In the first half of the year, domestic agrochemical industry sentiment weakened, but pesticide companies have been proactively responding, and the market remains promising.

Agrochemicals are critical agricultural inputs that underpin food security and agricultural development. However, in the first half of 2023, sluggish global economic growth and inflationary pressures led to weak external demand and subdued consumer spending. As a result, the external environment proved more challenging than anticipated, with pronounced overcapacity in the sector, intensifying competition, and product prices falling to their lowest levels for this period in recent years.

Based on the semi‑annual reports already released by listed agrochemical companies, most have seen a decline in operating performance, and overall industry sentiment has weakened. Faced with mounting pressures from the broader macro environment, firms have proactively adjusted their business strategies, placing customer needs at the core of their operations. By seizing opportunities amid challenges, they have demonstrated unwavering determination and confidence in overcoming difficulties.

Although the industry is currently experiencing a temporary cycle of supply‑demand fluctuations, the bottom line of food security remains unshakable, and the rigid demand for agricultural chemicals will not change. Looking ahead, the agrochemical sector will continue to enjoy stable growth prospects. It can be anticipated that, with policy support and guidance, pesticide companies will further focus on optimizing industrial layouts, refining product portfolios, ramping up investments in high‑efficiency, low‑toxicity, green pesticides, advancing process technologies, and promoting clean production. By proactively addressing challenges, they will enhance their competitiveness and achieve faster, more sustainable development.

Domestic production capacity is being released, and the agrochemical market sentiment has weakened.

Like other markets, the agrochemical sector is influenced by macroeconomic conditions; however, due to agriculture’s relatively weak cyclical nature, its exposure is limited. In 2022, amid complex external factors, the pesticide market experienced temporary supply‑demand imbalances, with downstream customers adjusting inventory levels and engaging in over‑purchasing out of concerns about food security. In the first half of 2023, international channel inventories remained elevated, prompting customers to focus on destocking and adopt a more cautious purchasing stance. Meanwhile, domestic production capacity was gradually brought online, easing supply‑demand dynamics and intensifying market competition. With no sustained price support for most products, prices continued to decline, leading to an overall downturn in market sentiment. According to data from the National Bureau of Statistics, during the early January and late June 2023 periods—when tracking price changes in key production materials in the circulation sector—the price of glyphosate (95% technical grade) fell by 49.9%, dropping from RMB 48,416.7 per ton to RMB 25,666.7 per ton. These trends underscore the volatility and competitive nature of the agrochemical market.

Amid fluctuating supply-and-demand dynamics, intense market competition, and declining product prices, the operating performance of major agrochemical listed companies in the first half of 2023 was less than encouraging. According to the interim reports already released, most firms were weighed down by weak external demand and falling product prices, resulting in year-on-year declines in both revenue and net profit, thereby impacting their overall results. In the face of this challenging market environment, how agrochemical companies are responding to pressure, proactively adjusting their strategies, and ensuring the continuity of their production and operations has become a key focus of market attention.

Pesticide companies are adjusting their strategies to meet challenges, leveraging their strengths, optimizing production, and securing orders.

In the face of adverse industry conditions, agrochemical companies have promptly assessed the situation and adjusted their strategies, leveraging their strengths to address difficulties and challenges head-on:

Yangnong Chemical has adopted a flexible sales strategy, capitalizing on the emerging trends of order fragmentation, small‑batch, and time‑sensitive demand. By closely monitoring market dynamics and formulating pricing strategies in a data‑driven manner, the company is actively securing orders. At the same time, it is strengthening market analysis to expedite product shipments and enhancing customer communication to improve the accuracy of its sales forecasts.

Facing market pressures, Changqing Co., Ltd. has been actively engaging with the market and securing orders, resulting in steady growth in its direct‑sales business. At the same time, by placing a strong emphasis on safety and robust environmental management, the company has effectively unlocked nearly all of its production capacity. Meanwhile, the company is vigorously advancing the construction and commissioning of its production‑base projects and accelerating the relocation and site‑clearance work at its Yangtze River‑side facility, thereby supporting the company’s sustainable and sound development.

Runfeng Co., Ltd. has fully leveraged the operational team’s strengths—“a lean structure and rapid responsiveness”—to confidently navigate swift and significant shifts in the market environment. By harnessing a comprehensive, end-to-end understanding of supply-chain data from factory to farm, the company has been able to respond swiftly, make informed decisions, and effectively mitigate and control operational risks. Against the backdrop of an industry downturn, it has delivered solid financial performance, underscoring its distinctive competitive advantages.

