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Fertilizer freight from Paranagua remains low

11 May 2018 18:20 (+01:00 GMT)
Fertilizer freight from Paranagua remains low

Rio de Janeiro, 11 May (Argus) — Fertilizer road freight costs between the key port of Paranagua and the main agricultural areas in Brazil's interior have declined in 2018 because of lower demand and a high availability of trucks.

Demand and freight rates normally fall in the first half of the year after the high volume of deliveries for use in the Central-West winter corn crop in January. Freight costs usually reach their annual peak at this time because of the low supply of return freight for fertilizers from ports. But current costs are the same as or lower than those normally observed in June, when they usually hit the annual floor.

Since the beginning of the year, Argus freight assessments between Paranagua and Rondonopolis and Sorriso in Mato Grosso state have fallen by 43.2pc on average to R95-165/t, surpassing the average decrease of 25.5pc in this same period in 2017. Meanwhile, freight costs to Rio Verde (Goias state) and Uberaba/Uberlandia (Minas Gerais) have fallen by 37.3pc and 23.6pc since January to R110-120/t and R$125-140/t, respectively.

Market participants have not ruled out further price declines in the coming weeks because of repressed demand as consumers delay deliveries amid exchange rate volatility and a lack of storage space in the interior because of the record 2017-18 soybean harvest. Since January the exchange rate has risen by 7.3pc to R3.54 to the US dollar.

But the decline in freight costs has had little influence on fertilizer prices in the domestic market, which mainly reflects the variations in import values for these products and the exchange rate.

"Fertilizer prices, especially for phosphate and potash-based ones, are rising in the interior of the country along with import values and the devaluation of the Brazilian real since January, despite low transport costs," said a representative of a trading company that operates in the Central-West. "Demand for transport is down but should increase in May-June and the cost of freight will increase, further increasing the cost of fertilizer for consumers."

Freight costs could perk up in mid-June, when demand for the service typically increases for use on the 2018-19 crop. Current repressed demand for freight services could be an additional driver of costs, overloading the fertilizer transport system and further increasing the cost of freight before applications for the next crop in July and August.

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