by Maria Cappuccio

In its latest review of the global economy, the International Monetary Fund (IMF) confirmed that prospects had deteriorated since the beginning of the year. The path of economic recovery ‘weak and uneven’ was reflected in downward forecasts for global growth, at 3.3% for 2014 and 3.8% for 2015; the IMF also noted that, in some countries like the US, Sweden, Norway and the UK, economic recovery was solid, but in Japan the outlook poor and in the Eurozone, the probability of a further recession, likely. The IMF expects the vast majority of global growth is still to come from emerging markets. Economists remain pessimistic, downgrading estimates for China, Brazil and Russia, amongst others, hit by local, political or economic difficulties, while urging countries to provide a plan combining financial stimulus and structural reform to deal with the legacy of the financial crisis and the challenges of low-growth but tailored to suit individual economies. Reflecting growing economic uncertainty, global equity markets tumbled in mid-October, as investors sought safety in government bonds — some stock analysts link the current ‘commodity crash’ to the unexpected slowing of global growth, pointing to the downward assessments for growth in a number of advanced and emerging economies.


Excellent global crop prospects for cereals and oilseeds forecast by the UN’s Food and Agricultural Organization (FAO) to increase to a new record just shy of 3Bn/t in 2014, better than last year, and, some 200mt (million tonnes) above the drought-hit 2012 harvest have, since the summer, contributed to weaker grain and oilseed prices, that are expected to remain weak for the rest of this year and much of 2015. The FAO confirmed that the global food price index fell again in August for the sixth consecutive month, the longest period of continuous decline since the late 1990s.


Feeding a growing global population without increasing the stress on the Earth’s finite land and water resources promotes fervent discussion on the best way to make improvements to the global food system. This year, FAO’s World Food Day event is focused on “Feeding the world, caring for the earth” — chosen to raise the profile of family farming and smallholder farmers, and the significant role they play in providing food and employment, while managing resources and protecting the environment, especially in rural areas. Contributing to the discussion, a report entitled Leverage points for improving global food security and the environment by researchers at the University of Minnesota’s Institute on the Environment, found that by focusing on a few specific regions, crops and actions, had the potential to, not only meet the basic food needs of 3Bn more people, but also to reduce agriculture’s environmental footprint.

FERTILIZER DEMAND STALLS AS CROP PRICES FALL TO MULTI- YEAR LOWS The International Fertilizer Association’s (IFA) assessment of the global fertilizer sector, earlier in the year, forecast a relatively positive outlook for 2014/15, based on declining but still fairly attractive prices for cereals and oilseeds, overall demand seen rising to 188mt with an increase for potash, phosphate and more modest demand for nitrogen; with demand expected to rebound in North America, with continuous growth in all other regions, and rates above 3% in Africa, South Asia and Latin America, the exception being Oceania. But since the summer demand for fertilizers was negatively affected by global economic uncertainty, huge harvests boosting stockpiles and resulting in steep price falls, at a time when fertilizer margins were pressured, due to higher operating costs, slower demand, growing supplies of nutrients and Chinese overproduction of phosphate and urea.

Longer term, the fundamentals for agriculture-growing population, dietary changes in the emerging nations, the impact of weather dynamics on food production-remain valid, the IFA forecast fertilizer demand, to rise to over 200mt by 2018/19, indicating a progressive slowdown of nitrogen, driven by efficiency gains in advanced and emerging economies, while 


demand for phosphate and potash would continue to expand. The highest growth rates are forecast in Latin America — where land is expanding steadily — followed by Africa; while in Asia although demand is expected to fall in China, as nitrogen and phosphate fertilizer reach a plateau, scope for improvement in India depends on a better subsidy regime in place and in West Asia due to a better political outlook.


