May 20, 2008 / 2:28 PM / 12 years ago

Brazil threatens to nationalize fertilizer mines

CUIABA, Brazil, May 20 (Reuters) - Brazil may nationalize privately held mineral deposits used to make fertilizer to bring down farm production costs, Agriculture Minister Reinhold Stephanes said.

The threat from Latin America’s farming powerhouse, which is heavily dependent on fertilizer imports, is the latest in a regional trend to bring natural resources under greater state control as world oil and food prices push new highs.

Fertilizer prices have doubled over the past year.

“If it’s necessary, yes, if it’s necessary,” the minister said on Monday night to the question of whether the state would repossess private concessions in the mining sector.

He was speaking at an event in Brazil’s No. 1 soybean producing state of Mato Grosso.

Mato Grosso Governor Blairo Maggi, who has a controlling stake in the world’s largest soybean producer, Amaggi, said the government was studying all the mineral deposits in Brazil that would provide phosphate and potassium for fertilizer.

The government would decide on whether to repossess mineral deposits and give them to state-run companies or others in the private sector to return fertilizer prices to levels four months ago, he said.

Brazil imports 80 percent of its potassium and 60 percent of its phosphorus. It is also a major importer of nitrogen. Prices for all of these have skyrocketed with increased world demand for agricultural crops.

Some fertilizers, such as nitrogen, are also made from petroleum products and have suffered price increases as world oil prices hit daily records.

Brazil may begin producing most of its own nitrogen fertilizer once a giant new natural gas field off the coast of Rio de Janeiro comes online, Energy Minister Edison Lobao has said. Brazil is in the midst of a natural gas supply shortage at present, however.

Stephanes said nitrogen production from gas could start in two years, but this was unlikely as large offshore oil and gas fields take closer to a decade to bring to production and the Jupiter find was announced in January. [ID:nN22258408]

Stephanes said fertilizers were a strategic sector for Brazil, which is Latin America’s largest agricultural producer.

The farm sector makes up more than 15 percent of Brazil’s economy.

Brazil is the world’s largest producer and exporter of coffee, sugar and orange juice and a major producer of soy and corn.

The government and the productive sector have expressed frustration over the concentration of Brazil’s fertilizer sector in a handful of companies, which include large multinational grains traders such as Bunge Ltd (BG.N) and Cargill.

Part of the supply problem in Brazil’s fertilizer sector stems from the risks investors face. Increased output of potassium, for example, depends on the exploration of deep underground deposits in the Amazon, where environmental red tape deters development.

“It’s a very big deposit that could supply nearly all of what Brazil could use,” Stephanes said.

Brazil’s environmental minister of the past five years, Marina Silva, resigned last week, frustrated with President Luiz Inacio Lula da Silva’s push to expand and consolidate economic development at the cost of the environment.

The sharp rise in farm production costs have prompted analysts to limit their forecasts of Brazil’s potential to expand output to meet demand from the new middle class in the fast growing emerging markets. [ID:nN13391921] (Reporting by Jonas da Silva; Writing by Reese Ewing; Editing by Walter Bagley)

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