, such as difficulties accessing US dollars and, consequently, in paying suppliers amid a balance of payments crisis marked by surging inflation and sharp depreciation of the Argentinian currency. Imports were also further reduced because the country went through a presidential election period this year. In the weeks before and after primaries on 13 August and during the electoral period from 22 October to 19 November, market activity was scarce amid political uncertainty. President Javier Milei, a libertarian bent on reducing bureaucracy, took office on 10 December, but fertilizer activity may only intensify once there is more clarity on agricultural and economic reforms, according to market participants who operate in Argentina. Milei this week signed a resolution eliminating the SIRA and replacing it with a new import system, changes that took effect on 27 December.

In this context, Argentina commanded a higher-than-typical premium over Brazil this year. MAP/DAP prices usually have a $10-20/t premium in Argentina relative to Brazil, but this year the average premium reached nearly $30/t.

Fertilizer deliveries in the Argentinian market totaled 2.4mn t in the first half of 2023, according to the country's civil fertilizer association Fertilizar. Nitrogen-based fertilizers accounted for nearly 61pc of deliveries, followed by 32pc for phosphate-based deliveries. That compares with 2.7mn t delivered in the same period a year earlier and with 3.3mn t delivered in the first half of 2021. Nitrogen and phosphates also accounted for most of the volumes in 2022, respectively, with 58pc and 34pc, Fertilizar data show. Argentinian soil is rich in potash and the country buys higher volumes of nitrogen and phosphates.

Argentina is expected to have reduced fertilizer usage in 2023 - because of the country's ongoing balance of payments crisis - despite the expected increase in its 2023-24 production. The country is among the main global exporters of corn, soybeans and wheat. Corn production in Argentina is projected at 55mn t in the 2023-24 crop, compared with 34mn t in the previous cycle, according to the US Department of Agriculture (USDA).

In the third quarter of 2023, farmers in Argentina could opt to substitute soybeans for corn at the last minute in the 2023-24 crop, as soybeans' cost of production is lower than corn, according to market participants. Soybean planted area is estimated at 17.3mn hectares (ha), after the Buenos Aires Grain Exchange (Bage) increased the acreage by 200,000ha in its latest outlook in November at the expense of corn. Bage lowered expected corn planted area by 200,000ha to 7.1mn ha.

Soybean output should increase to 48mn t in 2023-24 from 25mn t in the previous crop, according to USDA. As for wheat, output is expected to reach 15mn t from nearly 13mn t in the 2022-23 crop.

El Nino hampers activity in Paraguay

The pace of fertilizer purchases advanced between September-December in Paraguay, but farmers are still weighing whether they will plant soybean or corn for the winter crop.

The El Nino weather phenomenon caused a drought and delayed soybean planting in Paraguay, which started in September. There were areas that needed to be replanted and around 10pc of the oilseed crop has yet to be planted, according to market participants' estimates.

Fertilizer deals for corn were expected to intensify in the fourth quarter of the year in Paraguay. Local market participants estimated in mid-September that around 65pc of nitrogen needs had been fulfilled to grow corn, planting of which usually starts in February. In mid-December, around 80pc of fertilizer needs had been fulfilled. Paraguayan inquiries for ammonium sulphate (AS) intensified in the fourth quarter, but market participants that operate in the country report that offers for new loads were scarce. AS imports were up by 1pc to 120,200t in January-November from a year earlier, but activity in the domestic market remains slow, with farmers postponing purchases.

Uncertainty over planting corn in its ideal window gives extra support to farmers to postpone purchases for the 2023-24 corn crop and the 2024-25 soybean crop, which will be planted in late January-February and October, respectively. Farmers in Paraguay have bought less than 5pc of their fertilizerneeds for the 2024-25 soybean crop, compared with a historical average of 20pc-30pc for December.

By Renata Cardarelli

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