Market Talks: Perspectives for Brazilian fertilizer market in early 2024

After a year of changes in fertilizers trade flows, market expectations turn to this year’s first quarter.

Join Renata Cardarelli, Argus Brazil Grains and Fertilizer Deputy Editor, and Gisele Augusto, Argus Brazil Grains and Fertilizer Reporter, as they talk about the perspective for key-macronutrients in early 2024. 

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 Renata Cardarelli, deputy editor of the Argus Brazil Grains and Fertilizer publication. In today's episode, I talk to Gisele Augusto, reporter for the Argus Brazil Grains and Fertilizer publication, about the expectations for the fertilizer market in early 2024. Hello Gisele, welcome.

GA: Hi, Renata. It is a pleasure to be here.

RC: Gisele, the first weeks of 2024 were marked by a slow pace in the fertilizer market. What are the expectations for the coming weeks?

GA: Camila, market participants expected a more active market in early 2024 especially for nitrogen-based fertilizers, which are a major fertilizer for corn crops. Farmers have been postponing purchases for the second corn crop 2023-24 this season. They usually intensify acquisitions in the last quarter of the year, so they have time to receive the product with time to apply in fields. In 2023, however, they carefully analyzed the development of the soybean crop, corn prices, barter rates and perspectives for the crop, which lead to a different buying pattern. In early 2024 market is in the sidelines. Market participants diverge regarding if the Brazilian industry is short or long in urea, but most agree that stocks are comfortable. Last year's imports were the second-highest annual figure on record, up by 3.1pc on the year and only eclipsed by the 7.79mn t received in 2021. Final purchases of small volumes did happen in the domestic market this January, but not in the import market as delivery would not be on time for applications. Fertilizer traded in November-December has also been arriving this month. Most of the ammonium sulphate needed was already covered by imports, as Brazil imported a total of 5.1mn t of amsul in 2023, almost 3pc above the prior year.

RC: How exactly have soybeans been affecting fertilizer purchases for corn?

GA: The soybean planting is delayed this season because of the drought in Central-west and heavy rainfalls in the South region caused by the El Nino pattern. These difficulties push corn sowing outside the ideal window, as it is planted in the same area as the oilseed. Another factor for the delay is the need to replant some soybean areas, especially in the Central-west. Mato Grosso’s agriculture institute Imea predicts that replanting will reach 6pc of total soybean acreage. Delays affect the quality of the corn output, as when it is pushed further in the year, weather conditions become more unfavorable for the grain development.

RC: What about corn prices, Gisele? Most of the year they were below prior years’ levels, how did this influence the market?

GA: You are right, corn prices have been key for farmers to decide on acreage and on fertilizer purchases. Corn prices ended 2023 at R$44.10/ per sixty-kilogram bag, that is 36pc below last year’s level. As corn supply increased both domestically and globally, grain prices were pressured down in Brazil and farmers hold crop selling waiting for an increase that did not came as expected. Current corn price is not enough to cover production costs in most of the producing areas. Corn prices and the uncertainties over the ideal climate condition result in farmers willing to reduce investment this season. All this reflects in a slow input acquisition, as most of the crop is financed via barter transactions — when a given volume of production is exchanged for one metric tonne (t) of fertilizers.

RC: For phosphates, what is the context in early 2024?

GA: No deals were confirmed in the first weeks of 2024. Prices still find support in the international market, while in Brazil there is reduced liquidity. Apart from the offseason period, Brazil imports of MAP were record in 2023, totaling 5.2mn t. Of the annual total, just over 2.4mn t, or nearly 47pc, was sourced from Russia, a rise of nearly 31pc from a year earlier. Suppliers of Russian phosphates have increased shipments to destinations such as Brazil owing to the displacement of volumes from traditional markets as a result of Russia-Ukraine conflict in February 2022. MAP prices are firm, which also discourages farmers to take position for 2024-25 soybean crop in the domestic market.

RC: Market participants point that 2023 was another year of high carryover stocks to 2024. Volumes still need to be officially confirmed, but consensus is that potash inventories are high. In this context, what is expected for potash?

GA: Camila, Brazil imported a record volume of potash this year, reaching around 13.5 million t, up by 14pc on the year. The problem is that negotiations on fields did not follow the pace of imports, with product pilling up in stocks. There was high competition between producers, with Belarus regaining its third place on market share, from fifth in the previous year. in 2023 The competition between potash producers also helped to keep prices in a downward trend. Argus estimates that potash carryover stocks may reach 2.5mn t, up by nearly 16pc on the year. Official data from Brazil’s national fertilizer association Anda is expected to be released in March. High potash stocks should continue exerting a downward pressure on prices in the first quarter. Some demand for potash to February-March delivery was registered in late 2023 to supply the 2024-25 soybean crop. The offers, however, had a premium over spot levels, reaching up to $360/t cfr while spot market was at around $315/t cfr in the occasion. Prices have currently decreased to an average of $300/t cfr.

RC: Thanks a lot, Gisele. 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!