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Brazil coffee farmers boost nutrient orders, as bean prices soar

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The coffee price rally has encouraged a marked rebound in fertilizer orders by Brazilian coffee farmers, data from Fertilizantes Heringer showed, although the group itself has missed out on a nutrient market revival.

The fertilizer distributor said that its deliveries of nutrients to coffee farmers soared 23% in the July-to-September quarter, to 237,000 tonnes, reversing recent declines.

The group's deliveries to coffee growers in the first half of this year fell by 1.2%, after a 6.2% drop in calendar year 2015.

The revival in deliveries comes at a time when elevated coffee prices are encouraging growers to boost production, boosted largely by concerns over the dent from drought to output in major robusta growing countries such as Vietnam.

New York arabica futures for December on Monday touched 173.35 cents a pound, the highest since January last year.

January robusta futures hit $2,195 a tonne, the highest for a nearest-but-one contract since October 2014.

Minas orders

The data tally with statistics from fertilizer industry association Anda showing a rise to 2.56m tonnes in the first nine months of 2016 in deliveries to Minas Gerais, the top arabica-producing state, which has escaped drought - unlike robusta-growing areas such as Espirito Santo and Rondonia, where dryness is viewed as deterring applications.

Heringer fertilizer deliveries by crop, Q3, and (year-on-year change)

Soybeans: 375,000 tonnes, (-33.6%)

Coffee: 237,000 tonnes, (+22.8%)

Sugar cane: 230,000 tonnes, (-13.5%)

Corn: 183,000 tonnes, (+13.0%)

Others: 295,000 tonnes, (-27.2%)

Total: 1.320m tonnes, (-17.0%)

With farmers often swapping crops for nutrients, and domestic prices of many agricultural commodities having been particularly firm, a "healthy barter ratio has been fuelling demand for fertilizers in Brazil", Heringer said.

'Major reversal'

However, the group saw its own delivery volumes drop by 17.0% to 1.32m tonnes in the July-to-September period, although Heringer said that this decline was "in line with the business plan for the period".

The group is switching its focus from commodity fertilizer products to higher margin specialty products, of which deliveries grew 2.4% in the quarter to 636,000 tonnes.

The switch helped Heringer raise by 19.8%, to R$189.3m, its gross margin for the period, despite a drop of 25% to R$1.51bn in revenues.

In terms of earnings, the group returned $22.5m to the black, achieving what it termed a "major reversal" of the R$209.m loss reported a year before.

The improvement was also down to firmness in the real, which reduced to R$38.9m, from $384.9m, its financial expense line.

By Mike Verdin

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