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Crop & Chemical Dashboard: Recovery unlikely to be sharp

Current data around chemical demand and pricing remains soft; while destocking is expected to gradually fade, chemical industry growth in 2024 is likely to be modest, amid weak demand. In the crop markets, trends are mixed, with declining corn prices hurting farmer profitability, but climatic headwinds are creating uncertainty around output for numerous crops, including rice, wheat and palm oil.

Chemical industry recovery unlikely to be sharp—contrary to expectations

India’s exports of organic and inorganic chemicals fell 3.2%/11.4% mom/yoy in November 2023; imports dropped 11.9%/16.5% mom/yoy. US chemical production for November 2023 rose 0.8% mom, but dipped 0.1% yoy; chemical railcar holdings—a measure of volumes—fell 0.1% yoy based on a 13-week moving average for the week ending December 16. US data indicates continued softness in pricing, with producer prices down 0.7%/5.5% mom/yoy and import prices down 0.5%/11.9% mom/yoy. Chemical stocks have been buoyant in recent weeks on expectations of interest rate cuts and more recently, logistical disruptions in the Red Sea. However, while customer destocking is indeed expected to gradually fade, the American Chemistry Council expects only 1.5% growth in US chemical volumes in 2024, with demand still “relatively weak”.

2024 outlook for crop commodities is quite mixed

International futures prices of corn and wheat were up slightly during the past month—on concerns around safe exports of grain from Ukraine through the Black Sea—but remain down 31% and 24% yoy, respectively, due to rising supplies. The 2024 outlook factors in concerns such as El Nino, export curbs and higher biofuel mandates. Rice prices have already been on the boil due to India’s move to restrict exports, while wheat is threatened by dryness in India and Australia, and palm oil output is also expected to fall next year. India’s Rabi season has been hurt by low reservoir levels and unseasonal rains, which have damaged horticultural crops in Maharashtra. The government’s move to ban onion exports has further infuriated farmers. Broiler and layer chicken prices plunged last month on higher production, amid sluggish demand.

Chemical price trends

Although soda ash spot prices in China have been on the rise in recent weeks, import prices into India remain weak, as do export prices out of the US. Similarly, prices of PVC have been softening. Pricing trends remain subdued across most other chemicals as well, although a modest recovery is visible in some cases off depressed levels. Export prices of 2,4-D herbicide (a key product for Atul) appear to have bounced a little after a sharp decline, whereas export prices of p-cresol remain at depressed levels. Prices of ATBS (Vinati Organics) also remain under pressure. Prices of MEHQ (Clean Science) have recovered modestly in recent months after a correction. In the refrigerant category, prices of R-22 corrected in December 2023, whereas R-32 was stable. International phenol spreads have softened in recent weeks.

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