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Fertilizer prices at high levels challenge producers

Producers in Brazil are preparing themselves to start the 2021/22 planting activities in September, after the host-free period, to avoid the soybean rust. They have faced many challenges referring to the next crop budget, mainly because of the significant price rise for agrochemicals.

 

In the international market, price increases of nitrogen fertilizers were attributed to the lower production in China. As for phosphate fertilizers, values rose due to countervailing duties applied by the US on the product from Morocco and Russia. As a result, producers in the United States are looking for phosphate fertilizers in other countries.

 

From January to July 2021, the average price for prilled urea at the most important ports in the world was 60.3% higher compared to that registered in the same period last year. The average price for monoammonium phosphate (MAP) at ports in Casa Blanca (Morocco) and Saint Petersburg (Russia) rose by 96.3% in the same comparison.

 

As for potassium chloride, prices increased significantly. Between June and July, values soared 39.6% at the Vancouver port, in Canada. This increase is related to restrictive measures imposed by the European Union to Belarus in late June. It is worth mentioning that Belarus accounts for at least 1/5 of the global potassium chloride production, and it is the second world’s largest producer. Comparing January to July 2021, average prices at Vancouver port increased 26.9% compared to that registered in the same period last year. The average quote in July was the highest since December 2012, in nominal terms.

 

In light of that, players in both domestic and international markets are focused on the intervention of the Chinese government on fertilizers sales, on the political relation between Belarus and the European Union and on the advance of more covid-19 cases in many countries. In China, the government is pressing fertilizer companies to interrupt temporarily exports in order to guarantee the domestic supply. The Chinese government intervention in the market, in turn, aims to limit price rises of fertilizers in the country. China is the biggest producer and consumer of nitrogen and phosphate fertilizers, but it is also a major exporter of both products.

 

In Brazil (considering states followed monthly by Cepea), the average from January to July this year for urea values upped 58.4% compared to the same period in 2020. As for MAP, the average soared 90.3% in the same comparison. Concerning potassium chloride, the increase was 52.4% this year against 2020.

 

Simulations[1] performed by Cepea indicate that the average expense with fertilizers to produce soybean and summer corn in the 2021/22 season may move up 50.1% and 55.4%, respectively, compared to the crop before (2020/21). Concerning the second corn crop, beans, irrigated rice and wheat, average expense are likely to increase 53%, 65.2%, 68.2% and 71.1%, in the same order.

 

Other important items in the cost of production, such as chemicals for crop protection, diesel, preventive machine maintenance, have also increased. Therefore, the estimate for the total budget for the 2021/22 crop upped – the most significant increase was verified for soybean, 32.9%. As for wheat, the increase in the cost of production was 31.6%; for summer corn crop, 30.9%; for the second corn crop, 28.7%; for irrigate rice, 20.1%, and for beans, 16.1%. These costs might move up during this season (21/22), depending on the weather, the occurrence of pests and diseases at crops, on the exchange rate behavior and on prices of raw material for chemicals and oil in the producing countries.

 

 

[1] The simulations consider technical data gathered by Projeto Campo Futuro (a partnership between Cepea and CNA) of the 2019/20 crop, monthly input prices and average costs of production for soybean and summer corn crop in the 2020/21 season. Moreover, it was considered that 60%, on average, of the fertilizers in the 2020/21 crop were purchased at average prices in the first quarter of 2021, and the other 40% were acquired at values in the second quarter. As for other items that are part of the production cost, average values in the first quarter of 2021 accounted for 30% of the cost, and prices of the second quarter this year represented 70%. Average values estimated for the second corn crop, beans and irrigated rice are from the period between April to July/20 to represent the 2020/21 season, and from April to July/21 to indicate the 2021/22 crop; as for wheat, average prices are from February to May 2020 to represent the 2020/21 crop, and the same period in 2021 to indicate 2021/22.

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