Fertilizer International 519 Mar-Apr 2024
31 March 2024
Fertilizer Latino Americano 2024
CONFERENCE REPORT
Fertilizer Latino Americano 2024
More than 900 delegates from 400 companies and 56 countries gathered at the Hilton Downtown Hotel, Miami, Florida, 5-7 February, for the 2024 Fertilizer Latino Americano (FLA) conference. The event was jointly convened by Argus and CRU. We present selected highlights from this year’s three-day conference.
Fertilizer Latino American returned to Miami, that most Latin of US cities, having last been held in the Sunshine State in 2022 (Fertilizer International 508, p24). The event has drawn record numbers in recent years (Fertilizer International 513, p20) as the industry has returned to in-person events post-Covid.
Delegates arrived on Sunday 4th February in the middle of a tornado warning. This extreme weather event was apt, given that sustainability was the focus of the event’s opening day on Monday. This remains an overarching theme for the fertilizer industry which, as highlighted at last year’s IFA conference in Prague (Fertilizer International 516, p36), continues to define itself as the place where energy and food markets intersect.
All things sustainable
Unshaken by Sunday’s extreme weather, the conference opened on time on Monday. The opening sustainability forum focused on decarbonisation, EU emissions trading, green ammonia, next generation fertilizer technologies, biostimulants, micronutrients and AgTech.
Sustainability is very far away from being something people are willing to pay for, according to Hunter Swisher, the CEO of Phospholutions, because there is still a need for sustainability to demonstrate value.
“Profitability still drives farmer decisions, not sustainability. A product that is less cost effective but more sustainable is simply not a viable product,” he said. The yawning gap between farmer and industry perceptions of sustainability therefore need to be bridged, in his view.
USDA research shows that since 1961 global agricultural productivity grew at 2-3 percent annually, according to Chris Ferreira, Verdesian’s managing director, LatAm & Spain. Previously, these gains have largely been driven by land expansion, increases in irrigation and a greater use of inputs.
But an increasingly important driver has been total factor productivity (TFP). This measures improvements in farmer productivity from innovations in technology, labour and efficient farm practices.
From 1961-1970, TFP contributed a miniscule 0.05 percent to improvements in agricultural productivity. Its contribution to productivity has, however, increased rapidly in subsequent years, rising to 1.14 percent in the decade 2011-2020.
In recent years, therefore, ag innovation and greater resource efficiency are contributing more to feeding the planet, relative to other factors. In short: TFP is delivering more food from fewer resources.
Ferreira highlighted the role of fertilizer product innovation in delivering these agricultural productivity gains, now and in future.
Summing up Monday’s session, Tim Cheyne, head of agriculture and fertilizers at Argus, said: “It’s really interesting to see how sustainability is becoming a mainstream issue. Something that the main producers, consumers and farmers are increasingly needing to think about.
“We really dug into some of the key initiatives and technologies which are showing a lot of promise, in terms of improving nutrient use efficiency, [including] biostimulants and biologicals.”
Unprecedented volatility and regional risks
Global fertilizer markets, Latin America’s role in global food security, Brazil’s new agricultural strategy and its ambitious new National Fertilizer Plan were the focus of Tuesday’s keynote presentations. Market volatility and supply risks were highlighted throughout. Markets in Argentina, Uruguay and Paraguay also came under the spotlight.
Although recovery has been uneven internationally, Nutrien continues to see demand rising in its key markets, particularly North America, according to Jason Newton, the company’s chief economist. He opened the main conference with a keynote address that placed the fertilizer market in regional settings and its wider global context.
Unprecedented commodity market volatility was a key theme of Newton’s presentation.
“We are, in the last 2-3 years, in an environment globally that is more volatile than certainly at any point in my lifetime – and probably in the lifetimes of most of you in this room,” he told delegates.
Newton flagged up three disruptive geopolitical events, namely:
- Russia-Ukraine. Currently, Ukrainian grain production and exports remain around 30 percent down from 2021/22 levels, while fertilizer exports from Russia have returned to near/above pre-war levels, with the exception of ammonia.
- The emerging Middle East conflict. This is a cause for concern given the region’s significance as a key maritime hub for global crude oil and LNG shipments. There are signs of increased shipping costs and transit times as vessels divert from the Red Sea. A widening conflict could impact on production and trade in the region, as well as wider global trade flows.
- China’s urea and phosphate export restrictions. These have tightened the global supply/demand balance. China has traditionally been a key destination for imports of soybeans, corn, wheat, barley and rice. But the country’s increasing focus on domestic crop production and sufficiency is prioritising internal fertilizer supply.
Collectively, all of the above have the potential to affect fertilizer, crop and energy markets and freight rates. Yet, at the time of the conference, fertilizers were not really seeing a risk premium from any of these three events, Newton said.
Summing up, Newton highlighted four key macroeconomic drivers to watch out for in 2024:
- El Nino-related weather volatility and its impact on Brazil’s corn and soybean harvest
- Geopolitical unrest
- Macroeconomic uncertainty
- Supply chain risks.
