Insights from the Recent UN Vote

The UN General Assembly has moved to suspend Russia from its Human Rights Council, a decision that resonates deeply within international relations.

Bolsarno’s National Fertilizer Initiative

My narrative begins on February 7, 2022, when Brazil’s state-run company, Petrobras, finalized a sale of its National Fertilizer Unit III (UFN III) to Russia’s Acron Group, with the approval of Agriculture Minister Tereza Cristina Dias, who has recently announced her resignation.

A week later, on February 14, 2022, President Jair Bolsarno enacted decrees to promote exploration in the Amazon Rainforest. Despite anticipated opposition to mining activities there, these decrees align with Bolsarno’s objective to bolster Brazil’s fertilizer sector.

Bolsarno’s strategy is encapsulated in Brazil’s National Fertilizer Plan. According to Argus Media, Brazil aims to reduce its reliance on imported fertilizers from 85% to 60% by 2025. Currently, the country is heavily dependent on imports for its primary fertilizer commodities: nitrogen (95.7% dependence), phosphate (72% dependence), and potash (96.4% dependence).

The National Fertilizer Plan gained momentum with support from Canada following the escalation of the Russia-Ukraine conflict. Luis Rangel, Director of Programs at the Ministry of Agriculture, stated, “The national fertilizer plan is a long-term initiative, a 30-year infrastructure transformation plan. Our goal is to lower dependence on imported fertilizers from 85% to approximately 50% or 55%.”

In light of the ongoing crisis in Ukraine, Brazil aims to further decrease import reliance to 50%. Strategic objectives for achieving this goal have been established, including the formation of a South American fertilizer industry council within Mercosur, which aims to tackle Brazil's natural gas challenges—an essential component for the country’s fertilizer production ambitions.

Russia’s Historical Role in Brazil

This discussion cannot ignore Russia's prior influence in Brazil's fertilizer market.

Russia is a leading supplier, accounting for 21% of nitrogen exports, 15% of phosphate exports, and 26% of potash exports to Brazil. Furthermore, both China and Belarus have faced difficulties in meeting Brazil's fertilizer needs, with China imposing export restrictions in 2021 and Belarus’s potash sector facing US and European sanctions.

> For additional insights into the global fertilizer industry, refer to my Medium article on the CEO transition at Nutrien Ltd.: https://readmedium.com/what-went-down-at-the-worlds-largest-potash-producer-nutrien-ltd-c174d19e403d

The data indicates that Russia is crucial for Brazil's nitrogen fertilizer imports. With China’s exports currently limited, Brazil may increasingly rely on Russia.

As noted, Acron Group has faced a Countervailing Duties (CVD) case at the US International Trade Court, initiated by CF Industries, which alleges that Russian subsidies for urea ammonium nitrate solutions (UAN) create an unfair competitive advantage for American producers.

It appears that Acron may lose this case, as the preliminary ruling favored CF Industries, potentially removing Acron from the US UAN market, where it has previously held a significant position. However, Russia is likely to continue exporting nitrogen fertilizer to countries like Brazil that are in need.

> For insights on CVD cases, check my analysis of The Mosaic Company’s petition against Morocco’s OCP: https://readmedium.com/big-year-for-d-c-62a64978a5cf

Potash Production and the Amazon

Turning our attention to potash, the ongoing conflict in Ukraine has led Russia to halt potash exports. In response, Brazil has accelerated efforts to mine substantial underground potash reserves in the Amazon.

Notably, Brazil’s potash reserves are located on indigenous lands, which has stalled a proposed mining bill in Congress. Prominent Brazilian musician Caetano Veloso recently led a protest against this bill during an event called “Earth Event,” advocating for indigenous rights and environmental concerns.

> For a detailed examination of the indigenous response to these developments, see my Medium article: https://readmedium.com/indigenous-groups-vehemently-oppose-bolsarnos-national-fertilizer-plan-e4aef667f4c7

Brazil's Future in the Global Fertilizer Landscape

What role will Brazil play in the future global fertilizer scenario? According to a USDA report from March 6, 2022, key points about Brazil’s National Fertilizer Plan include:

• Nitrogen Production:
  1. Increase nitrogen capacity to 2.8 million metric tons by 2050.
  2. Attract 2 nitrogen producers to Brazil by 2030.
  3. Attract an additional 4 producers by 2050.
  4. Allocate $10 billion for nitrogen production and output by 2030.
  5. Allocate $10 billion for nitrogen production and output between 2030–2050.
• Phosphate Production:
  1. Conduct 5 auctions for phosphate mining areas.
  2. Add 2 phosphate producers by 2030.
  3. Increase phosphate producers to 10 by 2040.
  4. Boost phosphate rock exploration by 3% annually through 2030 and by 2% from 2030–2050.
  5. Enhance phosphate rock production to 27 million metric tons annually by 2050.
• Potash Production:
  1. Hold 5 auctions for potash mining areas.
  2. Raise national potash production to 6 million metric tons by 2050.
  3. Increase the number of potash producers to 10 by 2030.
  4. Add an additional 10 potash producers by 2040.

Key Points: For nitrogen production, terms like increase, attract, and allocate suggest an open invitation for international investment in Brazil’s fertilizer sector. For phosphate production, add, increase, and enhance highlight the pressing demand for phosphates essential for Brazil's agriculture. Meanwhile, in potash production, raise, increase, and add indicate a critical focus on addressing the challenges posed by reduced imports from Russia and Belarus, which is vital for long-term planning.

The global fertilizer landscape is shifting, with various factors at play. Companies like Morocco’s OCP are expanding operations in Africa to address food security issues, while the US is tightening access to its fertilizer markets, and China is reducing its exports. Russia, leveraging fertilizer diplomacy, seeks to achieve its political goals.

Votes matter.

Whether at the UNGA or within Brazil’s legislative framework, decisions made can have significant ramifications. Such votes enable countries to pursue their strategic interests, exemplified by Brazil's choice to abstain from the vote to suspend Russia from the Human Rights Council. Additionally, nations from the Middle East and North Africa, including Morocco, Qatar, Oman, Saudi Arabia, and Algeria, are stepping in to mitigate Brazil's fertilizer import challenges, while Jordan aims to maintain its potash fertilizer exports, valued at $70 million in 2021, to replace lost Russian exports in the foreseeable future.