One of the reasons given for President Jair Bolsonaro’s “neutrality” in the face of Russia’s invasion of Ukraine is Brazil’s dependence on fertilizer imports. In 2021, Russia was the main source of fertilizers imported by Brazil, supplying 22% of our external demand. Added to the fertilizers coming from Belarus (a former Soviet republic aligned with Moscow and which has already suffered a series of economic sanctions since last year for disrespecting human rights), the share grows to 28%.
Agricultural power, the world’s largest producer and exporter of soy, sugar, coffee and orange juice, and owner of prominent positions in the global production and export of corn, cotton and meat (which benefit from fertilizers indirectly), Brazil is also a giant in import of fertilizer not only to correct the poor and acidic soil of the Cerrado, where most of the expansion of the soybean area in recent decades, but also to improve the productivity of agriculture in other regions of the country.
In 2021, Brazil imported 41.6 million tons of fertilizers, a new record for the country, which takes turns with India as the main global importer. The state that imported the most was Mato Grosso, the largest Brazilian producer of soybeans, corn and cotton, with 19% of the total imported. Then came Rio Grande do Sul (16%) and Paraná (13%), which are major producers of soy, corn and wheat, and São Paulo (11%), the largest producer of sugar and ethanol from cane in the country.
Responsible for a third of Brazilian fertilizer imports (the other two thirds are with nitrogen and phosphorus, their companions in the acronym NPK), potassium chloride (widely used in soybeans) is the main fertilizer we buy from Russia. The country is also an important supplier of urea and other nitrogenous compounds, fertilizers made from natural gas exploration and used, for example, in the production of corn and sugar cane.
Difficulty buying fertilizer pre-war
Meetings with Russian businessmen to secure Brazil’s fertilizer supply were high on Bolsonaro’s agenda during his visit to Russia in mid-February, just days before the invasion of Ukraine. Despite the record of imports in 2021, Brazil (as well as the rest of the world) has been struggling since last year to buy fertilizers due to the energy crisis in Europe and China, disruptions to global chains caused by the Covid-19 pandemic, of exports by some producing countries and sanctions against Belarus.
All this, combined with firm demand, resulted in an explosion in international fertilizer prices in 2021. The rise did not significantly affect Brazil’s last crop because most producers buy inputs many months before planting and this helped them to escape the price spike. In the 2022/23 harvest, however, the impact should be heavy – and not only because of prices, but also because of the difficulty in accessing products.
Government prepares plan to encourage local production of fertilizers
In early 2021, the government created an Interministerial Working Group to prepare the National Fertilizer Plan, whose first guidelines should be presented shortly. The idea is not to make the country self-sufficient in fertilizers, but to reduce dependence on imports from 85% to 60% of total demand.
It will not be an easy task, since increasing domestic production necessarily involves stimulating mining – something that most environmentalists don’t even want to hear about. Nor will it be a quick task, as it is estimated that this decrease in dependence could take 20 to 30 years.
The plan is more than welcome, but planting of the 2022/23 soybean crop starts in September and immediate measures are needed. Shortly after the invasion of Ukraine, the Minister of Agriculture, Tereza Cristina, said that the war “worries”, but that Brazil has “alternatives” to replace Russia in the import of fertilizers. After Russia (22%), Brazil’s main suppliers are China (15%), Canada (10%) and Morocco (7%).
Iran is a partner of Brazilian agribusiness even under sanctions
In the same week as Bolsonaro’s trip to Russia, by the way, the Minister of Agriculture led a Brazilian delegation that visited Iran, a country that exports 600,000 tons of urea per year to Brazil and that intends to triple that volume. Representatives of the Mato Grosso Soy Producers Association (Aprosoja-MT) also participated in the visit and returned from Tehran with open negotiations to export 5 million tons of corn to the Middle Eastern country in exchange for receiving the equivalent in fertilizers.
“The direct sale of fertilizer producers from Iran to Brazilian producers and vice versa in relation to exports will be of great benefit to both sides, with a view to more agility and better negotiations,” said the president of Aprosoja-MT in a note. , Fernando Cadore.
Iran is among the main importers of Brazilian corn and is also a major customer of Ukraine, whose exports tend to be harmed by the war, opening more space for Brazilian corn abroad, especially if the conflict extends to the second half of the year.
While the food trade is excluded from international sanctions imposed on Iran over its nuclear program, the country struggles to import corn and other grains because most of the trading companies that dominate the sector are based in the US.
There are also restrictions on Iranian banking, which makes payment for imports slower and more complicated. Therefore, the country ends up resorting to smaller exporting companies and suppliers that do not put so many obstacles in their purchases, including Brazil.
Pragmatism versus values
The question now is whether this commercial pragmatism that allows Brazil to be one of the main food exporters to Iran, one of the pariahs in international policy led by the United States and the European Union, will also prevail in relation to Russia.
On the one hand, the exclusion of Russian banks from the Swift system, in itself, is already an obstacle to Brazilian imports of fertilizers from Russia, with or without Bolsonaro’s neutrality in relation to the invasion of Ukraine.
On the other hand, even if Brazil sides with the defenders of Ukrainian sovereignty, Russian exporters probably have no interest in losing a customer like Brazil, which last year paid US$ 3.5 billion for Russian fertilizers. In other words, being for or against the invasion of Ukraine does not seem to help, nor does it harm our access to Russian fertilizers at this point.
Brazil may seek alternative countries to replace part of the fertilizers it cannot import from Russia, but it would pay higher prices for this, simply because of supply and demand, and without achieving a complete replacement. The result would be a smaller harvest in 2022/23, precisely at a time when agricultural commodities are reaching record prices and when Brazil can further increase its role in world food production.
The Brazilian choice, therefore, seems to be this: remain neutral in an attempt to guarantee a supply that is already threatened not by the Russians’ unwillingness to sell, but by the sanctions that make international trade difficult; or join the chorus that condemns the aggression against Ukraine, defending values that underpin all Western democracies.
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