Following impressive fertilizer demand in 2017-with record imports of all nutrients-agricultural fundamentals in Brazil look likely to correct downwards in 2018. For the first time in a decade, Safrinha corn area is expected to fall. This will be the main factor in dragging fertilizer consumption lower in 2018.
Overview of crop area dynamics in Brazil Over the past two decades, Brazil has emerged as an agricultural powerhouse due its ample availability of arable land and suitable climatic conditions. Brazil is the world's largest producer of sugar and the second largest producer of soybeans. The growth in agricultural production has led to a sharp rise in fertilizer demand.
A majority of the expansion in agricultural area has occurred within the Cerrado, a vast tropical savannah region in centre-west Brazil covering the states of Goias, Mato Grosso and Mato Grosso do Sul. Crop expansion has been driven by the conversion of pasture lands to soybeans and corn. The Cerrado has oxisoils/ferraols soil types, which are low in fertility and sulphur deficient, resulting in crop production limitations. This has underpinned the growth in fertilizer application rates and demand.
The cropping system in Brazil has evolved to include more soybeans, with area of this crop rising sharply. While most of this expansion has come from the conversion of inefficient pasture land, it has also come at a cost to full season corn area.
Farmers have moved to a double cropping system, with many choosing to plant soybeans in October/November and then plant corn immediately following harvest in February/March, known as Safrinha (second season) corn. Safrinha corn area has been rising in line with soybeans and now accounts for 70% of total corn production in Brazil.
Why is Safrinha corn area going to fall in 2018? Total crop area is forecast to expand at a slower growth rate in 2018 compared to the record increases witnessed in 2016/17, owing to lower crop prices. Corn prices have been a particular concern for farmers.
Planting of full-season corn, Brazil's first corn crop, which was complete by the end of November 2017 is estimated to have fallen by 10% y/y, with farmers favouring soybean planting. This first corn crop is more sensitive to crop price ratios and currently accounts for 30% of total corn area.
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