CPEW exclusive: Brazil’s PPP imports decline by 49% yoy from January to May, with agricultural market outlook remaining optimistic

• Brazil’s agri- inputs imports are expected to experience a significant drop in 2023
  

• Channel inventory remains high
  

• Market development potential remains promising
  

• Sustainable cultivation is preferred over speculative short-term gains in agriculture

On July 13-14, 2023, Mr. Alberto Araujo, CEO of Belagricola (Brazil), delivered a presentation on ″Integration of Brazilian Agri-inputs and Supply Chain Management of Ag-retailer″ at the 7th China Pesticide Exporting Workshop (2023CPEW), hosted by AgroPages. He shared the latest import data for fertilizers and plant protection products in Brazil for the period from January to May 2023, highlighting significant inventory levels of bulk agrochemical products in the Brazilian distribution channels, specifically using Glyphosate and Atrazine as examples.

Alberto Araujo, CEO of Belagricola

7th China Pesticide Exporting Workshop (2023CPEW)

According to Alberto Araujo, data from the National Association of Distributors of Agricultural and Veterinary Supplies (″Andav″) revealed a substantial decline in the imports of fertilizers and plant protection products (″PPP″) for the first five months of 2023 compared to the same period in previous years. From January to May 2023, Brazil imported fertilizers worth $5.934 billion, indicating a decrease of 37.8% in import value and a 10.4% decrease in import volume year on year. In terms of prices, Brazil’s imports of fertilizer products reached a record high in the past decade in 2022 and experienced a slight decline in 2023 compared to 2022, but, the overall trend over the past decade still showed an upward trajectory.

Source: Andav www.andav.com.br

The decline in imports of plant protection products in Brazil in 2023 was even more pronounced. From January to May 2023, Brazil imported plant protection products worth $1.288 billion, witnessing a decrease of 32.7% and an overall import volume decrease of 48.9% compared to the same period in 2022.

Source: Andav www.andav.com.br

The imports of Glyphosate plummeted by 68.61% year on year

Glyphosate is one of the most widely used herbicide varieties in Brazil and even in the world (with a market share exceeding 30% globally).

As indicated in the table below, from 2020 to 2022, Brazil’s imports of Glyphosate increased from 100,100 tons to 142,000 tons, representing a growth rate of over 40%. However, during the period from January to May 2023, the total import volume of Glyphosate technical to Brazil was merely 20,000 tons, representing a sharp drop of 68.61% year on year.

Source: Andav www.andav.com.br

The imports of Atrazine dropped by 47.20% year on year

Atrazine is among the top-selling herbicide varieties in Brazil. As a pre-emergent and post-emergent herbicide with systemic selectivity, Atrazine is primarily used in sugarcane, sorghum and corn crops. Due to its relatively low cost and effective control effect, Atrazine has gained popularity, especially as Glyphosate’s efficacy decreased.

From 2020 to 2021, Brazil’s imports of Atrazine formulation products remained around 10,000 tons. In 2022, the imports surged threefold, reaching 32,000 tons. Additionally, the total imports of Atrazine technical and formulations increased from 37,000 tons in 2021 to 53,000 tons in 2022, representing a growth rate of 43%. Nevertheless, during the period from January to May 2023, the imports of Atrazine formulation products witnessed a significant decline compared to the same period in 2022, with a substantial year-on-year decrease of 47.20%.

Source: Andav www.andav.com.br

It is evident that both Glyphosate and Atrazine have relatively high inventory levels in Brazil. However, the actual usage of these products by farmers has not increased significantly. This could explain the drastic reduction in purchase quantities during the period from January to May 2023 compared to the same period in the previous year.

The term ″de-stocking″ has become quite common this year. For instance, on one hand, Brazilian distributors may report that inventory levels remain high (ranging from 40% to 140%), while upstream suppliers may claim that de-stocking is accelerating, and some have even cleared their stocks entirely. On the other hand, Bayer’s semi-annual report explicitly mentions that weak demand for Glyphosate in 2023 has led to a decline in sales outlooks, further complicating the understanding of the actual inventories. Regardless of the circumstances, exploiting information gaps in the market for violent speculation or cutthroat competition, leading to drastic price fluctuations in the short term, can inflict enormous harm on market confidence and agricultural production stability.

The long-term outlook for the Brazilian agricultural market remains positive

Though the short-term growth rate may be affected due to various factors over the past two years, we believe that the Brazilian agricultural sector still holds great potential. For the 10-year period from 2020 to 2029, we project a growth rate of around 150% in agri-inputs sales in Brazil, with an annual compound growth rate of 15%. Several reasons support these expectations:

Firstly, Brazil has around 22 million hectares of arable land that can be developed for agriculture (excluding factors that involve deforestation), capable of producing over 120 million tons of grain, primarily corn and soybeans.

Secondly, the introduction of new agricultural inputs, such as biofertilizers and biopesticides, is contributing to rapid sales growth.

Thirdly, Brazil practices fallow farming, and the level of land degradation and contamination is relatively low, leaving room for increased agri-inputs use per unit of land.

Lastly, though China’s import of staple food grains may not have much room for growth, its dependency on imported plant oils and feed, particularly plant protein, still exceeds 85%. Additionally, China is the world’s largest grain and oil reserve country. After the Russia-Ukraine conflict, Brazil has become the most stable grain source for China. Brazil can not only ensure the export volume but also has relatively good geopolitical relations with China.

In summary, the pesticide industry is a highly regulated sector with the primary objective of safeguarding agricultural production and promoting plant health in an environmentally friendly manner. However, excessive marketing combined with artificial interventions can lead to volatile fluctuations in agri-inputs prices, undoubtedly harming market confidence and tarnishing the image of agri-inputs brands. Brazil’s long-term agricultural production security holds significant importance for China’s food security. Hence, we advise China’s agri-inputs companies to conduct in-depth research, adopt scientific planning, exercise prudent operations, respect local culture, carefully nurture the market and seek a long-term growth strategy when entering the Brazilian market.

About Belagrícola:

Belagrícola is one of the leading agri-inputs sales platforms and grain acquisition platforms in Brazil. The company operates in 165 cities across the northern region of Paraná, the southern region of São Paulo, and the state of Santa Catarina. With 37 agricultural product warehouses, 57 retail stores, and a team of over 200 agricultural experts, Belagrícola offers one-stop agri-inputs (seeds, pesticides, fertilizers, etc.) procurement solutions to farmers, and has established a robust sales system and a complete industry chain layout encompassing grain acquisition, warehousing, logistics and export.

In 2017, Pengdu Agriculture & Animal Husbandry Co., Ltd., a Chinese agricultural company, acquired a 53.99% stake in Belagrícola for $200 million. Following this acquisition, Belagrícola began providing B2B solutions to facilitate Pengdu’s entry into the Brazilian fertilizer and agrochemical markets.