February 29, 2024

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Drought in Brazil Triggers Agricultural Crisis

3 min read

The lack of rainfall in Brazil is causing farmers to postpone the acquisition of fertilizers for the upcoming corn planting season, impacting sales for global fertilizer suppliers in the world’s leading corn exporter, according to executives consulted by El Mundo Agroindustrial.

In Brazil, the soybean harvest is already experiencing delays, which could push back the planting of the main corn crop to early next year, affecting companies such as Nutrien, Mosaic, and Yara. Corn, being one of the crops most dependent on fertilizers, is particularly affected.

This drought, linked to the El Niño climatic phenomenon, highlights the volatility facing global agriculture amid accelerated climate change. Fertilizer companies are already experiencing lower profits due to falling crop and fertilizer prices, following the peak during the Russia-Ukraine conflict.

Brazilian farmers, by planting less corn after the ideal window in January or February, are reducing fertilizer demand. Mosaic anticipates a 12% decrease in the production of “safrinha,” Brazil’s second corn crop, surpassing government forecasts.

The potential reduction in the harvest would impact potash fertilizer demand by around 4%, estimating losses of around $160 million. Until December, farmers had only acquired 60% of their estimated fertilizer needs.

Financially, a sales loss of that magnitude wouldn’t be substantial as Mosaic could sell to other countries. In the worst-case scenario, however, the safrinha corn harvest could decrease by 25 million tons.

In early December, farmers had only purchased 60% of their estimated fertilizer needs in the corn-producing states of Paraná and Mato Grosso, compared to the usual 80% at this time of year, said Guilherme Schmitz, director of market development for Yara’s Brazilian unit based in Oslo.

Safrinha corn represents about 75% of Brazil’s national corn production, depending on the year.

Jason Newton, chief economist of the Canadian fertilizer company Nutrien, stated, “The combination of low crop prices and meteorological uncertainty has led farmers to timely purchase their inputs for the safrinha harvest.”

Brazilian potash prices have fallen to around $325 per metric ton, a 36% decrease year-over-year, illustrating weak demand.

It is estimated that Brazilian potash imports for the entire year will reach a record level due to strong previous shipments, although some of these imports could stay in retailer warehouses if farmers buy less.

The drought has also forced crop chemical producers FMC and Corteva to sell Brazilian stocks at a discount due to lower-than-expected demand.

Both companies may be forced to reduce production, as the increased global demand for chemicals may not fully compensate for the loss of sales in Brazil, said Fernando Cadore, head of the Aprosoja farmers’ group in Mato Grosso. “Undoubtedly, the drought could lead to a reduction in the use of technology, including fertilizers, and a cost reduction to make the harvest viable.”

FMC and Corteva did not respond to requests for comments.

The reduction in Brazilian production could revive global corn prices and stimulate U.S. farmers to purchase more fertilizers to maximize their corn production, offsetting the loss of Brazilian sales, said Jung from Mosaic.

However, initial forecasts suggest that U.S. farmers will prioritize soybean planting, a crop that requires relatively little fertilizer.

Published by Iraic.Info, a news and information agency.

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