Analysis-Soaring fertilizer prices dim Brazilian farmers' edge over US rivals

By Ed White, May Angel and Oliver Griffin

WINNIPEG, Manitoba/LONDON/SAO PAULO (Reuters) June 8 - Brazil's cheap, abundant land has long helped the country's farmers create vast, low-cost farms, allowing them to wrest export markets from U.S. farmers hurt when China began switching suppliers during President Donald Trump's tariff wars.

While U.S. farm acreage has not grown this century, Brazil's has soared about 50%, making it an agricultural powerhouse. ‌But the South American country's edge is being tested as the U.S.-Israeli war with Iran sends fertilizer prices soaring.

About a third of the world's fertilizer flows have been bottled up inside the Strait of Hormuz ‌since the war began. The U.S. produces much of its own fertilizers, but Brazil relies heavily on imports, so many of its farmers have cut back on fertilizer purchases.

Even if the conflict ends tomorrow, industry experts say Brazil's farmers are in trouble. Already, they are saddled with thousands of ​acres of farmland producing diminishing returns or even losses. Many are starting to accumulate significant debt.

In addition, many U.S. farmers have land rich enough to produce decent yields, even if they skip some fertilizer applications for a year. Few Brazilian farmers can do that.

Varying growing seasons are also an issue. Brazil's spring planting starts in September so its farmers are currently exposed to soaring fertilizer prices. U.S. farmers were mostly done with their purchases when the war began.

Unlike their U.S. rivals, Brazilian farmers cannot count on government bailouts or generous support programs.

“Profitability just isn’t there," said Murilo Rabelo Martins Pereira, a farmer in Goias state in central Brazil.

"Expansion is something everyone is rethinking right now."

Pereira, 34, farms soybeans, corn and tomatoes on 800 hectares. He said soaring production ‌costs make it too risky to expand his farm, even though he has received ⁠offers to lease more land.

"For sure we'll not see the same trend" of agricultural growth in Brazil, said Purdue University agricultural economist Joana Colussi, a Brazilian native.

She expects growth to stall, at least temporarily, as farmers spend more on fertilizer, fuel, seeds and other inputs, and less on expansion.

HISTORIC GROWTH

Brazil's history-making growth in agricultural production began in response to booming demand from ⁠China. Vast areas of grassland were converted from cattle grazing to growing crops like soy and corn, putting Brazil and the U.S. into direct competition.