Energy prices, especially those of natural gas and electricity, have risen extremely in recent months. The consequences for agriculture mainly concern the increase in the price of fertilizer. However, current developments in the energy market also have significant consequences for plant protection products (PPPs).
Various manufacturers indicate that the cost price for the production of resources is increasing, partly due to higher energy costs. However, that increase will certainly not be as extreme as with artificial fertilizer. The biggest concern for companies is not the price, but the availability of resources in the (near) future. Boerenbusiness discussed the latest developments in more detail with Han Rupert, director of Adama Northern Europe BV and Kees Jan Nell, Area Manager Benelux at Adama.
Can we expect the same price development for GBMs as for fertilizer?
Han Rupert: "The GBM market often follows the trend on the fertilizer market with some delay. This will probably also happen now. Energy is a much smaller part of the cost price for GBMs than for fertilizer. A price increase for GBMs is likely, but ultimately It will vary greatly per product/active substance. This is not only due to the high energy prices."
What other factors are at play?
Rupert: "These high energy prices also have an impact on other facets of the economy. The current exceptional situation on the energy market and perhaps raw materials markets in general is driving up the price of all kinds of goods and causing rising inflation. This year our cost price has already increased. approximately 5% up and that is without the extreme developments on the energy market in recent weeks."
"But in addition to price, we should also not lose sight of the availability of products. We make many active substances, but approximately 70% of the raw materials and/or raw materials for raw materials in the chemical industry come from China. In that country, the energy crisis, entire provinces are temporarily disconnected from the electricity grid. These include companies that directly or indirectly produce raw materials for our industry. The logistics sector is also turned upside down with long waiting times and prices that have even increased tenfold between some destinations. The problems in the work continues at the beginning of the chain and we will also notice that."
What does that mean for European production?
Rupert: "The production planning for the rest of this year, but also for the first two quarters of 2022, is as good as completed. We have the raw materials required for this on order from our suppliers. We have not yet had any major problems with the availability of raw materials, but we seriously take into account that we will not receive everything we have ordered on time and in full. If, for example, an additive used in various GBMs is not delivered or not delivered on time, entire batches of resources that are appear to the outside world to have nothing to do with each other."
Last year there were already problems with the availability of resources. Is this noticeable in the trade?
Kees Jan Nell: "The cause of this was the wet course of the summer. Last season we saw problems with the availability of fungicides in particular. In our industry we often work with scenarios for wet and dry years. We do this for our production and That's what the trade does for their purchasing. You notice that after three dry summers in a row, manufacturers and buyers are making different choices. Problems with the availability of fungicides for beets, for example, have put everyone on edge again."
Does the trade therefore order earlier this season?
Nell: "Our customers (cooperatives and distributors) have placed the first orders, but the sales season usually runs until January. For certain (groups of) products, demand can be predicted reasonably well and buyers do not wait but want to order early. as far as we can see at this point in the season. For other products, for example, we are waiting for the results of test fields. Before they are harvested and the results are processed, it could easily be January."
"Our production planning is largely completed before the products are sold and adjustments during the growing season are difficult. That is why we have stored a strategic stock in bulk per region, in this case Europe. If there is unexpected additional demand, we can respond quickly and do not have to the GBMs only need to be packaged and labeled in the correct language. However, it does not mean that we can fully solve any problems in production."
Can a farmer do something about this himself?
“Communicate,” say Nell and Rupert. “Keep your suppliers informed of what is going on at your company. You can then plot the strategy together and adjust it if necessary, for example because the drug of first choice is not available. Hoarding GBMs makes little sense and should be prevented. That only causes problems in distribution and artificial shortages of products that later turn out not to be necessary."