São Paulo – Prices of nitrogen, phosphate and potash fertilizers remain high, affecting Brazil’s agribusiness supply chain. Two of the main drivers are the conflict in the Middle East and China’s export restrictions. According to experts speaking on Thursday (30) at the online event “Fertilizer volatility: geopolitics, prices and how producers can reduce risks,” organized by SCA Brasil Aliança, prices are expected to remain elevated in the coming months.
According to Renata Cardarelli, Agriculture and Fertilizer Pricing Specialist at Argus Media, the conflict in the Gulf has disrupted shipments of urea, a nitrogen fertilizer, through the Strait of Hormuz. Besides affecting supplies to end users, the conflict has also disrupted the flow of raw materials used in fertilizer production. About 16% of the world’s phosphate fertilizers, 35% of nitrogen fertilizers and 50% of sulfur pass through the Strait of Hormuz.
“Urea prices are highly volatile and closely tied to developments in the Middle East, a key region for nitrogen fertilizer production. There’re also concerns about natural gas, which is a key input for nitrogen fertilizers,” Cardarelli said. Adding to the pressure, China has restricted fertilizer exports since March to protect its domestic market.
The current situation has already prompted Brazil to seek alternative suppliers, said Marcelo Soto, Head of Operations and Supply Intelligence at SCA Brasil Aliança. Among them are Nigeria, which has a surplus of 2 million metric tons of fertilizer, and Bolivia. “Whenever there’s a problem in the Middle East, fertilizer prices rise in other markets. Urea prices, for example, can jump by USD 100 in a single day and then fall just as quickly,” Soto said.
Higher fertilizer prices are creating challenges across the agricultural supply chain, the experts said. Ocean freight costs have risen as insurers charge higher premiums for shipments through conflict-affected regions. Higher prices may also prompt farmers to delay fertilizer purchases, leading to a buildup of cargo at Brazilian ports and higher port fees, the speakers said.
Home to one of the world’s largest farming sectors and among the leading global grain exporters, Brazil is a major fertilizer consumer that relies heavily on imports. About 95% of its nitrogen and potash fertilizers and around 70% of its phosphate fertilizers are imported. Although the government has invested in restarting domestic fertilizer plants, particularly through state-run oil firm Petrobras, Brazil is expected to remain dependent on foreign supplies in the coming years.
Both Soto and Cardarelli said fertilizer prices are likely to remain high even if the conflict in the Middle East ends soon, due to strong competition in the global market. They recommended that farmers plan fertilizer purchases well in advance.
Read more:
Global fertilizer trade down 30%
Translated by Guilherme Miranda
