May 6, 2008

 

High grain prices boost equipment sales in Brazil

 

 

High grain prices should boost sales of agricultural equipment in Brazil this year to record levels, after years of negative margins, manufacturers said.

 

However, producers are more cautious this time round, unlike the euphoria experienced in 2004, said Isomar Martinichen, commercial director at the Brazilian subsidiary of US-based machinery maker Case IH.

 

Brazilian grain producers suffered huge losses from 2004 through 2006, due to rising production costs and the gains of the real against the dollar.

 

Equipment manufacturers will not have a record output this year only because they were not prepared to fulfill surging demand, he said. Case IH expects an increase in equipment sales next year, too.

 

Massy Ferguson's subsidiary in Brazil is also enjoying the strong demand. Sales of grain harvesters jumped 115 percent in the first quarter from a year ago, said marketing director, Fabio Piltcher, director of marketing at Massey Fergusson.

 

"Whenever agriculture starts making money, all the input industry makes money," said Brazil's former agriculture minister Roberto Rodrigues, who is also the president of Latin America's largest agricultural fair, Agrishow, held in Ribeirao Preto last week. The fair is expected see 800 million reals (US$482.8 million ) worth of deals made this year.

 

However, the spreading of the credit crisis in the US to Europe and Asia and the increase in fertilizer costs could put a halt to growth, Rodrigues added.

 

Due to high demand in Asia and production delays, fertilizer prices are jpw close to record levels, he noted. The use of fertilizers would be lessened, but if prices remain at high levels, it could be a problem, according to Gilson Ferrucio Pinesso, a large cotton and grain producer in Mato Grosso, Brazil's largest growing state.

 

Pinesso said he pays now US$750 per tonne of potassium chloride compared with $208 per tonne a year ago. Phosphorus derivatives are at around $500 per tonne this year, up from US$180 in 2007.

 

De Marco said the situation is better as output rose and prices increase. The problems would surface when planting the new crop, he added.