External and Internal Influences on the Pesticide Market in Russia

The pesticide market in Russia is experiencing challenging times due to various external and internal factors. These factors have a complex impact on Russian manufacturing companies, distribution networks, importers, and agricultural producers. Let's examine the main trends and possible development scenarios for the next two to three years.

External Factors

1. Dramatic decline in world pesticide prices:

- World pesticide prices have significantly dropped due to overproduction and competition among leading producers like China. This exerts pressure on the Russian market, where prices for imported pesticides are also falling, complicating the competition for local producers.

2. Sharp decrease in demand for pesticides due to the economic unfeasibility of growing certain crops:

- Economic instability and changing demand for agricultural products have led to a reduction in the acreage of certain crops, which in turn has decreased the demand for pesticides.

3. Problems with selling agricultural products abroad from Russia:

- Sanctions and political tensions complicate the export of agricultural products, leading to a surplus of products on the domestic market and reducing farmers' incomes. This decreases their purchasing power and investment in quality agrochemicals.

4. Price wars between large foreign players and Russian producers for the shrinking solvent demand:

- In the face of declining demand for pesticides, price wars are emerging in the market, further deteriorating the profitability of both Russian and foreign producers.

Internal Factors

5. High protective measures in the form of high registration costs for new pesticides and long registration periods:

- The cost of registering new pesticides in Russia is about $300,000, significantly higher than in other countries (e.g., Australia - $5,000). This creates serious barriers to the introduction of new products to the market.

6. Introduction of the FGIS Saturn traceability system and its low market adaptation (30%):

- The implementation of the FGIS Saturn traceability system has shown a low level of adaptation, especially among small and medium-sized enterprises, due to high implementation and operational costs.

7. Planned introduction of import quotas for formulations:

- The proposed import quota for pesticide formulations could lead to a product shortage in the market, creating additional difficulties for agricultural producers.

8. Pressure from the illegal cheap products market, occupying more than 25%:

- The high share of illegal pesticides in the market (more than 25%) threatens the safety and quality of agricultural products and the competitiveness of legal producers.

9. Transparent borders for illegal imports of formulations through border and Eurasian Economic Community countries:

- Transparent borders for the illegal import of pesticides through borders and Eurasian Economic Community countries contribute to the growth of counterfeit products in the market.

10. Problems with settlements not only in dollars and euros but also in yuan with China and India:

- Financial sanctions and restrictions on international settlements create additional difficulties for pesticide importers from China and India, increasing transaction costs and delivery times.

Development Scenarios for the Next Two to Three Years

#### Russian Producers

- Optimistic Scenario: Successful adaptation to new economic conditions, state support in the form of subsidies, and reduced registration costs can help Russian producers improve their competitiveness. Increased investment in new technologies and product quality improvements can strengthen their positions in the domestic market.

- Pessimistic Scenario: Continued high registration costs and increased competition with illegal products may lead to reduced profitability and market share for Russian producers. Bankruptcies and market exits for the most vulnerable companies are possible.

#### Distribution Networks

- Optimistic Scenario: Diversification of supplies, improved logistics, and increased operational transparency can help distributors adapt to market changes and maintain their positions.

- Pessimistic Scenario: Increased control over illegal products and reduced demand for pesticides may lead to decreased turnover and the exit of less stable distributors from the market.

#### Formulation Importers

- Optimistic Scenario: Simplification of registration and quota procedures, as well as improved international settlements, can support the increased import of quality pesticides and ensure stable market supply.

- Pessimistic Scenario: Strengthened quotas and settlement issues may lead to formulation shortages in the market, increased product costs, and reduced competitiveness for importers.

#### Agricultural Producers

- Optimistic Scenario: Government support, subsidies for pesticide purchases, and improved conditions for product sales can help agricultural producers reduce costs and increase profitability. Increased availability of quality pesticides will improve yields and product quality.

- Pessimistic Scenario: High pesticide prices, product shortages, and problems with selling agricultural products may lead to reduced profitability and decreased acreage. Increased use of illegal pesticides will heighten risks to product quality and safety.

### Additional Factors

- FGIS Saturn and low adaptation: It is likely that adaptation to the FGIS Saturn system will remain low due to high implementation and operational costs. The state may try to increase pressure on agricultural producers to increase the level of adaptation, but without significant support, this is unlikely to lead to a rapid improvement in the situation.

- Political and economic uncertainty: In conditions of sanctions, geopolitical tensions, and economic instability, many of the proposed measures to support agriculture may be delayed or only partially implemented, which will exacerbate pessimistic trends in the market.

Conclusion

Given the current management methods in Russia and the described economic and political factors, pessimistic scenarios for the development of the pesticide market seem more likely. High registration costs, import problems, product shortages, and the rise of the illegal market will pressure all market participants. However, with effective government support measures and improvement in the economic situation, some of these trends may soften, although significant changes in the short term are unlikely.