Fertilizer Latino Americano 2023

CONFERENCE REPORT

Fertilizer Latino Americano 2023

More than 1,000 delegates from 500 companies and 60 countries gathered at the Sheraton Grand Rio Hotel & Resort, Rio de Janeiro, Brazil, 29 January – 1 February, for the 2023 Fertilizer Latino Americano (FLA) conference. The event was hosted by CRU in collaboration with Argus. With attendance at record levels this year, we present selected highlights from this year’s four-day FLA event.

More than 1,000 delegates attended FLA in Rio which was hosted by CRU in January/February, making it the most successful year in the event’s history – which stretches back more than three decades.

PHOTO: CRU

What’s next for prices?

In this opening conference session, a panel of CRU analysts provided an overview of the nitrogen, potash and phosphates markets. Their key messages were:

• Nitrogen prices are falling in a market characterised by ample supply and demand resistance
• Phosphate prices are normalising after the 2022 supply shocks from Russia and China
• The potash supply disruptions of the last 12 months are set to fade away as we move into 2023 and beyond.

Shruti Kashyap, CRU’s head of nitrogen, set the scene. Although global grain prices look set to follow a modest downwards trajectory, she suggested, they will still be supported by tight stocks, given that these ended 2022 at the lowest stock/use ratio for more than 20 years. And while fertilizer affordability is improving, the reluctance to pay high prices remains, in CRU’s view.

Shruti Kashyap, CRU’s head of nitrogen, opened the conference by heading up the markets overview panel.

PHOTO: CRU

In Europe, around 30 percent of nitrogen capacity (across ammonia, urea, nitrates and UAN production) was still down, as of January 2023. The TTF gas price (weekly average day ahead), which reached a high of $98/MMBtu at the end of August had, however, fallen back to around $25/MMBtu at the time of the conference. This price decline had improved European nitrogen production economics and partly reversed the widespread autumn/winter curtailments. These had peaked at more than 70 percent in September 2022.

Looking at nitrogen market prospects for 2023, CRU is expecting:

• Modest improvements in Latin American nitrogen consumption this year after poor affordability dragged this lower in 2022
• Support for Latin American urea imports driven by better affordability and stock build-up
• Support for global urea exports from the entry of new production capacity and China’s return to the export market
• Ample supply looks set to pressure urea prices, while ammonia prices also face a downturn on a weaker gas outlook and returning Russian exports.

CRU forecasts that Russian ammonia exports from Black Sea and Baltic Sea ports could resume in the second half of this year, after recent UN reports suggested that an agreement may be close. Exports from both ports ceased after the start of the Russia-Ukraine conflict at the end of February last year.

Phosphate prices are continuing to recover from their excessive 2022 peak, said Maurício Fortuna, CRU’s phosphate fertilizer analyst. Prices have fallen across the board with Brazil MAP (monoammonium phosphate) prices correcting and stabilising particularly fast. Phosphate supply disruptions resulting from the Russia-Ukraine conflict were not as dramatic as many had expected, said Fortuna, a factor that had encouraged prices to stabilise.

Phosphate sales to Brazil fell by nine percent year-on-year in 2022. Inventories swelled from April onwards and were filled by August. “We expect the return of normal demand in 2023, with imports likely to pick up in coming months, even as Brazil enters the year with strong inventories,” Fortuna said.

The key potash market observations from Logan Collins, CRU’s senior potash markets editor, were:

• Potash prices are now mostly in decline – following the record highs of 2022. MOP (muriate of potash) spot prices surged in 2022 on supply fears, with Brazil reaching $1,210/t cfr in April last year. The Brazil MOP price is, however, now largely stable at $515/t cfr.
• Affordability has improved in Brazil – supporting a rebound in demand. Potash affordability in Brazil is now at its most favourable level since mid-2021 with a barter ratio of around 17 bags of soy per tonne of MOP.
• Supply disruptions are fading as Russian/Belarusian volumes reach those markets that will accept them. Potash exports from Belarus and Russia were 4.8 million tonnes (61% down y-o-y) and 7.7 million tonnes (32% down y-o-y), respectively, in 2022. China has largely maintained its MOP imports from both countries. Russian shipments have proved most resilient with imports across American and some Asian markets keeping in line with historic norms.
• Effective production capacity continues to grow – especially in Canada. Around 15.3 million t/a of MOP capacity additions are expected between 2022-2026, outpacing forecast demand growth of 7.7 million t/a over this period.
• Prices will remain under downwards pressure during 2023 as supply returns.

NPCT’s director general Luís Prochnow explaining how best to manage fertilizer use at a time of high prices – in a well-received and authoritative presentation.

PHOTO: CRU

Fertilizer use in a time of high prices

The use of fertilizers needs to follow the science – especially in times of high prices. That was the clear message from Luís Prochnow, the director general of Brazil’s NPCT (Nutrição de Plantas Ciência e Tecnologia). He listed the following 12 strategies to help growers adjust their fertilizer management and achieve better returns:

• Evaluation and control of soil fertility
• Good nutrient management practices that follow the 4Rs (right source, right rate, right place, right time)
• Liming to improve nutrient use efficiency (NUE)
• Soil profile improvements to boost root growth through no-tillage practices and/ or phosphogypsum use
• Selection of the right crop varieties to ensure better plant development, stronger roots and greater nutrient uptake l Greater adoption of no-tillage systems to improve organic matter content, soil physical properties and nutrient availability
• Crop rotations, especially those that include grasses in the cropping system
• Monitoring and improving soil health by microbial testing and the application of microbial products
• Farmer education programmes on the wise use of nutrients
• Ensuring farmers can access crop consultants experienced in plant nutrition
• Finally, knowing exactly how much knowledge to apply per hectare and per plant – fast operational procedures should not surpass good quality ones!

