July 17, 2018 / 7:19 PM / a year ago

UPDATE 1-Brazil transport costs hurt fertilizer demand, soy area growth

(Recasts throughout, adds quotes, context and Anda figures)

SAO PAULO, July 17 (Reuters) - Higher transportation costs in Brazil following a truckers’ strike that crippled the country’s logistics will hurt fertilizer demand this year and may slow the growth in soy acreage in the next season, analysts said on Tuesday.

Brazilian demand for fertilizer will fall this year for the first time since 2015 due to disruptions caused by the strike and increased transportation costs after the government agreed to set minimum freight prices in a deal to end the demonstrations, according to INTL FCStone analyst Fábio Rezende.

The strike began in May with hundreds of thousands of truckers moving to block highways for 11 days, choking up shipments of supplies ranging from consumer products to animal feed. Brazilian logistics took weeks to return to normal, with many contracts to deliver grains and fertilizer held up over uncertainty about how the government would set minimum freight prices.

The situation is delaying farmer planning for the coming soybean and corn seasons, which starts around September, Rezende said at an event in Sao Paulo.

“We are in the middle of July and at this point farmers should already be stocking up (fertilizer),” Rezende said. “This means purchases will be concentrated in August, September and October, affecting internal fertilizer prices.”

Brazilian farmers will likely buy 3.7 percent less fertilizer this year compared to 2017, or 33.17 million tonnes, according to the consultancy.

Fertilizer trade group Anda said deliveries fell 2.3 percent to 12.83 million tonnes in the first six months of the year, weighed down by the trucker protests.

Brazil imports most of its fertilizers supply, with empty trucks delivering grain to ports generally making return trips with fertilizer to farmers in the interior of the country.

Uncertainty over freight prices will linger until transport regulator ANTT updates a table setting minimum prices following Congressional approval of government-set prices last week.

Higher freight costs may also limit the growth of Brazil’s soybean area in the next harvest, INTL FCStone analyst Ana Luiza Lodi said at the same event, declining to provide an exact projection. Last season, the government estimated the area to be 35.1 million hectares (86.7 million acres).

Before disruptions in Brazil’s transportation system, the consultancy expected 5 percent growth in the soy area, driven by strong demand from China for Brazilian beans.

“Now farmers are more cautious,” Lodi said referring to planting intentions. “The freight impasse may affect the next harvest and increase input costs,” she said. (Reporting by Ana Mano and José Roberto Gomes Editing by Chizu Nomiyama and Richard Chang)

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