Agriculture and Chemicals: Crop & Chemical dashboard: Feb 2024

7 Mar 2024 , 12:31 PM

The highlight of the month was the early announcement of NBS rates for the upcoming Kharif season, which is likely to benefit fertiliser companies in H1FY25. BASF highlights the trends in the Chemical industry, noting weak global growth in 2023 (1.7%) with significant regional variation. China saw dynamic growth of 7.5%, while the rest of the world contracted by 3.9%. Demand for industrial goods to normalise slowly, and the share of goods in private consumption to increase gradually. Recovery in China, especially in real estate and the labour market, remains highly uncertain.

NBS rates for upcoming Kharif unveiled:

The government has approved a subsidy allocation of Rs244bn for P&K fertilisers for the upcoming Kharif season. However, the industry's profitability will remain under pressure in the near term, as NBS rates remain unchanged for 4Q’24. These revised rates translate to ~11-38% rise in product-wise subsidies.

Global Agriculture update:

US cotton prices rose by 20% MoM, due to recovery in demand leading to tight supply-demand balance. Soybean and corn fall 6% each, because of excess supplies, with disappointing U.S. mandates for plant-based renewable fuels contributing to weakness. Brazil corn and wheat prices, too, decline 12%/8% each. On the other hand, healthy global demand for rice continues to keep prices elevated. Bloomberg Agriculture spot index was down 3% MoM.

Agrochemical prices a mix bag:

While agrochemical prices seem to have bottomed out, prices Mancozeb, Hexaconazole, Metconazole and Propanil declined 2-8%. Prices of 2,4-D and Acephate continues to remain stable.

Weather update:

Indian weather in the upcoming months is likely to remain erratic. IMD forecasts heat wave from March to May’24 – which may negatively impact crop yields. World Meteorological Organization expects about a 60% chance of El Nino March-May and an 80% chance of neutral conditions (neither El Nino nor La Nina) in April to June. It also highlights likelihood of La Nina developing later in the year, but currently, the odds are uncertain.

Low reservoir levels concerning:

Season-to-date rainfall (since 1-Jan23) is ~32% below normal. Reservoir levels are below last-year levels and even fall short of 10yr average. Reservoir levels in the South are at 35% lower than the last year and 9% points lower than the 10yr average.

Spreads remain weak:

Spreads of some chemicals witnessed MoM decline, due to softening of chemical prices. Caprolactum spreads declined 9% to CNY5,454/MT. Phenol spreads remained weak and further declined 13% MoM to Rs35/kg. Spreads of Atul’s key products P-cresol, Resorcinol too declined MoM. On the other hand, TAN spreads recovered sharply, owing to sharp decline in ammonia prices.

Other highlights:

1) Clean Science commissions HALS capacity. 2) DCM Shriram to foray into Advanced Materials products including epoxy and value-added products. 3) Chemplast Sanmar commissions 41,000tpa Paste PVC capacity at Cuddalore, Tamil Nadu. 4) Deepak Fertilisers has entered into a long-term supply agreement for 15 years, for LNG with global energy major Equinor for annual supplies of up to 0.65mn tonnes. 5) Balrampur announces foray into bio-plastics (PLA).