The escalating Iran conflict threatens Brazil’s grain exports and fertilizer supplies

By Anna Mano and Roberto Samora

SAO PAULO, March 5 (Reuters) – Brazilian farmers may be hit by escalating conflicts in the Middle East, according to analysts and trade data, with the region a key destination for Brazil’s farm exports and an important supplier of fertilizers such as urea.

The US-Israeli attacks on Iran, which in turn triggered attacks on other countries in the region and disrupted maritime traffic through the Strait of Hormuz, may lead to the termination of the grain agreement and a shortage of fertilizer in Brazil, which is heavily dependent on imports.

According to consultancy Argos, shippers are considering whether to load grain cargo in Oman to avoid problems in the Persian Gulf.

“The alternative would be to cancel the (wheat) shipments,” Argus told Reuters. “It is also not yet known whether the cargo can be transferred in Oman and from there by truck or rail to its final destinations.”

Arthur da Annunciacao Nieto, owner of shipping agency Alphamar Agencia Maritima, said large cargoes such as corn enter the Middle East through the Strait of Hormuz.

The threat of shipping in dangerous waters has driven up the cost of marine insurance, he said. According to Alfamar data, ten ships with more than 600,000 tons of Brazilian soybeans and soybeans are scheduled to leave for Iran in the next few days. The cargo, depending on conditions, may be diverted to other locations, Neetu said.

Iran was Brazil’s main corn export destination last year, shipping about 9 million tons or 20%. Most Brazilian corn is shipped in the second half of the year.

Creative ways of shipping

Middle Eastern fertilizer producers, especially Iran, are also important suppliers to Brazilian farmers.

According to the Agrinost consultancy, Brazil will cover 100% of its urea needs through imports by 2025. An estimated 41% of those imports, or nearly 3 million metric tons, pass through the Strait of Hormuz before reaching Brazil, the data show.

Francisco Vieira, director of consultancy Agroconsult, said the war would likely limit urea supplies and raise prices in the short term.

“Nothing is expected from Iran,” Vera said. “We don’t even know if their factories are being bombed or not.”

Government figures show Brazil imported 7.7 million tonnes of urea last year, representing less than 2.5% of shipments from Iran.

But Iran’s exports are often routed through Oman due to US sanctions affecting international trade with Iranian parties, and private estimates show that Iran’s annual imports from Brazil range from around 1.3 million to 1.4 million tonnes.

“The absence of Middle Eastern suppliers will lead to an imbalance in (urea) supply,” StoneX’s Renato Francoso told Reuters. He said the Middle East exports an estimated 22 million tons of urea, accounting for 40% of world trade.

The problem before

Analysts say the protracted conflict could affect fertilizer supplies ahead of Brazil’s 2026/2027 crop cycle, when planting begins in September.

Tamirs Katli, founder of advisory and brokerage firm Hudi Consulting, said the war in Iran had caused dealers to pull urea price lists this week and disrupted global trade.

Other countries could replace part of any lost Iranian shipments to Brazil, but the second-order implications are still unclear.

Production in Egypt, which accounts for about 8% of the world’s supply, is dependent on natural gas supplies from Israel, which could be threatened, Stone X Francois said.

China, another major fertilizer producer, has been reducing exports in recent years to supply its domestic market.

Russia, which is expected to account for 16% of the world’s urea supply in 2024, could fill the gap. But drone strikes such as last month’s attack on a fertilizer factory in Smolensk have highlighted the threat to these supply lines.

(Reporting by Anna Mano and Roberto Samora Editing by Brad Haynes, Kirsten Donovan)