REPORTS INDICATE US GROWERS TO CUT-BACK ON FALL APPLICATION Since June global cereal and oilseed prices have fallen dramatically due to a record global harvest of cereals and oilseeds. This year’s corn harvest is forecast at over 991mt — and includes a huge US crop of 368mt — with yields of 174.3mt, more than beating expectations-boosting global supplies and weighing on international prices. CBOT futures prices for corn (Dec) contract fell from over $4.58/bu in June to $3.43/bu (Oct 20). While the IFA and analysts from major fertilizer companies, forecast a greater uptake of potash to replenish nutrient-depleted soils in the US this year and again next year, preliminary reports indicate that a number of US growers are cutting back on spreading fertilizer this autumn in response to, the fall in crop prices to multi-year lows, a delayed harvest and tight 2015 budgets-encouraging much greater scrutiny of costly items like fertilizer, seed and rent.



Fertilizer prices are mostly expected to decline in 2015 — phosphate rock and potash to decline by almost 25% in 2015, urea to average a fall of over 6% while TSP and DAP to make moderate gains. According to Rabobank, seasonal fertilizer demand from China, India and the US is unlikely to cause any prolonged rise in prices-bearish commodity prices to impact farmers decision to cut-back fertilizer applications; with demand also affected by record-low monsoons in India, a weakening euro 


and resistance to higher prices in the EU, lower estimates for Brazilian soybean acreage and weather concerns, while in the US-farm equity has risen significantly putting growers in a position to get the money they need for inputs-logistics seen as the big challenge as the demand for rail and barge service is increasing.



Global wheat plantings for 2015 were tentatively forecast by the IGC, 2.3% higher at 225.4m/ha (million hectares) driven by firm futures prices. Wheat sowings in the EU are taking place on a larger area forecast up 24m/ha under generally favourable conditions, at the expense of other coarse grain and oilseed plantings. Strategie Grains cautioned that weather conditions may affect planting prospects. In Russia, wet weather in the middle Volga region and in some regions of Central Russia may limit plantings and reduce the winter sown planted area by 3m/ha to 13m/ha. Conditions in the UK are satisfactory and the winter cereal area may increase; while in Asia, planting, of mainly wheat is underway in China, India and Pakistan.


While local crop forecasters expect the area planted to soya in Brazil to rise by around 5% to 75m–79m/acres, with production of 89mt-96mt, Oil World has cut its forecast for the Brazilian harvest by 3mt to 89mt due to a difficult start to sowings. Conab, Brazil’s official agency estimate the soya crop at 89–92mt, but 5mt below USDA’s (US Department of Agriculture) current estimate of 94mt. In some areas north of Mato Grosso soybean prices have fallen to $7.90/bu for March delivery, below the cost of production $8.63/bu. Slow forward selling of last year’s crop-just 10% of soybeans compared to a more typical 25–30%, as farmers hoard dollar-denominated assets; the possibility of sales concentrated around harvest time implies unusually strong harvest pressure on prices. CBOT November soybean contract saw prices fall from $12.44/bu (Jun 26’14) to $9.44bu (12.48pm 20 October 2014).


Oil world also estimate that Argentine sowings for 2014/15 may fall by 200,000ha to 19.6m/ha, that compares, with an estimate from USDA staff in Buenos Aires of plantings of 21m/ha, due to profit margins being squeezed. The fall in international prices, rising costs and weaker peso encouraged growers to hoard dollar-denominated assets like soybeans — using silo bags to increase on-farm storage; estimates suggest that 40–45% of last year’s crop is still unsold — with fertilizers and herbicides for the current crop being bought on a hand-to- mouth basis. Argentine farmers rely on leased land for some 60% of the soybean area so delays help to lock-into falling land- rent.


Monsanto’s seed sales rose in the June-August period boosted by sales in the agricultural division, especially soya seeds, which more than doubled, including the launch of Intacta, the genetically modified seed, in Latin America; while those of corn seed dropped in the last quarter, as US growers cut corn acres in favour of soybeans for the harvest underway.


