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Article: Global crop protection market down 1% in 2019

01 May 2020

This article is taken from our Agrow platform dated 22/04/20.

The global market for crop protection products dipped by 0.8% to $59,827 million at the ex-manufacturer level in 2019, according to figures from Phillips McDougall. In real terms (excluding the impact of inflation and currency fluctuations), the market experienced a more significant decrease, down by 5.8% on the previous year. Currency conversions were calculated using 12-month average exchange rates.

Preliminary figures at the start of the year indicated a flat market, inching up 0.4% on 2018, but with lower sales for both years. The consultancy has employed new market research data, and re-evaluated some historic market values. That has produced revisions, but general industry trends remain, it notes. The trend has been generally down over the past four years, rising only once in real terms over the period.

Sales of all pesticides, including non-crop products, dipped 0.3% at $67,629 million. Non-crop pesticide sales grew by 3.5% to $7,802 million.

Global agrochemical market ($ million)

Market segment

2018

% change

2019

Crop protection

60,304

-0.8

59,827

Non-crop pesticides

7,538

+3.5

7,802

Total

67,842

-0.3

67,629

Source: Phillips McDougall.

In 2019, weather was the most significant influence on the global crop protection market, the consultancy avers. It cites extremes from severe flooding in North America to dry conditions and drought across major areas of Europe and Asia Pacific, equally detrimental to demand for crop protection products. The consultancy cites tensions between the US and Chinese governments for shifts in global trade patterns, with China replacing US produce, particularly soybeans, with that from Latin American countries.

Increasing regulatory pressures in Europe leading to the ban of "notable chemistries" and the strength of the US dollar, which limited growth potential elsewhere, also weighed on the market.

Somewhat offsetting the impacts outlined above were: the continued high prices for generic products, particularly those emanating from Chinese manufacturers; further growth in Latin America as inventory levels normalised; and an increasing adoption of alternative genetically modified traits, shifting demand away from glyphosate tolerance into newer and more expensive herbicides such as glufosinate-ammonium, dicamba and 2,4-D.

As for non-crop pesticides, rising business was largely in line with global gross domestic product growth. This market can continue to grow in the coming years boosted by improving economies in developing nations, Phillips McDougall says.

Crop protection market by category

In 2019, the herbicide market still dominated but saw the largest falls. Sales dropped by 1.5% to an estimated $26,175 million, equating to 43.8% of the crop protection market. Unfavourable weather in most regions and negative currency effects impacted business. Positive trends for the sector included: continued high prices for generic products, particularly those emanating from Chinese manufacturers; strong market conditions in Latin America; and increasing adoption of alternative and more expensive GM traits.

Fungicide sales fell by 0.7% to $16,356 million, representing a 27.3% share of the crop protection market. Similar market drivers to herbicides contributed to the decline in the sector, with hot, dry conditions in key regions leading to reduced disease pressure and lower demand for fungicides. Latin American business provided relief for the sector. A shift in demand of Chinese imports away from US produce due to the trade war led to increased soybean acreages in Brazil and Argentina, and subsequently higher demand for fungicides.

The insecticide market was flat, inching up 0.2% at $15,146 million. That represented a 25.3% share of the crop protection market. Currency fluctuations hit dollar valuations, despite more positive sales in various national currencies. Insecticide sales also benefited from the improved soybean market in Latin America, while expanding fall armyworm (Spodoptera frugiperda) infestations in Asia Pacific contributing to demand for products.

Regions

Asia Pacific remained the largest regional market. Sales decreased by an estimated 2% to $18,323 million with unfavourable currency effects and detrimental weather impacting key national markets. This was especially true of Australia where persistent drought prevailed throughout the year, significantly reducing demand for agrochemicals. Elsewhere, increasing fall armyworm infestations was a major factor, particularly in China and India. In some situations, this is expected to drive insecticide usage. However, it is likely that this is largely offset by the impact of crop losses, resulting in reduced farmer income prospects. In Japan, the rice market, which had been in a long-term decline due to changing farmer demographics, fell further, largely impacted by the withdrawal of minimum support payments via government subsidies. Higher prices have partly offset the negative factors.

For a second consecutive year, sales in Latin America are estimated to have increased significantly, up by 7.6% in to reach $15,915 million. The market rose by over 10% in 2018. Reduced inventory levels in recent years and improved prices of products from China have boosted demand, particularly so in Brazil. The region, especially Argentina and Brazil, has also been a beneficiary of the US/China trade war. Offsetting factors included unfavourable foreign exchange effects, with weakness in the Brazilian real and Argentine peso limiting dollar growth. Dry weather was also experienced across much of the region, particularly in Chile where continued drought has been experienced.

The European crop protection market is estimated to have fallen by 2.8% to $12,042 million. Major declines are estimated for France, Germany and the UK where hot, dry weather reduced demand for crop protection products for a second year, especially for fungicides. Such conditions also hit eastern markets where growth had been driven in recent years. In addition, farmer cash liquidity remained a problem in Ukraine, limiting spending on crop inputs. An increasingly strict regulatory environment with key products being banned or phased out in recent years has weighed on the market, the consultancy says. In addition, political uncertainty amid Brexit impacted the UK market, bolstered by a weakening UK pound against the dollar.

Crop protection sales in North America saw the severest decline. The estimated fall of 7.1% resulted in an $11,160 million market. The trade conflict between the US and China was the major factor hitting the market. The imposition of tariffs on US soybeans by China in 2018, resulting in lower US acreages and agrochemical demand, led to excessive stock levels and suppressed prices. Furthermore, detrimental weather in the US Mid-West during the first quarter, with severe cold temperatures and snowstorms followed by significant flooding, delayed pre-season crop protection applications and spring planting. Offsetting factors included a return to more favourable weather in the second half, a continuation of high generic prices and increased adoption of recently launched herbicide-tolerant GM technologies such as Corteva Agriscience's Enlist (2,4-D and glyphosate tolerance) and Bayer legacy company Monsanto's Xtend portfolio (dicamba, glyphosate and glufosinate tolerance). Such traits are driving demand for more expensive active ingredients than the long-term blockbuster, glyphosate.

As for the Middle East and African region, Phillips McDougall estimates that sales were 1% lower at $2,388 million. The consultancy highlights continued severe drought in South Africa, limiting demand for agrochemicals.

Crop protection product sales by region ($ million)

Region

2018

% change

2019

Asia/Pacific

18,697

-2.0

18,323

Latin America

14,787

+7.6

15,915

Europe

12,395

-2.8

12,042

North America

12,013

-7.1

11,160

Middle East/Africa

2,413

-1.0

2,388

Total3

60,304

-0.8

59,827

Source: Phillips McDougall.

Leading national markets

The ranking of the leading countries changed little in 2019. Brazil remained the leading market, growing by 9.3% over the previous year to $10,913 million. It was followed by the US, which decreased by 8.4% to $8,181 million. The major Asia Pacific nations of China, Japan and India occupied the next three positions.

Impacted by unfavourable weather and reduced use of pesticides in response to the regulatory situation, France dropped from 6th largest to 8th, overtaken by Argentina and Canada. Estimates show that growth was strongest in Argentina among the leading 20 markets with double-digit growth.

Romania was an entrant to the top 20 national markets, overtaking Thailand. The latter was hit by drought, impacting agrochemical demand. The Romanian market, in line with neighbouring countries in eastern Europe, grew strongly in recent years, boosted by funds available following its accession to the EU in 2007.

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