Kynetec: Agri-input inventories start to return to longer-term normal levels

At the end of each year, AgroPages conducts a survey of our columnists, asking them to review the major trends in the agricultural industry over the past year and make predictions for the year ahead. Based on the responses we received from many experts for our 2023 survey, we produced this article: ‘Climate, Biologicals, Policy, Supply Chain, Agtech, AI’ - Key Words Frequently Mentioned in Year-End Interviews with 17 Industry Experts. Due to space constraints, this article is not exhaustive. Each expert response contains more valuable information, and we'd like to reorganize it and present their views in more detail.

Dr. Nomman Ahmed

Executive Director, Global Practice Advanced Analytics & sigma, Kynetec

In your view, what was the most impactful industry event or trend in 2023? 

Dr. Nomman Ahmed: The agricultural chemicals market in 2023 experienced both growth and contraction across various segments, facing challenges like persistent wage inflation and elevated inventory costs. Significant factors included the destocking of retail inventories for generics and key proprietary crop protection products, putting pressure on prices in crucial markets. Despite this, the area under cultivation for key row crops remained stable, and while commodity prices were on a lower trajectory, they were still relatively high, leading to a less severe contraction from an on-ground use perspective. This resulted in a market contraction within the range of 2-5%, according to the latest Kynetec estimates.

North America had a strong start to the year, benefiting from continued high price levels for some key pre-planting product segments, which helped balance losses seen later. 

LATAM, Europe, and APAC experienced contractions, but there was a promising growth trajectory in almost all Biologicals segments and PGRs, indicating a readiness among growers to substitute synthetic chemicals with biologicals, despite the price premiums. This shift towards value-driven growth in the Biologicals space signifies a departure from traditional volume-driven metrics. 

Integrated Pest Management (IPM) approaches benefited from the introduction of a wider biologicals toolset, though they did not replace conventional chemistry entirely, but acted as a complimentary tool. Additionally, specialty crop segments showed resilience and signs of continued market growth.

Looking ahead, what changes and trends in the industry should we pay attention to or look forward to in 2024?

Dr. Nomman Ahmed: Looking ahead, the market dynamics for 2024 indicate pressures on commodity prices for key row crops, potentially leading to a decline in acres planted (more likely for the US). This could have a cascading effect on the demand for agricultural chemicals. However, the positive side includes promising growth in the biologicals space as well as growth in the Horticulture segments. 

This year seems to be one of re-calibration, possibly bringing the market back from the ″outlier″ situation in 2022, where product availability prevailed over everything else, even at the highest price levels demand remained very high, distributor margins remained elevated, growers continued paying price premiums. Back to normal would mean a more measured approach by end-users as well as retailers, margins will be lower – growers will watch carefully what to buy and what not to, passing on some precautionary treatments. 

On the positive side, price drops for key technical material AIs in the Herbicide, Fungicide, insecticide Segment are expected to have reached low points at the end of the year 2023, so further drops are less likely, which should help end-users make decisions sooner than later. 

The Sustainable Use Regulation (SUR) in Europe not coming into effect as well as a number of AIs coming off-patent should provide some growth momentum, at least in the short term. 

Macroeconomic headwinds are expected to see some stabilization, which could also inflict some positivity. Weather and Climate fluctuations create uncertainty in some continents, however, largely areas are expected to remain stable and in some cases only decline marginally. 

Inventories will start to return to longer-term normal levels, and if shipment costs remain as high as at the beginning of the year, we might well see some speedier re-stocking of inventory than expected. All helping to balance the challenges in 2024 and leading to a flattish growth trajectory versus 2023.

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