Xin’an Shares, guided by the principle of value maximization, coordinates its supply chain and, through efficient production planning, strategic production cuts, and precise cost accounting, ensures that each business segment achieves maximum value. At the same time, leveraging its global channel network, the company maintains close engagement with customers, secures high‑priced orders to reduce inventory, stabilizes overall price levels in the African region, and capitalizes on timing discrepancies in market fluctuations to drive further year‑over‑year sales growth.

Yingtai Bio has responded promptly and proactively, adjusting its business strategy to place customer value creation at the core. By seamlessly integrating and coordinating multiple functional areas—including production management, supply chain operations, marketing and sales, and product and technology R&D—it has focused on cost control and on-time order fulfillment, thereby establishing an efficient, professional supply system that meets customer needs. The company convened a company-wide marketing and sales meeting, tailoring differentiated sales strategies to suit the unique characteristics of each regional market, boosting confidence, securing orders, and safeguarding market share. Meanwhile, in production and operations, it has pursued both cost‑cutting measures and revenue‑generating initiatives, promoting green office practices and fostering frugality and efficiency. By streamlining and consolidating existing strengths, expanding into new commercial opportunities, and optimizing corporate management from multiple angles, the company has implemented a comprehensive set of measures to ensure stable and sustainable operations.

It can be observed that agrochemical companies have fully recognized the impact of adverse market conditions on their development. At the same time, they have promptly adjusted their business strategies in light of their specific circumstances, leveraging their strengths to implement a dual‑pronged approach of cost reduction and efficiency enhancement, thereby adequately preparing themselves to navigate the downturn in market sentiment.

The bottom line of food security must remain unshaken, and the agrochemical market continues to hold promise.

Although the agrochemical industry is currently operating in an unfavorable market environment, companies in the sector have responded promptly and proactively, allowing us to remain confident in the industry and its leading players.

In June 2023, the Asian manufacturing PMI stood at 50.4%, unchanged from the previous month, remaining above 50% for the sixth consecutive month, signaling a sustained stable performance in the region’s manufacturing sector. Among major economies, China’s manufacturing PMI, though still below 50%, showed signs of stabilizing: the decline in market demand has eased, new‑growth‑driver demand is accelerating, corporate production is expanding steadily, destocking of both raw materials and finished goods continues to advance, and market prices have begun to stabilize. In the chemical industry, despite facing some demand pressures in the first half of the year, the gradual implementation of the comprehensive package of domestic policies aimed at stabilizing the economy bodes well for an overall recovery in domestic demand.

From a long-term development perspective, with the continued growth of the global population, the importance of global food security remains unwavering. As an agricultural input that safeguards crop production and ensures food security, demand for pesticides is expected to remain stable over the long term. Coupled with the agrochemical industry’s ongoing efforts to optimize and adjust its product portfolio, the agrochemical market is likely to maintain a degree of growth in the years ahead.

Furthermore, the “14th Five-Year Plan for National Pesticide Industry Development” identifies optimizing production layout, enhancing industry concentration, restructuring product portfolios, and promoting green and clean manufacturing as key priorities for building a modern pesticide production system. The agrochemical sector will continue to advance toward greater scale, intensification, and environmental sustainability.

With the support and guidance of relevant policies, enterprises that can further optimize their industrial layout, refine their product mix, intensify efforts to develop high‑efficiency, low‑toxicity, green pesticides, enhance process sophistication, and adopt clean production practices will become more competitive. They will also move into the leading group within China’s agrochemical industry, achieving faster and more robust growth under favorable policy conditions.

Therefore, amid the current downturn in the agrochemical industry, the market should adopt a long-term, forward-looking perspective, focusing on pesticide companies’ core competitive advantages and their ability to manage risks—assessing whether they can achieve sustainable growth within the industry’s foreseeable expansion prospects. At the same time, only by continuously improving production management, closely monitoring market demand, advancing transformation and upgrading while ensuring the successful implementation of key projects, and consistently prioritizing safety and environmental protection—integrating sustainable development into daily operations—can pesticide firms further strengthen their competitive edge, mitigate the impact of industry cyclicality on production and operations, and grow stronger and more resilient in the face of both opportunities and challenges.

Source: Every Economy Network