Agricultural Chemicals

An Expert's View about Chemicals in Colombia

Posted on: 26 Nov 2011

Summary

Agricultural production in Colombia currently represents around 15% of GDP, down from around 20% in the 1990s. In fact, the proportion of agricultural production within the GDP has been declining, decade after decade, over the last 50 years. Colombian agriculture production has experienced particularly sluggish growth in recent years, and is no longer considered a best prospect growth area. In line with declining production, imports of agricultural machinery and chemicals have suffered over recent years.

However, opportunities for U.S. exporters may be found in certain types of agricultural machinery and chemicals, especially in business areas which are conscious of the need for innovation and the upgrading technology. The Colombian government is also seeking to encourage agricultural development by offering financing opportunities, especially for the introduction of irrigation systems.

Market Demand

Domestic production is focused on the manufacturing of low technology machinery such as plows, discs, harrows, planters, hoes, subsoil tillers, sugar cane crushers, coffee pulp removers, corn shellers, forage cutters, sprayers and dusters, grain threshers, machetes, shovels, rakes, grass choppers, axes, pickaxes, as well as components for tractors and other heavy agricultural machinery. Domestic production, except in the areas outlined above, is not a major competitive factor with respect to U.S. exports of agricultural equipment.

Estimates indicate that cattle ranching generates over half the country’s agricultural income. Dairy products, fruit, grain, poultry farming and vegetables combined generate another 40%, and the balance comes from forestry and fishing.

Also a dispute with the neighboring country of Venezuela, during the previous government, had severely disrupted agricultural exports, particularly for grains, livestock and dairy producers. However, in August 2010, it was announced that the two countries had resumed diplomatic relations and are currently taking steps to reactivate trade relations.

One of Colombia's major Ag exports is sugar, however export sales have dipped markedly in 2010, as the price of sugar has dropped in the international market. Exports have fallen to 115,185 tons in the second quarter of 2010, down by 45.2% from the first quarter of 2010.

Practically the only sub-sector which has continued to register a dynamic growth in recent years has been the poultry industry, and is continually demanding new technologies for egg farms, hatcheries, processing and packaging equipment, etc.

In the long term, the combination of aging equipment and government stimulus to increase agricultural production may result in favorable prospects for exporters of certain types of Ag machinery.

There is virtually no national competition for high end agribusiness technology and equipment, almost 90% of machinery in this sector is imported. However, in the fertilizers segment, any exporter would face fierce competition from local producers, but local fertilizers usually consist of traditional products mainly based on urea.

Agrochemicals generally comprises: chemical fertilizers or inputs for the production of these, pesticides, herbicides and biological regulators. Most of these products are either imported or supplied through local subsidiaries of foreign owned corporations. Local production of pesticides includes two types of categories: insecticides and fungicides. This production represents the highest proportion within the agrochemical industry in Colombia with 45.4%. Herbicides and biological regulators are used especially in crops such as cotton, rice, sugarcane and sorghum. Some products such as nitrogen, a component used in the production of fertilizers, are also locally produced, but are insufficient to cover the entire demand. Companies such as Amocor and Ferticol are the main suppliers of this ingredient for the local industry. Value added in domestic production is relatively low, and only a small number of companies engage in the process of synthesis such as Proficol el Carmen.

Market Data

The only types of equipment which have shown a slight increase are those under the items: Harvesting/Threshing Machinery, Hay Mowers; and Agricultural, Horticulture or Forest Machinery for Soil Preparation. In terms of leading exporting countries to Colombia, the U.S. maintains the lead but has shown no increase in 2009-2010. Other countries such as China and several European countries have significantly increased their market share in the period 2008-2010.

As for fertilizer imports, these have had very erratic changes over recent years. For example fertilizers of animal or vegetable composition saw an increase of 53.42% in 2008-2009 and then a decrease of 43.84% in 2009-2010. Likewise, the leading exporters of fertilizers to Colombia have seen an erratic behavior in the volumes shipped to this country. The U.S. sold 50.57% less in 2009 compared to 2008 and then 56.15% more in 2010 compared to the previous year. The reasons for such changes from one year to another are unclear but may be due to variations in agricultural production, due to variations in climatic conditions and changes in where large markets source their products from.

Best Prospects

As indicated initially, the agricultural industry in Colombia in general is not considered as a best prospect sector, due to sluggish overall growth in recent years. However opportunities may be found for certain products, especially those which face no local competition. The end user sectors which appear to offer the best prospects for consumption of agricultural equipment are those with the highest degree of mechanization such as: poultry and dairy industries, meat processing (beefpork- poultry), and sugar cane processing. These sectors require modern agricultural machinery, more efficient technologies and enhanced pesticides to protect crops, animal feed, and packaging equipment.

Specifically, opportunities may be found for the following:

Irrigation systems

Forestry machinery

Poultry processing equipment

Herbicides, insecticides, fungicides (for innovative products where there is no local Competition)

Electronic identification devices for cattle (depending on price)

Harvestable land in some regions is expanding into new and dry areas, which means farmers now have to invest in irrigation systems. Currently the main irrigation system used in Colombia is the gravity-fed system. The users of more advanced systems (center pivot, drip, and micro spray systems) are generally the larger producers because they have greater access to credit and financing. More advanced systems are not manufactured in the country, thus end users are supplied through imports. The government has also created a program (Agro Ingreso Seguro) to provide financing to farmers in need of irrigation systems.

Farmers are increasingly investing in substances to protect their crops, such as pesticides and herbicides, much of which again is supplied through imports.

Key Suppliers

Colombia is a price sensitive market, where prices are a major selling factor for most companies. Agriculture equipment is imported mainly from Europe, China, Brazil, and the United States (see chart above).

The top U.S. exports to Colombia in this sector include: tractors, harvesters, and mowers. The United States was once the major supplier of agricultural equipment to Colombia, but its share has been decreasing over the years, mainly because of: strong competition from other countries offering lower prices as well as cooperation agreements under which financing and technical assistance is provided through government entities and/or associations. However, if the FTA between the U.S. and Colombia is implemented, over 92 percent of U.S. industrial exports will receive duty-free treatment immediately upon implementation of the agreement. Tariffs on the remaining 8 percent of U.S. exports will be eliminated over five years with equal cuts. Also, the devaluation of the U.S. Dollar against the peso places American companies in a more competitive position vis-a-vis Asia and Europe.

The most common brands found in the local market are: Ford, Massey Fergusson, International, John Deere, Caterpillar, Allis Chalmers, and Case from the United States; Kubota, Komatzu, and Mitsubishi from Japan; Fiat Allis from Italy; New Leyland, and Perkins from the United Kingdom; and Zetor from the Czech Republic.

In the agrochemicals industry, the market in Colombia is comprised of domestically owned companies and subsidiaries of multinationals. In recent years there have been several mergers of companies that have operations in the country. Although the competition from domestic companies in the agrochemicals business isn’t very strong, this does not necessarily mean that the market is open to foreign companies wishing to sell products of this type. On the contrary, the market seems to be already dominated and divided up among the local subsidiaries of the major foreign brands. Among the major participants in the market we may mention: Rhom and Hass, Ciba Geigy Colombia, Dupont Colombia, and Dow AgroSciences Colombia, all of which are subsidiaries of foreign corporations. 

Read the full market research report


Posted: 26 November 2011

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