A Week In Mumbai
5 February 2008 I am writing this week’s FCI eNews from my room at the Sea Princess Hotel at Juhu Beach in Mumbai. It is my first time in India, and has already been a very memorable trip.
Meetings in our first two days have gone well. Of course, there are concerns plaguing the Indian ag-chem companies, the foremost being a growing shortage of Chinese produced technicals and raw materials. As one Indian basic manufacturer told us, 2008 will be a year of shortage, which creates opportunity, as well as difficult decisions. Many key raw materials that India (and much of the world) depended on Chinese factories to produce are simply drying up. The questions now facing the remaining manufacturers is where, strategically, to aim their supplies. It is a good time to enter new markets, because ag chems in general, while priced higher, are in higher demand due to the contracted supply and strong international crop prices. However, these companies need to make sure that their long-term partners are still kept content, or risk losing them.
And the situation doesn’t end with the limited supply of Chinese technicals. Another problem is the Chinese winter, and the effects it could have. As far as crop production, Planalytics does a good job summarizing the concerns and possible benefits of the situation. However, it was pointed out to us that on the chemical side, the current snows in China are demonstrating the country’s strained power supply. As it stands for certain products now, energy is the major expense in China; if the cost of powering a plant becomes prohibitive for the slim-margin producers, supplies of ag-chems could dwindle further.
Beyond China, raw material costs are rising in general, as well as freight and shipping costs, and the depreciation of the US dollar has complicated matters worse. On the bright side, this means higher prices for crop protection products — but on the downside, it doesn’t translate to higher margins. However, for the companies with long-term views, the opportunity to enter or expand in key markets is very real, if exercised judiciously.
2008 is certainly shaping up to be an interesting year for agriculture. Experiencing India for the first time has already made it an interesting year for us.
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