Supply crisis of agrochemical additives in Russia

Auxiliary supply shortage

A possible supply crisis will occur onagrochemical additives. At present, the world's high-quality additivessuppliers are mainly concentrated in European and American countries. Majorauxiliaries suppliers such as Solvay and Clarient have indicated that they willsuspend operations in Russia. Kseniya Polyakova pointed out that if the currentsituation does not change soon, all Russian plant protection producers willhave to look for surfactant manufacturers with more reasonable prices andguaranteed quality. While building this new supply chain and integrating itinto the production process takes time, it is imperative to ensure that thesenew raw materials meet standards and material requirements. The good news isthat Russian government agencies are ready to support Russian producers byorganizing logistics corridors, increasing subsidies, and even communicatingwith overseas partners at the state level.

[Features of the Russian market]

The United States and the European Unionimposed economic sanctions on Russia due to the Ukraine crisis. Underunfavorable external economic and policy conditions, in order to maintain thesustainable development of the national economy and social stability, Russiaformulated an anti-crisis plan and began to implement an import substitutionpolicy. Anastasia Romanovskaya, Director of Marketing and Exports at LysterraLLC, said: "In the past five years, Russia has turned to an importsubstitution policy. Agriculture has become one of the strategic areas and hasreceived strong government support.

According to the latest report fromconsulting firm Kleffmann, the Russian crop protection market in 2019 increasedby 28% compared with the previous year, reaching an all-time high of 160billion rubles (about 2.62 billion US dollars, based on the exchange rate of1:61 US dollars to rubles),

[Features of the Russian market]

Herbicides are the main agriculturalchemicals and are widely used throughout the territory of the RussianFederation. In the last four years from 2016 to 2019, the market share ofherbicides has been no less than 60%. The second is fungicides, the most usedare those mixed products composed of two or more active ingredients.

[Features of the Russian market]

The development of the Russian market overthe past decade has been dominated by three forces: multinational companies,local manufacturers, and importers who buy products from China and India. Inthe past three years, local manufacturers have fought against importers bytightening the formulation policy and multinational companies by anti-dumpingduties. Manufacturers are deteriorating their financial situation each year asaccounts receivable exceed their turnover, and importers' effective demand isfalling. The trend today is to promote the development of the local formulationindustry, but this can only be done by multinational companies or localmanufacturers, and new players in the market will experience a long start-uptime and require significant investment in product registration.

Registration management policies andtendencies in Russia:

First, the government supports localcompanies and has launched corresponding protection measures.

  Russia's import substitution policy makes domestic manufacturers morecompetitive in the country through subsidy support and special economic environmentconditions. For example, in 2019, the Russian government implemented specialtariffs on herbicides imported from EU states, and this regulation will beextended to other pesticide categories, which is a protective measure for localpesticide producers.

Second, product registration is verylengthy and expensive.

   Russian laws are stricter than those in Europe, and the registrationrules are completely different from those in the EU, and arguably even harsher.If a pesticide is to be registered, regardless of whether there is a similarproduct on the market, a complete dossier of the product must be prepared. Theregistration process takes three years or more and must provide all researchand experimental demonstrations for each crop's application rates and pests anddiseases, and the tests (toxicological tests, bioassays, ecological tests) mustbe conducted by the state government.

Third, the marketing activities of existingcompanies are very active, and it is difficult for new players to enter the market,establish a good brand image, and become widely known.

Many localRussian companies not only continue to actively cooperate with foreign partners(especially with China and India), but also establish their own productionbases within the Russian Federation to ensure sufficient stocks to securesupply, reduce logistics costs and create more flexible system to meet consumerdemand.