EU relicense glyphosate, a view on the effect on China’s industry 12-06-2017  203

The EU relicense vote for glyphosate is a relief for many European farmers, who don’t have a real alternative to the weed killer. However, to what extent are overseas exporters, like the largest glyphosate production nation China, are affected by the result?


 


The European Union has voted to relicense the controversial herbicide glyphosate, marketed as Roundup by agrochemical giant Monsanto, for another five years. This result represents an achievement with a bitter taste for the pesticide industry, which expected the 15 years initially relicense. However, the result is surely better than the total immediate ban claimed by glyphosate opponents such as environmental and human activists. 


Glyphosate was first discovered in 1974 by the international enterprise Monsanto after decades of researching. Nothing since has come close to its herbicide profile of non-toxicity and broad-spectrum activity. As a fact, glyphosate was called a “once in a century” herbicide by many industry insiders for the aforementioned reasons. 


The Commission, the European Union’s executive, said in a statement that 18 countries had backed its proposal to renew the chemical’s license. Nine countries were against and one abstained.


An extension required 16 states representing 65% of the EU population to vote in favour. In the actual vote, 18 supporting countries, accounting for 65.7%, passing the vote by the smallest possible margin. 


The European Union had been struggling for the past two years over the fate of the popular herbicide, whose license was set to expire on Dec. 15, 2017. Notably, glyphosate has been the best-selling weed killer In Europe by far. Total EU sales of glyphosate-based products are around 1 billion euros per year. Monsanto has a share of about 40 percent of the global market.


A dedicated industry group for this issue, including representatives of Monsanto and Syngenta, has stated that they feel disappointed at the outcome of the vote whereby member states categorically ignored scientific advice, like the report of the European Chemical Agency, which came to the conclusion the herbicide shows no cancerous effect on humans. The group added that it believed the decision was influenced much by public debates of unsupported activist claims, rather than be supported by scientists’ results. 

 

On the other hand, opponents of the glyphosate relicense in Europe felt disappointed as well, as the result of the voting demonstrates the preference of the European Union for the highly profitable pesticide industry rather than the health of the people and the environment.


It is worth noticing, that the vote is not legally binding for countries to keep farmers using glyphosate on domestic fields. EU countries are still free to ban the pesticide domestically. 


Effects on EU markets

Many farmers in the European Union had already begun stockpiling Roundup, unsure about the future of the popular herbicide and lacking real alternatives. This has pushed the sales in Europe quite significantly. After all, there is no viable substitute, and banning the herbicide would have meant a lot more soil erosion in an expensive effort to control weeds and stop crop yields from falling too far.


The effect of a glyphosate ban would have been immense to European farmers, as calculations of those are indicating. For example, French pollster Ipsos said in a study that a ban on glyphosate could cost the French grains sector, the largest in the EU, about USD1.3 billions due mainly to lower yields and a fall in exports. 


In terms of what would happen if there is a ban on glyphosate in the EU, it would have global ramifications. Those wishing to import products to the EU would have to ensure that there are no detectable residues of glyphosate on their products.


Now, with the relicense of glyphosate, the uncertainty of farmers could be relieved so far, allowing the markets to turn back to normal.


The meaning for of the relicense for China

Glyphosate is the largest export commodity in China’s pesticide segment. For that, China's glyphosate industry highly depends on the overseas market, exporting about 85% of its output.

 

The major export destinations of Chinese glyphosate technical are Argentina, the USA, Brazil, Malaysia, and Indonesia while the major destinations of glyphosate formulations are Thailand, Australia, Vietnam, the USA, and Ghana. Hence, the EU is neither part of China’s most important glyphosate technical nor glyphosate formulations exports. Changes in the European Union would therefore only have a small impact on the export situation in China.


After all, only about 10% of global glyphosate demand is coming from Europe, far behind other relevant markets like South America, North America, and Asia-Pacific. 


What’s more, the EU has punished Chinee glyphosate with anti-dumping duties in the past, lowering the competitive advantage.


Monsanto lodged a charge to the EU in October 1995 for the first time about the dumping of glyphosate originated from China. The final ruling was made in 1998 and Monsanto won the case. The EU imposed a 24% anti-dumping tax on glyphosate originated from China. Later in 1998, the anti-dumping tax was increased from 24% to 48%.


In early 2003 the EU started the investigation of sunset review and expiry review on glyphosate originated from China. As a result of the investigation, all glyphosate producers of China have levied an anti-dumping tax of 29.9%, and the effective period was extended to 2008.


In order to enter the EU market, Chinese glyphosate producers, such as Zhejiang Wynca, have kept fighting with Monsanto and other companies in the EU, and finally won the case in June 2009. The EU then cancelled the 29.9% anti-dumping duty on Zhejiang Wynca's glyphosate.


In July 2012, the EU released its final judgment on the glyphosate anti-dumping case against Zhejiang Wynca. The investigating court ruled that the EU's anti-dumping measure on Zhejiang Wynca was invalid, and dismissed the EU Council's appeal entirely. Zhejiang Wynca got the final victory of the case.

 

About CCM

CCM is China’s market intelligence provider for research into the agriculture, chemicals, and food % feed industry.

 

If you are interested in the information of this article, please have a look at our monthly newsletter with insights in market news, company dynamics, price developments, policy changes, and any newsworthy information of China’s pesticide market.

 

CCM also has recently published a new report covering the glyphosate industry in China and giving an outlook for the development in the next years. This report is a must-have for any players in the glyphosate market in China to know where, when, and why to invest. You can check the report here.

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