Thursday, August 22, 2013

Will high price imported pesticide face any policy risk?

Recently, the Chinese government has been closely monitoring the price variations in the import commodities, such as milk powders and medicines, with a view to protect the common citizen against unfair prices. In recent years, the price of imported pesticide has risen abnormally. Will this continuing price rise face any policy risk?

Price variations have an influence not only on people's life, but also on national stability. Thus, the government has the responsibility to take steps against price rise when the price has risen at unacceptable rates. Over the past years, the prices of imported commodities, such as milk powders, cars and medicines have soared leaving consumers puzzled. Finally, the Chinese government had to take steps against price rise, giving most of the foreign companies a severe hit. 

Lately, the market share of imported pesticide is on the rise, so does the price. As a result, price rise of imported pesticide has become farmers' burden. Under this situation, if the price of imported pesticides increases again, will the government try to regulate?

It is believed that the government of China would not take any measure for price control of these imported pesticides in the near future.

Firstly, compared with the industries mentioned above, domestic pesticide market is very small, whose annual sale is only around USD8.1 billion to USD9.8 billion. It's quite reasonable, pesticides are a kind of product specifically for specific people--the farmers, and the small aggregate demand determines its low impact on people's daily life in a short term.

Additionally, domestic pesticides would be the back-up choice to hit back the rising price of imported pesticide. China is the biggest producer of pesticide in the world. If farmers don't like imported products, they can choose the much cheaper homemade products.

On the other hand, the imported pesticide is well received by farmers. Presently, the market share of domestic pesticide has been declining year by year; conversely, the amount of the imported pesticides is rising. According to the data from China Customs, totally 35,639 tonnes of pesticides have been imported from January to May in 2013, up by 6.9% compared to the same period in 2012. Even though the price of imported pesticide is rising, some farmers or agencies prefer the high price imported pesticide rather than the domestic pesticide, the imported pesticide is accepted by more and more farmers at the moment.

There are multiple reasons for this. Firstly, the imported pesticides are believed to be more environmentally friendly and the low toxicity and pollution-free features make them easily accepted by the market. Besides, the most important point is that the imported pesticides show farmers better performance than domestic products, which can help farmers to lower the labor cost and to ensure the output.

However, the farmers suffer from the high prices. The high prices of these imported pesticides will directly increase their planting cost and decrease the profits. The continued price rise of imported pesticides will ultimately make the consumers pay higher prices for agricultural products. Furthermore, the continued high price of pesticide may reduce the farmers' enthusiasm.

So, if the price rises unfairly, it is possible that the Chinese government will take measures to bring imported pesticide prices under control. Threat to the national food security is the last thing the Chinese government wants to see.

In fact, many local governments issued policies to crack down the high price of rice seed, when some companies raised their rice seed prices. This may be repeated in pesticides industry as well.

Source: Insecticides China News 1308 issued by CCM.

Table Contents of Insecticides China News 1308:
Shanghai port prices of major insecticides in August 2013
Ex-works prices of major insecticides in August 2013
FOB Shanghai prices of major insecticides in August 2013
Shandong plans to build 2 new pesticides projects
Output of insecticide increases by 2.20% YOY in June 2013
China's imidacloprid export continues to surge in the first four months this year
Will high price imported pesticide face any policy risk?
Jiangsu Changqing achieves good operating performance in H1 2013
Full implementation of new pesticide policy in Hainan Province finally comes true
Guangzhou Lonkey to buy 25% shares of Qiheng Agro-chemical
Brief registration overview of China's microbial insecticides
Total profit of China's chemical pesticide industry up 48.2% YOY in Jan.-May 2013
Noposion to delay resumption of trading
Lanfeng Biochemical to establish an import and export company
Huifeng Agrochemical's net profit up 54.52% year on year in H1 2013
Lier Chemical enjoys double-digit rise in revenue and net profit in H1 2013
DuPont takes multi-product strategy for chlorantraniliprole in China
China to strengthen management of neonicotinoid insecticides
Hubei Jinhaichao firstly achieves the registration of molluscacide—TDS
4 enterprise with pesticides business get into 2013 China’s top 500 enterprises
Indoxacarb TK is registered twice in July 2013
Sinochem agro actively expands overseas pesticides market
Most insecticides show price uptrend in H1 2013
Major rice pests' occurrence dynamics and trend analysis in 2013

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