Ludmila Dulskaya
There is a difficult situation on the PPP market: the supply of imported drugs has been suspended, prices have increased significantly compared to last year, suppliers require 100% prepayment. What should farmers prepare for in these circumstances?
For clarifications, we turned to Vladimir Alginin, Executive Director of the Russian Union of Producers of Chemical Plant Protection Products, and Dmitry Belov, Head of the Product Development Department at Firma August JSC.
Vladimir Alginin immediately urged not to dramatize the situation and reminded that 70% of the total amount of plant protection products used by Russian farmers is produced in Russia. Of these, 52% are the product of domestic companies and 18% are produced by foreign companies that have localized production on the territory of the Russian Federation. Only about 30% of drugs are imported into our country from abroad.
The PPP market is in a fever
Dmitry Belov noted that changes in the plant protection products market did not begin this year. “The pandemic has caused supply chains to break. A number of other developments followed, including, for example, the introduction of significant restrictions on the use of coal by China in 2021, which led to the establishment of quotas for the use of electricity in many manufacturing enterprises. Prices on the plant protection products market began to grow even then,” the specialist emphasized.
“The special military operation, which began in February 2022, made additional adjustments,” continued the head of the product development department of Firma August JSC. – There were difficulties with the supply of adjuvants from Europe. Their share in the total volume of production is not large, but a number of active substances are supplied to Russia from China through the ports of European countries - for example, Rotterdam (Netherlands)."
Dmitry Belov called March 2022 a month of upheavals: shipments were suspended, the cost of drugs was automatically linked to the euro exchange rate, an almost one-month lockdown was set for supplies, which also affected domestic production. “Unfortunately, if a manufacturing company has even 90% of the components, and only 10% is missing, it will not be able to make a finished product,” the expert summed up.
There will be no shortage
Suspension of supplies of imported plant protection products is not expected, Vladimir Alginin is sure. According to information received by the Russian Union of KhPPP Producers from the Association of European Businesses, foreign companies plan to fulfill their international obligations to supply plant protection products to consumers in the Russian Federation. All required volumes will be sent to Russia in the near future, with the exception of individual drugs.
The Executive Director of the RSP KhPZR is convinced that there will be no shortage of plant protection products in our country this year, since the volume of production of plant protection products in Russia, compared to 2021, will increase, but demand (against the background of high prices) is likely , will decrease slightly.
According to Vladimir Alginin, the companies that are members of the Russian Union of Producers of Chemical Plant Protection Products scheduled the purchase of active ingredients in a timely manner, and the 2022 season was provided as early as 2021. Only a small part of the components remained, which, due to difficulties with logistics, were delivered with delays through the Trans-Siberian Railway and European seaports.
The expert notes that a number of multinational chemical companies operating in our country are provided with drugs for the whole of 2022. In addition, the production facilities of these companies, thanks to the efforts of the Russian Union of Producers of Chemical Plant Protection Products and the Ministry of Industry and Trade of the Russian Federation, are located on the territory of Russia.
The head of the product development department of Firma Avgust JSC generally agrees with a rather optimistic forecast for the development of the situation, but in his opinion, the likelihood that individual drugs will have to be replaced still exists. For example, there are difficulties with the entry of glyphosate and diquat into Russia. Especially diquat.
The main problem, according to Dmitry Belov, is that. that in previous years glyphosate was removed from the list of drugs that can be used for desiccation. Agricultural enterprises have completely switched to diquat, and there is a need for large volumes on the market. According to the expert, the solution of this issue largely depends on the Ministry of Agriculture of the Russian Federation. “It is possible that a moratorium will be imposed on previously adopted laws and decisions, temporary concessions will be introduced - this is a world practice,” Dmitry Belov believes. “For example, in the United States, in cases where a mass invasion of a pest was noted, a temporary permit for the use of an insecticide, which had previously been banned, was introduced for one or two years.” In addition, the specialist recalls, diquat has an alternative in the form of carfentrazone and glufosinate.
