Brazil's fertilizer imports are set to be slow in the first quarter, with importers holding back deals as farmers focus on the 2023-2024 second corn crop planting.
Brazilian buyers usually intensify purchases of fertilizers for corn in the fourth quarter of the year, as it gives them time to receive the fertilizer in time to apply on the winter corn crop. But farmers have been postponing nitrogen-based fertilizer purchases, waiting for more clarity on the 2023-2024 soybean crop's development and for higher corn prices in the international market. The purchases are being pushed to the last minute, in line with the movement for soybeans in July-August.
The delay in soybean planting — in reaction to the El Nino weather pattern that brought drought to Brazil's center-west and heavier-than-usual rainfall in the south — will push corn sowing outside the ideal window. That may also compromise production of the grain, as the weather becomes more unfavorable for crop development as time progresses.
Farmers are less willing to invest in a crop surrounded by such uncertainties. And with corn prices below average (see chart), farmers have even less motivation to sell, which also delays input purchases as most of the crop is financed via barter transactions — when a given volume of production is exchanged for for one metric ton (t) of fertilizer.
That could push final purchases of small fertilizer volumes to early-mid January. Market participants do not expect much import volume in the month as delivery would not be on time.
Volumes traded in November-December are set to be delivered in January and vessels that were set to discharge in December will roll into 2024 because of long queues in main ports.
Lower liquidity in the import market is also expected for phosphates and potash, as farmers have sufficient quantities and there were record imports in 2023. But phosphate prices can find support in other regions, such as the US, where demand for first half 2024 could help prices to continue rising.
Brazil's strong imports of potash and lower demand point to a high carryover stock for 2024. Brazil imported 12.8mn t of potash in January-November, a 9pc increase from the same period last year. MOP stocks in mid-December were estimated at almost 4mn t, an elevated level for the period, considering deliveries to the market and imports, according to Brazil's association of fertilizer blenders Ama. Argus estimates MOP carryover to 2024 will reach 2.5mn t, up by nearly 16pc on the year. That should continue to pressure Brazilian prices into the first quarter.
Some demand for potash has been registered mostly for February-March to supply the 2024-2025 soybean crop. Future loading prices hold a premium over spot levels, with offers reaching $360/t cfr above spot prices.
Domestic market key for corn
Farmers' delayed deals for corn should be supplied by fertilizers already cleared by customs or en route to Brazil.
Market participants expect nitrogen-based fertilizer deals for the second corn crop to pick up mostly in January and to extend throughout the first quarter for later planting areas. Urea prices started going up in early December in southern Parana state, with the weekly range advancing by $47/t in Paranagua on 7 December. But lower liquidity pressured prices down again in the following weeks, reaching $389/t fob Paranagua in early January.
It is expected that volumes of ammonium sulphate (AS) and potash in the country will be delivered to farmers in the three-month period. January-November 2023 AS imports increased by only 1pc from the same period in 2022. Market participants report that there is still a high volume of these fertilizers available in warehouses.
But purchases should be limited by the soybean crop's development, considering delays and investments on a low-priced crop.
