AgroPages-Brazilian farmers adjust timing of fertilizer purchases in 2017-Agricultural news

Brazilian farmers are expected to take delivery of more fertilizers in 2017 than in 2016, but the timing of the deliveries will be different. Brazilian farmers purchase a significant amount of their fertilizers through a barter process with grain companies. They receive fertilizers and other inputs before the growing season begins in exchange for delivering a promised amount of grain to the companies at a later date.

During the 2016/17 growing season, the exchange between fertilizers and grain was more favorable and as a result, farmers took delivery of the fertilizers they needed to plant their safrinha corn in late 2016 instead of early 2017, when the crop was actually planted. In other words, they could purchase more fertilizers in exchange for a sack of grain to be delivered at a future date.

It now appears that the exchange between grain and fertilizers will not be as favorable for the 2017/18 growing season. As a result, many Brazilian farmers may take delivery of the fertilizers needed to plant their safrinha corn during the first few months of 2018 instead of late in 2017.

This difference in delivery times has led to a reduced estimate in the amount of fertilizers that will be delivered in 2017. INTL FCStone is estimating that farmers in Brazil will take delivery of 1% less fertilizers in 2017 compared to 2016. They have revised their estimate of fertilizer purchases in 2017 to 33.7 million tons, which is less that what is estimated by the Brazilian National Association of Fertilizer Distributors (ANDA).

The reduced estimate may be more a function of when the fertilizers will be delivered and less a function of the amount of fertilizers Brazilian farmers will utilize for the 2017/18 crops. Brazilian farmers are expected to increase their soybean acreage in 2017/18 by approximately 2% compared to last year and their safrinha corn acreage is also expected to increase.

Another reason why fertilizer demand may increase in 2017/18 is the fact that farmers need to replace the nutrients removed from the soil due to the record grain production in 2016/17. According to Conab, Brazil produced 238.2 million tons of grain in 2016/17, which was 27.7% more than last year and 14.7% above the previous record.

Even though Brazilian farmers have been slow sellers of their 2016/17 grain production due to low prices, many Brazilian farmers harvested record amounts of soybeans and corn due to the nearly ideal growing season weather. As a result, even though commodity prices are low, they are better capitalized going into the 2017/18 growing season than they were the prior year.