Farmers in Brazil have teamed up to drill an area the size of New York for phosphate-based fertilizers, seeking to cut dependency on producers including Vale S.A. (NYSE:VALE) and Mosaic Co. (NYSE:MOS) after prices surged.
Farm groups representing about 4.500 soybean and cotton producers in Brazil bought drilling equipment worth about 270,000 US dollars to prospect for phosphate on 80,000 hectares in the center-western state of Mato Grosso. They plan to expand prospecting to another 400,000 hectares and drill 300 to 400 holes in the next 30 days, said Gilson Pinesso, the head of the project.
Mosaic (NYSE:MOS) and Vale (NYSE:VALE), which agreed in January to pay 3.8 billion USD for Bunge’s (NYSE:BG) fertilizer assets in Brazil, control 45% of the country’s fertilizer production, said Carlos Florence, the Fertilizer Distributors Association’s managing director. Phosphate prices have more than doubled in six years to about 266 USD a ton, Florence said.
“Farmers are in the hands of those companies,” Pinesso, owner of eight farms in the states of Mato Grosso and Mato Grosso do Sul, said in a May 4 interview in Sao Paulo. “We want our independence.” The Mato Grosso Soybean Producers Association and the Mato Grosso Cotton Producers Association formed an exploration company, hired two geologists and 20 other people to conduct the prospecting, Pinesso said.
“We are looking for phosphate, but we may even run into gold here,” Pinesso said, referring to the history of the state of Mato Grosso, which was developed after a gold rush in the 18th century. Brazil is the world’s largest producer of sugar and coffee and the second-biggest for soybeans, trailing the US.