Live from the CAC: Global Crop Protection Market Set for Steady Rise
6 March 2012 After adjustments for inflation and currency valuations, the crop protection industry is set to climb about 8%, analyst Matthew Phillips told attendees at CAC. Although final 2011 calculations are yet to be finalized, this represents a fourfold increase over expectations.
Many of the reasons behind the robust 2011 are the same factors that have many companies optimistic about 2012:
1) Favorable commodity prices generated strong farm incomes.
2) A rising demand for protein-based diets and vegetables that require more crop inputs.
3) Rising oil prices that likely will buoy commodity pricing in the coming months, evidenced by the strong futures markets.
4) Stronger prices for herbicides, especially glyphosate, and the increased adoption of biotechnology that relies on dicamba, 2,4-D and glyphosate.
5) Adverse 2011 weather events, such as flooding in Thailand, drought in the Black Sea Region, Japan’s tsunami and a heavy monsoon season in India are unlikely to repeat.
6) Low global cereal stocks in 2011.
These factors and others have many analysts bullish on prospects for 2012, so much that companies are confident that farmers will be willing to pay higher prices for crop protection products in 2012. “The expectation in 2012 is that volumes will be about flat, but price inflation will create better value; farm incomes were favorable in 2011, and many companies are talking about price increases for 2012,” Phillips says.
Although Phillips says mature markets, including the EU and US, likely will see flat volume growth, the size of the markets and stronger prices should drive higher overall market value in 2012.
Latin America and Southeast Asia show the highest potential for growth, although adoption per hectare still lags behind developed markets. For 2012, BRIC countries show the largest potential for expansive growth because of increased planted area, adoption of better seed technology including GM, and crop intensification amid higher commodity prices.
Fungicides continue to increase in adoption and have outpaced the value of insecticides for crop protection since 2008, a trend that is expected to continue.
Weather events continue to be a wild card. Drought in Argentina could affect the country’s soybean crop. And political developments in the US and EU could drastically change the way subsidies are expressed in the two largest crop protection markets in the world.
Editor’s note: See our February issue for a complete 2012 Outlook on crop protection, fertilizer, biotechnology and ethanol subsidies.
Continue to tune in as FCI evaluates the 2012 US Farm Bill and the EU Common Agriculture Policy to determine how the world’s largest subsidy providers are changing the way they fund their farming systems that influence commodity prices around the world.
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