The US development of shale gas and tar sands has 


revolutionized the energy sector resulting in lower natural gas prices in the US, which is having an impact on the global fertilizer industry; during the last two years, there has been a surge of announcements of new plant capacity in the US — access to cheap gas supplies significantly reducing production costs for nitrogen based fertilizers. Recently Norway’s Yara, the world’s largest nitrogen producer, and Chicago-based CF Industries held talks to consider merging the two companies. But despite identifying ‘significant’ operating and financial synergies, the discussions ended when both parties failed to agree on terms that met the requirements of their respective shareholders.


CF concluded that a proposed all-stock merger, would have given the two companies a 50:50 ownership, that did not adequately reflect the value of CF’s significant near-term capacity expansions.

With global nitrogen capacity rising, the IFA forecasts supply to increase by almost 24mt N through 2018, almost twice as fast as demand at 13mt N (fertilizer 6mt N, industrial 7mt N), and to grow in East Asia (9mt N — especially non-fertilizer use), South Asia (3mt N), Latin America (2mt N) and in other regions by 0.4–1.0mt N, increasing the nitrogen surplus to over 15mt N by 2018. Credit Suisse forecast global nitrogen supply and demand would grow at similar rates of 2% a year.

The IFA, forecast ammonia capacity to grow by 16% to 245mt NH3 by 2018, with large increases expected in East Asia, Nigeria, Western Asia, Latin America, with global seaborne ammonia to reach 19mt, or possibly lower, depending on the integration of new downstream capacity. The significant increase in potential ammonia capacity in the US would increase capacity by over 25%, well above the IFA forecast by 2018, and a key concern for would-be investors, although many of the plants announced are expected to be cancelled due to labour, construction and or financing issues.


Fresh from leading the failed merger discussions with CF Industries, Torgeir Kvidal, newly appointed CEO for Yara, forecast continued and robust demand for nitrogen fertilizers with deliveries significantly up in key markets including Europe, US and Brazil, with prices to remain volatile as traders deal with rising Chinese supplies of urea; however ammonia prices have bucked the trend, underpinned by supply chain disruptions in Trinidad,Tobago and the Ukraine — where exports out of the Black Sea are restrained — Russia and Ukraine failed to reach agreement on restarting natural gas deliveries, but output from the Caribbean may improve in the coming season. Typically, 


prices fall in winter on slowing demand, but prices in the key Tampa market for ammonia are at $640/t, with Black Sea origin at $530/t. Credit Suisse expect prices to moderate averaging $527/t in the Tampa market, and may outperform, due to the threat to Black Sea exports, but not until the end of the US autumn sowing period.



With 60 new units planned, urea capacity is expected to increase to almost 245mt by 2018; overall demand, according to the IFA, is expected to rise by almost 23mt (fertilizer 10.4mt, industrial 12.3mt) to over 203mt, notably in East and South Asia (25 units located in China) and Latin America; rising industrial use in East Asia is expected to contribute two-thirds of the demand growth-leading to a urea surplus of over 13mt by 2018.


Prices of granular urea have continued to fall to $310/t at the Gulf (Oct 22); reduced demand from the US and Brazil have softened the market, which typically moves lower into early November. Small quantities have been booked at $350/t FOB (free on board) Egypt (Oct 24); with supply constraints from major exporting origins no longer an issue, attention is focused on future demand-concerns remain, that low crop prices could keep the market soft, longer than usual-uptake in Europe remains low as distributors appear unwilling to hold stock with farmers reluctant to buy.

Overproduction of urea in China led to large exports, supported by the government’s decision to relax export taxes and the supply disruptions in Eastern Europe and the Middle East–North Africa region, that more than doubled by July to 5.3mt and following huge sales to India in September, could rise to a record 9mt by the end of the year. India continues to rely heavily on imported urea as production fundamentals in the country remain constrained.

Rising Chinese domestic demand for urea and lower supplies available, following large export sales, saw prices edge higher with restrictions limiting exports at the main ports in China. Asking prices for prilled urea have moved above $290/t FOB China, with significant demand to come from India (further tender expected in November) and Pakistan supporting higher levels. Commodity broker Macquarie forecasts that higher prices seen this year are due to supply disruptions and that going forward weak supply/demand fundamentals will see, first urea, then ammonia prices fall and marks both urea and ammonia as bearish for the next five years.


