Low commodity prices, currency volatility and political uncertainty on an international basis are leading to farmers spending less on inputs and have resulted in a challenging year for BASF’s crop protection business
Speaking at a conference in Ludwigshafen, Germany, BASF board director Harald Schwager said he expected the agricultural market to remain volatile and the business environment to be challenging for the rest of this year.
He said: “The future is difficult to predict. In the second half of 2014 the oil price started to plummet to less than $30 a barrel. There has been a slight recovery but there is a very distinct correlation between the oil price and many commodity prices, particularly soya and corn.”
Sanctions imposed by the US and EU on Russia following the Ukraine crisis had led to a fall in GDP and tightening of fiscal policy, making it difficult for Russian farmers to get access to capital, said Dr Schwager. “Domestic demand increased which helped the farmers but they needed to have all the inputs that were necessary.”
An economic crisis in Brazil due to high inflation had made it harder for farmers to buy inputs, he said. “We are observing that across the industry there is a wait and see mentality, especially regarding investments, which includes spending on agricultural products.”
Events in Europe had also led to uncertainty, said Dr Schwager. “Who would have believed a year ago that the British people would really vote for Brexit, causing uncertainty and going into the future, lots of question marks about how this will impact trade and the agricultural industry.”
Dr Schwager also referred to recent rumours of mergers and takeovers concerning crop protection companies. “Lately the agro industry has seen some big announcements. Whether all these deals will materialise at the end of the day remains to be seen.”
Regarding the Dow and Dupont merger, he said the EU was going to scrutinise the deal. “Anti-trust officers will have a close look at it and what it will do to the agro industry.”