Rabobank Group

20-7-2010 | Food and Agribusiness news

Despite a 6 billion dollar government injection to develop its home industry, the Brazilian fertiliser sector will remain dependent on imports, according to a new Rabobank report ‘Changes in Brazil’s Fertiliser Industry’. “Plans to increase fertiliser production in Brazil will not eliminate the country’s fertiliser imports. Instead, they will open a new window of opportunity for retailers,” says Rabobank analyst Erin Fitzpatrick.

World's second largest importer of phosphate and potash fertilisers
Agriculture represents 25 percent of Brazil’s GDP, a figure which is set to grow since Brazil is also home to 13 per cent of the world’s untapped arable land. And the growing agricultural sector brings with it a strong demand for fertiliser. Despite the country’s own large reserves of phosphate rock and potash, today more than 70 percent of Brazil’s fertiliser use is imported, making it the world’s second largest importer of phosphate and potash fertilisers.

New incentives to encourage domestic fertiliser industry
In early 2010, the Brazilian government announced new incentives to encourage the expansion of its domestic fertiliser industry, to reduce this import dependency and the related exposure of its farmers to international price volatility. The government has allocated $6.2 billion to the sector, as part of an $880 billion programme focused on infrastructure investments to boost economic and social development.

 “No details are available of how the money will be spent, but the government is likely to focus on developing the private sector, in contrast with previous announcements that it might nationalize privately owned reserves,” says Erin Fitzpatrick, Rabobank Food & Agribusiness Research and Advisory (FAR) Farm Inputs Analyst.

“Brazil’s economic reserves of phosphate rock and potash place them sixth and fifth in the world, respectively. While phosphate rock reserves are sufficient to meet the country’s demand through capacity expansions, potash reserves can be further developed in Brazil, but will not be enough to meet long-term demand in the country.” 

Expansion plans could double Brazil’s phosphate rock production and triple potash production by 2015. At least half of phosphate and all of potash expansion will come from reserves controlled by Vale, a Brazilian company that is now the country’s biggest producer of these two nutrients.

A change in Brazil's fertiliser chain
“Vale is putting production into the hands of fewer companies, which represents a change in Brazil’s fertiliser chain,” says Priscila Richetti, a FAR fertliser analyst based in Brazil, and co-author of the report. “This leaves less integration between upstream and downstream players in the value chain causing retailers to seek new strategies. Which, in turn, opens the door for new market entrants at the retail level, which could interest international or regional companies.”