Chapter 8

Fertilizer distribution

Historically fertilizers were imported through the main ports, which had been developed essentially for the export of cereals. With the increase in fertilizer demand in the 1990s, up-river ports on the Rio Parana began to be used. Normally the products are stored in nearby depots after unloading. Mixing plants are often located in the depots. From the depots, trucks owned by the importers or retailers usually transport the fertilizers. Fertilizers are normally bagged in 50 kg bags, exceptionally in big bags of 500 or 1 000 kg. Today it is estimated that half of the fertilizer is transported in bulk to the final destination.

Importers, merchants, wholesalers and producers

The rapid growth of the fertilizer sector during the past decade resulted in great changes in the input market in Argentina. The process began with the consolidation and integration of distribution systems, both wholesalers and retailers. At the same time farmers required and received more and better services from the distributors.

Some wholesalers (importers), cooperatives and retailers have introduced the provision of services in their structures.

Three fertilizer producers aim to develop and increase their range of products and specialties. Three important grain exporters aim to be price leaders as fertilizers are money of exchange for cereals. These six companies account for 70 to 80 percent of the urea and DAP markets and between 10 and 20 percent of the ammonium nitrate, monoammonium phosphate, triple superphosphate and potassium chloride markets. Each of them is able to produce physical mixtures in different strategically located plants.

Marketing is principally through their own sales forces, which use exclusive or non-exclusive distributors, cooperatives etc. and their own structures for direct sale to the farmers.

The firms accounting for an estimated 24 percent of the market are:

1. Smaller cereal traders and firms controlled by associates.
2. Firms specializing in intensive crops, which in general offer specialties and their own lines of products such as micronutrients, soluble fertilizer for foliar application or fertigation.

Merchants (Acopiadores)

These commercial organizations deal with the conditioning (drying, sieving, disinfecting), classification, storage and dispatch of the merchandise.

The merchants deal directly with the producer. They provide services including the provision of agricultural inputs (seed, agrochemicals, fertilizers, fuel, lubricants etc.). In most cases they offer technical assistance by agricultural professionals. In many cases the grain merchant is involved in the transport creating real parallel enterprises for this activity.

There are similar systems for trade in tobacco, cotton, fruit and horticultural products.

Retailers

The turnover of the retail distribution sector for fertilizers amounts to some 300 million dollars and accounts for about 60 percent of the market. The remainder of the market is accounted for by sales to large producers, farmer associations, agro-industrial groups (tobacco, sugar companies). The proportion that each wholesaler sells directly to the producers varies from 0 to 100 percent. Some retailers are integrated with wholesalers, others are independent.

Seasonality

The seasonality of distribution is determined by the demand for four groups of crops, namely pastures, wheat and barley, maize, sunflower and soybeans and the regional crops sugar cane and rice. These succeed each other from February to December. Imports are normally purchased one or two months before effective unloading at the Argentine ports.

Services

The main development of private, individual retailers occurred in the 1980s, along with the increase in soybean production and the sale of herbicides and insecticides. Since 1995, with the rapid spread of herbicide resistant soybeans, several herbicides were no longer sold and the retailers have expanded their range of products to include fertilizers. Since fertilizers are undifferentiated products with relatively low profit margins, the retailers have increased their profit potential by offering services to the farmer. These have taken the form of offering mixtures formulated according to the requirements of each field, liquid fertilizers, the use of soil analysis, finance and agronomic assessments etc.

Regulations

SENASA answers to the Secretary for Agriculture and to the Ministry of Economics and controls the quality of the imported product and conformity with labeling. All marketed fertilizers must be registered.

With the establishment of MERCOSUR, it became necessary to harmonize definitions. This was done for nitrogen and biological fertilizers, but an agreement concerning phosphate and potash fertilizers was not possible since in Brazil triple superphosphate must have a minimum of 42 percent P₂O₅, in Argentina 46 percent, potassium chloride 58 percent and 60 percent K₂O respectively. However, the impact is not important for intra-zonal trade since Brazil does not have significant surpluses of these products.

Costs of importation, trade and distribution

The cost of port handling has fallen substantially due to investment in the port infrastructure during the last decade.

There is a compensation fund to stabilize prices, to which the companies contribute (Table 14) and in recent years prices have been relatively stable on the domestic market despite fluctuations in the international market.

TABLE 14
Main cost items for imported fertilizers

Source: Adapted from Basile and Deyerhalde, 1992.