These were all important market influences, suggested Newton, because, although supply and demand have re-balanced, macroeconomic drivers could be highly volatile in the year ahead.
Navigating a chopping and changing market
The need to build more secure and responsive supply chains in Latin America was a key talking point among the panel in the next keynote. This explored global food security and how best to navigate a constantly changing fertilizer market.
Ruy Cunha, Lavoro’s CEO, said we’re in a more volatile world than before with strong but shifting fertilizer demand patterns. In Brazil, for example, last minute buying decisions were proving to be particularly problematic in his view.
Marcelo Altieri, Yara’s SVP for Latin America, agreed. He said last minute buying behaviour not only placed stress on supply chains, it also ended up with farmers paying more for their product.
The lesson of recent years for the industry, policymakers and others was a simple one, said Alzbeta Klein, the DG/ CEO of the International Fertilizer Association (IFA): “Food is energy.” Whatever happens in energy markets is subsequently reflected in food baskets, she said.
Eduardo Monteiro, Mosaic Fertilizantes’ supply chain director, said “innovation must be part of the fertilizer industry’s DNA” if it was to continue to thrive. Summing up, Marcelo Altieri called on the whole of the agricultural supply chain to take a systemic approach and share the costs, the risks and the rewards of making food production ‘nature positive’.
Latin American supply risks
The themes of supply risks and freight costs were centre stage on Wednesday, the last day of the conference.
Chris Lawson, CRU’s head of fertilizers, gave an informative review of the supply risks facing Central and South America.
Chris’s general take was that, while not expecting an immediate price surge, there was no room for complacency. “I don’t see the fertilizer market going to the moon again any time soon,” he said.
Nonetheless, a range of medium-tolow risks to Latin American fertilizer supply were highlighted. The drought afflicted Panama Canal, for example, looks set to affect vessel supply and movement for the next few years, although the hit to freight rates has now largely been priced in.
Houthi attacks in the Red Sea were also on Chris’s radar. Increases in Red Sea bulk freight rates have been modest to date at around +$10/t.
Producers in Egypt, Israel and Jordan are most exposed to Red Sea risks, in Lawson’s view. While Gulf producers are also at risk, they have more viable alternative shipping routes available to them.
It is the scale of fertilizer trading out of the Middle East, however, which makes the prospect of deepening regional conflict worrisome. The global trade share of Middle Eastern urea, sulphur and phosphate rock is around 40 percent for each commodity, while ammonia from the region has a 30 percent share of global trade.
Consequently, urea supply to Latin America from the Middle East is at medium risk of disruption, in CRU’s view. Brazil is particularly reliant on urea supply from Qatar, Oman and other Gulf producers, for example.
Lawson also gave a round up of risks to the supply of potash from Belarus and Russia, and briefed delegates on the status of urea and phosphate exports from China. Macroeconomic risks and European ammonia production economics were also covered.
Carolina Tascon, commercial executive director, VLI Logistica, gave a detailed presentation on the cost structure of fertilizer logistics in Brazil. Around 85 percent of fertilizer transport in Brazil is by road, not rail. This is less efficient and more expensive due to the sensitivity of truck transport to fuel cost rises.
Tascon was optimistic about the scope for reducing Brazil’s fertilizer freight costs by optimising port logistics and shifting fertilizers from road to rail. When combined with new rail and waterway infrastructure projects, there is potential to cut fertilizer freight costs to Mato Grosso state from BRL 217/t to BRL 175/t, Carolina concluded.
Parting thoughts
Following a sociable, insightful and highly informative conference, delegates departing Miami were left with plenty of follow up questions, such as:
- Firstly, does Argentina’s depressed fertilizer consumption of 4.6 million tonnes in 2023 represent the floor? The country’s trade association seems to think so and is anticipating a potential recovery in domestic consumption to between 4.77.0 million tonnes by 2030.
- Secondly, will Brazil deliver on its ambitious national fertilizer production plan? The region’s agricultural powerhouse is aiming to supply 50 percent of its fertilizer demand domestically by 2050. The fortunes of Brazil Potash’s 2.2 million tonne capacity Autazes project is one bellwether.
- Finally, will the arrival of blue ammonia capacity be hypothecated to emerging energy/fuel markets or end up competing with grey ammonia instead. Future price trajectories for the ammonia market may partly depend on this.
Fertilizer International will be looking to inform its readers about these and other critical issues as 2024 unfolds.
Save the date!
Next year’s Fertilizer Latino Americano conference is returning to Rio de Janeiro, Brazil, 26-29 January 2025. Please visit the event’s website for the latest information on registration, sponsorship, the exhibition and agenda: events.crugroup.com/fertilizerlatinoamericano
Author’s note
Market information and commentaries should be interpreted with caution as these date from the time of the conference in early February and may no longer be accurate.
