Cold snap heats agrochemicals prices in Argentina

Date:04-06-2021

By Dardo Lizárraga

The cold snap in the southern United States and the communications of force majeure and shortages, has only accelerated the price tension of all basic raw materials for the production of agrochemicals, regardless of the geographic region of origin.

Last month, an unprecedented cold snap was felt in Texas (United States). It caused multiple upheavals in daily life and strongly impacted petrochemical production, shaking the international board and overheating the already turbulent market.

More than 20 refineries went out of service due to sudden freezes, and after two weeks they are now back in operation. It was followed by equipment checks, damage repairs, redundant safety checks, no-load tests, and a myriad of “safe start” procedures until a slow start curve begins. The refineries will return to normal operation only at the end of May.

Concerning supply, the refineries have communicated force majeure reasons to their customers to negotiate in good faith the terms of the contractual breach in the face of inevitable shortages. The game of supply and demand found the perfect excuse to unleash the storm that was brewing since the end of last year with the rise in the price of commodities.

In the third and fourth quarters of last year due to the pandemic effect and productive rearrangement, we saw soybeans rise from US$300 to $500 per ton in its international price, with corn and other grains accompanying this rise. China, in its role as the great world buyer of soybeans and commodities, is the one who pays the bill for this rise, but nothing is free.

The giant eastern dragon, followed by India, is also the world's largest producers and exporters of agrochemicals, and that put pressure on the price of key active ingredients. In the ranking of the rises, glufosinate is positioned at 50%, atrazine at 45% increase, technical glyphosate at 35% and technical 2,4-D close to 25%.

At the same time, as international freight increased exponentially, transporting a container from China to Argentina went from $2,000 to $8,000 in a matter of months. The reason for this increase is the economic recession brought on by the pandemic and the closure of some ports and sea routes. The transoceanic logistics lines had to be rearranged and in many cases, the ships operated with false freights and incomplete loads.

In the field, at the other end of the chain, the distributor and producer will surely begin to feel the effects. One begins to think about fallow treatments and winter hedges. The pencil point will begin to be drawn to see the input-product ratio and the cost of agrochemical treatment per hectare given the 2021-2022 season.

If the producer validates the new agrochemical prices and soybeans remain above $500, these prices are most likely here to stay. If, on the contrary, these prices are not validated and the price of grains falls, then a shortage will be felt, inventories of petrochemical derivatives will increase, prices will fall again, the refineries will be in normal operation and the storm will have passed, returning to a reasonable balance of supply and demand. In any case, these processes tend to last more than one year, so "gentlemen, passengers of the 2021-2022 campaign, tighten your belts as we are entering a turbulent zone."