BRASILIA, BRAZIL — Brazil plans to expand its corn and wheat planted area in 2022-23 due to rising prices and demand but the question remains whether it will have enough fertilizer because of the conflict in the Black Sea region, according to a report from the Foreign Agricultural Service (FAS) of the US Department of Agriculture.

Corn area is expected to expand by 1 million hectares to 22.5 million hectares with production estimated at 22.5 million tonnes. Wheat planted area will increase to 3.4 million hectares with production reaching nearly 9 million tonnes.

“A reduction in inputs would also lead to lower yields, though the impact will be uneven across the country and will depend at least to an extent on climate,” the FAS said.

The corn production estimate would be a 3% increase from the previous market year and would set a new record.

Brazil is the third-largest corn producer and exporter in the world. Growers will be constrained by the high price and availability of fertilizer. Corn consumes 17% of the total fertilizer used in Brazil, and the nation is a top global importer of fertilizers, the FAS said. Top suppliers include Russia, Canada, China, Morocco, the United States and Belarus.

Due to the conflict in Ukraine, the market assumes that the flow of Russian fertilizers will slow substantially, if not stop, over this year and next. The Brazilian government officials have sought to strike deals with major fertilizer exporters from Canada to the Middle East and North Africa to plug the expected shortfall, the FAS said. However, the market anticipates that some fertilizer shortage is inevitable, the only question is how large the gap will be.

Initial corn exports for 2022-23 are forecast at 45 million tonnes, up 1 million tonnes from the previous year. The forecast is based on the expectation of a new record harvest in the next season, which would make ample supply available for export.

If production is lower than the initial expectations, then exports are likely to be lower as well.

The anticipated wheat area is a 25% increase from the previous season. Initial yield forecast is estimated at 2.59 tonnes per hectare.

Factoring in the productivity forecast, the FAS said Brazil could surpass the current record wheat crop by some two million tonnes.

Wheat will be the first major crop in Brazil to be planted amid fears of a fertilizer supply crunch. The FAS confirmed that input contracts for the winter crop mostly were concluded well before the conflict began and that the deliveries are currently ongoing. However, it is difficult to estimate whether 100% of contracts will be fulfilled. Furthermore, it is unclear whether those producers who cultivate soybeans and corn may choose to save some of their inputs for those crops.

Similar to corn and other commodities, some wheat producers may choose to reduce their fertilizer application simply because they are priced out of the market.

The FAS sets its initial 2022-23 wheat export forecast at 3 million tonnes on a wheat grain equivalent basis. The forecast takes into account the brisk pace of exports seen in the first half of 2021-22 and the expectation that global wheat demand will remain firm well into 2023.

“Wheat exports in excess of one million tonnes are a huge paradigm shift for Brazil, which generally exports only a small share of its wheat production amounting to around 10%,” the FAS said. “If this wheat trade dynamic persists over several seasons, Brazil may substantially grow its wheat production to emerge as a global player in wheat exports.”