Global potassium capacity is forecast to rise to almost 61mt K20, with the largest increase expected to occur in North America (Canada), the EECA (Russia, Belarus) and East Asia (China); with supply to increase to over 51mt K20, with potash demand expected to rise modestly by 3.7mt K20 (fertilizer 3.2mt other 0.5) to over 38mt K20 by 2018, leaving a potential surplus, depending on the rate of growth, of 13.2mt K20 by 2018.


PotashCorp confirmed it had strong sales to US buyers, driven by the need to replenish potash levels following back-to-back record harvests of corn and soybeans and increased sales to other major markets with Canpotex, the export consortium owned by PotashCorp, Mosaic and Agrium, fully committed with China driving some of the renewed potash demand. PotashCorp’s CEO Jochem Tilk, noted “improved potash pricing trends” too. The group sold its potash for an average of $281/t (Jul-Sept) above the $263/t (April-June) period. Strong demand coupled with seasonal maintenance and outages, is expected to keep potash supply tight for the remainder of the year, with shipments expected to rise to 58–60mt in 2014.


Domestic prices in China have reportedly strengthened due to robust demand for potash from NPK manufacturers and local producers facing rail constraints, boosting additional ocean shipments. Chinese potash consumption is forecast at 12mt ahead of North America 8mt and Brazil 8.5mt in 2014, driven primarily by rising domestic food requirements and strong prices for key grains such as corn — Dalian Futures Exchange, Jan ’15 corn contract,Yuan 2336 ($381.73 — Oct 23) — and, when compared with the price of fertilizer, the ratio is 1.2:1, well above levels at the time of the last financial crisis in 2008. Elsewhere in Asia potash demand is said to be relatively stable, growth driven by increased application and a shift to potassium- intensive crops such as oil palm, sugar cane, fruits and vegetables. Indian fertilizer sales have picked up but rates are still well below the recommended norm.

RISING SUPPLY PROSPECTS AND WEAK CROP PRICES, LIKELY TO CAP POTASH PRICES With supply potential increasing-North America-Agrium's Vanscoy mine, PotashCorp, K+S legacy, and in Russia- Eurochem- at a time when weak crop values are most likely to constrain demand; the decline in prices of oilseeds in particular likely to cap demand in Brazil, a potential growth area for potash. Currently, Uralkali has a contract to supply China with 700,000 tonnes of potash at $305p/t on a CIF (cost, insurance, freight) basis and is seeking a 10% increase in the price for a new contract in 2015. Uralkali expects once Chinese contract negotiations for potash supply, seen as the industry benchmark, are concluded in January, this will stimulate growth, and forecasts global potash shipments to rise by 2mt to 60mt.

Credit Suisse saw a ‘slight’ rise in the price of potash, and forecast shipments of 56mt, lower than both PotashCorp and Uralkali, while other analysts took a cautious view on prices, seeing little scope for Brazil to increase shipments on the back of much lower commodity prices, especially oilseeds, likely to cap demand and the large quantities of potash imported earlier in the year; while a 10% increase in the potash price for China was less unlikely, in North America, tighter granular potash markets may provide some price support in the US market.



Phosphate rock supply is expected to grow by 40mt to 258mt in 2018, with Morocco, China and Saudi Arabia responsible for almost two-thirds of the increase. The steep fall in prices last year saw phosphate rock at $100/t (Dec 2013) but prices have since increased to $120/t (Sept 30). The IFA forecast phosphoric acid capacity to rise to 61.5mt P205 by 2018, with large additions in Morocco, Saudi Arabia, China and Brazil and global supply increased to 52mt P205, and expected to outstrip demand by 4.3mt P205 leading to an 8% surplus by 2018. While global capacity of the main processed phosphate fertilizers would grow by 5.1mt P205 to 47.7mt P205, of the 22 units planned, seven units in China, seven units in Morocco and Saudi Arabia, DAP capacity is expected to account for 80% of the increase.

