Brazil’s coffee and corn farmers have led cutbacks in Brazilian fertilizer purchased, data from Fertilizantes Heringer signalled, as producers adjust strategies in the face of soaring prices.

The nutrient distributor reported a “major” 20% tumble to 301,000 tonnes in its fertilizer deliveries in the January-to-March quarter, even as volumes to soybean producers showed a small rise, and those to sugar cane growers soared by 27% to 42,000 tonnes.

Indeed, the dip reflected a 30% slump to 76,000 tonnes in volumes bought by corn producers, and a 24% fall to 81,000 tonnes in deliveries to coffee growers.

These decline were evident too in Fertilizantes Heringer’s geographical sales breakdown, which showed a plunge of “towards 38%” in sales in Minas Gerais, the south eastern Brazilian state which is the country’s top producer of arabica coffee and of first-crop corn.

Minas cutback

The decline in deliveries “was even bigger mainly in the regions where we have a higher share – Minas Gerais, Espirito Santo and the south east in general”, said Lleven Cooreman, the Fertilizantes Heringer chief executive. Espirito Santo is Brazil’s top state for robusta coffee production.

The group reported that data from Brazilian fertilizer industry association Anda show a 34% dip year on year in Minas Gerais volumes for the January-to-March period.

Publicly available Anda data show an 11.0% decline to 5.73m tonnes in industry fertilizer deliveries in January and February, as prices soared, thanks largely to rocketing costs of the natural gas important in particular to nitrogen manufacturers.

The squeeze on former Soviet Union fertilizer exports since Russia in late February invaded Ukraine, provoking a raft of Western sanctions, has also supported global prices.

Soaring fertilizers values allowed Heringer to lift its revenues by 66% year on year in the quarter, to R$1.10bn, despite the 20% dip in volumes – implying a doubling in its average price.

Nonetheless, the group’s operating profit fell by 19.8% to R$77.84m, reflecting higher nutrient buy-in costs, as well as increased freight charges.

Prices vs availability

The transformation of the world fertilizer market has been particularly important for Brazil’s farm sector which, while the top exporter of agricultural commodities such as coffee, soybeans and sugar, requires hefty fertilizer imports – not least thanks to weak levels of soil nutrients.

For Brazil, “it’s not the same as countries like Argentina and the United States or even Russia and the Ukraine, where the soil is so fertile and this gives them the ability to save on fertilizer,” said Aurelio Pavinato, chief executive of SLC Agricola, one of the country’s top crop producers, which last week offered insight into its input buying strategy.

He underlined the rise in fertilizer prices, saying that “we used to have a level of $300-400 per tonne,” although post-pandemic “with high demand and shrinking supply, those prices doubled to $700-800.

“Now with the war in Ukraine, prices have increased by threefold [to] $1,000, $1,200.”

He added that in Brazil “fertilizer supply won’t be a problem this year”, with reports of shipments continuing to the South American country even from Russia. “The problem is the prices fertilizer is fetching.”

‘This year we have a war’

André Guillaumon, chief executive of BrasilAgro, another large Brazilian farm operator, said last week – explaining a strategy of delaying nitrogen and phosphate purchases – that fertilizer prices often declined in the second half of the year.

This cycle reflected in part the passing of the spring peak for northern hemisphere applications. “Farmers in the US, they plant in March, April until middle of May,” he said.

Furthermore, “you have more natural gas” in the northern hemisphere summer, compared with the winter when more energy is required for heating.

However, he added that “this is in normal conditions. This year we have a war” involving Russia, the world’s top natural gas exporter.