CHAPTER 8 - PRICES AND PROFITABILITY OF FERTILIZERS

Prices of mineral fertilizers

Since the beginning of the 1990s, when Brazil implemented a fourth process of trade liberalization, trade barriers for the Brazilian fertilizer industry, including barriers concerning raw materials, have been very small. As a result, the domestic market prices of straight fertilizers and their raw materials became comparable with those of imported products (Table 18).

Data on the average prices of fertilizers (US$ per tonne) in Brazil for the period of 1993 to 2002 (Table 19) indicate that for all fertilizers the average prices for 2002 are below those practiced in 1993 and considerably lower than those observed in 1996, a year when prices of fertilizers reached the highest level of the recent years. It has been observed that the final price of fertilizers to the farmers is now closely related to the prices of imported fertilizers.

Prices of agricultural products

The prices of agricultural products are influenced partly by international prices and partly by the country’s own supply and demand balance.

Exported products such as cotton, coffee, citrus, soybeans and wheat are strongly influenced by international prices. The prices of basic food products such as rice, potato, common beans, and maize are influenced much more by internal factors. Sugar cane prices are influenced by the international sugar market and by the domestic alcohol market.

TABLE 18
International fertilizer price indices¹

¹ Average international prices (C&F). Indices of relative prices, 1993 = 100

Source: ANDA, 2003.

TABLE 19
Prices indices of some fertilizers in Brazil

Compound fertilizer used on:

¹ Soybean
² Potatoes and common beans
³ Cotton, maize and wheat
⁴ Rice
⁵ Citrus
⁶ Coffee
Source: ANDA, 2003.

TABLE 20
Agricultural product prices

¹ The “units of product” area as follows:
Cotton: 15 kg
Rice, potato, coffee, beans, maize, soybeans and wheat: 60 kg bag
Oranges: 40.8 kg box

Sugar cane: tonne

The prices of basic food products have been constrained by the inflation control policies practiced by the Federal Government since 1994. The data in Table 20 indicate that the average prices for the great majority of the Brazilian agricultural products, apart from oranges and wheat, fell during the period of 1993 to 2002.

As shown in Table 21, the quantity of agricultural products needed to buy one tonne of fertilizer was similar in 1993 and 2002 in the cases of sugar cane and soybeans. It declined in the case of oranges and increased in the cases of cotton, rice, potato, coffee, beans and maize.

Profitability of fertilizer use

In general, the profitability of fertilizer use in Brazil has been influenced much more by variations in the prices of the agricultural products than variations in the prices of fertilizers. For the great majority of crops shown in Table 22, the cost of fertilization per ha during the past five years has remained reasonably constant. However the share of fertilization costs in relation to the total income per ha increased substantially due to falls in income.

TABLE 21
Units of products required to buy one tonne of fertilizer

¹ See footnote Table 20.

TABLE 22
Expenditure on fertilizers¹ as a proportion of farm income² Centre-South region

¹ Farm income: price received by the farmer multiplied by the average yield per ha.

² Fertilizer cost: average annual price paid by the farmer multiplied by the quantity applied on the crop.

Source: ANDA, 2003.