In-Depth Analysis of the COVID-19 Impact on US Agrochemical Market: Ken Research

COVID-19 outbreak has been declared a pandemic by the WHO, causing a huge impact on people’s lives, families, communities and businesses. As of 7th July 2020, US has been lead
ing in terms of total number of positive cases registered i.e. over 3.2 million with clusters around New York, Seattle and in the California. The state of New York (which was once stated as the epicenter), now have lowest infections in the country, but other states such as Texas and Florida are seeing increase in number of COVID positive cases. Being a developed nation, US economy faced an unconventional shock followed by reduction in productive capacity as a consequence of lockdown and shortage of healthcare equipment & healthcare workers. However, the US government followed certain counter-measures to deal with the long term consequences of unemployment. Additionally, the size of resources put behind the relief package (put in place by US government) has collectively surpassed the collective set of efforts taken across Europe and other regions.

The pandemic continues to take its toll on both large scale businesses & MSMEs. Businesses must evaluate the financial as well as operational challenges caused by COVID-19 while rapidly addressing the needs of their clients / end users and suppliers. The infection has spared only a few businesses, mostly offering healthcare products-services, while many other sectors for instance, travel and tourism, hospitality and food & beverage industries experienced major disruptions. It led to closure of work places, shopping malls and restaurants which further reduced demand for numerous activities in the short as well as long term. Data estimates from the U.S. Census Bureau showed April’s monthly sales for retail purchases in stores & online spending at bars and restaurants totaled USD 403.9 billion thus, resulting into a decline of 16.0% from the previous month and over 21% lower than the same time last year.

The severe effect of the corona virus pandemic on low-wage workers was also briefly stated by “the Peterson Institute for International Economics” which said that approximately 40% of the US house-holds in February were making less than USD 40,000 per year and had lost their jobs in the month of March.”

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Most businesses are focusing on survival as the markets have become highly uncertain and are socially distant. E-commerce on the flip side is expected to see over 20% growth in 2020, majorly driven by increased uptake of online shopping from consumers who shifted online while brick-and-mortar stores were closed. As a result of which, players are increasing budget towards online and social media advertising as US adults are expected to continue spending more time on social media post pandemic. Amongst the North American region, US is one of the leading countries with 288.1 million internet users (87.0% penetration), 353.2 million mobile phone connections and 230.0 million active social media users (70.0% penetration) therefore, highlighting the growing digital base which has enforced more significance and greater participation of E-commerce activities in multiple sectors.

Impact on Agrochemical Business:-
Corona virus outbreak has hit supply chains across the world thus, causing disruptions and trade tensions. Compared to large industries such as energy, tourism and airline services which are more affected, the agrochemical industry is smaller in size however, and it is closely related to food production. In addition, the US chemical industry has been severely affected due to oil price shock. The country being a net export of disinfectants and other agro-chemical based products saw decline in terms of value and volume over the past few months. Exporters of raw materials are facing issues as US factories remain shut and a prolonged trade halt will impact margins and profitability of any company. Agrochemical prices which were going down during last year saw a rapid surge of 20-25%. Thus, any sort of global movements are restricted by major players due to possible infections at airport / transit airports causing a negative impact on sales activities. The functioning of domestic pesticides industry may not be affected immediately by halt in production levels as the country is currently in possession of inventories for the next 2-3 months. As manufacturing and logistics are slowly recovering with ease in lockdown restrictions, the US government must help local manufacturing companies by granting registration from the USEPA (The United States Environmental Protection Agency) and manufacturing licenses by states. The virus has impacted major agrochemical producers from raw materials to finished products. US is one of the major producers of both active ingredients that form the base of formulated agrochemical products, and ready-made conventional pesticides.

Impact on Agricultural Activities:-
Agriculture is a labor-intensive industry however the COVID pandemic has led to non-availability of labor because people are self-isolating or travel instructions are in place thus, causing bottlenecks in harvesting, packaging and transportation activities. Disruption in terms of food produce / supply will be mostly felt by farmers, small businesses & medium sized companies. Agriculture, food and related industries contributed over USD 1.0 trillion to country’s GDP i.e. over 5-6% in the past few years. In accordance with the USDA, around 22.0 million full and part-time jobs were related to the agricultural and food sector i.e. 11.0% of total U.S. employment during 2018. USDA service center employees continue to assist agricultural producers with disaster assistance, conservation, safety net & farm loan programs and services such as conservation planning and acreage reporting while supporting flexibilities for producers and implementing the Corona Virus Aid, Relief, and Economic Securities (CARES) Act. Additionally, US Small Business Administration (SBA) offers multiple programs available to agricultural producers whose operations have been impacted by the corona virus pandemic.

