The Current State of the Ag Supply Chain in Australia in 2021
As part of our continued mission to bring transparency to pricing in the market we’re sharing a global update from the FBN® procurement team alongside local market commentary by Dirk Butter, FBN’s Director of International Supply Chain and Procurement.
Please join FBN Co-Founder and Chief Innovation Officer, Charles Baron and team as they dive into the recent chemical pricing environment alongside key actives notes for the Australian market in an upcoming special edition FBN podcast.
To help shed light and kick things off for the Australian market, I’ll focus on some key highlights in our podcast to summarise the Macro economic factors at play as many of you across Australia are gearing up and getting ready to swing into full harvest.
Key call outs
The build up to shortages since 2020, COVID and global freight rates
China / India production capacities
Raw material capacities - yellow phosphorus, 2-EH
The North American Market
What does this mean for Australia?
Cautiously, the price impact is much the same for the Australian market. Similar to record fertiliser pricing, the Ag chem market has followed suit and been on this trajectory since May 2021. Local market conditions in all key actives appear fragmented, with limited pricing and volumes released, causing distortion in pricing and uncertainty in local stock availability.
Firstly, from an Australian perspective a key call out is the larger than expected impact of the North American market on our common supply chain of technical and end use products in China. Noting the big freeze throughout Texas and lost production due to floods in Louisiana in Q4 - key production sites for their domestic market have fallen offline in peak months, which were required for 2022 preparation.
This North American impact has caused a major shift in import reliance on our common international source. This peak volume demand on international formulators spike has placed Australia directly in line with the biggest consumers.
This has seen a noticeable decrease in formulator allocations to the Australian market, resulting in increased priced markets on limited stock. For example, baseline formulated glyphosate - in the US 62% of this product is now reaching as high as USD $50 a gallon, roughly an equivalent of AUD $17.60 a litre.
Secondly, a continued roll out of China’s carbon policy has seen electricity cuts across key production regions. This has resulted in many factories reducing volume output in product down to 30% of total capacity in some cases.
This big impact was particularly felt on Simazine and Atrazine where there was a noticeable short position allocated to purchasers and significant delays in shipping windows. Lastly, both land and ocean freight markets have seen considerable peaks but some leveling out in the last month which has added a significant incremental cost in moving product.
Port congestion in China coupled with the current COVID-19 climate has seen shipment estimated time of delivery continually pushed out. As product makes its way to Australia, some capacity remains tight coming into Fremantle and Melbourne ports.
As a result at FBN, we are seeing key herbicides such as Glyphosate 450 sales price track from a three year average of $3.90 to $12 - $15 a litre in the market. Paraquat 250 from a 3 year average at $3.60 spike to $7 as some examples.
These are just some of the current factors behind what some consider a super cycle on input pricing. These macro economic impacts faced across the entire ag supply chain highlights the importance for growers to be informed in order to make the best on farm decision.
What's FBN doing about this?
FBN Australia officially celebrated 1 year in Australia in August this year and we have been very busy in preparation, bringing global, local.
Building on our Farmers First mission in Australia, the Australian business has seen fast integration into our global supply chain which places us in a strong position to support you coming into the 2022 season. We, as many other retailers, will likely face plenty of challenges, but we hold strong positions in light of our growth aspirations. This involves stocks on hand now and committed volumes for arrival in December.
On the point of bringing global, local and in light of such challenging cost environments for growers, we are excited to launch the following global initiatives for the Australian grower:
Agronomic swaps; and
Looking to secure your product?
As part of Cyber November, we have a large range of products now available.
Visit fbn.com/direct to act now and stock up while supplies last.
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