February 18, 2008

 

Brazil soy harvest underway; fertilizer prices problematic

 

 

Brazil's 2007-08 soy harvest is underway, with much of the centre-west soy belt expected to be at least in the early phase of harvest in some fields, Andre Pessoa, director of farm consultancy Agroconsult, said Friday (February 15).

 

Agroconsult kicks off its annual 11-state crop tour next week, with three different teams of agronomists and soy market specialists visiting soy fields from Tocantins in the north to Rio Grande do Sul in the south.

 

Pessoa told a gathering of reporters in Sao Paulo Friday that he suspected no major downside surprises with the new crop.

 

"Our expectation is for a very good crop," Pessoa said.

 

In January, Agroconsult estimated the crop to be around 60.9 million tonnes compared to the previous year's harvest of around 58 million tonnes.

 

Pessoa said some pockets of major soy-producing states like Rio Grande do Sul and Goias had to deal with prolonged dry spells over the last month.

 

"But we don't see any serious problems with this crop at this time," he said. "Their problems will be made up by better productivity elsewhere."  

 

Skyrocketing fertilizer costs will likely be the main theme among farmers during the crop tour, which officially ends on March 10.

 

Demand from farmers the US, European Union, China and India - on account of both biofuels and overall demand for food - has the prices of the raw materials for making fertilizer rising around the world and not just in Brazil, Pessoa said.

 

He said he doubted a recent study by the Agriculture Ministry that said Bunge Fertilizantes, a subsidiary of Bunge Ltd. (BG), had created a price-fixing cartel of sorts with competitors Mosaic and Yara Brasil SA (ILMD4.BR).

 

"We have some farm cooperatives in Mato Grosso who buy the raw materials - phosphate, sulphur, whatever - directly from the overseas suppliers and they are all paying the same prices," Pessoa said.

 

"I suspect that fertilizer prices will keep rising next year, and this could tap into the margins of producers and cause some of them to ease back on investing in next year's crop," Pessoa said, adding that soy farmers still have good profit margins despite fertilizer costs doubling or tripling in some cases, depending on the brand and type of fertilizer.

 

"If I were a Brazilian farmer, I'd be buying my fertilizer for next year's crop right now before US farmers start buying in droves and prices rise again," he said.

 

He said the four main consumers of fertilizer - the US, EU, China and India - together purchase 10 times as much fertilizer as Brazil does.

 

Pessoa said cotton farmers were suffering most from higher fertilizer costs and this could cause some of them to turn to soys next year.

 

"Cotton farmers might just plant what they need to plant to fill orders and not much more. They could turn to soy in 2008-09," he said.

 

Brazil is the world's No. 2 soy producer behind the US.