Brazilian farmers are, in the face of concerns of a squeeze on supplies of inputs, prioritising forward purchases of potash and agrichemicals over those of phosphate and nitrogen fertilizers, to judge by the strategy of two of the country’s largest operators.
SLC Agricola – which boasted plantings of 672,000 hectares for this season, following the takeover of Terra Santa Agro – said that it had bought 83% of its potash fertilizer needs for 2022-23, and 70% of its pesticides.
This was ahead of the 49% of phosphate needs purchased, and the zero coverage of nitrogen – which with phosphate and potash is one of the big three nutrients.
“Nitrogen has not been purchased yet,” SLC Agricola said.
‘Everything has been negotiated’
Separately, BrasilAgro, which planted 170,000 hectares for 2021-22, said that it had also bought forward all of its potash requirements for 2022-23 – and all of its agrichemical requirements too.
“Regarding the chemicals needed for the 2022-23 harvest year, everything has been negotiated and settled in terms of prices with the producers,” the Sao Paulo-based group said.
However, “phosphate and nitrogen have not yet been purchased.”
The comments come amid widespread concerns over whether Brazil, the world’s biggest fertilizer importer, will have sufficient nutrients to support its extensive agricultural sector, the top exporter of the likes of coffee, soybeans and sugar.
The country, which relies on imports for 85% of its fertilizer needs, has been left scrambling for supplies thanks to the disruption caused by the Ukraine war, and the sanctions it has brought to key potash exporters Belarus and Russia, as well the threat posed by high gas prices to nitrogen output.
Israel-based fertilizer group ICL on Wednesday said that “there’s over 2m tonnes of potash missing for Brazil”, adding that the South American country “has to have the potash because the type of land that is there in Brazil, demands potash that they can’t skip a season”.
Prices vs availability
However, with the former Soviet Union a lesser force in exports of phosphates than potash, and ideas of a ramp-up in nitrogen output in areas with lower-cost gas, such as North America, some investors are less concerned over nitrogen and phosphate supplies.
BrasilAgro said that its “concern with nitrogen is regarding prices and not availability”.
SLC said that nitrogen “will be needed only towards the end of the second half of 2022”.
The groups also said that, in view of the forward purchases of nutrients, they had made significant forward crop sales, to lock-in revenues as well as costs and so fix margins.
SLC Agricola had hedged 49.4% of its expected 2022-23 corn output, compared with a comparable figure of 36.2% a year before.
BrasilAgro had sold 19.0% of its 2022-23 cotton production, up from a comparable figure of 4.0% a year before, and 10.0% of corn, up from 4.0%.
The company said its “expectation is that the increase in input prices should be offset by the rise in commodity prices, with margins above the historical average”.