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Market Update - October 2021

- AG Market Update - 2022 Outlook -

There are 3 major factors that will be impacting supply and pricing for all crop protection products including fertiliser now and into 2022 calendar year.

Australia import approx. 70% of our raw materials and finished goods from China and approx. 10% from India. Even the finished goods that are not imported are heavily reliant on the raw materials from China. There have been exceptional circumstances impacting and will continue to impact supply and pricing of products from China and India particularly, but also from other countries.

The first major factor is China’s energy reduction policy, which encompasses a policy to

achieve lower carbon dioxide and greenhouse gas emission targets. This policy came into play 6 months ago and 10 Chinese provinces have not been able meet the energy reduction levels. A high percentage of these provinces are major manufacturers of crop protection products and have been impacted by "power rationing" impacting on their production capacity.

Many of these manufactures supply raw material and finished goods have been advised by the government to STOP production or drastically reduce their capacity to meet their emissions target by the end of the year, which is now being phrased as "Authoritarian environmentalism".

As an example Yunnan province has had to reduced their production of yellow phosphorus

by 90% which accounts for 46% of China's total yellow phosphorus output. As a result we have seen the raw materials increase over 300% in the past month impacting on products like Glyphosate. There are many other raw materials impacted in the same way which has led to higher prices and delays in supply.

The second major factor which will impact product supply in the near future is China's production shut down that will occur in early 2022. Chinese New year is the 1st February and therefore most of China's crop protection and raw material production and logistics will shut down from mid/end January til the 6th February for Chinese NY holidays. To make matters worse add in there the fact China is hosting the winter Olympics from the 4th February to 20th February, so much of China's provinces surrounding Beijing will be in shut down also through this period for pollution control measures.

And the third factor impacting product supply and pricing is sea freight, Shipping delays are affecting all types of products imported from China and India. Sea freight rates have increased astronomically and is now 300-500% increase from the previous 12 months. It also seems vessels are being prioritised for more profitable shipping routes like the US than Australia and all reports suggest logistical issues are here to stay for the next 6-12 months!!!!

Fertiliser has also been impacted by a lot of the above factors that relate directly or indirectly to supply and manufacturing. We are also seeing price increase of 100%+ from the 2021 season. Gas shortages intern create price increase's by over 100% which impact on production. Coal shortages in China causing higher prices which impact on their ability to produce product. The Chinese government have banned all exports from June 2022 to sure up their own domestic supply due to the inability to manufacture excess product to export. Importing product from countries like Morocco, ( where 70% of the worlds phosphate rock comes from) Mexico and Tampa in the US just to name a few add to the logistic nightmare by adding 34 days extra to the sea freight than it would have from China.

So I have tried to paint a picture which simplifies the challenges for us all over the next 12 months. Whilst our season promised so much and to be let down with the lack of spring rainfall we totally understand the sentiment within our community. To have to get your heads around next season whilst dealing with what lie ahead for this season can seem daunting enough.

As a business EP AG n FERT have been busy securing product and forecasting for the 2022 season whilst trying to minimise the impact on any price increases. We have a lot of product coming into store now rather than waiting until the new year to also avoid any delays in supply which gives us confidence knowing we have you, our clients 2022 input products secured.

As I have mentioned to you before if you find you have any major changes to cropping rotations for 2022 then please let us know otherwise we have you covered.

Come in and talk to myself and Kevin if you have any concerns regarding anything mentioned above or just to discuss your 2022 requirements.

As always, please feel free to ring us to discuss any of your specific issues, questions or you are looking for more detail.

Kevin Dart - 0474 272 577

Troy Maitland - 0499 272 544

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