Brazil Pledges USD $13 Billion to Domestic Fertilizer Production

August 29, 2013 05:20 AM

Port problems, declining infrastructure and geography all work together to cause headaches for South American farmers when it comes to fertilizer. Brazil imports nearly 70% of the fertilizer its growers consume each year, and a recent meeting of the Third Fertilizer Congress highlighted the need for domestic nutrient production as a means to reduce imports.

When Vale S.A. announced it was tabling its Rio Colorado project in Argentina, the stakes were raised prompting the National Fertilizer Distributors Association (Anda) to suggest an investment of USD $13 Billion over the next five years in domestic fertilizer production.

All told, the proposed projects would reduce Brazilian imports from the current 74% to 54% of annual nutrient demand by 2018. Nitrogen production would increase from 2013's 0.825 million tons to 3.99 million tons; Phosphate production would increase from 2.24 million tons to 4.1 million tons annually and Potassium production would increase from 0.278 million tons to 0.72 million tons.

Pro Farmer South American contributor Dr. Michael Cordonnier says, 'The Brazilian government has long recognized the fact that they cannot be so highly dependent on the volatile international fertilizer market so they have set a goal of being self-sufficient in fertilizer production by the year 2020."

The additional production capacity is expected to mitigate delays in shipping as imports through the Port of Paranagua are frequently held up by labor disputes and strikes. In 2012, this led to planting delays as growers were forced to stand idle while fertilizer was moved from the Port to suppliers along infrastructure much in need of improvements.

As Brazil surveys its competitors, a reduction in imports resulting from increased domestic nutrient production would give growers better access to fertilizer when it is most in demand. But in order to make the ventures profitable, local tax structures will need to be redesigned to favor domestic product over imports.

"One of the problems in Brazil is the fact that the local tax structure favors imported fertilizers over domestically produced fertilizer. Fertilizer executives feel the tax structure is exactly the opposite of what the country needs if it wants to significantly reduce fertilizer imports," Dr. Cordonnier notes.

If all goes according to plan, Brazil hopes to be fertilizer independent by 2020. China imports 7% of its fertilizer each year. India imports 43% and the U.S. imports roughly 36% of its annual fertilizer needs. With Brazil off the top of the charts importing 70%, production increases will go a long way to stabilizing the flow of nutrient to end users and, once the import tax policy is fixed, may help growers save on inputs.


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