Transport costs hurt fertilizer demand, soy area growth in Brazil

Transport costs hurt fertilizer demand, soy area growth in Brazil

Wednesday, July 18, 2018 6:35 am

President Michel Temer of Brazil

Brazil higher transportation costs following truckers’ strike that crippled it’s logistics will hurt fertiliser demand this year and may affect soy acreage growth in next season, analysts said on Tuesday.

Brazilian demand for fertiliser will fall this year for the first time since 2015 due to disruptions caused by the strike.

Increased transportation costs after the government agreed to set minimum freight prices in a deal to end the demonstrations, will add to fertiliser fall according to INTL FCStone analyst Fábio Rezende.

The strike began in May with hundreds of thousands of truckers moving to block highways for 11 days, choking up shipments of supplies ranging from consumer products to animal feed.

Brazilian logistics took weeks to return to normal, with many contracts to deliver grains and fertilizer held up over uncertainty about how the government would set minimum freight prices.

The situation is delaying farmer planning for the coming soybean and corn seasons, which starts around September, Rezende said at an event in Sao Paulo.

“We are in the middle of July and at this point farmers should already be stocking up (fertiliser),” Rezende said.

“This means purchases will be concentrated in August, September and October, affecting internal fertiliser prices.”

Brazilian farmers will likely buy 3.7 per cent less fertiliser this year compared to 2017, or 33.17 million tonnes, according to the consultancy.

Fertiliser trade group Anda said deliveries fell 2.3 per cent to 12.83 million tonnes in the first six months of the year, weighed down by the trucker protests.

Brazil imports most of its fertilizers supply, with empty trucks delivering grain to ports generally making return trips with fertiliser to farmers in the interior of the country.

Uncertainty over freight prices will linger until transport regulator ANTT updates a table setting minimum prices following Congressional approval of government-set prices last week.

Higher freight costs may also limit the growth of Brazil’s soybean area in the next harvest, INTL FCStone analyst Ana Luiza Lodi said at the same event.

She declined to provide an exact projection. Last season, the government estimated the area to be 35.1 million hectares (86.7 million acres).

Before disruptions in Brazil’s transportation system, the consultancy expected five per cent growth in the soy area, driven by strong demand from China for Brazilian beans.

“Now farmers are more cautious,” Lodi said referring to planting intentions. “The freight impasse may affect the next harvest and increase input costs,” she said.


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