Greater purchasing power of fertilizers has limited benefit for the 22/23 harvest, says Agrinvest
The current improvement in the exchange-to-purchase ratio of fertilizers at the Brazilwhich favors the farmer, has a limited effect for the 2022/23 season, since producers in most states have already purchased the input that will be used in planting the second crop, he told Reuters the consultancy agrinvest.
According to Agrinvest’s fertilizer market intelligence analyst, Jeferson Souza, only Minas Gerais It is São Paulo among the main producing states would still have a “window” for buying fertilizers for winter corn.
“Farmers comment that there is still between 15% and 20% of the need for fertilizers to buy for the off-season in these places, especially nitrogenous ones”, said the expert.
On the other hand, he said that the drop in the exchange ratio encourages producers –especially in Mato Grosso, which is the first to start summer planting– to work on purchases for the next harvest, which will start in September.
“In the case of soy, Mato Grosso has 55% of fertilizers purchased in 23/24, a number close to the historical average, but above the 44% of the same period last year”, stated Souza.
Producers in other regions, such as Paraná, normally move at a slower pace in the purchase of inputs and, according to the analyst, have around 15% to 20% of purchases of fertilizers made for 2023/24. In these cases, there is more room to take advantage of the favorable exchange ratio for the producer.
“There is also a feeling of caution on the part of the farmer because, last year, those who anticipated purchases a lot in advance paid more than those who bought at the ‘mouth’ of the harvest, in mid-August, when prices had already started to fall”, highlighted.
This Monday, the multinational Mosaic informed in a note that the Fertilizer Purchasing Power Index (IPCF), calculated by the company, reached an average of 0.99 points in January, the lowest number in the last 19 months, which indicates that the exchange ratio for the acquisition of fertilizers is favorable to the farmer.
The indicator was below the 1.02 level recorded in December and the 1.49 seen in the same month in 2022, according to the data.
According to the IPCF methodology, whenever the indicator is below 1, farmers have a positive exchange ratio. Results greater than 1 show that purchasing power is less favorable to rural producers.
“The result at the beginning of the year is due to the higher reduction in fertilizer prices (-2%) compared to agricultural commodities (-1.5%), in addition to the drop in international logistical costs of maritime freight and taxation in Brazilian ports ,” Mosaic said in the statement.
According to the company, the drop in fertilizer prices was led by the nutrients urea, potassium chloride and monoammonium phosphate.
“The Brazilian market demanded more phosphates than the global market, while the demand for potash remained stable. The lower global demand for nitrogenous products and the reduction in natural gas have influenced fertilizer production costs,” he added.
The index is also weighted by the exchange rate, which had a variation of 0.8% down in the dollar, highlighted Mosaic.
It is worth remembering that the IPCF ended 2022 with an annual average of 1.47 points, the highest level since 2019, with high results during the first half of last year weighing more than the slowdown that occurred at the end of the year.
Souza, from Agrinvest, recalled that the rise in fertilizer prices in the first half of 2022 was motivated by the war between Russia and Ukraine, which initially generated uncertainty about the supply of Russian inputs and its ally Belarus. However, with the continuity of deliveries to importers, he said that the market has become accustomed to negotiating with these countries even in the face of conflict, which removes the risk of shortages.
“Even before the start of the war, prices were already high, so now I don’t know if there is much room to fall, but new price drops are not ruled out, with the market returning to normal quotations”, he estimated.
He calculates that around 20 bags of soy are currently needed to purchase 1 ton of potassium chloride, based on the price at the port of Paranaguá. The number is below the 30 bags that were needed a year earlier, but still above the historical average of 18 bags.
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