While Latin America\u2019s agricultural market powers ahead with seemingly unrelenting dynamism, sourcing crop protection products in parts of the continent has become more difficult for many buyers. The supply squeeze following enforcement of Chinese environmental laws adds salt to the wound of the region\u2019s free trade impediments and economic and currency volatility.<\/p>\n
Gabriel Mellone, director of ID Tech-Agro registration consultancy in Buenos Aires, discussed the challenges presented by Argentina\u2019s increasingly turbulent economic and trade environment. A prime example is a trade regulation that came into effect more than two years ago. The law requires all registered importers to fill in the so-called Anticipated Sworn\u00a0 Declaration of Imports (DJAI) application, and provide details about the transaction in advance and wait for the national tax agency, the Federal Administration of Public Income (AFIP), to issue a permit. Without a valid DJAI number, no goods can enter the country. For many, this is a difficult if not impossible obstacle to overcome.<\/p>\n
German Pessagno, chief operating officer of Paraguay-based manufacturer Chemtec S.A.E., explained that the company currently holds more than 20 formulated product registrations in Argentina, sourced from its plant in Paraguay. \u201cFor some time the delivery of products to Argentina has become increasingly complicated due to regulations in the import process,\u201d Pessagno said in an interview with Farm Chemicals Interational<\/em>.<\/p>\n \u201cThere is the theory of free trade within Mercosur, but the reality is completely different,\u201d Pessagno said. \u201cArgentina and Brazil have taken advantage of the circumstances to hinder the entry of certain products to your market. This situation has undoubtedly increased in recent years with a much tougher policy in Argentina.\u201d<\/p>\n As Argentina takes steps to tighten its capital outflow, businesses are increasingly concerned about the impact on foreign currency transactions. Signing contracts with Argentina-based companies has become more complex as companies require special permission to send U.S. dollars and other foreign currencies abroad, Mellone explained. The payment process begins only after the import of goods has been authorized. This is governed by the foreign exchange regime and in order to make the payment, the purchase of foreign currency must have an authorization from AFIP. In other words, payment can be made in U.S. dollars, but not without a cumbersome process.<\/p>\n \u201cUnfortunately, these new rules are affecting the dynamic of businesses in Argentina. This situation has led foreign companies to reduce credit lines and payment conditions, and sometimes they prefer not to sell in Argentina at all,\u201d Mellone said.<\/p>\n In Brazil, hindrances to trade come in a different form. The country\u2019s Internal Revenue Service has stepped up checks on products entering Brazilian territory to ensure they comply with origin requirements, Pessagno said.<\/p>\n For about two years, Argentina has also struggled to maintain a continuous supply of key actives such as glyphosate, dicamba and paraquat when demand for\u00a0 the active ingredients peaks. Mellone blamed not just shutdowns in China, but also the loss of buying power to multinationals, raw material limitations and a strategic move to keep prices high. The consequences, he said, extend to higher prices of formulations, loss of customers, discontinued product lines and production disruptions, not to mention confusion and sometimes, panic.<\/p>\n Roman Macaya, general manager of Agroquimica Industrial RIMAC in Costa Rica, pointed to myriad factors challenging Latin American market players. \u201cThere is no doubt that sudden implementation of new environmental regulations in China, and inspections with severe consequences, have had a major impact on the supply of certain AIs, as plants can experience shutdowns or production volume limitations,\u201d Macaya told FCI<\/em>. The temporary halt in production can create a temporary under-supply, which of course raises prices.<\/p>\n Monsanto Glyphosate Lead: \u2018Little to No Impact\u2019<\/strong> Lucas said Monsanto is still trying to figure out what exactly the impact of environmental changes in China will mean. At a governmental level in Beijing, it is clear that pressure to improve environmental standards is the impetus. \u201cWhat we can\u2019t figure out is provincial implementation of these newly announced policies,\u201d Lucas explained. \u201cObviously there\u2019ve been some well-publicized penalties that have been issued to individuals inside of certain companies; there\u2019s even been prison time for certain individuals that have violated those policies. In terms of making huge structural changes in the amount of production in the chain, we just haven\u2019t seen it.\u201d<\/p>\n Lucas added, \u201cThere seems to have been a shift in production from the small- and mid-sized companies to the larger producers.\u201d Marty Kisliuk, FMC Agricultural Solutions global supply chain and manufacturing director, said staying ahead of the regulatory curve has helped it evade supply chain disruptions in Latin America.<\/p>\n \u201cOur partnership relationships and how we stayed ahead of the game has put us in a position where I can really sit here and say: pretty minor impact. Although I have to admit, I know people that have problems. I do know shortages that are occurring,\u201d Kisliuk said.