MOSAIC OUTPUT HIT BY FALLING PRICES AND STRONG AMMONIA COSTS Supply challenges and strong demand in several key importing regions early on resulted in a tighter than anticipated phosphate market. Markets softened thereafter with Indian demand slow to materialize. At the end of September, the Mosaic Company, announced a cut-back in output to limit the build-up of high-cost inventory for its phosphate operations due to falling phosphate prices and stronger costs for ammonia (due to reduced supplies from the Black Sea and Trinidad) and sulphur; the Tampa ammonia contract for October settled at $640/t (the highest monthly settlement since early 2013) up from the third quarter average of $535/t, and in North Africa $630/t and above $680/t in Europe with sulphur around $150/t in most region. Jim Prokopanko Mosaic’s CEO, forecast sales price for DAP in the closing quarter, typically a slow period, likely to come within a range of $440-$470/t as curtailments may tighten supplies, but stronger US exports and lack of Chinese sales (2.5mt DAP/MAP in the first seven months of the year) now that the low tax window has closed, could temper reductions this winter. Prices for DAP at the Gulf slipped $15 to $412.50 (Oct 22), PhosAgro’s CEO Andrey Guryev, views the cut-back in production by large- scale producers as a strong offsetting factor against any significant price decrease in the low season environment.

While Mosaic, has joint ventures with other producers Ma'aden and Saudi Basic Industries Corp SJSC and expects to cap nitrogen costs through a long-term supply deal with CF Industries, beginning in 2017, in a bid to reduce raw material costs comparable to those of low-cost operators, like Russian- based PhosAgro and Saudi Arabia-based Ma'aden who produce ammonia and are able to access cheaper sulphur sources.

Despite the effect of much lower crop prices and their impact on fertilizer demand Mosaic forecast a good fall season in North America, with crop nutrients remaining affordable for farmers, to replace falling soil nutrients; elsewhere although DAP production is down in India, NPK production has been robust driving the need for imports and slow demand in Brazil may improve as growers prepare for the Safrinha crop; phosphate demand is forecast to remain strong with shipments to increase by 2% year-on-year to 65–66mt in 2014.

Poor monsoon leaves India with unsold stocks of imported fertilizer 

The volume of land under cultivation, kinds of crops grown and the annual behaviour of weather are the principal determinants of use of chemical fertilizers by any country, writes Kunal Bose. Indian fertilizer companies got a scare earlier this year when the country’s meteorological department made a forecast of a poor south-west monsoon during June to September. As it would happen, not only did the monsoon arrive late but rains in the first few weeks were well below normal. The south-west monsoon, which principally decides the fate of summer-monsoon crops, including rice, sugarcane some major oilseeds, cotton and raw jute, picked up strength end-July onwards. This, however, was not enough to spare zones in the country’s north, north-east and south from being declared highly rains deficient or drought hit.

A fertilizer industry official says “monsoon delay of the kind experienced this year forced growers of rice and other crops to go on postponing land preparation and sowing operation. In a number of states, land shrinkage under summer-monsoon crops became a fait accompli. We saw it in 2012–13, how a deficient monsoon led to a 5.58 million hectare fall in land under various foodgrains from the previous year’s nearly 72.1 million hectares. We are yet to know precise figures of land left uncultivated this season because of a bad monsoon.”

However, the first estimate of production of all crops for summer-monsoon season shows foodgrains production of 120.2mt (million tonnes) is 8.92m tonnes less than the record output of 129.24mt in the corresponding season last year. Production of major oilseeds like groundnut and soybean and coarse cereals has also suffered a setback due to late monsoon arrival or overall deficient rains. Much like farmers, fortunes of fertilizer producers and importers are dependent on the behaviour of monsoon. In the event of monsoon failure, fertilizer units and dealers and retailers of nutrients are left with unsold stocks. The hit is taken mostly on account of imported fertilizers. The government Economic Survey says while about 80% of the country’s requirements of urea (that is, nitrogen) are met by domestic producers, it remains very largely ‘import dependent’ for potassic (K) and phosphatic (P) fertilizers.

