The wind in global agriculture is now blowing from a different direction. After a few years of mainly rising markets, the agricultural sector is now more affected by falling prices and when they have reached their lowest point. In the wake of good market conditions in the primary sector, producers of crop protection products also managed to make a profit (or more). Now that agriculture is doing less well, companies in the periphery are also benefiting from this.
In the Netherlands, the mood among arable farmers is not bad due to decent potato and onion prices. This is different for larger, more extensive arable farmers abroad. The low grain prices create a much gloomy mood. For example, the Ag Economy Barometer of Purdue/CME group has fallen from more than 175 points at the end of 2021 to 100 points at the beginning of this year. The main reason for this seems to be the grain market, which fell sharply last year.
It is not illogical that if the farmer's earning capacity declines, he also becomes more critical of costs. If we look at the annual figures of the agricultural divisions of three large chemical companies, things appear to be more complicated. At Bayer (the largest in terms of turnover), turnover in 2023 amounted to €23,27 billion. That is a turnover decrease of 7,5% compared to 2022 in the agricultural division. Adjusted for currency fluctuations and portfolio adjustments, the turnover decline is 3,7%, Bayer writes in the annual report. Prices are under pressure, especially for glyphosate products and generic products in general, according to the company. Prices did rise for other products in the portfolio, partly due to relatively high commodity prices. Gross profit (Ebitda) in Bayer's agricultural division fell by 25% to €5 billion. The Ebit will amount to €2023 billion in 3,49, partly due to significant write-downs on goodwill and strong competition in glyphosate products and cotton seed.
Industry peer BASF also saw turnover decline somewhat in 2023, but the decline was less steep than at Bayer. Sales in BASF's agricultural division amounted to €2023 billion in 10,09. That is a decrease of 1,8% compared to 2022 when turnover was €10,28 billion. BASF writes in the notes to the annual figures that the volume sold has decreased considerably, but that the prices for the products sold were higher. According to the company, the fact that fewer resources have been sold is largely due to the fact that the intermediaries are again holding smaller inventories. The Ebit before exceptional items at the agricultural division increased by €343 million to €1,56 billion. The Ebit after exceptional items is €91 million lower at €1,13 billion. The exceptional items largely consist of write-downs on factories in Europe in the context of a cost savings program.
Another major player, Corteva saw revenue decline 1% to $17,23 billion. After-tax income amounted to $941 million, a decrease of 23% compared to 2022. Here too, prices for the products sold were higher while volumes were smaller. In addition to maintaining smaller stocks, Corteva also cites postponement of purchases by farmers and products disappearing from the range as reasons for the lower volumes sold.