Crop & Chemical dashboard: September 2023

6 Oct 2023 , 10:36 AM

While the overall acreage sown ended flat YoY, acreages for pulses are lower by ~4%. This was offset by the higher acreage in rice. Monsoons too ended on a weaker note, with only ~26 out of the 36 districts receiving normal or better rains this year. In South and East India, reservoir levels are at a large deficit to average levels – which could impact sowing patterns during Rabi. On the Chemicals front, Crude rallied and drove up the aromatics prices. Phenol spreads started rising, on the back of better phenol and acetone realisation while ammonia continued its uptrend in Sep’23 (up ~28%). DGTR intensified anti-dumping duty investigations on five chemicals that saw higher Chinese imports. 

Crude oil rallies:

Last month, crude oil rallied ~9% & drove up the prices of most chemicals. Aromatics such as Benzene rose by 8% MoM, while toluene remained flattish. Olefins such as Ethylene was up 7% while prices of Caustic soda, Bromine & PVC largely stayed flat. Phenol spreads were up ~22% to Rs55/kg, on rise in phenol/acetone by 14%/7%; spike in ammonia pulled down TAN spreads, down 23% to $201/tn. 

Int’l fertilizer input prices have surged recently: Prices of key inputs viz. ammonia and phosphoric acid that had declined ~63-7% in the last six months have risen sharply in Sep’23, with ammonia rising ~35% while new contracts of phosphoric acid for Q3FY24 being entered at $985/tn (up 14% QoQ). While spike in ammonia bodes well for ammonia manufacturers, the profitability of user industries viz. TAN, nitric acid will start normalising. Fertiliser prices have also firmed up: urea is up 6% to US$383, while DAP is up 9% to US$530. With spot price being higher than the average Q2FY23, any cut in NBS rate by govt will impact the domestic fertiliser manufacturer’s profitability. 

Global Agriculture update: 

Sep’23 witnessed a 5-2% increase in sugar, wheat and corn prices. While the rise in wheat prices was owing to ~1% cut in production estimates by USDA, sugar prices rose on lower production forecast. Despite lower supplies and production cuts, soybean prices declined by ~6%. USDA has also cut global cotton production forecast by ~1.5% in the same month. Global cotton production is now expected to decline 5.3% YoY. 

Sowing and rainfall update: 

While the overall acreage sown ended flat YoY, acreages for pulses are lower by ~4%. This was offset by the higher acreage in rice. Monsoons too ended on a weaker note, with only ~26 out of the 36 districts receiving normal or better rains this year. While the overall deficit stands at 7%, East/North-East and South India have seen 18% and 8% deficits respectively. The impact of lower rainfall is likely to affect the output in crops like sugarcane, rice and some coarse cereals. Reservoir levels in South and East India are at a deficit to average levels – which could impact sowing patterns during Rabi. 

DGTR intensifies anti-dumping duty (ADD) investigations: 

After witnessing a lull in most part of CY23, DGTR has intensified ADD investigations. It has now initiated investigation on five chemicals in this week. The investigations have been initiated on Epichlorohydrin (filed by Meghmani Finechem), PVC paste resin (filed by Chemplast Sanmar), Iso Propyl Alcohol (filed by Deepak Fertilizers), TPU (filed by Covestro India) and Trichloro Isocyanuric Acid (filed by Bodal Chemicals). It takes around three to six months to conclude — if found injury to the domestic manufacturer, ADD gets implemented. Historically, these trade barriers, particularly on Chinese imports, have been beneficial for domestic manufacturers. However, over the last one year, FinMin has been turning down DGTR’s ADD recommendations.

Other highlights: 

1) The GoI may raise the MSP of Rabi crops by 2-7%. 2) The Ministry of Chemicals & Fertilisers has urged farmers to reduce the use of chemical fertilisers and pesticides by 20% in the upcoming Rabi season. 3) Navin Fluorine MD and CEO Mr. Radhesh Welling tenders his resignation. Mr Welling will be relieved from his services from 15th Dec’23. 4) Chemplast Sanmar has commissioned first phase of MPP of the custom-manufactured chemicals division. 5) Godrej Agrovet to set up an Integrated Palm Oil Complex in Khammam District in the State of Telangana, with an investment of Rs3bn over the next three to four years. 6) SRF has commissioned a phased capacity expansion of TCF value chain amounting to Rs1.6bn.