Imports of fertilizers are always planned and executed well in advance of their application in the field. Last year, India produced 22.5mt of nutrients while their requirements were 51mt. The huge gap between domestic supply and demand was met by imports. Prices of fertilizers in the world market are moved by what the world’s largest consumer, China, and the second-largest, India, are going to import in a given period. Cartels in the commodity have been weakened in recent years but they still have some influence over price determination. The challenge for Indian importers like their counterparts elsewhere is to strike deals when nutrient prices have touched the floor or at close to that. Whatever commercial judgement is exercised, imports must precede a crop’s growing season. If for a bad monsoon there is a setback in farm production as has happened in India this time, importers are left with unsold stocks costing them a pretty penny.

The Indian currency has suffered much value depreciation in recent times making imports costlier. RG Rajan, chairman of government owned RCF says “the company withstood [during

2013–14] severe economic onslaught in the form of substantial value fall of Indian rupee against US dollar. In recent years, there has been high volatility in fertilizer making raw materials prices resulting in creation of scarcity impeding production and marketing plans.” The ordeal faced by RCF is, however, a common experience in the Indian fertilizer industry. According to an industry official, the government’s target of 4% annual growth of the country’s farm sector, which has a share of over 14% of the country’s gross domestic product (GDP) is achievable provided conditions are found congenial, particular in allocation of feedstock natural gas to grow fertilizer production.

FAI director general Satish Chander, however, says the fertilizer industry is not in good shape due to some “stifling controls.” He also contends that the fertilizer pricing policy remaining unchanged will continue to have an adverse impact on soil health, income of farmers and the industry’s earnings. It is disturbing that the country has hardly seen any fertilizer capacity addition over the last 15 years while nutrient demand during this period was rising between 3% and 4% annually. On the contrary, in recent periods urea capacity of about 1.5mt was taken off the production line in the states of Karnataka and Tamil Nadu because of government failure to provide natural gas. The irony is the victimized units following government direction made considerable investment in making changes in their plants to be able to use gas instead of naphtha as feedstock. But the government in its turn failed to keep its commitment to supply gas.

No wonder India is becoming increasingly import dependent for all kinds of fertilizers. Government policy is to ensure availability of fertilizers at affordable prices to farmers, which New Delhi continues to defend in various forums, including the World Trade Organization. Retail fertilizer prices are much lower in India than their cost of production or imports. To make nutrients affordable for farmers and keep food prices in check, the government continues to reimburse the difference between cost of production/import and retail prices to fertilizer companies. However, ultimate beneficiaries of the subsidy are not fertilizer producers but millions of farmers. The industry keeps on complaining that the “stigma of subsidy” has wrongly befallen it in the public eye. 
A contributing factor to the country’s large fiscal deficit is the over $11 billion India spends each year subsidizing farmers for selling fertilizers at below production cost. Incidentally, gas accounts for nearly 80% of the production cost of urea, a nitrogenous fertilizer that consumes more than half of the subsidy. The official target is to make direct transfer of the subsidy to individual bank accounts of farmers bypassing fertilizer producing companies. That will amount to deregulating the fertilizer industry, meaning the producers will fix nutrient prices on cost plus basis, farmers will buy their requirements at market prices and the government will pay them directly the subsidy amount. The proposed switch in subsidy payment will plug leakage of funds and ensure benefits reach farmers in full.

As India is having only limited success in raising production of gas, the principal feedstock for urea production, RCF has taken the lead to make the nutrient through coal gasification route. In partnership with Coal India Limited, the world’s largest coal producer and two other government owned companies, RCF is in an advanced stage of planning a coal gas based 2,700-tonne per day ammonia unit and a 3,850-tonne per day urea unit at Talcher in Orissa, which abounds in coal. But India, which is fully import dependent on potash and must find gas in North 


America and the Middle East to make urea has become active in building plants in a number of overseas locations principally using joint venture route.


