Why You Can’t Find Products

If you just returned for CAC in Shanghai, then you know that certain products have all but disappeared along with their suppliers. Dicamba, imidacloprid and paraquat are just a few of the notable actives in precariously short supply as buyers look to fulfill orders already in the works for in-country distributors. Glyphosate continues to have its own challenges.

The reasons could be a perfect storm of factors that have largely been in plain view for at least a decade.

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Most recently, China’s new federal pollution regulations have cut production as facilities retool to meet discharge and disposal standards. This has been in the works for some time. Regional authorities have been curtailing pollution across China’s eastern seaboard for decades, and factories have migrated south and west to evade the standards. Now there is nowhere else to run.

The regional authorities were controlling pollution and public health around the megalopolises dotting the country’s east coast. While the new federal standard certainly has public health and safety in mind as Chinese nationals voice concern about air and water quality, it has a ancillary effect: consolidation. And it very well could have been intended. CCPIA has been encouraging consolidation of its more than 500 basic producers for the better part of 10 years, vigorously in the past five.

Small-scale, opportunistic manufacturers have been undercutting the market for years, and it was hurting reputable companies trying to play by the rules and looking to expand their export business. The low-cost companies struggled to control quality and deliver product on time. Competition from within the country was thwarting the industry’s ability to compete outside.

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Larger, more progressive companies began to address the issue under CCPIA Working Groups, which attempted to monitor the supply and demand of key active substances. But actives were still seeping into the value chain in large volumes. Not even the government’s industrial park mandates, incentives for consolidation and lending availability for large enterprises could stem the unhealthy competition driving down prices and making sourcing an unpredictable endeavor for importers. The federal pollution standards solved two problems.

The current supply disruption still wouldn’t be as severe if not for another factor: overwhelming capacity in a single market. China produces technical materials for formulators around the world, including a good share of India’s formulation enterprise. Many multinational companies employ contract manufacturing in China as well. Add the hundreds of independent importers, formulators and distributors around the world, and it is clear that far too much risk resides in the same consolidation that is required to create more predictable sourcing.

In the shakeout of low-cost producers and global pollution standards that hamper origination capacity, the industry moves closer to a more unpredictable buying experience that could hamper distributors’ ability to deliver the right technologies in the right agronomic cycles, the results of which will affect the most the countries that can least afford to lose crop production.

Read our China Report in our May issue as we discuss how Chinese companies are managing through new regulatory standards and how long supply might be affected.

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