Strategies Adopted by the Market Players: -
The US-headquartered company FMC has followed procedures to ensure the health & wellness of employees, including alternative work arrangements, travel restrictions and other measures. The company recently formulated a business continuation plan and its commercial teams are focused on supporting customers and ensuring farmers have the products they need. Additionally, they have sufficient product stock to meet anticipated customer needs for the immediate future. FMC’s sales & marketing & technical service teams continue to operate fully.

Farmers Business Network (FBN) is a US data and pesticide E-business Company which has recently announced a discount sale of more than 80 kinds of key seeds and pesticides with 15.0% discount on top of the current low prices, which will further aid farmers to cope up with the financial stress during the pandemic, which happens to be a planting season. Products can be ordered online & can be further delivered from more than 70 FBN warehouses across the US. Given the epidemic circumstances, offline sales saw a huge decline and therefore, the online selling mode in the near future will play a more significant role.

Domestic demand as well as exports for agrochemical products is largely affected due to the global lockdown situation causing a decline in terms of production capacity. Major focus is also being given on marketing the products in a safe & sanitized manner across US to regain the confidence of end users.

Shifts in the Industry Practices:-
For agrochemical companies, disruption of their supply chain network will pose major risk. Another major challenge is changing suppliers or manufacturers which might not be easy, since changing source of material will require updates on product registration. Unless emergency status is granted by governments, changing or adding a new source may take at least a year or longer, before getting approval from any national authority according to the current pesticide registration regulations in the US.

Comprehensive measures are taken by agrochemical manufacturers to make sure the restrictions to control outbreak will not potentially lead to halt in agribusiness globally.
Looking at the agricultural commodities under the current circumstance reported by the USDA, US companies have increased production of pasta and rice to meet the growing demand by consumers worried by the COVID-19 crisis.

In the coming months, shortage of raw materials and products might occur together with further transportation interruptions. Agrochemical players need to bridge possible financial bottlenecks due to the material shortage, production stoppages and falling demand in the markets. Under the current circumstances, it is important to ensure the smooth flow of trade and to make use of the international market as vital tool to secure supply and demand.

Key Segments Covered:-
Product Type
Herbicides
Glyphosate
Atrazine
2,4-D
S-Metolachlor
Acetochlor
Dicamba
Others

Insecticides
Organophosphates
Carbamates
Pyrethroids
Neonicotinoids
Other

Fungicides
Chlorothalonil
Mancozeb
Other

Other Agricultural Pesticides:-
Fumigants
Defoliants & Desiccants
Rodenticides
Nematicides
All Others

Pesticide Form
Liquid
Granules
Powder

Market Structure
Organized Market
Unorganized Market

Crop Type
Cereal
Fruits
Vegetables
Others

Key Target Audience:-
Venture Capitalist Firms
Agrochemical Manufacturers
Raw Material Suppliers
Research & Development Institutes
Government Bodies & Regulating Authorities
Herbicide Manufacturers and Distributors
Insecticide Manufacturers
Fungicides Manufacturers

Time Period Captured in the Report:-
Historical Period: 2013-2019P
Forecast Period: 2019P–2025F

Companies Covered:-
Bayer
Syngenta
BASF
Corteva Agriscience
FMC Corporation
Others (ADAMA Agricultural Solutions, DOW Chemical, Du Pont, Monsanto, Nufarm and Sumito Chemical)

Related Reports:-
https://www.kenresearch.com/agriculture-and-animal-care/crop-protection/brazil-agrochemical-market-outlook/299311-104.html

https://www.kenresearch.com/agriculture-and-animal-care/crop-protection/indonesia-agrochemicals-market-outlook/303063-104.html

https://www.kenresearch.com/agriculture-and-animal-care/crop-protection/europe-agrochemical-market-outlook/313759-104.html

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