Luis quoted the late Dirceu Gassen, Brazilian agriculture’s great visionary, who said: “Farmers and crop consultants need to act like engineers in measuring, calculating and interpreting – and then make decisions.” He also pointed out that none of the above measures were quick fixes.

Pedro Paul Dias, economist at BNDES, explains the financing options for Brazil’s fertilizer sector.

PHOTO: CRU

Most were strategies for the longer term – and therefore not just for times when fertilizer prices were high.

Nutrient use efficiency

How to increase nitrogen efficiency. That was the focus of the presentation by Augusto Meneses, vice president at Verdesian Life Sciences. Two Verdesian products were able to achieve this goal – one by increasing nutrient use efficiency (NChargeG) and the other by controlling nitrogen losses (Trident).

NChargeG incorporates Verdesian’s cation exchange resin technology. This combines the benefits of long chain polymers with high cation exchange capacity and lower pH – and is proven to increase nitrogen efficiency in soils. Rice field trials with NChargeG in Puerto Gaitán, Colombia, for example, delivered a 23 percent yield improvement, compared to growers’ standard practice.

Trident, meanwhile, protects against nitrogen losses due to volatilisation and denitrification-leaching, respectively, by incorporating nBPT (15%) and DCD (5%). The other active ingredients are a patented co-polymer that maximises the efficiency of nBPT and DCD and a patented solvent that stabilises the formulation. In a US corn trial, Trident treated urea delivered a yield of 12.5 t/ha versus 12.1 t/ha for untreated urea.

Another of Verdesian’s innovative products, AvailT5, is designed to improve phosphorus availability by reducing soil fixation. It contains anionic polymers which complex with soil iron and aluminium ensuring that more phosphorus remains plant-available in the soil solution. In corn trials, the application of AvailT5 with MAP improved agronomic efficiency by increasing corn yield from 8.1 t/ha to 10.0 t/ha at an optimum MAP application rate of 110 kg/ha

Fertilizer Industry financing in Brazil

Pedro Paulo Dias, economist at the Brazilian Ministry of Mines and Energy (BNDES), outlined the available financing options for Brazil’s fertilizer sector. BNDES has leveraged BRL 5.6 billion of support for more than 3,600 fertilizer-related activities in Brazil since 2002. This was delivered via BRL 3.4 billion in direct support and BRL 2.2 billion in support from financial partners.

With the launch of the National Fertilizer Plan last year, the Brazilian government was very much focussed on growing domestic production capacity, Dias said. The plan was supported by reforms to the tax regime (ICMS Agreement 100/97) which will equalise taxation on imports and domestic fertilizer products from 2025.

BNDES is supporting new fertilizer production projects by offering long-term corporate finance of up to 20 years and covering up to 80 percent of the necessary investment. FINAME (Financing Fund for the Acquisition of Machinery) loans are also available for equipment acquisitions.

The recovery of degraded pasture was another priority for the Brazilain government and the country’s agricultural sector. Pedro quoted Carlos Favaro, Brazil’s Minister of Agriculture: “In Brazil, there are 40 million hectares of pastures with very low productivity, which can be and are suitable for agriculture. They can and should be restored – making it possible to increase production without the need to convert new areas.”

Recovery would also create more demand for fertilizers and agricultural lime. The restoration of 10 million hectares of degraded pasture, for example, would require 20 million tonnes of lime and between 9.7-15.7 million tonnes of fertilizers, depending on agricultural land use. Restoring 20 million hectares of degraded land would cost more than BRL 90 million, according to some estimates. Fertilizer applications make up most of the restoration cost, although its contribution to costs varies greatly depending on the agricultural use – being as high as BRL 4,559/ha for pasture/cropland systems.

“Farmers and crop consultants need to act like engineers in measuring, calculating and interpreting – and then make decisions.

Brazilian market deep dive

2022 was a year to remember for soft commodities. The soybean price, for example, averaged a spectacular $15.09/bushel last year. That compares to the $13.60/ bushel average for 2021 and the $9.27/ bushel price average over the preceding four-year period 2017-2020.

Nevertheless, Bruno Fonseca, senior economic analyst at Rabobank Brazil, described 2022 as a frustrating year. Fertilizer deliveries to Brazil went into reverse and fell back by 5.6 million tonnes last year, having risen year-on-year by 4.3 million tonnes in 2020 and 5.3 million tonnes 2021. Fertilizer affordability in 2022 did not do farmers any favours either, Fonseca suggested, with crop nutrients generally at their least affordable since the 2008 fertilizer price peak.

However, another way of assessing the market over the last two years, said Fonseca, was by asking: “Was 2022 a frustrating year – or was 2021 too good?” The stars certainly did seem to align for Brazil in 2021 with, for example, low potash prices (<$250/t) and high soybean prices ($13.60/bushel average) combining to provide record soybean margins (70%) for growers.

A similar analysis might also conclude that Brazilian fertilizer deliveries in 2021 (46 million tonnes) were an above-trend outlier and that the downwards correction seen in 2022 was mostly a return to trend.

Looking ahead, Rabobank expects to see a recovery in Brazilain fertilizer demand in 2023. This is likely to be accompanied by fertilizers taking up of a smaller share of operational costs and overall margins improving for growers – if current agricultural commodity price levels are maintained.