Transformations in Brazilian agricultural retail and their impacts on the fertilizer market

In recent years, the agricultural retail sector in Brazil has been undergoing significant changes. driven by the entry of investment funds and a strong wave of mergers and acquisitions in the resale sector. These transactions redesigned the structure of the distribution sector, creating large platforms and increasingly verticalized companies. Despite the important focus on operational efficiency, synergies and professionalization of the chair, the movement also brought new challenges.

The scenario of favorable prices for agricultural commodities during the consolidation period capitalized producers and reduced the risk of default for resales. However, the recent movement of falling prices of main products brought a greater challenge of default in the sector, particularly impacting companies that did not adapt to verticalization, did not structure their operations strategically and, thus, were already facing challenges related to revenue and profitability. .

In a specific focus on fertilizers, we have a market highly influenced by the prices of raw materials, essentially imported, in which fluctuations directly affect the profitability of producers. At a time when the country is preparing for the corn harvest (which follows the soybean harvest in the first quarter), the damaged exchange rate between commodity and fertilizer prices has led farmers to postpone their decisions to purchase inputs. The result is the current scenario, with a delay in the off-season market compared to previous years. And there is an imminent risk of logistical bottlenecks.

It is important to remember that the vast majority of raw materials for fertilizer production are imported, and that the main Brazilian mixers also tend to postpone their own decision to import these materials until they have a firmer indication of sales volume. From the purchasing action, through the import logistics process, to finally processing the mixture and making the fertilizer available to the farmer, we have up to 120 days. In this way, dynamics of postponing purchasing decisions by the farmer can lead to a real risk of supply limitations in the local market, at the correct time.

These market dynamics made 2023 a very challenging year for Brazil. The shortage of raw materials was a lesson learned for the input industry and agricultural retail, which at the end of the year are already working to anticipate part of their purchases for the next cycle as a way to get ahead of the competition and guarantee stocks of products for sale. . The scenario for 2024 still largely depends on the behavior of commodity prices, mainly soybeans (responsible for around 45% of the country's total fertilizer demand), but there is now optimism for this cycle, with prospects for growth in demand for fertilizers. and necessary replenishment of soil nutrient reserves.

Returning to the movement to form platforms for input distribution networks in Brazil, verticalization has brought more resilient business models that are resistant to challenging local dynamics. In this context, Nutrien, a multinational agricultural retailer, stands out with its "one-stop-shop" model. In addition to regional fertilizer mixers, the company offers a complete portfolio of solutions, including crop protection technologies, seeds, biological products, agronomic services, and also high investment in digital input recommendation platforms and creative financial solutions. A robust architecture that can offer greater stability in prices and financing options, helping farmers face volatility. Nutrien's strategies also include strengthening local and global partnerships, taking advantage of the advantage of being one of the largest fertilizer producers in the world. Accompanied by competitive prices, qualified teams and efficient logistics, the model proves to be effective and should gain market share.

When it comes to the role of fertilizers in soil health and fertility, nutrition and crop development, farmers' access to productive technologies at the right time and qualified technical assistance contribute to greater efficiency in investment, with savings and rational use of resources, resulting in greater productivity and environmental and economic sustainability. With its model centered on the efficient supply of inputs, Nutrien is therefore strongly positioned to lead in the evolving landscape of Brazilian agricultural retail, ensuring complete solutions and essential support for the country's farmers.

By Luiz Fernando Naso, director of fertilizers at Nutrien in Brazil