<\/p>\n From a supply chain standpoint, distance is the single biggest challenge in Latin America, he said. \u201cWe source from the lowest-cost places in the world \u2026 but Brazil is half a world away from most of our sources, including India, Vietnam and other places. That\u2019s a lot of lead time we have to deal with,\u201d but it does so, successfully. FMC posted a 24% jump in profit and a 38% gain in revenue to $677.7 million in its recent fourth quarter, which it heavily attributed to market penetration in Brazilian soybean applications, new products and increased cotton acreage. It is set to start construction on a formulation plant in S\u00e3o Paulo state that will double its capacity in the country by the end of the decade, Kisliuk said.<\/p>\n Beyond Environmental Regulations<\/strong> Utz Klages, spokesman for Bayer CropScience, told FCI<\/em> that the company \u201cis stepping up its supply chain capacities\u201d as demand from Latin American growers for its products heats up. Bayer, which Klages said will further expand its soybean business in the region through acquisitions, expects the market to remain favorable but weaken over the course of 2014. Klages stressed, \u201cDespite a volatile market environment, and that logistics in this region are still a challenge, Bayer CropScience remains convinced that Latin America is a growth region.\u201d<\/p>\n According to Macaya, supply chain problems stretch much further than Chinese environmental laws. Pricing agreements among a few big players in a consolidating industry, as well as strategic decisions by multinational companies to purchase most of their need for an AI instead of producing themselves, can also accentuate price hikes, he said. \u201cThis last strategy, which often involves locking up the production capacity of key manufacturers, can create planned (and severe) shortages and usually escape the claw of anti-trust laws,\u201d Macaya said.<\/p>\n However, price increases can draw smaller illegal producers back into the market, especially for AIs that allow for a quick set-up time at a plant. Por que a obten\u00e7\u00e3o de ingredientes ativos na Am\u00e9rica Latina est\u00e1 se tornando ainda mais complexa e como as empresas est\u00e3o enfrentando o desafio.<\/p>","protected":false},"author":72,"featured_media":49312,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4,26,28,29,18,19,20,5],"tags":[115,145,135,1061],"class_list":["post-49309","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-agrochemicals","category-americas","category-asia","category-europe","category-fungicides","category-herbicides","category-insecticides","category-markets","tag-bayer","tag-fmc","tag-monsanto","tag-sourcing"],"yoast_head":"\n
\nIn an interview with FCI<\/em>, Monsanto\u2019s global glyphosate and acetochlor lead, Louis Lucas, disagreed that supply shortages, at least of glyphosate, are affecting Latin America. The company has production facilities in Z\u00e1rate, Argentina and two in Brazil: Cama\u00e7ari and S\u00e3o Paulo, in addition to facilities in Europe, the United States and Asia that are \u201cbasically at capacity\u201d in terms of glyphosate output. He said there have been supply chain interruptions of glycine in China but maintained it is a short-term issue. Production plants in China that were interrupted in late February and early March are coming back online, he explained, adding, \u201cRight now there is certainly more supply than there is demand for the product, even though it\u2019s been what I\u2019d call very, very robust growth in both Brazil and Argentina.\u201d<\/p>\n
\nHe acknowledged that some smaller and mid-sized producers have been shut down, but said larger producers have either expanded or have expansion plans underway designed to meet demand, even if they may have to spend more to meet the higher standards. Will this slow future production? He says it has had little to no impact so far. \u201cAs a matter of fact, we just had an hour-long conference with a consulting company out of China that would indicate that the expansion plans are moving along.\u201d<\/p>\n
\nAs for dicamba and paraquat scarcities in the region and elsewhere, Monsanto\u2019s Lucas chalked those up to extreme environmental-related regulatory pressure and strong demand. Growers\u2019 appetite for the products continues to rise as they seek out alternative chemistries to battle resistant weeds. \u201cWe\u2019re already starting to see the expansion of manufacturing facilities in China and potentially in India to meet that demand [for dicamba,]\u201d Lucas added.<\/p>\n
\n\u201cOnce prices collapse, only the very large manufacturers, which are almost by definition legal producers, can survive through their economies of scale,\u201d he said. Under these swings, buyers who have significant needs of certain AIs can face serious supply problems, Macaya said, \u201cespecially since this is a seasonal business and late deliveries may be too late.\u201d Applying longer lead times whenever new regulations are introduced and enforcing anti-trust laws to quell market manipulation in the agrochemical industry around the world are just some actions that he said can make the market for AIs \u201cbehave more like a market.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"