Quarantine measures and transportation restrictions in China due to the COVID-19 pandemic have limited Brazilian farmers’ access to important inputs, such as pesticides. However, it is the variations in dollar prices and the exchange rate that are raising alarm bells in agribusiness, since Brazil buys 70% of the glyphosate used as an agrochemical in soybean, corn, and cotton plantations from there. “The active ingredient in glyphosate, which is reflected in prices, is heavily dependent on imports from China and the United States. Therefore, when it comes to prices, while on the one hand we have seen a significant rise in the dollar in the first quarter of 2020 and a buoyant market, creating expectations of a price pass-through to local buyers, on the other hand we see an opportunity for negotiation due to stable product prices on the international market,” says Erick Boano, vice president and founder of COSTDRIVERS, a data and market intelligence platform.
In 2019, fertilizers, herbicides and fertilizers (a category that includes glyphosate) ranked second in national imports, totaling US$ 9,1 billion (5,1% of the total), behind only petroleum fuel oils (7,3%). The volume of glyphosate is significant to meet the need for planting important crops. commodities exported by Brazil, such as soybeans, which alone is the main product sold to other countries. The Secretariat of Foreign Trade (Secex) highlights that Brazil sold, on average, 1,07 million tons of grain per day in the first week of May (versus 455,1 thousand in the annual comparison – growth of 135%) and that the 2020 season should produce a record 124,5 million tons, elevating the country to the top of the ranking of producers, currently occupied by the USA.
Fertilizers are more accessible
Boano points out that, unlike the case of glyphosate, the purchase of nutrients that make up the NPK mixture (a sum of potassium chloride, ammonium nitrate, MAP, DAP and SSP) is spread across ten countries – six of which account for 82% of Brazilian imports: Russia (28%), Canada (21%), Morocco (13%), Belarus (10%), Israel (6%) and Germany (4%), with the remaining 20% distributed among around 30 other trading partners. The compound is an important chemical fertilizer used in Brazil, with 16,9 million tons imported last year.
The logistical challenge also draws attention, but the expert highlights that, despite the volatility of the dollar, the prices of NPK raw materials fell in 2020. “Potassium chloride, which makes up potassium, recorded the largest variation among all nutrients in the period 2018 and 2019, of 19,7%, except in 2020, when it recorded a 14,7% drop from January to February. Ammonium nitrate, which represents nitrogen, showed a drop of 11,7% in the same period”, he states. On its platform, COSTDRIVERS also points out that the composition of phosphates was the one that recorded the greatest price drops in the period, with the following variations: MAP (-14,2%), DAP (-12,5%) and SSP (-14,9%).