Insights from experts: Will the Latin American agri-inputs market move from turbulence to stability in 2024?

At the end of each year, AgroPages conducts a survey of our columnists, asking them to review the major trends in the agricultural industry over the past year and make predictions for the year ahead. Based on the responses we received from many experts for our 2023 survey, we produced this article: ‘Climate, Biologicals, Policy, Supply Chain, Agtech, AI’ - Key Words Frequently Mentioned in Year-End Interviews with 17 Industry Experts. Due to space constraints, this article is not exhaustive. Each expert response contains more valuable information, and we'd like to reorganize it and present their views in more detail.

2023 saw a volatile year for agri-inputs in Latin America, decreased commodity prices, coupled with adverse weather conditions, led to a sharp decline in farmers' profitability.  AgroPages spoke to three experts from Brazil, Mexico and Paraguay about what changes are taking place in the market and what the trends are going to be.

In your view, what was the most impactful industry event or trend in 2023?

Renato Seraphim: 2023 posed significant challenges for Brazilian agribusiness across all sectors, particularly for grain producers like soybeans and corn, which constitute approximately 70% of the agrochemical, biological, specialty, and agricultural equipment market. Decreased commodity prices, coupled with adverse weather conditions, led to a sharp decline in farmers' profitability. This, in turn, created difficulties in meeting financial obligations, impacting crop input distributors, agricultural equipment dealers, and industries.

The excessive stocks of agrochemicals, biologics, and specialties, coupled with higher costs than prevailing market rates, had widespread repercussions throughout the sector. Regarding equipment, the diminished profitability and uncertainty about future returns prompted agricultural producers to reconsider fleet expansion and modernization. In the seed sector, there was an increase in volume due to multiple replantings needed by farmers, but this was accompanied by a decline in prices, as seed values were tied to grain prices.

Luis Xavier Quijano: Definitely, the most impactful event was climate change. During 2023, there was a pronounced drought that did not help with the proper development of crops. 

Economically, market value decreased considerably due to two factors: excessive inventories globally, because of overproduction in China, and domestically, the valuation of the peso against the dollar gave it strength to lower prices. However, without consumption due to extreme drought, it resulted in excessive supply with prices 25% lower.

For all segments – crop protection, nutrition, biologicals, seeds: Mexico entered a political period with an extremist, authoritarian vision, lacking scientific knowledge and foresight. Without adequate regulation, the industry will face a challenge to help authorities change their position, as there is great potential to continue growing and exporting many of their crops.

The shift from global economies to the strengthening of regional economies will demand that large companies producing intermediates and active ingredients to establish themselves and reduce their high dependence upon China, which represents a great opportunity for Mexico and the USA.

German Pessagno: I would like to talk about the crop protection market in Paraguay. Paraguay, a pivotal contributor to the global soybean production arena, is now halfway thru the 2023/24 soybean season. As the 8th largest soybean producer and the 6th largest exporter globally, the local and regional dynamics within Paraguay have wielded a more pronounced impact on the crop protection market compared to global occurrences.

Throughout the year, there has been a commendable stability in prices for both formulated products and technical grades. Fortunately, the supply chain has remained robust, with no disruptions from suppliers. Despite a brief episode of supply challenges amid a price drop at the outset of 2023, overall, the procurement landscape remained highly competitive, leading to competitive orders.

Despite global concerns such as the Russia-Ukraine conflict, tensions in the Middle East, and the Red Sea crisis, the Paraguayan market has maintained relative stability. Localized challenges, such as strikes at the Montevideo port affecting product arrivals, caused minor delays. Fortunately, there were no significant disruptions in the supply chain of crop protection products.

The agricultural market has been notably influenced by factors such as international soybean prices, end-of-season weather conditions, and the substantial impact of the financial landscape, marked by significant challenges stemming from a poor harvest in the 22/23 campaign.

However, Paraguay remains optimistic, with the Union of Production Guilds (UGP) foreseeing a successful 2024 soybean production. Initial projections hint at reaching 11 million tons, but vigilance continues as the harvest progresses. Despite initial concerns over soybean yields, stability is returning, and expectations of an average yield exceeding 3,000 kilograms per hectare are anticipated for profitability.

As the soybean campaign started with prices exceeding $1,400 USD/bushel, a subsequent 18% drop has been observed due to the downward trend in global commodity prices, notably following the World Agricultural Supply and Demand Estimates (WASDE) report released by the USDA in January. The soybean price on the Chicago Board of Trade, for the nearest contract (January 2024), closed at 443.0 USD/ton by mid-January, the lowest since September 2023. Corn and wheat prices also declined post-WASDE, influenced by expectations of significant corn production in South America and a global increase in final stocks.

Looking ahead, what changes and trends in the industry should we pay attention to or look forward to in 2024?

Renato Seraphim: For 2024, I anticipate a more moderate increase in the cultivation area for soy and corn compared to previous years, but growth will still occur. Additionally, more stable conditions are expected for cotton, sugar cane, coffee, and citrus.

In terms of industry trends, biologicals are anticipated to witness growth due to increased farmer confidence in these products, with a surge in new players entering the segment. Companies previously focused on nutrients, specialties, or agrochemicals are diversifying, making market access a key differentiator. The low entry barriers and a lack of product innovation contribute to the continuous emergence of new companies in this sector.

For the agrochemical market, a reduction in stocks is expected to drive price increases for innovative products, fostering greater competition with generics and attracting more companies to the market.

Sector consolidation persists for both farmers and distributors, with opportunities emerging for specialized agricultural retail. A shift towards fewer brands and a greater emphasis on consultative and modern sales approaches is expected.

Traditional retail is likely to face increased inefficiency, characterized by high costs and difficulties in differentiation, making it challenging to compete with growing cooperatives.

Luis Xavier Quijano: Biotechnology, bio-rational solutions, specialized nutrition, soil regeneration, everything that leads to a reduction in water consumption will be welcomed by the industry.

Another trend to watch is the use of artificial intelligence technologies, from pest and disease control, climate monitoring, satellite usage, planting volumes, crop values, to trends in foods with higher nutritional properties, superfoods at lower prices.

Not to be missed point is the homogeneous or identical regulations for product use in regional blocs, whether for protection, biologicals, nutrition, etc., to avoid and reduce carbon footprints.

Nearshoring, changes in Mexico including proximity issues, freight costs, and shifts away from dependence on China, as well as changes in the American ideology to avoid consuming anything from Asian countries, will also have an impact on the industry.

German Pessagno: At this time, Paraguay is already advanced in its main agricultural campaign and, as I mentioned before, with good performance expectations. Our sights are already set on purchases for what will be the 24/25 campaign. In this context we find ourselves facing a supply market that shows historically low prices with great uncertainty about what will happen in the coming months.

Despite reports indicating production capacity expansion and high inventories in some key products, historical trends suggest a potential turning point after reaching price floors.

Stakeholders face a dilemma: when is the optimal time to make procurement decisions? The market questions whether prices will continue to decline or if this is the opportune moment to secure competitive purchases. In a scenario where supply challenges are not anticipated (Will we be facing a new shortage during 2024?), the focus shifts to identifying the most advantageous timing for procurement to ensure competitiveness in the market.

For a relatively small market, extremely competitive and with the purchase window for agrochemicals so small, purchasing efficiency is key.

In conclusion, the dynamics of Paraguay's crop protection market in 2023 underscore the significance of local and regional factors. As the industry prepares for the 2024 season, stakeholders must carefully navigate market uncertainties to capitalize on favorable pricing opportunities.

Click to read/download AgroPages' 'Annual Review 2023' magazine.

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