(This story is part of a special package highlighting the
global potash industry.)
* High sugar price seen driving Brazilian potash demand
* Sugar cane acreage expected to double in next 10 yrs
By Inae Riveras
SAO PAULO, Sept 24 The expansion of sugar cane
farming in Brazil will likely increase reliance on foreign
supplies of potash in the Latin American country, already the
world's No. 3 importer of fertilizer.
Sugar futures recently jumped to their highest level in
nearly 30 years due to a steep decline in Indian output. The
high prices should encourage more cane planting and lead to
heavier use of potash as early as next year.
Potash is an indispensable ingredient to increase sucrose
concentration in cane -- or the actual amount of sugar that can
be extracted from cane.
"Cane is a potash sponge so I believe we'll see demand
growing in cane fields already in 2010," said Alexandre
Mendonca de Barros at MBAgro consultants, adding that he
expects cane planting to expand again from 2011.
Brazil is the world's fourth biggest consumer of fertilizer
and is highly dependent on imports. Even as the government
pushes for increased domestic production, imports will likely
to keep growing as the country's agriculture expands.
"Brazil demands more potash than the world on average due
to its needs in coffee and orange production and especially
sugar," said Eduardo Daher, executive secretary at the National
Association for Distribution of Inputs, Anda.
Currently, Brazil imports 90 percent of its potash
requirements, 75 percent of its nitrogen and half of its
The government is pushing for companies, including iron
mining giant Vale (VALE5.SA)(VALE.N), to invest more in
prospecting the vast Brazilian territory. Still, analysts
believe any increase in domestic output is still a long way
"Brazil's dependence on potash will grow even more. Local
supplies are laughable compared to Brazilian demand and I don't
see it changing in the short or medium term," said MBAgro's
Brazil is already the world's largest producer of sugar
cane and official estimates indicate the amount of land growing
cane will double in the next 10 years to around 13 million
hectares (32 million acres).
The increase could come sooner if sugar prices stay around
current levels in the months or even years ahead, analysts
Brazil's ethanol industry borrowed heavily in the last few
years to finance expansion but the credit crunch resulting from
the global financial crisis dealt a heavy blow and froze
With the recovery in sugar prices, analysts expect the
sector to resume investments in cane fields and expand the
total planted area.
One hectare of cane plantation usually requires between
450 kilos and 500 kilos of fertilizer, and almost half of the
product is composed of potash.
"Cane accounts for 13 percent of Brazil's fertilizer
consumption currently but this is gradually growing," said
Anda's executive secretary, Eduardo Daher.
He expects fertilizer demand for cane to surpass that for
corn, which is currently the second-largest consuming crop,
accounting for nearly 20 percent of Brazil's demand. Soy is the
hungriest crop, consuming 33 percent.
With farmers eager to cash in on high sugar prices, Barros
said they were using extra potash to replenish soils in fields
that had been in production for extended periods.
Based on that, the analyst expects potash demand for cane
to jump in the next few years, after two years of stagnation as
sugar and ethanol prices remained low.
High potash prices however, could cause some growers to
switch to vinasse, a potash-rich cane byproduct.
Potash prices during the first half of the year were close
to last year's peak of $700 per tonne but Barros said the
subsequent fall on international markets to around $460 per
tonne had not yet fully been passed on in Brazil.