Virus adds risk to Brazil fertilizer market: Correction

Corrects information type of protein defict in paragraph 9.

The coronavirus pandemic is clouding the economic outlook for agribusiness in Brazil, with logistics emerging as a main concern.

The pandemic has not yet resulted in changes to crop forecasts, but it has added uncertainty to them. In Brazil, the perspective for soybean and corn acreage has not changed so far. But analysts say that may change if the coronavirus pandemic takes too long to be resolved. A prolonged outbreak may impact demand for protein over the coming months, which in turn could lessen demand for grains as less animal feed is needed.

Demand for fertilizer is currently expected to reach 37mn t in Brazil this year, according to Dutch bank Rabobank. In 2019 fertilizer demand was 36.2mn t in Brazil.

"Before coronavirus, our outlook had an upward bias, but now has a downward bias," said Matheus Almeida, Rabobank analyst. "There is still potential for recovery if the situation returns to normal within 40 days."

Analysts in recent weeks have noted the risk of a logistical bottleneck in Brazil.

"The big challenge will be if we have a logistical flow challenge," said Guilherme Bellotti, an analyst at Brazilian bank Itaú BBA. "It can affect deliveries in the second half" of 2020.

Last week, Brazil's main port, the Port of Santos said it would maintain normal operations despite pressure from workers to shut amid coronavirus concerns.

On 22 March Canarana's mayor Fabio Marcos Pereira de Faria issued a decree prohibiting the flow of some goods outside the town, which is a key agricultural production hub. The lockdown on non-essential services to curb the spread of the coronavirus stoked concern about potential logistical problems for moving crops. But an agreement between the city of Canarana in Brazil's Mato Grosso state and trading companies such as Cofco, Archer Daniels Midland and Cargill will allow the movement of grains and oilseeds from the city to the country ports.

The demand for Brazilian agricultural products is so far not being affected. Although global growth of animal protein consumption is expected to slow, there is a huge deficit of pork — which is fed with soymeal and corn — in China. This demand can help compensate for reduced global demand from food service and restaurants, Bellotti said.

Brazil is expected to sow about 37mn ha and harvest 124mn t of soybeans. If producers decided to reduce the area by 1pc amid lower demand, it would mean 147,283t less fertilizer needed. For corn, about 18mn ha is expected, with a 1pc reduction resulting in 62,629t less fertilizer demand.

Fertilizer production has already shown some effects from the pandemic. The measures taken to limit the spread of the coronavirus have impacted operations at some of North American fertilizer producer Mosaic's phosphate rock assets in Peru and Brazil, as well as its supply chain in India. Mosaic announced that operations at its 4mn t/yr Peruvian Miski Mayo phosphate rock mine in Bayovar have been disrupted. The mine is a joint venture with Japanese trading conglomerate Mitsui, in which Mosaic has a 75pc shareholding. The mine produced 3.9mn t of dried product last year, with an average P2O5 content of 29.6pc.

Reports had emerged before the announcement that production at Miski Mayo had stopped last week. The impact has been felt in Brazil, with the open pit mine of Patrocinio in the southeastern state of Minas Gerais also affected. Mosaic operates two other mines in Minas Gerais — Araxa and Tapira — but did not provide updates on these sites.

In Spain, Israel-based potash producer ICL has halted all production from its Spanish MOP mines, after announcing last week it would cut output from its 950,000t/yr capacity Suria and 250,000t/yr Sallent mines by 50pc because of the effects of the coronavirus pandemic.

By Kauanna Navarro