Various factors have caused price increases in agricultural inputs, mainly in fertilizers and some phytosanitary products, where there have also been serious stock shortages of certain products. The situation is only comparable to what happened in the 2008-2009 season.
Throughout history, the agricultural industry has had to face various problems and challenges. However, since the middle of last year, the sector has been affected by a crisis surrounding agricultural inputs, mainly in terms of fertilizers; a scenario initially generated by the pandemic that caused, among other things, a logistical disorder that impacted freight prices and product shortages.
“There has been a shortage of raw materials, a product of the entire Covid situation, where the production chain of raw materials was reduced and after When demand was activated and the world began to move freely again, it encountered this problem, added to the rise in transportation, since the cost of freight went through the roof, so not only have inputs risen from their cost at origin, but also freight, and to that say the dollar in the case of Chile, where you end up having a ton of fertilizers with a cost that is probably the most expensive in the last 20 years, explained Max Donoso, Partner and Director of Agrocompra, the first digital market for agricultural inputs in Chile.
Both suppliers and distributors are closely aware of what has been happening for more than a year and a half in this market that is closely linked to the price of commodities agricultural and metal products, as well as natural gas and oil.
“Urea, for example, is produced in association with the generation of natural gas and this in turn is correlated with the price of oil, so when oil is worth 80 dollarsthe barrel, its production cost also rises," comment Max Donoso.
The most difficult part of the crisis has been reflected in the fertilizer market, where production and logistics problems have caused serious delays and even stock-outs of products and price increases for all products, in addition to a critical case in soluble fertilizers such as nitrates, sulphates, phosphates, phosphoric acid and other micronutrients.
“The unloading process has been very affected, there have been ships with fertilizers that have been unable to unload at ports in Chile for two or three months and this has affected many suppliers who have not been able to meet the established delivery dates. The other problem is that the suppliers who come on these ships are generally the same and with the same products, so if a product is missing there is no substitute, as there are for agrochemicals,” explained Sergio Garín, General Manager of Coagra.
Among the products that have presented the greatest stock complications and, in turn, price increases, are Soluble Magnesium Sulfate, Phosphoric Acid, Soluble Zinc Sulfate, Soluble Potassium Muriate and Soluble Calcium Nitrate.
According to figures provided by Agrocompra, the first Marketplace for agricultural inputs in Chile that brings together the main distributors and suppliers in the country, the rise in fertilizer prices has exceeded 60% in some cases: “"Almost all prices have risen, but nitrogen prices have risen by around 701 TP3T since March. This season and the 2008-2009 season are the two record years for price increases for inputs," said Max Donoso.
A significant part of the production costs of fertilizers, almost 70 percent in the case of urea, for example, is represented by the value of natural gas, which has risen to historically high levels worldwide, in addition to the crisis associated with the availability of this element after the recent winter in the northern hemisphere, one of the coldest in recent decades.
Luis Hernán Cruz, General Manager of Anagra, confirms this situation: “The rise in fertilizer prices that has been taking place over the last 4-5 months has taken the entire market by surprise, but it is apparently based, on the one hand, on the energy crisis, the inputs to produce fertilizers have been rising due to the rise in the cost of natural gas, sulfur and other materials, and on the other hand, there have been significant restrictions on exports from sources that are very important in the supply of fertilizers for the rest of the world.”
Cruz is referring mainly to the export restrictions applied in China, in order to control prices in its domestic market, but which in turn have had repercussions on the rest of the world, including Chile.
“The issue of fertilizers has had an increase that was very little expected at the beginning of the year. Although it was expected that there would be an upward trend, the movement of prices in the last three or four months has been dramatic, without even considering transport to Chile yet. This is multifactorial, there are supply issues, there are increases in commodities and there are also other factors such as the price of grain at an international level. Today, probably a large part of this is produced by something much more structural than what happened in 2008, because there are indeed supply issues in general and that has made prices move upwards.” explained Claudio Morales, Manager of CNA Chile.
During this season, the logistics chain has clearly been broken, which has caused fertilizers to arrive late to the fields; this implies fertilizing less, at the wrong time and at a higher cost.
“Probably all industries associated with agriculture and mainly with the inputs necessary for carrying out agricultural work have been impacted in one way or another by the supply chain crisis that we have seen during this year and part of last year; fertilizers have probably been the most affected, but in our case, as we work in the area of phytosanitary products and seeds, we have had an impact in one way or another on the supply and arrival of products, in a timely manner,” warned Jorge Grau, Commercial Director of Corteva Chile.
Bringing supplies forward to deal with logistical problems seems like a good solution, however, Juan Pablo Zúñiga, Marketing Manager of Adama Chile, warns about the inconvenience that this route generates, which by the way, despite the complications, is the one they have had to follow.
“If we as companies were making purchases for what we have to formulate, several months in advance, at least four months, today we are considering that this should increase by three to six months in advance, which also causes us, like all companies, a cost and logistics problem due to having to store products for longer,” they explained from Adama.
It is regrettable that, in a year of good climatic factors, except for rainfall, accompanied by good fruit set in our country, agriculture is facing this crisis. Problems in the logistics of agricultural inputs have been added to labor problems that affected this 2021, especially in pruning work. Although fertilizers will arrive, both for sowing and for technical management, there is the obvious risk that fertilization will be applied at the wrong time, which could have an effect contrary to the desired objective.
“According to what we have been told, these problems will continue to accompany us at least during the first half of 2022. We hope that this learning will generate some improvements in the short term. Although today I believe that we have regularized the arrival and supply of our imports, and we have probably reached the limit in many things, from now on I see that we will not have major problems, but that we have had a very complex year, it certainly has been, so we hope that all companies can regularize this supply of inputs for agriculture and that our farmers and clients do not have problems reaching the harvest in the best conditions,” concluded Jorge Grau, Commercial Director Corteva Chile
Although the outlook for 2022 remains uncertain, there are those who are a little less optimistic and point out that this complex scenario will continue throughout next year. The energy crisis and restrictions in the Chinese market cause a problem on the supply side and, on the other hand, demand for agricultural products remains strong. To this must be added the current crisis in maritime freight, which is causing very strong tension in the market and this is being regulated by way of rising prices, which are ultimately passed on to the final link in the supply chain, which will cause production in Chile to be one of the most expensive years on record this year.
