Crop and Chemical dashboard: November 2022

6 Dec 2022 , 11:11 AM

INR appreciated 2% MoM against USD, while Crude fell 8% MoM through November. Interestingly, the month witnessed announcements of long-term supply agreement by domestic chemical companies, with at least six of them declaring medium-to-long term contracts. The unique one being the two Indian Chemical companies (Aarti and Deepak Fertilisers) coming together and signing a 20-year Rs80 billion contract for Nitric Acid supply agreement. Other highlights of the month are listed below.

PVC prices and spreads witnessing uptick

IIFL Capital Services’ channel checks indicate PVC manufacturers have implemented ~3% price hike in PVC. The price hike is likely to revive prevailing dampening sentiments among dealers, who are maintaining lower inventories currently. This, coupled with lower imports (on the back of pending safeguard investigation) – bodes well for Chemplast Sanmar.

Updates from CIBRC meeting

UPL has been granted three registrations (new technicals and formulations) for domestic manufacturing of Pesticides. Meghmani Organics, BASF India and Coromandel are also among other key Pesticide manufacturers to receive registrations. Another key highlight was the application to grant registration from UPL and Seedling India for domestic manufacturing of Pyroxasulfone. The committee is taking this up in its next hearing. Pyroxasulfone is presently marketed by PI Industries with brand ‘Awkira’ clubbed with co-marketing tie-ups that are with BASF India and Bayer. Domestic market size is estimated to be ~Rs4.5-5 billion.

Chemical prices

Prices of key building block Chemicals such as Caustic Soda, Soda Ash, Benzene and Methanol corrected ~3-7% during November 2022. Phenol prices have fallen ~22% MoM leading to ~15% correction in spreads over last month. Spreads of TAN have risen ~7% in November 2022.

Global agriculture update

US Wheat futures declined ~7% MoM as ample Black sea supplies are giving stiff competition to US farmers in the domestic market. Rice prices rose ~10% MoM in November on the back of a reduction in inventory estimates predicted by the USDA. Soybean rose ~6% MoM on hopes of demand revival in China and adverse weather conditions predicted in Latin America. In India, prices of major Crop Commodities rose ~2-9% MoM in November 2022. The removal of stock limits imposed by the central government helped Soybean prices rise ~9% MoM in November 2022. Cotton prices rebounded, increasing ~9% MoM, post two successive months of declining prices. Uncertainty regarding exports from Ukraine has kept Maize and Wheat prices elevated.
 
Rabi sowing and rainfall update

Rabi acreages are currently ~7% above last-year levels. While Rice, Wheat and Oilseed sowing is up 9-14% YoY, Pulses and Coarse Cereals are flat YoY. Season-to-date rainfall (since 1-October-2022) is ~28% above normal; reservoir levels are above last-year levels.

Fertilizer MRPs

Despite falling import prices, domestic MRPs of key fertilizers remained largely flattish in October 2022. However, global prices have continued to decline in November 2022; this could lead to the industry taking MRP cuts, going forward. Fertilizer subsidy disbursement rose to Rs208 billion in September 2022.

Other highlights

• Five big fertilizer plants in the country that were lying closed for years, are being restarted towards achieving ‘atmanirbharta’ (self-reliance) in urea.
• The Union Fertiliser Ministry is likely to seek subsidy on soil nutrients of around Rs2.25 trillion for next fiscal year.
• Delhi High Court has granted a three-month stay on the notification released by central government, which restricted the use of glyphosate.
• Meghmani Organics has signed a US$100 million 5-year supply contract, with a leading global Agchem company.
• Advanta Seeds UK, and Bunge have signed an agreement to acquire a 20% stake each in SeedCorp.
• In a surprising move, Mr Narayan Krishnamohan, MD of BASF India, has tendered his resignation, with effect from 31 December, 2022.