Pesticide market between China and Brazil evolves

China has changed dramatically in the last 25 years and has also been a key player in transforming the global scenario and relations between countries, an agronomist from Esalq/USP, Flavio Hirata, a partner at AllierBrasil, an MBA, and an expert in pesticide registration, affirmed to AgroPages.  

″My first visit to the country was in 1999. Until then, the Chinese had no idea of the potential of the international market, let alone that China would be the world leader in the production and export of pesticides. All the manufacturers were state-owned companies, each with thousands of employees on the factory floor, where the reference was to have the largest number of people. Products with the same specifications as those made in China were sold in Brazil 10 to 20 times more expensive,″ he said.  

According to him, the Chinese had no knowledge of Brazil, which, at the time, was the ″future of agriculture″: They showed no interest in the possibility of trading based on ″China-pesticides and Brazil-grain″ exchange. The alleged reasons were ″long distance,″ ″difficult language,″ and ″time zone.″ Not even the attractiveness of the prices would persuade them to access the Brazilian market, which would become the largest market in the world. ″We are satisfied with our prices. Pricing is based on cost plus 6%-10%. There is no reason to change,″ the hosts said.

Hirata remembered that ″Made in China″ was not an alternative in Brazil. Chinese products were considered ″pirated,″ of poor quality, and of dubious origin. A business relationship between the two countries in this sector was not possible. 

Even so, he was convinced that the trade of ″China-pesticides and Brazil-grains″ would be the best partnership that would benefit both countries without third-party influence. So, starting in 2004, He began a series of activities to introduce Brazil and its agriculture to the Chinese through countless visits, meetings, lectures, seminars, and, above all, the Forum AllierBrasil, held in China. In Brazil, he opened doors to Chinese factories through meetings with local entrepreneurs and events, particularly the Brasil AgrochemShow, together with CCPIT CHEM-China, with hundreds of Chinese entrepreneurs and representatives of the Chinese government coming, despite the ″long distance,″ ″difficult language″ and ″time zone.″

″It was a rapid but gradual evolution. In China, safety, environmental protection, and quality practices have seen unprecedented improvement. Following the government's Five-Year Plans, thousands of irregularly established factories were closed down,″ he said 

Around 2005, Chinese pesticide manufacturers began to invest, although very timidly, in product registration in Brazil. Initially, it was in technical products and then in formulated products. Simultaneously, they entered into partnerships with local companies to send test samples; later, they began to provide test reports for technical products and, after several years, for formulated products to distribute them locally. 

″At this point, the partnerships also included transnational companies, expanding increasingly to reach the current levels,″ he explained.

Local players finally gave in to the prices, supply, and quality of Chinese products: Pricing has changed radically, from ″cost plus 6%-10%″ to ″what the market is willing to pay.″ This became very clear during the pandemic years when there was a shortage of products on the international market. Several products were sold at up to 400% more than pre-pandemic levels, with payment in advance.

″In addition to supplying the market through partnerships with local companies, Chinese companies have also started to import and resell to distributors, retailers, and farmers, with a huge differential, since in many cases, they are the manufacturers of these products themselves. This creates stiffer competition, considering they started to sell to customers of their customers,″ the AllierBrasil partner said.

The Chinese, he added, like all new entrants, ″have a long learning curve ahead of them. The Brazilian market has many peculiarities, and it is essential to have a suitable strategy. Otherwise, they will have a lot to lose. Some of the Chinese companies that are operating directly in the market have lost millions of dollars in recent years.″

″Importers of Chinese products now have credit lines, unthinkable until a few years ago. These importers are potential targets for future acquisitions by foreign players, especially China and India. Given the excess capacity of world production, there is a lot of speculation in the market about acquisitions and that the main way to sell products is through ‘product registration - distribution – sale,’″ Hirata stated.

According to him, there is growing concern in the market about the ″lowest price″ policy, which means continuously reducing prices, with price as the only differential. 

″This is a common practice in several countries in Latin America and Southeast Asia, not only in the agrochemical market but in several other sectors where China is aiming to be the market lead. In many cases, this is a path of no return. To offer cheaper products, costs are cut from rent, salaries, staff, quality, etc. A very illustrative example is pesticide companies established in residential apartments in Brazil, which have negligible costs, although they are inappropriate,″ he explained.

Hirata said this practice tends to be more frequent: ″Chinese manufacturers themselves are already showing concern, which has led to many consultations on how to deal with this type of competition. Unfortunately, there is no ready-made formula, no magic formula, and certainly no cheap formula.″

For twenty years, China has been playing a crucial role in Brazil's pesticide market. This relationship between the two countries is reciprocal. China became one of the leading suppliers of pesticides to Brazil and the world, and Brazil is the leading supplier of soybeans and corn to China and the world. More recently, however, the spotlight has begun to be shared with new entrants from India, whose industry is developing rapidly.″

″The entry of Asian companies into the Brazilian market is similar to the trajectory of AllierBrasil - a company that pioneered the massive promotion of Brazilian agribusiness abroad, from opening up the market, selecting a portfolio, making product registration possible, to developing technical-commercial partnerships and acquisitions. If 20 years ago the trading ‘China-pesticides and Brazil-grains’ was unthinkable, today it has become true,″ he said in conclusion.

AllierBrasil agenda 2025:

AgriTour China, March 7-17.

Agrochemical Tradeshow São Paulo, April 16-17.

23rd Forum AllierBrasil Seoul, South Korea, May 8.

16th Brasil AgrochemShow, August 12-13.

AgriTour India-China, November 1-15.

24th Forum AllierBrasil New Delhi, India, November 4.

25th Forum AlllierBrasil Nanjing, China, November 11.

(Editing by Leonardo Gottems, reporter for AgroPages)