South America Calling
Alastair Stewart South America Correspondent

Friday 10/26/12

Brazil's Input Bottlenecks

With millions of tons of fertilizer stuck at port in August, Brazilian farmers were concerned whether supplies would reach them in time for the coming soybean and corn crop.

In the event, nearly all farmers are receiving their fertilizer and seeds on time, but it served as a wakeup call.

"We have a culture here of farmers demanding late-minute delivery of inputs. That puts a huge strain on Brazil's logistics, which are already stretched to the limit," said Eduardo Daher, executive director of the Brazilian Association of Plant Defense (ANDEF) and a long-time fertilizer industry executive.

Farmers do this, in large part, because they lack the storage space to keep large amounts of seed, nutrients and chemicals.

But this habit will have to change because the ports and distributors can no longer cope amid a sharp jump in demand for fertilizers and chemicals.

"Farmers are going to have to find a way to receive inputs earlier. Otherwise, they risk not receiving in time for planting or application," says Marco Antonio Nasser, president of the Brazilian Farm Input Distributors Association.

An expansion in planted area and more intensive farming have prompted fertilizer demand to rise 30% over the last three years to a projected 29 million metric tons in 2012, while herbicide, insecticide and pesticide demand has jumped 72% in six years to 826,700 tons.

This year, the situation was aggravated by stevedore and health inspector strikes at Brazil's port, which may or may not have been politically motivated -- it's an election year here -- and heavy rain in June and July, which slowed loading and unloading at bulk terminals.

Nonetheless, the fertilizer industry seems to have got through 2012 by the skin of their teeth as distributors dug into stocks to supply farmers and a lack of rain has delayed planting giving everyone a crucial few extra days to deliver inuts.

There are some exceptions, most notably in Mato Grosso, but those delays are mainly due to incompetence by local distributors rather than a lack of product, according to Cleber Noronha, grains analyst at the Mato Grosso Agricultural economy Institute (IMEA).

Hopefully the drive to produce more fertilizer domestically will ease the port bottleneck -- some 70% of NPK is currently imported.

"But heavy investment is needed to ease the port-farm bottleneck as volumes will continue to grow. It really raises our costs, and that cuts our competitiveness," said David Roquetti Filho, executive director at the Brazilian Fertilizer Association (ANDA).

For example Demurrage on late fertilizer deliveries at Paranagua port alone cost $120 million, or $3.85 per ton, last year. And the situation was much worse this year with up to 130 ships waiting as long as 90 days to load and unload at the port in August.

Posted at 2:20PM CDT 10/26/12 by Alastair Stewart
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