UPDATE 4: Bayer Declares Force Majeure, Deepening Glyphosate Crisis
(Editor’s note: Story updates on Wednesday afternoon to add comment and resolution on the 25% glyphosate and glufosinate surtax.)
Shortages of key herbicides were already predicted to be a problem for the 2022 season. That situation has gone from bad to worse in a matter of days.
According to a Feb. 11 letter sent to customers from Dr. Udo Schneider, Bayer Crop Science Global Head of Active Ingredient Manufacturing, which CropLife viewed, one of the company’s key raw material suppliers experienced a mechanical failure in its manufacturing plant, which is resulting in a “substantial reduction” in production rates. The letter said the failure constituted a “force majeure” event, and as a result, “Bayer’s ability to supply its customers with glyphosate or glyphosate-containing products as agreed upon in certain agreements or under accepted purchase orders has been impacted.”
The letter continued, “We apologize for this impact, but hope you appreciate this situation is beyond our reasonable control.”
Bayer confirmed the legitimacy of the letter to CropLife on Monday and provided a statement on the matter (see the end of this story).
However, on Tuesday morning, Bayer spokesman Kyel Richard offered a more strongly worded statement to CropLife than the one offered the day before:
“While their failure, and the resulting shortfall in product, will have some near-term impacts on our active ingredient production for glyphosate, we are working through those challenges and do not expect a significant impact to the supply of our branded Roundup products in the U.S.
“Our supplier is on track to restore capacity quickly and we’ve sourced additional raw materials and made other changes in production in the interim to help best manage the situation.”
As of now, given the supplier notification, Bayer said it expects repairs of the production line to take around three months.
Three months from now would take us into mid-May – two months past critical spray times in the mid-South and a full month past the first round of spray applications in the Corn Belt.
“This is a huge gamechanger,” Jim DeLisi, chief at Fanwood Chemicals, which tracks imports and exports of agrochemicals into and from the U.S., told CropLife.
Bayer’s declaration of force majeure – a French term that literally means “greater force” – is the latest in a series of compounding supply chain problems being experienced by the agriculture industry. The supply chain had already been under heavy pressure with Covid fallout, and as Chinese suppliers were subject to heightened environmental mandates and its watershed “double control” policy. Then, Hurricane Ida hit Bayer’s most productive glyphosate plant in Luling, La. on Aug. 28, throwing it offline for nearly two months.
The force majeure declaration spiked the price of generic glyphosate from $50 to $60 overnight. To put it into perspective, glyphosate was trading at $10 to $11 in September 2020.
CropLife reached out to Nutrien, the country’s largest ag retailer with more than 1,000 retail outlets, for comment on the situation. Jeff Tarsi, Interim President, Global Retail at Nutrien Ag Solutions omitted any reference to the force majeure event in his statement, as follows:
“Nutrien Ag Solutions works closely with partners across the global crop protection industry. The depth and breadth of our relationships with the world’s largest suppliers ensures agronomists have many options they can recommend to our growers. Agronomists customize plans and can deliver a wide variety of products to meet many unique crop and soil needs based on what is readily available. That ability to pivot and choose from several effective solutions positions us well to help our grower customers succeed.”
Yet another problem preceding the Bayer announcement came to light when the U.S. International Trade Commission made an apparent error when it set the revised tariff schedule on Jan. 27, putting into effect a whopping 25% surtax on glyphosate and glufosinate from China, above and beyond the routine 3.7% duty.
The Office of the U.S. Trade Representative only on Feb. 16 confirmed it was indeed an error, and corrected the code.
“I am delighted to report that the USITC recognized the mistake that was made to include glyphosate, PMIDA, and glufosinate in the list of materials subject to the 25% China surtax. This error is in process of being corrected, and any additional 301 tariffs that were paid will be refunded,” DeLisi told CropLife.
The remedy, at least, should allay fears of massive, unexpected tariff bills. One source, who wished to remain anonymous, had told CropLife just before the correction that suppliers in China were about to cease shipping tech due to the tariff, resulting in even tighter supplies. “We are in scary territory,” the person said.
We spoke with several ag retailers, none of whom conveyed a sense of clarity on the herbicide supply situation (quite the opposite) or what the impact would be on their operations.
Randall Varnell, assistant manager with Wheeler Brothers Grain in Kingfisher, Okla., said he had not received the letter from Bayer on the force majeure, and was uncertain as to its impact. However, he confirmed his allocations from Bayer were “nowhere near” his operation’s needs.
“We tried to find replacements early,” he told CropLife. “I think as a country we’re way short, and as a region we’re way short. The alternatives are short: clethodim, paraquat. It will be an issue.”
His region, he acknowledged, will likely resort to ploughing fields for weed control. “They’re going to pull iron back out – they’re going to have to work the fields. The no-till guys will have the biggest issue.”
Bayer’s Original Statement
On Monday morning, Bayer spokesman Kyel Richard told CropLife that additional materials were sourced and other efforts were made to limit the impact of the downtime from the supplier.
“We shifted some things around to help ensure that we get the products where they need them and to the growers that are using them at that time,” Richard said.
Bayer’s original statement on Monday in response to the force majeure letter is as follows:
The crop chemistry market worldwide is experiencing historically tight supply due to challenging global trade flows, effects of the global pandemic and other forces which have continued to put pressure on already tight supplies.
Throughout these situations, Bayer has been working with our customers to help manage supplies and best meet their needs around the world.
Recently a supplier of a raw ingredient needed to produce glyphosate suffered a mechanical failure which may have some short-term impacts on our production of the active ingredient to manufacture glyphosate.
Our supplier is on track to restore production, we’ve sourced additional materials and made other mitigation efforts to help best manage this situation.
We expect any impact to be marginal in terms of our annual glyphosate production.
The Roundup branded ag herbicide business supply will continue to be balanced through the current ongoing supply management efforts.
With the world’s leading crop protection portfolio of products, we will continue to work diligently with our customers to address their needs and help them have a successful season.
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