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Syngenta calls time on fall in agrichemical prices

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Syngenta called time on the two-year slide in farmers' agrichemical bills, announcing that it was raising prices "across the business" by levels above that suggested by increased raw material costs.

The seeds and sprays giant revealed that its prices had stopped falling in the April-to-June quarter, breaking a trend dating back to mid-2009, when the market suffered a double whammy of economic downturn coupled with an oversupply in off-patent agrichemicals, largely from Chinese manufacturers.

And it highlighted a "favourable price outlook", as elevated crop prices encourage a drive by farmers to maximise yields.

"The outlook for pricing for the rest of the year is positive," Michael Mack, the Syngenta chief executive, said.

The group was, for the 2012 season, "currently raising prices across the business with the aim of achieving an overall increase in the mid single digits".

Besides offsetting raw material cost increases, which for oil it saw remaining below $100m in 2012, the raises would provide funding for a group shake-up which is reforming it around geographical lines, from separate seed and sprays divisions.

Sold out

Many observers have assumed that agrichemical prices will continue to remain depressed, failing to follow the recovery shown by some other farm inputs, such as fertilizers.

University of Illinois academics this week forecast farmers' pesticide bills remaining stable in 2012 from 2011.

However, Syngenta revealed that it had already seen reduced competition from generic product in the North American market for atrazine – at a time when demand for the weedkiller has been spurred by the highest US corn plantings since World War 11.

Indeed, the group revealed that supplies of its cutting edge, genetically modified Agrisure Viptera corn seed, responsible for about 20% of the North American portfolio, had sold out.

Profits rise

Syngenta also reported "particularly strong" growth in the former Soviet Union, where it exploited the growing popularly of sunflower seed and of high-performing hybrid" seeds, besides a return to better weather.

Overall seed sales rose 17% to $848m in the April-to-June quarter, with takings in the larger crop protection division gaining 14% to $2.84bn on growth in volumes.

For the first six months of 2011, group sales rose 14.3% to $7.70bn - supporting growth of 13.4% to $1.43bn in earnings, a figure close to market forecasts.

Indeed, Credit Suisse analysts said the statement showed "an in-line set of results with great progression in the seeds business - particularly the strong margin development".

Nonetheless, Syngenta shares stood 1.5% lower at SFr270.10 in afternoon trade, and earlier hit a nine-month low of SFr263.90.

By Agrimoney.com

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