Crop and Chemical dashboard: April 2023

9 May 2023 , 10:53 AM

Steep price correction, coupled with focus on working capital has led to a ‘wait and see’ approach; thereby further delaying inventory liquidation. Recent results reported by MNCs such as ADAMA and FMC also suggest slowdown looming across most geographies. EMEA faces volume headwinds within herbicides and sprays in LATAM have been severely impacted by drought conditions seen earlier this year. APAC sales have also been affected by dry conditions in Australia and high channel inventory in India.

Global agriculture update

April 2023 witnessed a decline in prices of most crop commodities. Soyabean, corn and wheat prices declined ~2-11% MoM, as forecasts of rains in key US regions and ample global supplies weighed in on prices. Corn market is facing pressure as exports to China reduced. Indian markets too witnessed fall in prices given that wheat, maize and soybean decreased ~5-7%.

Strong growth in Urea and DAP volumes

FY23 ended with Urea and DAP volumes growing ~12% and 42% YoY respectively. Growth was largely driven by increased imports as global availability improved. MRPs of Urea and DAP have remained flat MoM; but those key NPK grades are declining every month at a marginal rate. Ammonia prices fell ~35% MoM in April 2023. Given the decline in key raw material prices (for fertilisers) over past few months, analysts at IIFL Capital Services expect the government to announce NBS rate cuts for the upcoming Kharif season.

Capacities commissioned

During the month, SRF commissioned a ~Rs. 2.2 billion Pharma intermediate plant for precursor processes. Jubilant Ingrevia added ~63,000MT of acetic anhydride capacity and Philips Carbon Black commenced commercial production of the first phase (63,000MT) of its greenfield carbon black facility.

Update on Chemical prices

Price trends of commodity chemicals were mixed in April 2023. While prices of Caustic, Benzene and TDI corrected ~3-10% MoM, that of Phenol and Soda Ash increased by ~1-5%. Phenol spreads rebounded ~16% MoM. Spreads of other chemicals such as TAN, TDI and Ethyl Acetate too rose by ~19-20% MoM; largely on the back of declining raw material prices. PVC spreads declined 15% MoM — on the back of a reduction in VCM prices. Spreads of packaging films continue to remain subdued.

Rainfall update

Rainfall from March 1, 2023 to date is ~30% above normal and reservoir levels across key reservoirs are ~20% above average. Backed by the IMDs “normal” monsoon prediction, Agriculture ministry has set the national food grain production target at an all-time high of ~332mn MT in FY24.

Other highlights

1) Subsidy bill for Fertilizer is likely to come down by ~Rs. 10 billion, on account of new domestic gas pricing mechanism that has come into effect from April 1. 

2) India approved 24 of 27 generic pesticides previously banned after data evaluation by expert technical committee. 

3) CCFI is seeking an increase in customs duty on import of formulation and technical grades.

4) Chinese lithium prices slump 74% from all-time high in late 2022. Prices decline as battery makers, EV manufacturers use up chemical stocks amid slowing demand. 

5) Astec LifeSciences launched its new advanced R&D Centre in Rabale, Maharashtra. 

6) PI has announced twin acquisitions in Pharma API and CDMO. Combined purchase consideration (including performance-linked payouts) would be US$109.2 million (~Rs. 8.9 billion). 

7) Cosmo First, a global manufacturer of BOPP Film has announced plans to invest US$60mn in capital expenditures over the next two years.