Market Talks: Mixed trend for nitrogen-based fertilizers in Southern Cone

Nitrogen fertilizer market activity is poised to continue reduced in Argentina, where farmers may switch corn acreage to soybeans, as soybeans' cost of production is lower than corn. Ammonium sulphate purchases are expected to intensify in October in Paraguay to supply corn crop fertilizer needs.

Join Camila Dias, Argus Brazil Country Manager, and Renata Cardarelli, Deputy Editor for the Argus Brazil Grains and Fertilizer publication. They talk about the nitrogen demand in the Southern Cone markets.

Transcript:

CD: Hello and welcome to ‘Market Talks’- a series of podcasts presented by Argus addressing the events impacting commodities and the energy sector in Brazil and around the world. My name is Camila Dias, Argus Brazil Country Manager. In today's episode, I will talk to Renata Cardarelli, deputy editor for the Argus Brazil Grains and Fertilizer publication, about the trend for nitrogen-based fertilizers in Southern Cone. Hi Renata, welcome.

RC: Hello, Camila, it is always a pleasure to be here.

CD: Renata, the Argentinian market has registered reduced demand for nitrogen-based fertilizers. Should this trend continue?

RC: Argentinian market participants say that the latest granular urea business reported happened at $420-430/t cfr, but prices are likely to have increased to around $445-455/t cfr. Market participants operating in Argentina say that there are few offers and only one-off deals are expected to happen until October. It is worth highlighting that the Argentinian imports of granular urea decreased by 28pc to 307,900 metric tonnes (t) in the first seven months of the year from a year earlier, as market participants struggle to access US dollars as the country is going through a balance of payments crisis, with the peso losing more than half its value in a year. Some buyers have been paying global suppliers in Chinese yuan. Global companies headquartered in other markets are trying to pay global fertilizer producers outside of Argentina. Imports are also further reduced because the country is in a presidential election period. In the weeks before and after primaries on 13 August, market activity was scarce amid uncertainty over political developments in Argentina.

CD: Does this difficulty in accessing US dollars have any effect on the decision to purchase fertilizers in Argentina?

RC: Without a doubt, Camila. Farmers in Argentina may opt at the last minute to substitute soybeans for corn in the 2023-24 crop, as soybeans' cost of production is lower than corn. Corn is a crop that needs between 180-300kg/hectare (ha) of fertilizer in Argentina, above soybean fertilizer needs of around 62kg/ha. In comparison, in Brazil the soil needs around an average of 400kg/ha of fertilizer to grow soy. Lower costs in the Argentinian market are also a reflection of the reduced demand for fertilizers. Market participants estimate that soybean costs of production in Argentina account for around 15pc of the cost in the Brazilian market. Soybean costs of production are estimated at R4,179 ($854)/ha in the Brazilian state of Mato Grosso. Fertilizers used to plant soybeans in Argentina are basically MAP and SSP. Argentina's imports of MAP decreased by 6pc to 430,200t in the first seven months of the year from the same period a year earlier. Argus' weekly range of DAP/MAP was assessed at $550-555/t cfr Argentina on 31 August, down by 21pc from early January. But regional farmers may intensify purchases of SSP, as Argentina has regional producers of the phosphate and it is possible for domestic market participants to pay with the local currency, the Argentinian peso.

CD: Renata, does this reduction in Argentinian nitrogen imports and the last-minute decision to replace corn with soybeans have any effect on fertilizer purchases from other countries in the Southern Cone?

RC: Reduced activity in Argentina affects local markets, especially Uruguay and Paraguay. Uruguay historically relies on bulk cargoes of fertilizer that first land in Argentina and then are reshipped to Uruguay and Paraguay is a landlocked country, where buyers can opt between prices in Argentina and Brazil to close fertilizer deals. Paraguayan buyers are struggling to find trucks available to transport fertilizers from Brazil to supply their last-minute fertilizer needs for soybeans, as truckers in Brazil are busy moving grains to export corridors and carrying fertilizer to soybean farmers.

CD: Is Paraguay in its nitrogen purchasing season?

RC: As soybean planting accelerates, fertilizer deals for corn are expected to intensify. Deliveries are expected to go on until October, while planting has already started in some eastern areas of the country in early September. Local market participants estimate that around 65pc of nitrogen needs have been fulfilled to grow corn in Paraguay, as nitrogen-based fertilizer purchases intensified in late-July. The remaining 35pc of the needs are expected to be purchased in September-October, with imports projected to increase in the period. Paraguay is expected to intensify its imports of Ammonium Sulphate (AS), a nitrogen-based fertilizer commonly used in blends for corn, such as 12-15-15, 10-15-15 and 15-15-15. AS imports totaled around 87,700t in the first eight months of the year, up by 15pc on the year.

CD: Thank you very much, Renata. This and other episodes of our podcast are available on the Argus website at www.argusmedia.com. Visit the page to follow the events that affect global commodity markets and understand their developments in Brazil and in Latin America. We'll be back soon with another edition of “Market Talks”. See you soon!