Brazilian Pesticide Market (2014-2015): Ups and Downs

Continue pesticide sales and volumes increase keeps Brazilian pesticide market ranked in the top for the last years. Preliminary numbers of 2014 estimate 6% sales growth compared to 2013 totalizing US$ 12.2 billion.

 

Brazilian Pesticides Sales 2000-2020 (US$ billion)

2014 and 2020: estimative

 

Nevertheless the market shrank companies’ profit and competitiveness in 2014 that will also impact negatively 2015 results. Some traditional players are facing severe financial difficulties, some others are bankrupted. 

 

The combination of listed factors is resulting in negative impacts in pesticides business, according to Mr. Flavio Hirata, MBA, from AllierBrasil, during the 4th Forum AllierBrasil last January in Suzhou:
 

- Severe draught for the last 2 years is impacting harvesting and consequently collects by dealers and distributors.

- International prices of main commodities such as corn and soybean dropped drastically based on the USA harvesting estimative.

- Generic pesticide products competition focused in price reduction is lowering margins and profitability. In many cases it is wiser not to sell.

- Higher interest rate practiced by banks as result of government economic policy.  

- The favorable exchange rate for commodities exporting, do not compensate the end price of the commodities that are much lower or close to the break-even point.

- Longer payment term where large volume of cash flow is required. Only financial wealthier companies are willing to succeed.

- High inventory of products in the field (dealers) as result of last year sales campaign when distributors sold much more than the actual demand.

- Dealers and farmers committed to big distributors that requests real payment guaranties, contrary of smaller distributors that sells without enough payment guaranties.

- Delays on product registration evaluation and consequently approval by regulatory agencies are delaying companies to strengthen product portfolio and recover the investments.

 

This combination is lowering the competitiveness of distributors and dealers in Brazil. The majority of new entrants with product registration requests are struggling in order to try access this tremendous market. Some of them have been successful through lawsuits against regulatory agencies. In the beginning of this year IBAMA, the environment regulatory agency, was demanded by the court to continue the evaluation of imidacloprid products which were frozen since the re-evaluation of the active ingredient was initiated almost three years ago.  

 

Curious to say that singly some of these elements are important opportunities for some players:
 

- Price reduction: companies with broad product portfolio may sell very cheap some generic products while patent products at much higher prices.

- Local currency devaluation: devaluation/evaluation protection.

- Longer payment term: interest rates charged by those who give credit are very high.

- High product inventory: this avoid competition to access some sales channel.

- Dealers and farmers committed to big distributors: Only those who sold with real guarantees are protected.

- Delays on product registration: registration is a barrier to new entrants and who has it has limited number of competitors.

 

The not so optimistic panorama described above is punctual. On the contrary, Brazilian pesticide market perspectives and trends are highly favorable. Mr. Hirata emphasizes Brazil still has one of the most favorable weather conditions for agriculture in the world where it is possible to harvest 2.5 times/year in same areas; lots of available expandable areas for agriculture; local developed seed and cultivation technologies; farmers with dynamic entrepreneurial spirit. On the other hand some skills and innovations may be developed by companies to gain more competitiveness such as add value in services versus lower the price; product quality; logistics; irrigation technologies; partnership between suppliers-distributors; use of international loans with very low interest rates; barter are just some examples.

 

According to Mr. Hirata pesticide market in Brazil shall increase up to US$ 17 billion in 2020, where only more competitive companies shall have their share.