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Brazil's fertilizer market to hit fresh record, as sowings rise

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Brazil's fertilizer market, having recovered to set a fresh all-time high last year, will expand further in 2017, Fertilizantes Heringer said, as it unveiled a jump in corn nutrient volumes, but a fallback in sales to coffee growers.

Fertilizantes Heringer - in which Canada's PotashCorp has a 9.5% stake, and Moroccan phosphate giant OCP a 10% holding – forecast that Brazilian fertilizer deliveries will rose 3.0% to 35m tonnes this year.

While representing a slower pace of growth than last year - when deliveries rose by 12.9% to 34.1m tonnes, recovering from a rare decline in 2015 – it would represent a record high.

And the forecast reflects "the good barter ratios" for farmers in terms of exchanging crops for fertilizers, amid ideas of increased Brazilian crop sowings and production.

Conab, the official Brazilian crop bureau, sees domestic crop sowings for 2017 harvests rising by 1.20m hectares, with production seen soaring 17.4% to 219.1m tonnes, fuelled by a recovery in corn output from last year's drought-affected levels.

Corn nutrients in demand

In fact, data from industry group Anda for January show fertilizer deliveries to Brazilian farmers, at 2.63m tonnes, up 23% year on year, in a rise attributed by observers such as respected analyst Michael Cordonnier as buying, which starts in November, ahead of safrinha corn sowings.

Fertilizantes Heringer flagged a particularly strong finish to 2016 for its own sales to corn growers, whose purchases soared 27% to 257,000 tonnes in the October-to-December period, reversing losses earlier in the year.

The increase took sales to corn farmers for the quarter above those to coffee growers, whose purchases sank by 17.7% year on year to 253,000 tonnes, meaning a weak end to what had been a strong year.

The pullback coincided with an easing in arabica coffee futures in New York over the quarter, although Brazil's own values were protected somewhat by strength in the real, and continued disappointment at domestic output of robusta beans.

'Significant productivity gains'

However, Fertilizantes Heringer's volumes have also come under pressure from a shift to higher-value specialty nutrients from commodity products, with the group's overall sales down 6.7% at 1.2m tones.

Sales of specialty nutrients for the October-to-December period rose by 16.1% to 567,000 tonnes, contrasting with a 21% drop in sales of mainstream fertilizers.

"The growth in the sales of Heringer's specialty products in recent years has been essentially sustained by the significant productivity gains obtained by its clients with producers' improved profitability increasing their interest in these products", the company said.

The group reported a 20% tumble to R$1.72bn in revenues for the quarter, "due to the 4.2% reduction in delivery volume, lower fertilizer raw material prices and the appreciation of the real".

While the dent was softened somewhat by a boost to margins from the switch to higher-value products, earnings eased by 2.5% to R$52.4m.

By Mike Verdin

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