Resilient Brazil
7 April 2010 | Key Technical Product Registrations* |
| Fungicides |
| tebuconazole, flutriafol, mancozeb, carbendazim |
| Herbicides |
| hexazinone, picloram, 2,4-D, glyphosate, nicosulfuron |
| Insecticides |
| imidacloprid, lambda-cyhalothrin |
| Plant Growth Regulators |
| paraquat dichloride, mepiquat chloride |
| Miticides |
| fenbutatin-oxide, abamectin |
|
*Tebuconazole and hexazinone have more than 10 technical product registration approvals. |
| Key Technical Product Submissions* |
| Fungicides |
| tebuconazole, flutriafol, carbendazim |
| Herbicides |
| hexazinone, picloram, 2,4-D, glyphosate, diuron, metribuzin |
| Insecticides |
| imidacloprid, lambda-cyhalothrin, chlorpyrifos, |
| acephate, fipronil, diflubenzuron |
| Plant Growth Regulators |
| paraquat dichloride |
| Miticides |
| abamectin |
|
*Glyphosate, tebuconazole, acephate, fipronil, imidacloprid, abamectin, 2,4-D and metribuzin each have more than 10 ongoing submissions. |
The global pressures could not have been worse in 2009: financial crisis, falling commodity prices, declining consumption, diminishing currencies against the dollar, and other factors contributed to instability, uncertainty and recession. These crises had a profound impact on some agricultural countries, such as Argentina and Ukraine, which were also affected from weather phenomenon.
Brazil was affected, too, but to a much lesser extent. Brazilian agriculture accounts for 26.46% of the country’s gross domestic product, and 2009 numbers are expected to be about 7% lower (in relation to GDP) compared to forecasts. However, the most recent estimate of harvested crops in 2009 is 140.9 million tons or 2.3% more than the previous year.
• Pesticide Registrations Slow In 2009
Agriculture output grew largely as a result of more exports, although revenues were lower due to commodity prices falling off after the favorable commodity prices in 2008. Tobacco bucked the trend, which perpetuated in large part because of the stronger dollar driving down value of local currency.
Because of the importance of agribusiness to the Brazilian economy, it is important to minimize supply chain disruptions that could damage one of the most lucrative national businesses. The government’s approval of post-patent pesticides has enabled the entry of new companies into Brazil and has bolstered the product offerings of companies that already operate the country.
Today, fertilizer companies are seeing some significant opportunities. Although there are more than 500 companies in this segment, the sources of raw materials are mostly imported. In 2008, Brazil imported 17 million tons of nutrients, totaling about US $10 billion.
Because much of the fertilizer supply is coming to Brazil from Russia, the two governments are evaluating a tradeout: fertilizer technology for agriculture commodities. The Brazilian mining giant, Vale do Rio Doce, of which the Brazilian government holds shares, invested $5.7 billion in acquisition of shares of fertilizer companies in Russia. To protect local market, Brazilian manufacturers are lobbying for an anti-dumping tax on ammonium nitrate from Ukraine and Russia.
Now Exporting Expertise
Given Brazil’s reputation for agriculture productivity and efficiency around the world, the country is now starting to export some its technology and know-how. Brazil signed an agreement with African countries (Benin, Burkina Faso, Chad and Mali) to transfer technology for cultivating cotton. Brazil also has a deal with Angola to assist in the cultivation of beans, rice, corn, soybeans and vegetables. Other projects refer to sugarcane and milling. Brazilian companies are important to soybean and rice growers in Uruguay, Argentina, Paraguay and Bolivia. These are also creating an increased demand for pesticides.
A notable highlight of the Brazilian agriculture industry is sugarcane, which produces about 16% of the country’s energy source. The success Brazil has enjoyed in refining sugarcane has made it an international commodity, especially as more countries set green energy policies that mandate fuel blending without the refining capacity or expertise to produce enough to meet the mandates.
Strong foreign groups such as Cargill, Bunge, ADM, LDC, Sojitz, Mitsui and Itochu are investing heavily in acquisitions, totaling a share of 12.3% in the grinding of sugar-cane. In February 2010 the giant Shell Oil and Cosan, a local miller and world leader in grinding of sugarcane, signed an agreement to build a joint venture worth $12 billion for ethanol production, sugar, energy, supply, distribution and fuel sales. In 2008, Cosan had acquired from ExxonMobil a distribution network of fuels in Brazil that included 1,500 gas stations, in a business of $826 million.
| Other Key Brazilian Crops | |||
| Crop | Cultivated Area (hectares) | Key Benefits | Where Grown |
| Vegetables | 700,000 | Higher prices, shorter payment terms | Close to big cities |
| Tobacco | 377,000 | No credit risk | Southern region |
| Rubber trees | 150,000 | 60% profitability | 60% in Sao Paulo State |
| Reforesting | 6 million | Stable market | 66% in three states |
| Floriculture | 5,200 | Higher prices, shorter payment terms | Concentrated area |
| Apples | 38,800 | Higher prices, shorter payment terms | Southern region |
Another bright spot for Brazil is its rapid adoption and expansion of genetically modified organisms (GMO). The government recently issued an agriculture policy that seeks 40% of corn to be GMO technology, and it already grows GMO soybeans in two-thirds of its planted area.
Pesticide Pitfalls
Despite the success of various segments of the industry, Brazil has its challenges. Less than 6% of the cultivated area is irrigated, prices of tractors and farm equipment are double the cost of other agriculturally mature countries, and Brazil lacks storage infrastructure that would allow it to maximize its yields. These shortfalls could open several opportunities for entrepreneurs to develop businesses in these fields.
The value (US dollars) of the pesticide market in 2009 fell 8% compared to 2008. In local currency it was almost stable, with a growth of 1%. While fungicides had a considerable increase of 16.9%, mainly on soybeans, herbicides pulled the average down due to the international price drop for glyphosate.
Aside from the bounty of row crops, there are several other important niches that to date have not been attractive to the new entrants, including vegetables, tobacco and rubber (see chart).
There are several challenges for 2010, from the return of glyphosate anti-dumping tax; more generic registrations and competition; strong growth of GMOs; delay of registration evaluations; and the war against smuggling to bring back the traditional sales growth of 8%-9% a year.
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