Brazil Fertilizer Imports Surge to Record as Prices Ease

Brazilian fertilizer imports are surging to record levels as farmers take advantage of lower prices and the biggest gain among emerging-market currencies to boost their crop-nutrient stocks ahead of soybean planting.

In the first five months of the year, ships unloaded about 8.8 million metric tons of the nitrogen-, phosphorous- and potassium-based compounds used to nourish plants, up 10 percent from a year earlier, according to calculations based on preliminary monthly data from the Secretariat of Foreign Trade, or Secex. In monetary terms, imports fell 16 percent to $2.9 billion as prices slid 23 percent to $324 a ton on average.

Brazil, which imports about two-thirds of its fertilizer needs, is benefiting from lower international prices following supply increases in the U.S., Morocco, China and Russia, while strong demand keeps soybean prices high, said Lair Hanzen, who heads the Brazilian unit of Oslo-based Yara International ASA (YAR), which sells about 25 percent of fertilizers used in Brazil.

“Terms of trade improved,” Hanzen said by telephone from Porto Alegre, Brazil. “Farmers are spending less bags of soybean to buy the same amount of fertilizer, so they are anticipating the purchases to hedge their cost of production.”

After tumbling 13 percent against the dollar last year, the Brazilian real is the best performer among major emerging-market currencies this year, gaining 4.4 percent.

Local currency strength combined with the global price outlook is encouraging more Brazilian soybean growers to tap the fertilizer market early, Agriculture Minister Neri Geller said in an interview this week.

Soybean Driven

On average, farmers are spending less than 20 bags of 60 kilos of soybeans per ton of fertilizer, below the 22 bags seen in the previous years, according to Hanzen.

The soybean industry, which accounts for about a third of fertilizers used in Brazil, is leading sales growth this year, said David Roquetti Filho, head of Brazilian fertilizer distributors group Anda.

Brazilian farmers are expected to expand the area sown with soybeans by at least 4 percent in the planting season that starts in September to a record 31.2 million hectares (77 million acres), Andre Pessoa, head of crop forecaster Agroconsult, said in an event in Sao Paulo last month.

“Growers are really investing because they have funds from sales,” Minister Geller said. “We will harvest more that 200 million tons of grains next crop season from 194 million this season, and most of the growth will come from soybean.”.

Price Surge

Soybean for delivery in March, when Brazilian farmers will harvest the next crop, rose 6.8 percent in Chicago this year after a drought in southern Brazil and excess rain in center-western Mato Grosso state curbed the 2014 harvest. Record-low U.S. inventories also helped drive up prices.

Prices of nitrogen, phosphorous and potassium compounds used as fertilizers, known as NPK, fell 8.5 percent over the last 12 months in North America.

Nitrogen prices are being pressured by greater export supply from China and new plants in the U.S. while phosphates face growing supply from the Saudi Arabian Mining Co. plant in Saudi Arabi, said Jason Miner, a chemicals analyst at Bloomberg Industries.

Corn prices, which tumbled 18 percent in the past year, also helped curb fertilizer prices on the demand side. “U.S. corn is a heavy user of higher-margin fertilizer products”, Miner said by e-mail.

Corn futures traded near the lowest since February in Chicago today while soybeans for delivery in November were little changed at $12.115 a bushel.

To contact the reporters on this story: Gerson Freitas Jr. in São Paulo at gfreitasjr@bloomberg.net; Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Keith Gosman

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