As Brazil’s largest mining company exits the fertilizer industry, Canada’s leading potash exporter is ramping up its operations in South America’s largest agricultural market.
Canpotex Ltd., the Saskatoon-based company that sells potash from 10 Saskatchewan mines to farmers around the world, is expected to announce the opening of its first office in Brazil on Monday. In an interview, Canpotex chief executive Ken Steitz said expanding its sales effort in Brazil is part of a $1-billion investment to better position the Canadian company as a dominant fertilizer supplier to a country that’s expected to lead the world in food production over the next three decades.
The new Sao Paulo-based sales team is led by Talita Arcaro, hired in October as Canpotex’s managing director in Brazil. Ms. Arcaro previously worked for a major domestic fertilizer distributor and the Brazilian arm of a Morocco-based fertilizer producer. She was born and educated in Brazil.
Brazil is the world’s largest importer of potash and Canpotex is beefing up its presence after Rio de Janeiro-based Vale, one of the world’s largest mining companies, disappeared as a competitor.
Vale sold its fertilizer division to Minneapolis-based Mosaic Co. for US$1.4-billion in a deal that closed in January, more than a year after it was announced, as part of a restructuring aimed at paying down debt. The unit included the largest potash mine in Brazil.
Canpotex is owned by the Canadian arm of Mosaic and Nutrien Ltd., the company created from January’s merger of Agrium Inc. and Potash Corp. of Saskatchewan Inc., and is responsible for the two company’s potash sales outside North America. Canpotex has sales offices in three Asian cities — Shanghai, Tokyo and Singapore — but previously covered South America with agents in the region and a sales team based in Saskatchewan.
Brazilian farmers used approximately 10 million metric tons of potash in 2017, and imported 90 per cent of the fertilizer from six major suppliers, including companies based in Russia, Germany, Belarus and Morocco. Vale was the major domestic producer. Last year, Canpotex supplied almost three million tons of potash to soybean, corn, sugarcane and coffee farms in Brazil.
Canpotex’s Mr. Seitz said Brazil’s share of global food production and demand for fertilizer are expected to rise steadily over the next three decades, as the country’s increasingly sophisticated agricultural sector expands crop yields and converts cattle ranches into farms. Mr. Seitz said in the past decade, Brazil’s use of fertilizer increased 40 per cent, while crop production rose 72 per cent.
There’s another potash play with Canadian links attempting to meet this demand for fertilizer. Brazil Potash, a privately owned junior mining company based in Toronto, is developing a property in the Amazon basin with a largely Canadian executive team and board that includes former federal cabinet minister Pierre Pettigrew.
For Canpotex, hiring a sales team in Sao Paulo is part of larger investment in logistics to get potash from Saskatchewan to Brazil. Mr. Seitz estimates the company has spent $1-billion on custom-built rail cars, port facilities and ships to carry fertilizer on what’s typically a 35-day journey from mine to farm.
Brazil currently accounts for 25 per cent of Canpotex’s sales and is the company’s single largest market. Last year, Canpotex filled 25,000 rail cars and 60 cargo ships with potash destined for Brazil.
Potash prices rose steadily over the past two years after a number of producers, including Nutrien and Mosaic, closed mines to decrease supply. “The global potash outlook remains broadly constructive,” Jacob Bout, an analyst at CIBC World Markets, said in a recent report. “If demand holds, a balanced market could be sustained through 2020!”
Potash prices in Brazil are now higher than in any other regional market, CIBC pointed out. The fertilizer fetched US$293 a ton in Brazil at the end of the first quarter of this year, up US$49 year over year. In Canada, the spot price of potash was US$258 a ton at the end of the quarter, up US$22 year over year. Potash price moves in Asia and the United States were in line with those in the Canadian market.
Potash prices spiked briefly to more than US$800 a ton in 2008, then declined steadily over most of the past decade, bottoming out at approximately US$215 over the past two years.