Indian Farmers Fertiliser Cooperative, the country’s largest producer of nutrients, is to build a urea plant in Quebec in partnership with La Coop Federee as it is almost ready to commission a phosphoric acid plant in Jordan. In the meantime, Coromandel Fertilisers is planning a JV for the manufacture of phosphoric acid with Groupe Chimique Tunisien of Tunisia. The overseas venture will be part of the Coromandel’s backward integration for its domestic phosphatic unit. Tunisia has rich deposits of rock phosphate, an ingredient for phosphoric acid. Rajan says Indian enterprises have many opportunities awaiting them abroad for “manufacturing fertilizers and mining of raw materials.” The government admits that “overuse of nitrogenous and limited application of potassic and phosphatic fertilizers remain matters of great concern. The skewed use of fertilizers will stand in the way of improving productivity of land.” Balanced fertilizer use will require India to build potassic and phosphatic plants abroad and market their production here in full.

Brazil imports of fertilizer set to continue increasing year-on-year 

With production falling rather than increasing as had been hoped, but with demand growing strongly, Brazil is importing more fertilizer year after year, and will continue to do so for the forseeable future, writes Patrick Knight.

Brazil is on course to import about 24mt (million tonnes) of nitrates and potash this year, 11% more than in 2013, at a cost of about $10 billion dollars.

More than 70% of the 34mt of fertilizer to be spread this year, about 7% more than was used 2013, will have to be imported. This is because about 650.000 tonnes, or about 7% less will be produced in Brazil this year as in 2013.

Forty per cent of all the fertilizer supplied to farmers in Brazil is used by those planting soya, the output of which is now growing by about 6% each year, and is expected to do so for the foreseeable future. Between them maize, sugar cane and cotton, together with soya, use about 80% of all the fertilizer needed in Brazil each year. The steady increase in demand for grains, particularly of soya, means Brazil will need at least 40mt of fertilizer by about 2018.

It had been planned for about $13 billion dollars to be invested in projects aimed at increasing output in Brazil in the past few years. However, this did not happen, so most of the extra needed will have to be imported.

Above average world prices for soya, coupled with strong demand from China and other developing countries has allowed farmers to accumulate enough capital to buy large supplies of fertilizer in recent years, while the strength of the Brazilian currency also pushed up farmers purchasing power.

The situation has changed in the past couple of years, however, when the world price of most grains, as well as that of sugar, fell sharply. But this fall has not yet been reflected in a reduction in demand for fertilizer, of which Brazil is the world's fourth-largest consumer, after the United States, China and India.

The lower prices of most soft commodities has begun to hit farmers in the westerly state of Mato Grosso, the leading market for fertilizer. Many farms there are more than 2,000km from the Port of Paranagua, in the state of Parana, through which 40% of all imports enter the country. Congestion there, as well as at Santos, means ships waiting to unload potash and nitrates can sometimes spend up to 45 days in a queue. The high cost of demurrage helps explain why the cost of transporting fertilizer from mixing plants adjacent to ports such as Paranagua and Santos, can add 30% to the cost of fertilizer in the fields.

As waterways continue to be improved in the north and north east of Brazil, where most new soya and maize plantings are concentrated, and with highways and railways being upgraded or extended as well, more fertilizer is gradually being imported via ports in the region. But it will be many years before this allows farmers there to pay less for the fertilizer they buy than they do now.

The high cost of transport could be tolerated when the grains price was high. But numerous farmers are already complaining that they will be producing soya at, or close to cost this year. Some can be expected to reduce plantings, if not this year, at least in 2015, if prices do not recover, which they have shown little sign of doing so far.

