Tight fertilisers market risks dampening Brazil’s 2022/23 crops

Surging fertilizer costs have stoked concerns about production globally, but for Brazil - where many farmers have already locked in their supply of inputs for the upcoming harvest - fears are growing that the products booked may not be delivered.

If that scenario comes to pass, there are potentially-huge consequences for production outlooks. 

“At current market conditions, buying inputs is one thing... getting them delivered in time is something else,” Agrinvest’s fertilisers analyst Jeferson Souza told Agricensus.

Although most fertilisers for the main soybean and the second corn crop safrinha planting in the current marketing year have been purchased, it is still uncertain whether they will be delivered according to contracts.

“For soybeans there were some delays but no major impact on the crop overall,” Agrural’s Daniele Siqueira told Agricensus, but the outlook is much less sanguine for second corn crop - the safrinha - planted on land vacated by the first soybean crop.

“As for 2022 safrinha corn, there is a real risk that not all fertilisers that have already been purchased will be delivered… with potential impacts on yields,” Siqueira added.

This uncertainty is related to several supply disruptions in the global market that have their roots in the global economic recovery this year from the pandemic.

Bottlenecks have hit major producers and exporters in the trade, including China, Russia and Belarus.

As Brazil’s 2021/22 soybean planting has advanced at a fast pace so far, safrinha corn sowing is expected to start as early as January in some parts of the country.

Some farmers are needing to secure inputs by as early as December - making next month a key deadline.

“By December we will start to have a better idea if purchased-but-not-delivered fertilisers might weigh on the upcoming safrinha crop,” Souza said.

Looking beyond the current marketing year, Brazilian farmers may face some further headwinds due to high production costs in the seasons ahead.

“Fertilisers might be an issue for 2022/23 soybeans… farmers have been complaining about challenges to secure supplies as even sellers are not fully confident about how to capture prices for fertilisers for deliveries so far ahead,” Siqueira said.

“Making a historical comparison to 2005/06, when farmers’ margins were severely squeezed, we might see Brazil’s acreage suffer in 2022/23, with a halt in acreage growth or even some decrease in planted area,” Souza told Agricensus.

“Moreover, depending on how the production/inputs terms of trade develop ahead, there will be very little room for yield reductions and crop losses in 2022/23,” Souza added.

This scenario may become even more challenging considering that many farmers are opting to lock in input contracts for the 2022/23 crop at current high prices and are slowing down forward sales waiting for better prices.

If soybean and corn prices fall significantly, farmers could face losses and the outlook becomes a touch cloudier considering the high level of new debt Brazilian producers have contracted this year.

Besides risks of rising costs pressuring 2022/23 planted area, the lack of certain inputs also brings additional potential jeopardy for Brazilian yields.

“Brazil is particularly dependent on potassium chlorite and its supply may be limited in 2022, especially considering disruptions in Belarus,” Souza said.

“If farmers cannot secure the amount of potassium chlorite they need for the 2022/23 crop, we might see some yield losses,” the analyst added.