According to October 2012 estimates made by Conab (with data from Anda, the agrochemical industry association), the country is due to consume 30 mio tons of fertilisers in 2012, a 6.7% increase on 2011. Fertilisers are called "alta tecnologia" in Brazilian ag jargon, but numbers have to be put in some perspective: Conab forecasts a total harvest for 12/13 in a range of 177 - 182 mio tons, which suggests a ratio fertiliser:crop of 16.9-16.5%, or 1/6. In other words, producers need 1 kg of fertilisers for every 6 kg of crops (by crops I mean grains & oilseeds). The concern is that acreage expansion for the campaign 2012/13 is estimated at +0.2% on 2011/12 (led by +5.5% area expansion for soy to 27 mio ha), while production is estimated to expand by +7.2% over the same period, with soy contributing the largest single increment (+16.4 mio tons over 11/12 production) - thanks mainly to fertilisers, half of which are imported.
It is true that the country desperately needs a good harvest to compensate the disastrous soy campain of 11/12 (the Jan 2012 drought has had a large negative impact on soy, and not only in Brazil), replenish low stocks and deliver to the main client, China. However this is part of an established trend which points to fast area increments for soy, while corn areas are progressively cut on the highly optimistic assumption that "alta tecnologia" will raise yields indefinitely. Wheat areas are also on the decline, with the country's farmers apparently switching to cash crops and leaving a rising trade deficit to importers (in any normal year Brazil has to import half its needs in wheat, largely from Argentina).
Another obversed trend is dairy and cattle farmers switching to crops as a more profitable avenue (and also, a lot less less risky). This latter trend may have been made worse by the government support - via BNDES - of JBS and Marfrig, two companies with high gearing and by now among the world's largest animal protein suppliers. JBS and Marfrig have de facto monopoly in states where cattle ranching has always been a way of life, such as Mato Grosso. There, "fazenderos" have no choice but to sell to one slaughterhouse and increasingly struggle to get a fair deal. This has made a number of cattle and dairy producers nervous, some looking at alternatives (which most often is soy production). Hence the government support of large cattle processors has led to a potentially dangerous environmental issue, as soy are highly needy in terms of fertilisers & agrochemicals and soils are being saturated.
The expectations for the upcoming campaign are a large harvest for soy and a flat harvest for corn. In the best of climatic conditions of course. Add to this any weather problem and you might get a nasty surprise, which could translate into less corn (the same could happen in Argentina, where farmers have also planted more soy and less corn - since financially constrained after a bad 11/12 season). If Argentina, Brazil (and possibly the US) produce less corn than expected in 12/13 we could be in for yet another 2007/08 price spiral...As always I hope I'll be proven wrong.
Yet it doesn't change the fact that Brazil is moving towards an agriculture dominated by ONE crop at a worrying speed, leaving corn behind and giving up on wheat (but fortunately sticking to rice, and trying to save a depressed cane sector). This is clearly short sighted because soy has one client: Chinese pig farmers (but also poultry etc), at a time when a number of experts question the sustainability of the Chinese Marxist-Capitalist model in the long run. Indeed China will not grow indefinitely at 9% pa. (Japan used to grow by double digits until it cooled down and stopped growing). When China's economy cools down to 3-5% pa, Brazil will be left with a giant problem (overcapacity in one crop). This is what I call a big risk. But the main environmental price is thousands of ha of forest destroyed (on top of soil fatigue in agricultural land) to make room for soy containers, very much like palm oil-driven devastation seen in SE Asia...
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