Jun. 20, 2008
Nufarm has reached agreement with a number of Chinese companies to secure long-term supplies of the herbicide, glyphosate , in the face of global shortages. The company has also concluded a new long-term supply agreement with Monsanto, thereby extending the 20-year relationship between the two firms.
Nufarm has negotiated separate transactions with “four or five” unnamed Chinese companies involved in the manufacture of glyphosate. The deals take the form of financial support, minor equity positions or technology transfers, a company spokesman told. The initial investment in these transactions amounts to Aus28 million (US$27 million). Nufarm expects to source about half of its glyphosate technical from China within the next 12 months.
The Chinese deals represent a strengthening of relationships with existing long-term suppliers and a number of new projects involving capacity expansion, Nufarm points out. “Our involvement in these companies spans both financial support and the investment of technology and places Nufarm in a position that gives us a more integrated position in glyphosate synthesis,” says Nufarm’s managing director, Doug Rathbone.
The Monsanto deal is also seen as an important part of Nufarm’s glyphosate strategy. It “ensures we have a reliable source of quality tech[nical] into our glyphosate manufacturing and formulation facilities around the world”, Mr Rathbone adds. Under separate arrangements, Nufarm is the exclusive distributor of Monsanto’s Roundup glyphosate brands in Australia and New Zealand.
Glyphosate is the world’s largest-selling agrochemical, with annual sales amounting to an estimated $3,800 million. Nufarm is the second-largest supplier of the herbicide after Monsanto. Glyphosate accounts for some 30-35% of Nufarm’s sales, which totalled Aus$1,764 million (US$1,670 million at current rate) in the year to July 31st 2007.
Strong demand for glyphosate has resulted in sharp increases in raw material prices, with the cost of glyphosate technical almost tripling in the past 12 months. Coupled with tight global supplies, the cost of the herbicide to farmers has increased sharply. Nufarm’s profit forecast for fiscal 2008 was dependant on securing adequate supplies of glyphosate.
Demand for glyphosate continues to rise due to increased production of genetically modified glyphosate-tolerant Roundup Ready crops, greater use in minimum tillage systems and more land being brought into production, Nufarm points out. “The combination of the Monsanto relationship and the involvement with our partners in China will ensure that Nufarm can continue to grow our glyphosate position as the company’s business expands in various markets around the world,” Mr Rathbone says.