The past few years have seen big changes in the structure of the fertilizer industry in Brazil. When the industry was much smaller than it is now, the ‘big four’ trading companies which process and export much of the grains and sugar exported from Brazil, ADM, Bunge, Cargill and Dreyfus, used to process much of the fertilizer and arrange the import of the ingredients needed. The trading companies delivered fertilizer to farms, in exchange for farmers undertaking to send them their beans, maize and sugar in return.

The amount of fertilizer used in Brazil has doubled from less than 20mt to well over 30mt in the past decade and imports have increased much faster than that. Wanting to concentrate on their core business, the traders have gradually exited the fertilizer business. Their facilities have been sold to international companies, such as the Norwegian owned Yara, now the market leader, to Heringer and most recently, to the US owned Mosaic company.

The governments which have ruled Brazil for the past 11 years, led by the left leaning ‘Workers Party’ has been anxious for two large Brazilian companies,Vale, and Petrobras, both previously state owned, to play an increasing role in the fertilizer business in Brazil. Although now nominally in private hands, both Vale and Petrobras are still largely controlled by the government. Vale knows all about mining, while Petrobras produces oil and gas, used to make phosphates. This company has long had interests in the fertilizer industry. But both companies have faced serious financial difficulty in recent times, so have been unwilling to make the major investments needed if Brazil is to move towards being self-sufficient in fertilizer.

Anxious to continue being influential in its troubled neighbour, Argentina,Vale bought the massive Rio Colorado potash project, located in the Andean foothills, from Rio Tinto in 2009. Vale began making the large investments needed to produce and export 3mt of potash by about 2018.

This project soon ran into difficulties, however, and Vale has now suspended operations there, after spending an estimated $2 billions on opening mine workings, starting to build a rail link which would transport potash to a new port to be built at Bahia Blanca and laying a pipeline to supply the fuel needed to process ore at the mine.

Because of the sharp fall in the world price of iron ore,Vale has been forced to delay several other key projects, notably the second phase of the Carajas mine. The company is now seeking a purchaser for the Rio Colorado mine, and is also trying to find a partner for other fertilizer projects in Brazil.


Brazil, much of whose massive territory has yet to be fully explored and mapped for minerals, is thought to have numerous deposits of potash, as well as nitrates. The largest and most promising potash deposits are in the Amazon region and are both isolated and deep underground, so will be expensive and complex to develop. The Worker Party government has shown very little interest in encouraging large scale projects of this type. It has concentrated most of its efforts in the past 11 years on raising the incomes and living standards of the less well off, often at the expense of industry. The currency has gained ground against the US$ and other hard currencies, which has made exports less competitive, and imports cheaper.

One result of this policy has been that the healthy annual surpluses in visible trade which Brazil accumulated in the early years of this century, partly, it is true, because the price of both soft and hard commodities were above average, are now falling. 2014 could see a trade deficit, the first for more than a decade.

Brazil is of course one of the few countries in the world, with sufficient spare land to grow and export substantial quantities of the foods, both grains and oilseeds, and also sugar and meat which will be needed in the next 40–50 years. The world population is expected to increase by several billions and incomes are expected to rise as well, with many people able to eat more and better than they do now.

Brazil’s own population is now hardly growing and should stabilize at little more than the present 200 millions by 2050, which means that virtually all the extra food, or feed ingredients which are grown, will be available for export.

On the other hand, growing concern about the environment, and the threat of climate change, may limit the amount of extra land which can in fact be cultivated. Much of the extra food is likely to be the result of the steady rise in yields and if more fertilizer is applied, yields could almost double.

Arable crops are now grown on about 50 million hectares of land in Brazil, whose herds of beef and dairy cattle, about 200 million strong, now graze on slightly less than 200 million hectares of land. But the number of cattle per hectare has risen steadily during the past few years, partly as a result of farmers switching to arable crops, partly because more fertilizer is being used to improve pasture quality.

Many ranchers are being tempted by the fact that growing arable crops and sugar cane as well as planted forest are now far more profitable than raising cattle on the average ranch, which is encouraging farmers to switch.