China Price Index: Strategies for Managing Economic Downturns

AgriBusiness Global DIRECT contributing writer David Li offers insights into the Chinese agrochemical market through his monthly column published on AgriBusinessGlobal.com.

For each column, he provides a snapshot of current price trends for key herbicides, fungicides, and insecticides in the Chinese agrochemical market in his monthly China Price Index.
Below is a summary of his latest columns.

Three Important Variables to Pay Attention to in a Downturned Economy

Poor economic conditions create challenging times. While management can struggle to overcome difficult times there are often hidden dangers including loss of employee trust. To avoid that from happening, executives should pay attention to three key issues currently facing the market.

Moreover, price volatility also highlights the importance of diversification for Chinese agrochemical companies. Relying heavily on a single product or market segment can expose companies to significant risks. By diversifying their product portfolio and expanding into different market segments, companies can reduce their vulnerability to price fluctuations and ensure a more stable revenue stream.

For Chinese agrochemical companies, compliance with environmental regulations is not only a legal requirement but also a strategic imperative. Companies that prioritize environmental sustainability and invest in eco-friendly production processes are more likely to gain a competitive edge in the market. They can position themselves as responsible and trustworthy suppliers, attracting environmentally conscious customers and securing long-term partnerships.

Chinese agrochemical companies should carefully evaluate their competitive position and consider strategic partnerships or acquisitions to stay competitive in the market. By joining forces with other companies, they can leverage complementary strengths, access new markets, and achieve cost efficiencies. However, it is crucial for companies to conduct thorough due diligence and ensure compatibility in terms of corporate culture, business objectives, and long-term vision.  •

Read full article and see charts

China’s Glyphosate Manufacturers Miss the Mark on Pricing

In July 2023, a fire broke out at Dow’s Plaquemine chemical facility in Louisiana. Fortunately, all employees were safe and accounted for. This incident had the potential to cause concern for glyphosate buyers, as it could have led to a price increase. However, this may be a strategic misjudgment.

Since the second half of 2023, demand for total herbicides, including glyphosate, has been low. Imports dropped by 80% compared to the same period in 2022. Only a small amount of reloading by generic companies and Chinese glyphosate manufacturers contributed to the procurement behavior. Chinese pesticide companies, facing a decline in demand, are now looking for new growth opportunities.

The accident at the Dow factory seemed to give Chinese glyphosate players hope for a possible shortage of supply. However, there have been no warnings of force majeure in the global market, indicating that Dow’s supply chain is not as fragile as anticipated.

The global glyphosate market is largely influenced by giant producers like Bayer CropScience. By the end of July, Bayer had slashed its outlook due to weak glyphosate demand in 2023. This decline in demand would force Bayer to adjust its positioning and competitive strategy. Glyphosate is nearing the end of its life cycle in the burn-down herbicide market, but it remains necessary in the GMO market.

Chinese glyphosate manufacturers need three key elements to succeed in the market 1) large financial support, 2) upstream phosphate resources, and 3) a fluent global sales channel. Multinationals’ pessimistic forecasts of future demand should be of more concern to Chinese companies than Dow’s accident.

In the current environment, Chinese pesticide companies should focus on creating long-term, sustainable value. Short-term profit is not a mistake, but shortsightedness can hinder long-term development. To stimulate demand, downstream distributors should provide farmers with practical digital farming services, precision agriculture solutions, and high-growth categories like bio-products.

During market downturns, fluent sales are critical for low-margin commodity products. Chinese suppliers should support distributors at a reasonable price and ride out the storm with global customers. Market share becomes more important than profit rate in such times.

Chinese pesticide companies need to think like CEOs and make decisions based on marketing strategy and customer needs. They should also have a “God View” by acquiring reliable data and understanding the decision-making strategies of market practitioners. Diversifying analytics channels and avoiding path dependence are crucial. Entrepreneurs should attract management talents with a growth mindset and systematic thinking.

In conclusion, Chinese pesticide companies have a long way to go in terms of pricing strategy and the growth mindset of making the right decisions. By focusing on long-term value and adapting to changing market conditions, they can succeed in the glyphosate market.

Read David Li’s full analysis of the glyphosate here.

Photo of David Li; courtesy of SPM BIOSCIENCES (BEIJING) INC., David Li