The upheavals of the agriculture and crop protection industries post-Covid-19

2023 is a year all players in the agrochemicals industry want to forget. Prices of generic pesticides out of China plunged rapidly during the spring of Northern Hemisphere, leading to anguish, panic and large losses by importers from around the world.

It was a perfect storm. 

During the pandemic years of 2021 and 2022, China imported massive amounts of food grain and in fact, all food and related items such as tapioca chips that they needed, for consumption and for stock piling. 

The war in Ukraine in early 2022 lead to a spike in food and agricultural inputs prices and massive increases in freight rates. These factors, as well as good demand for food at the consumer level, resulted in strong demand for farm inputs around the world. Most, if not all, players in the agrochemical industry did well following the war in Ukraine, and during the pandemic. 

As prices of agrochemicals at manufacturer level went up in China and freight rates shot up,  in some cases, by up to ten times, panic buying drove prices even higher. The expectation of continued surging prices all the way to the end of 2022 and beyond did not happen. All of sudden, towards the end of 2022, domestic demand for farm inputs in China went down in the face of a looming recession. This, coinciding with over-production, of food and of farm inputs, compounded by China slowing down food imports, sent signals into the global market that made farmers in exporting countries wonder where the importers or buyers had gone. 

Demand for generic pesticides as well as for MNCs’ proprietary products went down significantly during the course of 2023. Several MNCs reported significant declines in sales and earnings. One piece of bad news just fed into another, spiralling everything down.

2023 was a year many agrochemical players in the global supply chain had to deal with ″toxic inventory″ (bought and imported at high prices and forced to sell at a loss due to price plunge at the manufacturer’s level). In fact, the ″toxic inventory″ is still being cleared at the beginning of 2024.

The only bright sparks were rice growers outside of India and also tropical fruit exporters such as Thailand. Thailand exports about USD2 billion worth of high-value durians to China alone. During the second half of 2023, India announced a ban on exports of rice to contain price rises domestically to forestall voter-anger in the 2024 elections. India exports about USD11 billion worth of rice. The announcement of a ban in exports drove up rice prices around the world. Food insecurity in rice importing countries, such as those in Africa, Middle East, and rice-growing but rice- deficit Philippines, Malaysia and Indonesia, once again came to the forefront. 

If 2023 is a year we want to forget, going forward, what changes and trends in the agriculture and crop protection industries should we pay attention to or look forward to in 2024?

First, 2023 was a year Dutch and Canadian farmers (with some American farmers doing the same in sympathy with their Canadian counterparts) were out on the streets with their trucks and tractors, demonstrating against strict government policies to contain greenhouse gas emissions.  And during the beginning of 2024, and still on-going at the time of writing this article second half of February, massive numbers in the hundreds of thousands, of European farmers have been out into the streets with trucks and tractors, demonstrating against the Farm to Fork strategy of the European Union’s Green Deal. 

The strategy calls for 50% and 20% reduction in the use of chemical pesticides and chemical fertilizers respectively by 2030. Aside from this reason, farmers in countries such as Poland and Slovakia bordering Ukraine are also demonstrating against cheap Ukrainian food grains coming across their borders to depress prices, and their income. 

Farmers in Europe are also demonstrating against higher costs of inputs such as energy and low food commodity prices at farm gate, impacting significantly and negatively their income. The low prices that farmers, from Europe to India, are getting for the food that they produced is a point I have made strongly before—food has been and is over-produced! (See my article in the Agropages). 

Ironically, consumers in many parts of the world are facing high food prices while many farmers are not making money. Distribution costs, profiteering in the food chain post-farmgate, high energy and logistics costs translate to high retail prices. Meanwhile, at the farm level, worse than before, food is being over-produced at a higher cost!

The end of 2023 also saw the European parliament pushing back on the Farm to Fork strategy by not passing a bill necessary to push this forward. 

What does this mean in terms of the growth projections and trends for biosolutions, in Europe and around the world? 

For sure, these events have taken the wind out of the sails of the growth. In fact, even with the trend towards containing climate change and consumers being more health conscious  and demanding less chemical residues in their food, farmers have resisted using more biosolutions unless they could clearly see the cost-effectiveness of the products. They also want them to be comparable to chemical ones in terms of efficacy. So, though biosolutions have experienced double digit CAGR over the past few years, we have to recognize that they started from a low base compared to the matured USD60-70 billion chemical pesticide industry.

The agriculture and crop protection industries will continue to experience various counter forces or cross winds in 2024—climate change leading to unpredictable weather, food and water insecurity, wars, logistics issues, geopolitical rivalries and governmental policies on climate change. As always, such upheavals and turbulence serve up threats and opportunities for all of us in the agriculture and crop protection industries.  

2024 is a year for us to stay calm and strategize.