AGCHEM BUDGETS ON RISE:By Andrew Shirley
GROCHEMICAL PRICES are set to rise next year, driven by the increasing cost of oil and the hunger for energy in key manufacturing countries.
The cost of some sprays could rise by up to 20%, although half that amount would be more typical, according to some manufacturers. But the state of agriculture means they may struggle to pass on their full cost increases, others believe.
Oil prices have almost doubled over the past 12 months and Brent crude touched $52 a barrel at one point. It has since slipped back to $44 a barrel, but is still $20 above year-ago levels.
Paul Jones of Makhteshim-Agan – one of the world’s largest manufacturers of generic brands – said this was largely to blame for the potential hike in chemical costs.
“Oil lies at the heart of almost every agrochemical, so it’s not surprising that oil prices have a major impact on costs, particularly with bulky, high-volume, low-cost products where the cost of manufacturing is such a large component of the final price.”
But the over-heating in some Asian economies was also having an impact, said Sidney Reid, third-party business director at Monsanto.
“Together with India, China is currently responsible for a major share of world agrochemical active ingredient supply.
“But the rate at which its economy is growing has created huge internal conflicts in energy resources. In this allocation of resources, commodity manufacturing is understandably losing out to higher-value sectors,” he added.
Mr Reid said the products made in China tended to be bulkier, older chemicals like glyphosate and phenoxy herbicides. More modern chemistry, like strobilurins, would be less affected by this trend, he said.
Graham Dickinson, UK branded sales manager at Nufarm – which manufactures in the UK – agreed that autumn herbicides were likely to see the largest jumps, with glyphosate rising by up to 20%.
But he said fungicides would increase, too. “Most are based on a benzene ring structure and benzene has increased from $400/t to $1200/t this year.”
Mr Dickinson predicted that triazoles and strobilurins would cost 8-10% more next season and some spring herbicides, like MCPA, would rise by a similar amount.
But John Lockett, logistics director at chemical distribution business Agrovista, said he was not sure if price moves would be that steep. “It is going to be very difficult to recover double-digit price increases given the state of farming today.”
He reckoned triazoles might increase slightly, but said he would be especially surprised if there were significant increases in the price of strobilurins given the issues surrounding septoria resistance.
Emma Saxton, arable business manager for Crop Advisors, which buys chemicals on behalf of independent agronomists in the south of England, said the introduction of the single farm payment would make it more difficult to pass on increases. “Farmers now have a choice. If costs increase too much they will take the SFP and walk away.”
Other large manufacturers were less keen to say if and by how much the cost of their products would increase next year. Syngenta, Bayer CropScience and BASF all acknowledged there were price pressures, but said they would be working to limit the impact on farmers when new prices were released next year.
Philip Wynn, managing director of Auborn, which manages over 10,000ha (25,000 acres), said prices rises were a concern. “There is going to be even more pressure on producers and agronomists to come up with the right cost/benefit ratio for chemicals.”