AGROCHEMICALS
150 Figure 2 - Active volume imports into the US , 2019-23
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The volume of non-selectives and off-patent products entering the US was significantly higher - as much as 50-100 % higher than the average - between mid-2021 and the beginning of 2023 than in other periods . This fell significantly into 2021 as supply chain demand dropped .
This is likewise the case for off-patent products , but not for proprietary products , which may have benefited from enhanced demand over other groupings due to the favourable agricultural economy and growers trading up to higher-value technologies . The US import example helps explain a single country market , but a similar situation is true in other regions and countries .
Interestingly , R & D-driven players like BASF and Corteva have managed to continue to increase prices into 2023 , which may be due to the higher demand for proprietary and premium product offerings , with these companies perhaps less influenced than some others by the non-selectives or off-patent product groupings for which stocks have been particularly high . In sharp contrast , prices have been less buoyant for Bayer and Syngenta , perhaps due to the strong influence of non-selectives ( glyphosate for Bayer ; paraquat and glyphosate for Syngenta ).
A realignment of demand is expected to continue to impact the agrochemical industry until channel inventories return to normal . It is difficult to assess levels of inventory with a great degree of accuracy , however general thinking on the matter seems to be that inventories will have normalised by Q1 or Q2 2024 . Company results are thus expected to continue to be impacted in the short term , which compounded by potential deflationary pressures , may lead to negativity for the value of agrochemical companies going forwards .
Pricing
As outlined earlier , prices of agrochemical products were significantly inflated in 2021 and 2022 . Indeed , prices have continued to rise for some products , expected to be mostly the more proprietary side of the market , into 2023 , but we do not expect this level of pricing to be maintained in the coming years .
Crop commodity prices have declined from a peak in 2022 , putting pressure on grower incomes . Further falls in commodity prices could limit grower spending power , adding deflationary pressure to agrochemical products at the grower side .
In addition , from the supply side , prices in the key manufacturing base of China have dropped significantly over the inflated prices of 2021-2 as supplies have normalised . Indeed , this drop in price is already being reported as an impact on turnover for companies involved , for example , in generic glyphosate and glufosinate .
Outlook
2021 and 2022 were significantly positive years for the agrochemical industry . However , this was mostly the result of inflated prices . We expect that the industry will face significant price pressure in the short to medium term such that the outlook in nominal terms is somewhat negative .
Volume growth potential remains in the market , particularly for developing economies in Asia Pacific , but , with a weakening agro-economic outlook , any volume gains will likely be offset by lower farm profitability and deflationary pressure on agrochemical pricing . ●
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Garry Mabon
PARTNER
AGBIOINVESTOR garry @ agbioinvestor . com www . agbioinvestor . com
JAN / FEB 2024 SPECCHEMONLINE . COM
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