Mainstream agrochemical prices could well rise sharply across
the country this season following two years of dramatic world oil
and gas price increases, warns a newly-published industry outlook
report. But the scale of the impact is likely to vary widely from
product to product.
“The cost of oil and gas, which are the basic building blocks of agrochemicals
as well as the main energy sources for their manufacturing, has nearly doubled
in the past two years,” points out report author Dr Nigel Uttley of Enigma
Marketing Research. “Escalating oil and gas prices
have also pushed up the cost of surfactants, other formulation
ingredients, paper and plastic packaging and, of course, transport.
”At the same time, many of the chemical intermediates employed in agrochemical
production are also used for a variety of other, higher-priced
he adds. “On top of the basic material cost increases, therefore,
competition from higher value end uses means a ‘double whammy’ for
Despite these global pressures, Dr Uttley’s report ‘Agrochemical
Pricing Outlook 2006 and Beyond’ foresees considerable variability
in their impact on individual product prices.
“For some active ingredients, higher oil and gas prices
are relatively insignificant,” he notes. “But for others,
with complex and very energy-intensive manufacturing processes,
it’s a different story. And high volume, off-patent products
are particularly vulnerable given low manufacturing margins less
able to absorb cost increases.”
Dr Uttley highlights glyphosate as an example of an agrochemical
especially sensitive to oil and gas prices by virtue of the combination
of steps involved in its manufacture and their energy intensity - not
least as a result of the large amounts of costly-to-produce chlorine
and phosphorous required.
”While there’s little or no justification for increasing sulphonylurea
prices on the back of oil prices, there certainly is for glyphosate,” he
stresses. “Having said that, though, I would expect to see the extent
of price rises varying widely depending on the type and source of the product.
“Approximately 75% of glyphosate from China is produced
by the glycine process in which energy is estimated to account
for at least a third of the overall active ingredient cost. Equally,
developing economies like China and India, where most of the generic
glyphosate is made, are also currently suffering very serious economic
pressures, as well as having to raise their environmental standards.”
Although it’s difficult to predict precise prices for the
coming season, industry sources are expecting to see the price
tag of generic glyphosate rise by 15-20%. This compares with an
anticipated rise of around 5% in the price of key brand, Roundup.
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