The ACE exhibition in Shanghai in October 2020 may be the least crowded in history. The new crown pneumonia is raging abroad, and many foreign customers cannot participate in this exhibition. It has basically become a meeting for Chinese suppliers to entertain themselves. Due to the impact of the flood, various manufacturers of the Leshan glyphosate base that stopped production have resumed work one after another. Glyphosate, as one of the few pesticide varieties that are still increasing in price this year, has attracted much attention. The relationship between supply and demand is the first element to determine the price, so I will talk about it from the side of supply and demand.

 

supply:

Generally speaking, the annual output of glyphosate in China is about 650,000 tons, which is an average of 54,000 tons per month. If we look at the entire 2020, China's actual production of glyphosate is declining.

1. COVID-19 impact at the beginning of the year.

During the COVID-19 from February to March this year, the government extended the holidays, and almost all manufacturers delayed their openings, especially the factories in Hubei, which reduced their production. It can be said that the COVID-19 at the beginning of the year affected the opening of most of the factories. In our general calculation, the production capacity of each manufacturer in the month from February to March is 50% off, which is equivalent to a reduction of 27,000 tons of glyphosate output.

2. Leshan flood impact.

As mentioned in the previous article, the annual output of Leshan FH is between 120,000 and 150,000 tons. We use 120,000 tons as an example. The average monthly output is 12,000 tons. Leshan HB's glyphosate production capacity is 180,000 tons, and the amount converted into glyphosate is about 120,000 tons, an average of 10,000 tons per month. From the August 18th flood to October 9th when HB announced the full resumption of work and production, it was about 42 days, which is equivalent to more than a month. My calculation is equivalent to a reduction in the output of glyphosate by 20,000 to 25,000 tons.

3. It will take time for Leshan to resume work and production after the flood.

After the resumption of work and production, it will take a while to fully recover to full production before the flood. Although glyphosate is currently a bit like a major chemical industry, its essence is still a fine chemical industry, and it needs to continuously modify the operating parameters of production. Each time node and process requirements are still different from those of Dahua Chemical. In this part, even if the author can return to normal in early November, the production will be 50% off, and the output of glyphosate will be reduced by 10,000 tons.

Sub-total of these three factors shows that China's glyphosate production will decrease by 50,000 tons this year. Note that this amount of reduction has not been calculated for the impact of the annual routine maintenance shutdown or production reduction of each manufacturer, and it is based on other manufacturers that all the devices are fully opened after removing these three factors.

 

Demand:

1. China:

China's genetically modified products have been liberalized on soybeans, corn, etc. These two products are the main substitutes for staple foods. The liberalization of these two products in this respect indicates that the staple food will be released soon, and genetically modified seeds have the highest penetration rate as a glyphosate-resistant gene. The demand for glyphosate in China is undoubtedly rising, which can be felt from the domestic sales situation. The demand for glyphosate in China is on the rise.

2. America:

Brazil, Argentina and other South American markets have had large channel stocks in the past two years. This year, due to favorable weather conditions and YQ reasons, governments of various countries have guaranteed agricultural production, and demand for glyphosate in South America has increased rapidly. Since Bayer (Monsanto) is a local company in the United States, the amount of glyphosate imported in the first three quarters was relatively small compared with previous years. However, in the fourth quarter, it is obvious that the amount is increasing, and the later demand is not a problem.

3. Africa:

As a traditional incremental market for glyphosate, Africa has always had a good market demand. Especially with the strengthening of the strength of certain African economies, the governments of these countries began to want to get rid of the traditional route of relying on the sky for food and relying on mines for food, and began to slowly start industries. In the past, glyphosate was exported to Africa mainly with traditional ammonium salt solution, but now some African companies are gradually importing the original medicine, making it into a liquid and selling it locally. While the genetically modified seeds in Africa have not been spread, the consumption of glyphosate in Africa is still increasing. With the gradual development of the African economy, I believe that the future demand of the African market will not be a problem.

To

4. Other market and policy influences

The Southeast Asian market has loosened its policies this year compared with last year, especially Thailand. The glyphosate policy in the Thai market has been relaxed compared to last year, and many domestic companies have begun to export preparations to Thailand. Demand from other Southeast Asian countries is also rising steadily.

Paraquat is banned in Brazil, which is beneficial to glyphosate, glufosinate, and diquat. Currently, glufosinate is 155,000 tons and diquat is 32,000 tons. It seems that glyphosate is still the cheapest broad-spectrum herbicide. There is still a part of replacement demand. The author has previous data here. Brazil imports about 5000-7000 tons of paraquat, and the amount of glyphosate used is three times that of paraquat. If 100% is completely replaced, the newly added amount of glyphosate is about 15000-21000. Tons, a 50% discount is also at 7500-10500 tons.

Glyphosate enters the peak season in the fourth quarter, and the demand for glyphosate in the northern and southern hemispheres is superimposed. Then demand is not a problem.

 

After the ACE exhibition, it is normal for the price of glyphosate to fluctuate slightly. After all, from an emotional point of view, the resumption of production at the Leshan glyphosate base is bad news for the market. However, from a medium- and long-term perspective, the price is determined by the marginal effect. The output of glyphosate has been greatly reduced this year, and almost all companies have no inventory, and the margin has improved significantly. Bayer (Monsanto) was affected by the carcinogenic lawsuit and also had the original motivation to make money from glyphosate.

Therefore, we personally believe that glyphosate will fluctuate slightly in the short term, and the fluctuating price will not exceed 1,000 CNY. The fundamentals of the current price increase are still very mature, and there is no reason.