Jan. 30, 2018
Andreas Kobrich has his eyes set on the current wheat harvest. As general secretary of the Wheat Growers’ Association in the region of Araucanía, Chile, Kobrich is worried about the paucity of rains in the region and the effect that it may have on the production and quality of the cereal.
The international price scenario is also dismal for the farmers. High stocks in the northern hemisphere have depressed the prices of cereals and grains. In addition, changes in China have increased the agrochemicals prices, which will soon be felt in Chile.
“With the current value of wheat, we will have a complex harvest. Added to more expensive inputs, we will have a demotivating situation, in the beginning of the 2018-2019 season,” said Kobrich. The worry comes from the restrictions on the other side of the Pacific Ocean.
“Recently, we have seen the authorities in China raising environmental requirements. In 2017, the restrictions forced factories and some industries to shut down, which led to lower supply of agro materials,” noted Gabriel Ormeño, general manager, Wheat Growers’ Association.
China produces 90% of the world’s active ingredients. These products are the raw material used to produce agrochemicals everywhere. Because of the restrictions in China, the export prices have seen a bullish trend since last October. Industry analysts say this is a global economic situation. “This is a mid and long-term change. It is a sign that the Chinese authorities will be stricter in their environmental standards and the production restrictions will be maintained,” affirmed Max Donoso, general manager at the Coagra Company.
Ormeño believes that the situation of agrochemicals in China is similar to that of copper in Chile. Jiangxi Copper, the largest refiner of the metal, was forced to close its doors in December because of contamination. The result was a sustained high in copper value, which depressed the dollar quotes in Chile.
The annual agrochemicals market in Chile is around US$400 million, and it might not see a robust 2018. The numbers are clear: Glyphosate jumped to $4,384 per ton last November – a hike of 20.83% compared to the same period in 2016. For imidacloprid, the jump is even steeper. The November quotes reached $37,800 – an increase of 108.33% from a year ago.
Chlorpyrifos, the molecules that control insects and caterpillars, are in short supply in China. According to a technical report of the Think Real consultancy, there are three factories still in operation in 2017. In November, the price reached $7,560 per ton, which a year ago was quoted at $5,000.
“The impact of the change in Chinese production and prices has not been totally felt in Chile. The market is still resisting a very abrupt price increase. Besides, there are older supplies with lower prices that need to be sold. However, the price pressure will soon be felt locally,” claimed Donoso.