AGROCHEMICALS
‣ disaster .” One plant was destroyed and it had a knockon effect across the economy
6 and the supply chain . 4
“ The long-term trend in
2 declining inventories reached a low point and then held 0 flat ,” said Swift . “ It has been moving higher in the last -2 four to five years , since the -4 2017 trade war . Commodity companies now want to build -6 more inventory to bolster
-8 supply chain resilience . They just have not been able to .” -10 Swift recalled that at an economic roundtable meeting in May 2021 , “ every industry – agriculture , mining , construction , manufacturing , utilities , transportation and the service sector – is struggling with labour issues , especially knowledge and skill of workers ; and with supplychain issues , especially the cost of containers . Basically there is a shortage of everything .” As has been recapitulated by other analysts in recent months , Swift explained in September that the supply chain dislocations and – at that time – signals of rising inflation , were not a problem of too little supply but too much pent-up demand flushed by too much ready cash . “ There is no question that customers have money ,” he said . “ The question is what are they willing to pay for .” Even before wages and consumer prices began their inflationary spiral , prices for agricultural commodities had risen sharply . And prices for the largest industrial monoculture crops supported expansion , said Alex Polinsky , tolling consultant and principal of Polinsky Chemicals . He delivered the annual agrochemicals business update in Charleston . “ Corn drives agriculture and corn is back , big ,” Polinsky said . “ In 2020 , there were 90 million acres in the US planted in corn ; in 2021 that rose to 92 million acres , out of a total area under cultivation of 180 million acres ; so tipped it into the outright majority . More than that , the context is that
% Change year-on-year
2.7
0.1
1.7
-1.2
3 2.3
3.6
2.9
2015 2016 2017 2018 2019 2020 2021 2022 2023 GDP
2.3 the second largest crop in area is wheat at about 30 million acres , so the expansion in corn moved to more than three times as much .” Corn also led the way in prices , rising from $ 3.85 / bushel in 2020 to $ 6 in September 2021 , an increase of 56 %. Wheat rose by 37 % from $ 5.34 / bushel to $ 7.33 . Soybean prices rose 16 % from $ 8.76 / bushel to $ 10.15 . In aggregate the corn crop is worth $ 95.5 billion , soybeans $ 61 billion , and wheat $ 12 billion , out of a total agricultural commodity market worth $ 168 billion . “ We are looking at 2008 all over again ,” said Polinsky . “ Corn prices are high , oil prices are high , there is a broken supply chain .”
Separately , Polinsky noted : “ There are a huge number of agricultural inputs coming off patent . And essentially companies have stopped putting new AIs into the market . In 2020 , 90 % of the AI market was generic . It will be 92 % in 2021 . It was 77 % in 2014 .” Biological inputs are a $ 7 billion market in 2021 with the prospect of growing into a $ 9 billion or even $ 10 billion business in 2024 , according to James Mann , principal of the Context Network , in his presentation about opportunities in biologicals . Drivers range from environmental pressures to regulatory and legal requirements .
0.7
Figure 2 – US speciality chemical market v . GDP , 2015-2023 Source – Dr Kevin Swift
-3.4
-7.9
5.6
5.1
Speciality chemicals
4.2 3.7
2.8 2.1
“ Governments are demand a reduction in agricultural residue and there is an opportunity to link biologicals with synthetics to extend the patent life of the synthetics . Most firms are thinking along the lines of combining biologicals and synthetics ,” said Mann .
There are also driving factors in business operations . “ The market is highly fragmented , with a lot of ‘ mom and pop ’, or ‘ bathtub ’ operations , so there would be an opportunity for a roll-up strategy .” Extending that logic , Mann suggested that integration can bring size and business expertise , which in turn would attract a capital influx . “ Biologicals would be a fantastic ESG play , in addition to creating new paths to market through variable application . There could be modular approaches among synthetics , biologicals and combinations .” The first steps to those opportunities are getting biological start-ups support in formulation and scale up , Mann said . “ Application technology , synergy with synthetics , marketing and sales , as well as regulation and certification are all barriers to entry today . Those can be addressed by the vast existing capabilities in the chemical and agricultural industries .” •
26 SPECIALITY CHEMICALS MAGAZINE ESTABLISHED 1981