Glyphosate has been industrialized by Bayer since 1971, and has experienced half a century of market-oriented competition and industry pattern changes. After reviewing the price changes of glyphosate for 50 years, it is believed that glyphosate is expected to gradually move out of the bottom range and usher in the beginning of a new round of business cycle.
Glyphosate has gone through four stages over the past 50 years:
The first stage (1971-2008), glyphosate was developed in 1971, commercial sales in 1976, in 2006 Monsanto announced the closure of 100,000 tons/year glyphosate production line, glyphosate ushered in the first round of business cycle. Between 2006 and 2008, glyphosate prices rose from 29,000 yuan/ton to a peak of 100,000 yuan/ton. During this period, many Chinese enterprises such as Xin 'an Chemical have invested in glyphosate capacity expansion.
In the second stage (2008-2013), Monsanto resumed production of 100,000 tons/annual production line in 2008, and glyphosate prices fell rapidly. As China's new production capacity has been put into production, glyphosate supply is seriously oversupply, and the price is hovering at the bottom of 20,000 yuan/ton. Glyphosate enterprises suffered serious losses and began to reduce negative production or stop production. From 2012 to 2013, domestic environmental protection policies were tightened, enterprise environmental protection costs increased, and construction was limited. At the same time, the demand for glyphosate from genetically modified crops has further increased, and glyphosate has ushered in a second round of rising prices. In September 2013, glyphosate prices rose to a second round peak of 44,600 yuan/ton.
In the third phase (2013-2022), as prices rose, glyphosate profitability improved and companies resumed production. Glyphosate supply and demand weak balance was broken, once again into the oversupply stage. In August 2016, glyphosate prices reached a low of 17,000 yuan/ton. In the following few years, environmental tightening, rising costs, carcinogenic waves, extreme weather and other factors have led to changing industry supply and demand patterns, and glyphosate prices have continued to fluctuate at a low level. In 2021, the outbreak of health incidents caused food security issues, and high food prices drove farmers' willingness to plant food and demand for agricultural resources. Combined with rising raw material prices, limited construction, soaring freight and other factors, glyphosate entered the third boom cycle, and the price rose to 80,000 yuan/ton by the end of 2021.
The fourth stage (2022 to the present), entering 2022, with the increase of the operating rate, the supply and demand situation of glyphosate has been improved, and the price has returned to rationality. In the second half of 2022, overseas warehouses entered the cycle, and poor demand led to a further decline in prices. At the beginning of June 2023, the price of glyphosate was as low as 24,500 yuan/ton, close to historical lows. From June to July 2023, overseas demand started to drive the market to a brief rise, and the highest price at the end of July was 40,000 yuan/ton. Affected by the price, the industry's operating rate climbed rapidly, the market oversupply again, and glyphosate prices re-entered the downward channel after a brief rise. As of September 25, 2023, the price of glyphosate has fallen to 29,000 yuan/ton, which is at a historical low.
Demand side: Brazil, the United States and Argentina are the top three consumers, and genetically modified corn and soybeans are the main demand crops
In 2019, the global use of glyphosate reached 738,400 tons, of which Brazil, the United States and Argentina were the top three users, with a total consumption of 14.2, 10.89 and 84,000 tons, respectively, accounting for 45.2% of the world's total consumption, and China's consumption was about 66,000 tons. In terms of use, agricultural use of glyphosate accounted for 76.2% in 2019. Soybeans and corn were the main glyphosate demand crops, with 195,400 tons of glyphosate used in soybean fields and 98,100 tons used in corn fields.
Supply side: The industry pattern tends to be stable, the new capacity is limited, and the operating rate determines the supply
The total global glyphosate production capacity is 1.183 million tons, of which 370,000 tons are overseas Bayer, and the rest are in China. There are 10 major glyphosate manufacturers in China, and the industry CR5 reaches 74.2%. At present, there are only 25,000 tons of capacity under construction, and the increase is limited. In recent years, China's glyphosate production and operation rate have shown an upward trend, and the two items will be 569,900 tons and 70% respectively in 2022. Glyphosate production capacity in China is dominated by glycine method, accounting for 72%. IDA route three waste emissions less, low environmental protection costs, with the gradual maturity of domestic manufacturers technology, IDA method or become the future of the domestic mainstream process.
The spread of GM crops is expected to drive demand for glyphosate in the medium and long term
Globally, there is a strong positive correlation between glyphosate demand and the area planted with GM crops. The vast majority of glyphosate in the United States is used to weed fields of genetically modified corn, soybeans and cotton. So far, China has only approved GMO cotton for commercial cultivation. In recent years, domestic GMO breeding policies have continued to be introduced, and 17/6 GMO corn/soybean safety certificates have been approved successively since 2019. If the commercialization of GM corn/soybean in China is implemented, we are pessimistic/neutral/optimistic that the penetration rate of GM crops will reach 80% in the year 5/8/10 of commercialization. Assuming that China begins GMO commercialization next year, it is optimistic that by 2030, the penetration rate of GMO crops will reach 95%, which is expected to bring 66,000 tons of glyphosate demand increase.
Global glyphosate demand is gradually recovering, and overseas replenishment demand is expected to accelerate in the fourth quarter
Glyphosate is a broad spectrum herbicide of non-selective absorption and conduction, and is also the world's largest herbicide variety. China is the world's leading producer and exporter of glyphosate. Affected by high inventory, overseas inventory has lasted for more than a year. At present, the global demand for glyphosate is showing signs of recovery. We judge that overseas warehouses will be stopped in the fourth quarter and the replenishment period will be entered. Replenishment demand will accelerate the recovery and boost glyphosate prices.
The judging basis is as follows:
First, from the perspective of China's customs data export, Brazil has stopped warehousing in June and entered the replenishment period, and the replenishment demand of the United States and Argentina has been oscillating at a low level for many months and has begun to show an upward trend;
In the second and fourth quarters, countries in the Americas will gradually enter the glyphosate demand crop planting season or harvest season, glyphosate use will peak, and it is expected that overseas glyphosate stocks will be rapidly consumed;
Third, according to Baichuan Yinfu data, the week of September 22, 2023, the price of glyphosate was 29,000 / ton, which has fallen to the historical bottom range, and under the pressure of rising costs, the current gross profit of glyphosate per ton is as low as 3350 yuan/ton, which also fell to the end of nearly three years. Judging from this, there is little room for glyphosate price to explore. Under the triple factor of price, demand and inventory, we expect that overseas demand will accelerate the recovery in the fourth quarter and drive the glyphosate market to reverse.
The current glyphosate price is in the historical bottom range, the fourth quarter is the traditional glyphosate demand peak season, the overseas storage cycle will end one after another and enter the replenishment stage, is expected to boost glyphosate price recovery. It is recommended to pay attention to Xingfa Group (230,000 tons of glyphosate), Jiangshan Shares (70,000 tons of glyphosate), Guangxin shares (30,000 tons of glyphosate), and Hebang Biological (50,000 tons).
Global glyphosate demand is gradually recovering, and overseas replenishment demand is expected to accelerate in the fourth quarter
2023 10/08