Potash Corp./Saskatchewan (USA) (POT), Vale SA (ADR) (VALE): Will Fertilizer Companies Lose Brazil’s Business Forever?

Page 1 of 2

Around two years ago, Brazil declared its intention to wean itself off of fertilizer imports by 2020. While acknowledging that it could not fully meet domestic potassium demand, Brazil’s stated aim was to become self-sufficient in nitrogen and phosphates, and to reduce its dependence on foreign Potash Corp./Saskatchewan (USA) (NYSE:POT) (water-soluble potassium) significantly. Considering that Brazil is one of the world’s largest potash consumers, importing 90% of its requirements, might this be shaping up to be a major blow to international producers?

Potash Corp./Saskatchewan (USA) (NYSE:POT)

Feeding a hungry planet
Over the last 30 years, Brazil has transformed itself into a breadbasket, and it’s done so in large measure by dramatically increasing farm inputs. The government is seeking to close that loop, putting pressure on the industry to triple spending on domestic fertilizer capacity over the course of the next five years.

Why might the country want to become less reliant on imports? Beyond the usual national security arguments, there’s the matter of competitiveness. Transportation of nutrients to inland farms from ports can be very expensive and time consuming. As a result, Brazil’s farmers are losing out to countries like the U.S.

To address this issue, Brazil’s government wheedled miner Vale SA (ADR) (NYSE:VALE), in which it has a golden share, to invest in potash and phosphates. Vale’s investment plan now calls for $8.8 billion in spending on fertilizers over the next five years. Coupled with related plans from state-owned Petrobras Argentina SA ADR (NYSE:PZE), predictions are that Brazil will reduce its overall dependence on fertilizer imports from 72% to 28% by 2017.

You’d think that this might have foreign potash suppliers quaking in their boots, but you’d be wrong.

Potash Corp./Saskatchewan (USA) (NYSE:POT) and Russia’s Uralkali are the two primary potash suppliers to Brazilian farmers. Potash Corp./Saskatchewan (USA) (NYSE:POT) makes only a passing reference to Brazil in its 2012 10-K: “Potash from our Saskatchewan operations for sale outside Canada and the United States is sold exclusively to Canpotex, which is an export marketing and sales company. A significant portion of Canpotex sales are to China, Brazil, India, Indonesia, Malaysia and Japan.”

CF Industries Holdings, Inc. (NYSE:CF) gets a little closer to stating a risk in its 2012 10-K: “Other geopolitical factors like temporary disruptions in fertilizer trade related to government intervention or changes in the buying/selling patterns of key consuming/exporting countries such as China, India and Brazil, among others, often play a major role in shaping near-term market fundamentals.”

Agrium Inc. (USA) (NYSE:AGU) is all smiles in its 2012 annual report, highlighting the fact that it had expanded its retail presence in southern Brazil. Mosaic Co (NYSE:MOS) shows in its 2012 10-K that it derives nearly 20% of its net sales from Brazil, and identifies only currency risk in that market.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!