News report

Brazil’s agriculture giant nervously eyes war on Ukraine

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Rio de Janeiro (AFP) – Brazil’s agricultural powerhouse nervously watches the impact of Russia’s war on Ukraine, unsure whether the uptick – an expected surge in Brazil’s corn exports – will outweigh the hit to its crucial corn imports. fertilizer.

Brazil, one of the main exporters of agricultural products, including beef, chicken, soybeans and corn, is expected to benefit from soaring commodity prices, pushed up worldwide by the war.

But the country is also heavily dependent on imported fertilizers and faces collapsing stocks from the main Russian supplier, whose exports have been hit hard by Western sanctions.

Maize was particularly affected by the war.

Russia’s invasion of Ukraine on February 24 has cast doubt on the ability of either country, the world’s fourth and fifth largest corn exporters in 2019-20 respectively, to deliver the expected deliveries this year.

This is driving up prices and could be a boon for Brazil, the third-largest exporter.

His maize crop was hit hard last year by bad weather, including the worst drought in nearly a century. But the harvest is expected to increase by 29% in 2021-22, according to the latest forecasts from the National Supply Company (Conab).

“The price of maize has reached one of the highest levels ever, making it attractive for Brazilian growers, a factor leading to an increase in planting area” for the second harvest, the largest of the year, said Joao Pedro Lopes of commodity market analysis. StoneX company.

Strong global demand and a favorable exchange rate “should enable a 67% increase in exports” of Brazilian maize in 2022, Conab said.

The U.S. Department of Agriculture meanwhile predicted that if Brazil’s crop is as large as expected, the country could overtake neighboring Argentina to become the world’s second-largest corn exporter this year, behind the United States.

“International demand suddenly appeared for an immediate shipment of Brazilian corn, which is unusual for the first half. And the demand for the second half also accelerated,” said analyst Paulo Roberto Molinari of the consultancy in agro-industry Safras e Mercado.

Fertilizer problem

But there is a big drawback.

“There are no guarantees on the key issue of shipping goods” with the shipping industry disrupted by war, said Cesario Ramalho, president of the Brazilian Maize Producers Association (Abramilho).

In this file photo taken on August 8, 2013, harvested corn is seen at a farm in Sao Felix do Xingu, Para state, northern Brazil Yasuyoshi CHIBA AFP/File

“And fertilizer supplies are also uncertain,” he told AFP.

Brazil imports about 80% of its fertilizers, including 20% ​​from Russia, its main supplier.

Belarus, another key supplier and which has supported Russia in the Ukraine crisis, has also been hit hard by Western sanctions.

Agriculture Minister Tereza Cristina said earlier this month that Brazil had enough fertilizer stocks to last until October. She negotiated with other major exporters to source more.

Farmers are already feeling the effects: the price per tonne of imported fertilizer skyrocketed in Brazil by 129% from February 2021 to February 2022.

Indigenous Land Mining

The question of fertilizers was raised in a politically charged debate last week when President Jair Bolsonaro called the Russian-Ukrainian war an “opportunity” to pass a controversial bill to legalize mining in indigenous reserves. .

Proponents argue that the bill would allow Brazil to fully exploit its mineral wealth, including reserves of potassium, a key ingredient in fertilizers.

Opponents warn that mining would be disastrous for protected indigenous lands, including in the Amazon rainforest, where they say there is little potassium anyway.

Bolsonaro said Friday the proposed legislation would help “integrate our indigenous brothers into society,” adding, “They are almost like us.”

His administration launched the same day a plan to nearly halve Brazil’s dependence on foreign fertilizers by 2050 with tax incentives, loans and other measures to boost domestic production.

Meanwhile, market turmoil is also sending shockwaves through other sectors of the agriculture industry.

It caused the prices of corn and soybean-based animal feed to rise, hitting Brazilian chicken and pork producers. The country was respectively the first and the fourth largest exporter in the world in 2020.

“It could have an impact on production, as profit margins will be lower,” said Fernando Ferreira of XP Investimentos.