Minas plays focal role in effort to ease Brazil’s fertiliser problem

On the eve of the Russian invasion of Ukraine in 2022, Brazil’s then-president, Jair Bolsonaro, travelled to Moscow on a special mission.

Eleventh-hour shuttle diplomacy it was not. Rather, the rightwing populist had an objective closer to home in his meeting with counterpart Vladimir Putin: to secure more fertilisers. 

As a global shortage sent prices of farming inputs soaring, fears of a conflict in Europe disrupting trade flows further exposed Brazil’s dependence on overseas suppliers for crop nutrients.

A food commodities powerhouse, Brazil — a significant producer of soyabeans, sugarcane and corn — is the world’s biggest importer of fertilisers. Inbound shipments cover 87 per cent of usage at an annual cost of $25bn, says the government. The highest volumes come from Russia, China and Canada.

Now, to lessen the vulnerability of Brazilian agriculture to external shocks, a drive is under way to boost domestic fertiliser manufacturing. A focal point for investment is the southeastern state of Minas Gerais, home to a number of factories and new projects. 

EuroChem, a company of Russian origin headquartered in Switzerland, this year cut the ribbon on a $1bn complex in Minas that it says will represent 15 per cent of Brazil’s output of phosphate fertilisers.

“It’s going to help improve the equation of food sovereignty,” says Gustavo Horbach, the group’s head for South America. “Brazil will increasingly have a role as a bread basket for the world.” 

Located in Serra do Salitre, the EuroChem mine and processing facilities will have an annual production capacity of 1mn tonnes.

Attendees at its inauguration in March included Brazil’s President Luiz Inácio Lula da Silva, five of his ministers and Minas state governor Romeu Zema.

Similar enterprises are found within 250km of EuroChem’s site. Toronto-listed potash producer Verde Agritech opened a second factory in 2022. Swiss company Atlas Agro is designing an $850mn nitrogen fertiliser plant.

Officials argue that these industrial initiatives, in adding value to extracted raw materials, will help diversify the local economy. Such developments are also represented as steps towards an ambitious federal target for Brazil to be at least 45 per cent self-sufficient in fertilisers by 2050.

A little over a decade ago, Brazil met about 30 per cent of its own needs, according to the national fertiliser association. That proportion fell as domestic output shrank even as demand rose from the country’s agribusiness boom. The result is more exposure to global price swings, exchange rates, shipping costs, port bottlenecks and geopolitical risks. 

“It is very important to increase national production, so as not to be at the mercy of international events,” says Tomás Pernías, analyst at commodities consultancy StoneX. “But these projects take time to get off the ground and fertiliser consumption is increasing [so], in the short term, Brazil will still be very dependent on imports.” 

The advantage of Minas is its reserves of potash and phosphate rocks, respectively containing potassium and phosphorus, two of the three primary macronutrients for plants.

Minas is Brazil’s largest domestic source of fertilisers, producing nearly two-thirds of output. Major hubs are found in the Alto Paranaíba and Triângulo Mineiro regions in the west, says João Paulo Braga, head of state agency Invest Minas. In addition to nutrient deposits, they have “logistical benefits, due to proximity to large areas of agricultural production”, he adds.

In addition to having nutrient deposits, Minas Gerais also has logistical benefits

EuroChem acquired its project in 2021. Outside Europe, it is the company’s first vertically integrated site, combining mining, processing, production and distribution.

Despite the relatively low ore content of rocks from the mine, Horbach says location is a positive factor. Most sales will be in Minas, where agribusiness accounts for more than a fifth of gross domestic product. “By entering production here in Brazil, we will be able to access the market in a more competitive way,” he explains.

Nitrogen, the other main category of fertiliser, normally requires as its primary feedstock natural gas, which is not cheaply available in Brazil. However, Atlas Agro’s installations will be powered by solar and wind energy, avoiding the need for the fossil fuel. 

But, in spite of the large and growing national market for crop nutrients, success for fertilisers manufacturers in Brazil is far from guaranteed. Inadequate transport infrastructure, such as a lack of railways and poor road surfaces in remote areas, can make carrying bulky goods across land costly. Erratic weather and crop failures have recently hit fertiliser sales, too. 

Verde Agritech, which began operations at its potash mine and factory in 2017, has faced challenges of late. The company blamed low demand and a slump in potash prices for its financial results in 2023, when revenue at the group fell by half. Founder and chief executive Cristiano Veloso says higher interest rates have made it harder to extend credit to farmers for purchases.

Still, Verde believes it can capture market share. Its potassium products are based on glauconite, a mineral free of chloride, which the company claims preserves microbes important for soil quality. The opening of its second production facility two years ago gives it annual capacity of 3mn tonnes. It awaits environmental licensing to build a $50mn third unit. “Success for our company will help make food supply chains more resilient,” says Veloso.

Additional reporting by Beatriz Langella