Rising Fertilizer Prices Squeeze Producers' Profits, Potentially Delaying Recovery—Turmoil from Brazil Indicates "Next Price Risk"

1. What's Happening: Fertilizer Prices "Again" High in Brazil

In Brazil, the largest agricultural country in South America, fertilizer prices are once again on the rise. According to local reports, a combination of tightening supply and the depreciation of the local currency, the real, is driving up the cost of fertilizers, which are heavily reliant on imports, directly impacting producers' margins. As the new planting season begins, the financial situation for farms is becoming increasingly strained.InfoMoney

There are two key points. First, fertilizers are one of the most significant cost components for farmers. Second, fluctuations in fertilizer prices can easily affect the amount used in "subsequent seasons," yields, and consequently global grain prices. The current increase may delay the recovery trajectory of earnings.InfoMoney

2. Drivers of Increase: Triple Burden of Raw Materials, Policy, and Exchange Rates

• Reversal of Raw Materials: The rise in basic raw materials like ammonia and sulfur is impacting the cost of nitrogen and phosphate fertilizers. This is due to plant shutdowns, maintenance, and supply constraints in gas-producing countries.revistacultivar.com
  
  

• Trade and Policy Risks: Global fertilizer trade remains "policy-driven" in 2025. China reduced urea and phosphate fertilizer exports at the beginning of the year, and although partially relaxed in July, sudden policy shifts can increase international market uncertainty.FB.org
  
  

• Geopolitics and Sanctions: Russia plays a significant role in global fertilizer supply, and if secondary sanctions by the U.S. are imposed, it could disrupt agriculture in Latin America. Brazil relies on Russia for about 30% of its fertilizers, making procurement risks more apparent.Reuters
  
  

• Exchange Rate Headwinds: In countries with high import ratios, a weaker local currency directly translates to increased costs. In Brazil, the depreciation of the real is raising the landed cost of fertilizers, pushing up domestic prices.InfoMoney

3. Why Brazil's Fertilizer Prices Matter to Japan Now

Brazil is a "global supply base" for soybeans, corn, and sugar. If fertilization is reduced or planting becomes more cautious there, it can have a delayed impact on the global supply of agricultural products. As a result, it can easily affect Japan's imported food prices and feed costs, potentially leading to pressure for price revisions in livestock and processed foods. Additionally, within Japan, the combination of fuel, electricity, and material inflation with a weak yen continues to create a situation where agricultural production costs are likely to rise gradually (especially nitrogen-based fertilizers are heavily influenced by energy prices).

4. Current Supply and Demand: Quantity is High, but Prices Remain "Stubbornly High"

Ironically, in terms of quantity, imports have reached record levels. As of the end of August 2025, Brazil's cumulative fertilizer imports are on pace to set a new record, reaching 24.2 million tons, up 8.8% year-on-year. While the quantity is secured, the reality is that adverse prices and exchange rates are not leading to "cost improvements."news.agropages.com

Additionally, the latter half of the year is typically a time when seasonal demand for phosphate and potash increases. In 2025, this seasonality, combined with weak grain markets, high interest rates, and rising raw material costs, is coming together in a "bad way," further squeezing margins.stonex.com

(Supplementary) Although there have been instances of softening in international markets on a weekly basis, the overall view is that uncertainty remains strong, and declines are unlikely to be sustained.Agrolink

5. Impact on Earnings: Factoring in "Delays" in Recovery

According to Rabobank, the pressure on producer margins is expected to continue until around 2027. The background is a combination of rising operating costs such as fertilizers and weak agricultural product prices. Compared to last season, fertilization costs are estimated to have increased by about 10%, introducing the risk of more cautious planting decisions.revistacultivar.com.br+1

6. Medium to Long-term Structure: Will Self-sufficiency Improve?

Brazil is said to have an import dependency of over 80% for fertilizers, making the rebuilding of domestic production a policy issue. While the state-owned oil company Petrobras is preparing bids for the restart of idle nitrogen fertilizer plants, arbitration and profitability issues with lessees pose challenges. Short-term supply increases are difficult to predict, and for the time being, the structure remains vulnerable to external shocks.Reuters+1

7. How It Affects Japan's Procurement and Prices (Practical Perspective)

• Imported Food and Feed Prices: Supply stagnation and high costs originating from Brazil are likely to eventually impact international markets. Cost pass-through to Japan's downstream sectors (meat, dairy, processed foods) is likely to occur.

• Increase in Domestic Production Material Costs: Nitrogen-based fertilizers (urea, ammonium nitrate) are heavily influenced by energy prices, requiring close attention to international gas prices and ammonia trends.revistacultivar.com

• Double Punch of Exchange Rates: A weak yen is also a headwind for Japan's import procurement. There may be situations where the triangular relationship between the yen, real, and dollar results in higher costs.

8. Risk Management Checklist for Producers and End-users

① Procurement and Price Hedging

• Diversify orders in advance and stagger the timing of price decisions by breaking down order quantities into smaller lots.

• Visualize hedging strategies for key items (urea, MAP, DAP, potash) and **exchange rates (USD/JPY)** on a calendar.

② Technical Approach

• Based on soil diagnostics, apply appropriate fertilization (targeting only deficient factors).

• Combine materials with different solubility and particle sizes to improve absorption efficiency.

• Use coated urea, slow-release fertilizers, and nitrification inhibitors to reduce losses.

• **Complementary use of organic and by-product materials (compost, biostimulants)**.

③ Cooperative Purchasing and Inventory Management

• Joint procurement through cooperatives, JA, and regional consortia and standardization of pick-up conditions.

• Advance procurement and securing storage space outside of peak periods.

④ Cash Flow and Interest Rate Measures

• In a high-interest rate environment, shorten turnover days and update cash flow statements weekly.

• Visualize inventory valuation gains and losses to quickly make purchasing timing decisions.

⑤ Optimization of Planting Portfolio

• Focus investment on crops and varieties with high fertilizer response, prioritizing fertilization in plots with high marginal revenue.

• Stabilize revenue fluctuations with price-linked contracts

  (combination of yield-linked and limit orders).

9. Monitoring Leading Indicators of Prices

• Movements in international indicators for ammonia and sulfur (Middle East FOB, North American Gulf).revistacultivar.com

• China's fertilizer export policy (export quotas, enhanced inspections, customs speed).FB.org

• Secondary sanction scenarios related to Russia and trade routes within the BRICS region.##