State of the Industry: Manufacturers
20 July 2011 Editor’s Note and Methodology: Farm Chemicals International’s annual State of the Industry Survey and Special Report offers readers a biographical snapshot of industry health and the sentiment of the companies that operate in it. This year, FCI reported separately on the responses given by producers and those given by distributors.
The survey was designed by FCI editors and broadcast to our email subscriber base, and a link was also posted on our website and Facebook page. Three email reminders were sent out during the five weeks the survey was open in May and June, and an incentive was offered to win one of three $100 Visa gift cards or $250 off our FCI Trade Summit registration.
The survey was taken by more than 200 respondents in more than 30 countries, giving the survey a margin of error of ±6.76% with a 95% confidence level.
Subscribe to our weekly email newsletter at www.farmchemicalsinternational.com for more in-depth reporting on the survey results and insights into what the data means for you and your business.
More than 25% of manufacturers and formulators plan to purchase another company this year, according to the 2011 Farm Chemicals International State of the Industry Survey (see editor’s note for methodology). New business development, including mergers and acquisitions, appears to be significantly more important than in recent years, when respondents prioritized volume growth of existing products over new initiatives that respond to the marketplace. Interestingly, just 6% of respondents plan to sell all or part of their company.
Nearly 71% of manufacturers and formulators plan to develop new product lines this year, compared to 66% last year and fewer in 2009. There are a myriad of reasons manufacturers must adapt to changing markets, including the rising adoption of biotechnology and their companion chemistries, pesticide resistance, demand for low-use active substances and rising interest in biological pesticides, plant growth regulators, micronutrients and better seed/seed treatments.
Almost one-third of respondents plan to construct new facilities this year to accommodate their expansion plans.
Latin America continues to be the most important market for sales revenue and growth opportunities. More than 46% of the manufacturers and formulators that responded to the survey said Latin America was one of their top three markets in terms of sales, followed by North America (37%), Southeast Asia (26%) and Western Europe (25%). One in five respondents said China and India were top-three markets.
Similarly, 54% of respondents say Latin America is one of three desirable growth markets, followed by North America (24%), China (23%) and India (20%). Unsurprisingly, just 12% consider Western Europe one of their top three growth markets.
More than 82% of respondents met or exceeded budget, and more than half of those who met or exceeded budget in Q1 revised their 2011 forecast higher. That illustrates the resilience of the agriculture economy and reflects the market conditions that seem to indicate that supply is moving through the value chain at a more regular rate than in years past, prompted at least partly by high commodity crop prices and food inflation, which is contributing positively to farm incomes.
Ultimately, almost 80% of respondents expect higher revenues in 2011 compared to 2010, and more than 36% of all respondents expect revenue gains in the double digits. Just 8% of respondents expect revenue to decline this year, and 12% expect revenues to be about the same as last year. The projections for sales volumes or output were almost identical to revenue forecasts, which is a positive sign compared to results of recent years, when sales volumes continued to rise but industry profitability stagnated under oversupply and downward price pressure. Prices continue to trouble producers, and almost half report that low product prices are one of the two biggest challenges to maximizing profits. More than half indicate that the high costs of raw materials are hampering profitability. Additionally, 65% of respondents report an increase in labor costs this year; one-fifth of those who said their labor costs were rising say the increases are between 25% and 75%.
Currency valuations are also influencing the profitability of producers; 56% of respondents say current exchange rates hinder their business. A weak US dollar typically translates into higher profits for companies in India and China, although inflation in those countries has mitigated some gains. More than a quarter of respondents say that fluctuating exchange rates have little or no effect on their business, while 20% say current exchange rates favor their businesses.
Get The Newsletter Today!
