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The Brazilian imports of Russian products accelerated at the beginning of this year at a much faster pace than the total of foreign purchases. As a consequence, the Russians, despite being at war with Ukraine, have climbed up the ranks and became, from January to April, the fifth-largest exporter to Brazil. In the same period last year, they were in the 12th position.
China is still the absolute leader in the supply of products to Brazil from January to April of this year, followed closely by the United States. Germany and Argentina come next. Russia, in fifth place, sold to Brazil in the period a total of R$2.4 billion, practically tied in value with India, which comes right after. In relation to last year, the Russians left behind countries such as Korea, Mexico and Japan.
Brazilian purchases from Russia grew 89% from January to April this year in relation to the same period in 2021. Overall, Brazilian imports rose 28% in this same comparison.
Specialists point out that Russia’s current position among Brazil’s five largest suppliers is not permanent, but the result of a scenario that came with the pandemic and was exacerbated by the Russia-Ukraine war.
The composition of our economic activity and the items Brazil buys from Russia help explain this. Fertilizers or chemical fertilizers are the main ones and account for 70% of the basket. Coal accounts for 15%, while petroleum fuel oils represent 7.1%.
Russia is one of the largest global suppliers of fertilizers. From January to April, Russians supplied $1.65 billion in these items, which represented a quarter of what Brazil imported in the period. The value of what we bought from Russians grew 142% year over year.
The increase in value was driven by prices and purchases brought forward. The prices of fertilizers imported by Brazil jumped 130.7% in April year over year. The data is from the Foreign Trade Secretariat (Secex/ME) and is valid for all the fertilizer we imported that month. However, the input that came from Russia was also more expensive. Data from consultancy MacroSector show that the price of Russian fertilizers that Brazil bought in the first quarter of 2022 increased 149% year over year.
Price increases reflect an increase that had already been happening since the beginning of 2021, said Fabio Silveira, partner and head of the consulting firm. Under the effect of the pandemic, fertilizers became more expensive due to increased demand, shortage of supply and logistical bottlenecks. The war brought even greater fear for the shortage of raw materials.
When releasing April’s trade balance data, Herlon Brandão, Secex’s undersecretary of Foreign Trade Intelligence and Statistics, explained that, according to the agency’s survey, farmers moved up the acquisition of inputs, probably due to fear of shortages, now already under the influence of the war in Eastern Europe. The usual, he explained, is that the import of these inputs increases in the second half of the year.
Mr. Silveira recalled that the robust agricultural production last year created a kind of “euphoria” in the industry regarding the prospects for 2022. The agricultural revenue in 2021, he says, reached R$893 billion, up more than 50% year over year. Capitalized, with high expectations for this year and with fears of a shortage of inputs, farmers have moved up the purchase of fertilizers and pesticides, he said.
Weather issues, he recalled, later led to a reassessment of the 2022 harvest. In spite of that, important crops, such as grains, are expected grow around 3% in volume, he estimated.
Mr. Silveira recalled that fertilizers imported now is likely to be used for next year’s crop, since this year’s is already planted.
José Augusto de Castro, head of the Brazilian Foreign Trade Association (AEB), says prices are expected to remain high and there is no prospect of a greater adjustment, either in fertilizers or in oil as long as the war continues.
For Mr. Silveira, it is possible that in May imports of fertilizers, including from Russia, will remain high. For him, however, demand will not remain at this level, because prices are very high, with a big impact on producers’ costs. In case the account shows that the price of the agricultural product will not allow farmers to pass on costs, the purchase of fertilizers and other inputs will be reduced. Producers will, at least in part, choose to use already fertilized soil from previous harvests, which, in turn, is expected to reduce productivity, he said.
Source: Valor International