With various price backups, but why are prices of major herbicides going down?

Recently, prices of major herbicides, such as glyphosate and glufosinate, have started to go down. In normal situation, prices of major herbicides could be backed up by the price rise of yellow phosphorus and food grains, the short supply in overseas markets, the high selling prices of formulations and the restrained supply to multinationals. However, the price trend of major herbicides in Chinese market becomes uncertain, due to experience-based judgment and expectations. The demand for pesticides has decreased in general, resulting in less purchase orders being placed while inventory is being built up. 

Prices of yellow phosphorus and phosphate fertilizer remain strong. In February, the price of yellow phosphorus in China rose significantly, which was in average at RMB32,250 per ton in early February and hit RMB37,666.67 ton at the end of February, which was an increase of 16.8% in a week. It is reported that the electricity tariff in Yunnan will rise by 2-3 cents in March, which is expected to be a backup for pricing. The price of phosphate fertilizer continues to stay high, due to multiple factors such as tight raw material market and China’s environmental compliance regulation. Industry insiders have made an analysis, saying that the supply of the raw material, phosphate ore, is tight while price stays high. Meanwhile, the prices of sulfur and sulfuric acid are rising. At present, there is no pressure on manufacturers for selling. Various factors are backing up the high price of phosphate fertilizer.

As affected by the international market situation, the price of crude oil hit a new high. The USOIL price in April surged 11% breaking through $100 a barrel, which is a new high since 2014; Brent crude oil futures rose 3.44% to hit $110.91 a barrel, which is a new high since 2014; and WTI crude futures rose over 5% to arrive at $109.13 a barrel.

The prices of wheat, corn and soybean futures rose sharply. The wheat futures contract in May at the Chicago Board of Trade (CBOT) came to a raising limit, which hit 934.75 cents/bushel, up 5.65%, a highest level since July 2012; corn futures hit 716.25 cents/bushel, up 5%, a highest level since June 10, 2021. 

Although Brazilian soybeans are put on the market now, but some of the importers have cancelled purchase orders and turned to the U.S. supply, due to the significant reduction of Brazilian soybean production. The CBOT soybean futures prices continued to rise, rising from 1366 cents/bushel to over 1700 cents to hit a new high in nine and a half years. The current soybean import price delivered to main Chinese port is RMB5,100-5,200 per ton, up RMB700-800 per ton over a year ago (1 U.S. bushel = 35.24 liters, which is roughly 27.215kg of soybeans, 25.4kg of corn).

The higher food grain prices will undoubtedly build up the confidence of the U.S. farmers to grow corn and soybean. According to an initial estimate of the USDA last week, the planting area of corn and soybean in the United States in 2022 is respectively 92 million acres and 88 million acres. The military conflict in Ukraine is not ending yet. In case that crop cultivation in Ukraine is decreased because of the war, the planting area in the United States is very likely to change. 

Glyphosate is the main herbicide for application to GM corn and soybean in the United States. According to AgroPages, Roundup PowerMAX is currently sold at $53 / gallon in terminal market, which is about $14 / liter, a slight increase over the rising price of $45 in September 2021. Meanwhile, according to the feedback of a U.S. consulting agency, the U.S. market is conservatively estimated to have a shortage of 15-20 million gallons (roughly 56,000-75,000 kiloliters). 

The feedback from the U.S. market a week ago reveals that the purchase price of glyphosate from US customers to Chinese suppliers remains stable at RMB75,000 / ton FOB.

In light of the above factors that back up the upward price, how will the prices of major herbicides fluctuate going forward?