Useless Market Intelligence - Predicted Analysis of Glyphosate Supply in Coming Six Month
“An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.” ― Laurence J. Peter
Multinational companies are particularly fond of intelligence. They can't wait to organize a team, especially in their marketing department. They want this team to help the marketing director, product manager, and third-party alliance manager to determine the current macroeconomic and pesticide market conditions in China, key product registration, raw material prices, product availability, and most importantly, key product market prices trend.
Information analysis focuses on timeliness, and at certain points, once a key event occurs, the secondary conditions that may be triggered are often caught off guard. However, the impact of events should be in line with the market environment and overall supply trends. For example, the incident of Binong's glufosinate production line in Gansu in mid-June had a relatively small impact on the market due to the overall stable supply as the market weakened and Binong's unstable supply. Therefore, market information collection is important for strategy development, but the understanding of future perspectives and industry trends can be worlds apart depending on the analyst's preference.
In the future, the most valuable thing will be the prediction of the industry trend. Such a prediction can never be 100% accurate because there is no prophet in the global and China crop protection industry. When making price trends and industry trend forecasts, we try to improve the probability of “winning” (saving cost) as much as possible based on a wide range of industry information and more than 100 AI prices database. We win more when we are right, and stop as quickly as possible when deviations from reality occur.
This is why we need to have close communication with our strategic partners to make appropriate adjustments and even reversals of our judgments in a timely and quick manner. In addition, for forecasting, we will be the whistle blower for the China agrochemical industry, providing early warning alerts to our partners when risks are not yet present or when they are about to have an impact. Finally, we are most concerned with major turning points in product price trends, and we are constantly testing to see if price turning points are coming and to positively support our key partners in making the right purchasing decisions.
Of course, we do not make operational recommendations until we have established a strategic sourcing partnership and paid membership because each company has different resources at hand, for example, capital resources, and sales strategies. And we cannot give our operational recommendations without knowing the details of our client's corporate strategy, resource allocation, and registration. Therefore, we only provide predictive trend analysis when you become our paid member. If our team is needed to manipulate the procurement, that will be a different story.
The most critical person needed to do industry trend forecasting is the critic. We must be naturally skeptical of all assertions and leave no stone unturned to disprove them. With the full support of our think tank team, our AG ALLIANCE has this key competency. On the other hand, we must also be short-term pessimists and long-term optimists, which is why we have a disdain for undifferentiated price competition in an almost perfectly competitive market and greater respect for maverick entrepreneurs in search of innovation and for young scientists who are dissatisfied with the status quo and are constantly exploring. This fundamental value sets our team apart from the “normal” strategic sourcing consulting team.
Talk a little about Glyphosate market prediction
The glyphosate market has recently stabilized in supply. September 2021, China's double control policy has brought a huge impact on glyphosate companies' operation rate, and the short period of extremely reduced capacity has brought huge disruption to global sourcing in the fall, and also caused glyphosate prices to soar from 8USD/Kg EXW to over 10USD in a few weeks. This also brought great panic and purchasing pressure to most distributors. One is worried that the supply would not recover quickly in the short term, and the other is worried that the price will increase too fast.
With the policy of double control of energy consumption gradually shifting to double control of carbon, the sudden energy shortage in 2022 will probably not happen. As part of the major capacity of glyphosate comes from Sichuan province, the flood season (August-September) in previous years has been a critical period for flood control in Sichuan. And under extreme weather conditions this year, the possibility of flooding in southwest China cannot be ruled out. However, this could have a smaller impact compared to the overall stable supply of glyphosate in China. China's glyphosate cost space is likely to peak in August due to the lower raw material price and weaker global demand, which also leaves room for price concessions to attract long-term large-scale purchase orders. Due to higher overseas inventory, it is likely that individual large purchase orders from overseas will not flood into the Chinese market at once. Multiple purchases and continuous price watch should be the main strategy for industry purchases. Therefore, we expect that the price of glyphosate is likely to bottom out in August.
In the long run, even though overseas single large orders may be rare, market demand still exists. Overseas may be very sensitive to the price of glyphosate in China in this year's peak season. Once the order amount is less than Chinese suppliers' expectation, price declines could become mainstream in the fourth quarter. Due to the major Chinese producers' control over the upstream phosphate mines and the possession of sufficient cash flow, companies are not strongly willing to cut prices. The new balance will be revealed in November.
Another thing to pay extra attention to is the strategy of overseas capacity. Bayer has more than 370,000 tons of glyphosate capacity, in addition to meeting the demand for its own branded products, maintaining market prices and keeping profit margins is likely to be a key strategy for Bayer 3rd party sales in 2022. The inflation level in the U.S. reached 8.6% in May this year. With channel costs gradually increasing, trimming AI procurement costs will be surely the key to maintaining overall profit levels for multinationals and key distributors. Therefore, it is very important for buyers to control the timing of purchases and the number of a single orders. Overall, weak overseas demand and lower consumption rates could be not conducive for distributors to make higher 2023 sales growth plans. Chinese companies would probably also offer prices that are as stable as possible. The game between the two sides in October 2022 will anchor the global glyphosate market trend in 2023.
To be honest, Glyphosate and Glufosinate market is close to the perfect competition market and even a tiny impact will cause a big fluctuation. It is hard to do a prediction. But for other active ingredients, they are easier to capture the market trend. Please feel free to open your mind to make “be AG ALLIANCE membership” possible because a short conversation and making friends with AG ALLIANCE is free of charge.
Have a good Monday morning, my dear friends.
David Li