In the future, the expert expects a gradual improvement in the situation, he emphasizes that domestic manufacturing companies continue to search for and purchase active substances and will try to provide agricultural producers with desiccants by the second half of the growing season.
Price forecast
But back to prices. In early March, when the exchange rate went up sharply, the price increase for plant protection products ranged from 40 to 70% for some items. There are some products that have doubled in price. For agricultural producers who did not have time to purchase drugs for the season, this was an unpleasant surprise.
It should be noted that the prices of plant protection products were already noticeably higher than last year.
Vladimir Alginin sees the primary reason for the increase in the cost of plant protection products in the rise in prices for active ingredients. According to him, since October 2021, domestic manufacturers of protective equipment have been under great influence and even pressure from rising prices for active ingredients (all AI are 100% imported). “There is a direct dependence of the cost of domestic drugs on the prices for active substances set by China. For individual products, they increased by two or three times, which significantly increased the cost of plant protection products produced in Russia, - states the executive director of the RSP HSZR.
The growth of the dollar also served as a negative factor, since all active substances are purchased for foreign currency. “Avgust Firm JSC, for example, is now forced to buy active ingredients at a 100% prepayment in foreign currency,” Alginin explains, “previously it could use delays in the supply of raw materials, and at the same time had the opportunity to provide delays to its customers. But in the current situation, it becomes more and more difficult.”
Experts are in solidarity: if prices for active substances start to rise again among suppliers, Russian manufacturers will be forced to respond to this in one way or another, otherwise they will not be able to produce the necessary products.
Now the ruble exchange rate has stabilized, the exchange processes for the yuan too. Price fluctuations are still possible, even a decrease of 15-20% is not excluded. But, experts conclude, there will definitely not be a rollback to the previous level.
What should farmers do?
“Work calmly,” says Vladimir Alginin. – Sow, grow, fertilize, protect crops and produce products that have also become expensive. Agricultural enterprises have every chance and opportunity to maintain their profitability.” And there is no need to be afraid of a shortage: "Today there are no such drugs that could not be replaced by others."
Moreover, in most cases, the lack of certain funds in the market is a temporary phenomenon caused by spontaneous demand. “Some shipyards also run out because reserves are being formed. Farmers are trying to insure themselves and, if possible, buy goods with a margin for the whole season, and often also for the fall, ”says the expert.
Prospects for the 2023 season
This material was being prepared at a time when the sowing campaign in the country had just begun. But Russian manufacturers of plant protection products have already been preparing for the 2023 season.
“Now we are engaged in the purchase of active substances and components for the next sowing season,” confirms Dmitry Belov, “Our chemists are working to create the most effective drugs that are insured against logistical and other risks. What will happen with supplies from abroad is not yet clear.”
The expert notes that the company "August" has enough production capacity to manufacture and supply to the Russian market almost the entire required volume of plant protection products. But it is difficult to purchase active ingredients for the production of plant protection products on a global scale - this step requires very large investments and is still under discussion. “In the near future, a decision will be made in which we will try to minimize the risks of undersupply of plant protection products to Russian farmers for the next seasons,” he concludes.
Farmers also think not only about the present, but also about the future.
According to the Russian Union of Producers of Chemical Plant Protection Products, domestic companies are now actively working to conclude contracts for the supply of drugs to Russian customers, and so far this process is proceeding at almost the same pace as last year. “For example, JSC Firma August has already contracted 74% of the total volume of planned production,” Vladimir Alginin comments. According to the expert, this result was achieved thanks to partnerships that have developed over the years of cooperation between Russian CPPP producers and agricultural enterprises. He places further hopes on these relations. “It used to be important where it was cheaper. Now it is more important to consolidate relationships in order to preserve what we all managed to achieve. You can't skimp on technology. If the savings result in a loss of crops, the whole enterprise may go downhill. It is necessary to preserve technologies to the maximum and be in close cooperation with reliable partners,” calls the executive director of the RSP HSZR.
Perhaps, under the current conditions, this is really the only way to success.
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