The COVID-19 epidemic which originated in the Chinese city of Wuhan and surrounding Hubei Province poses a threat to the 2020 agricultural chemical supply for the United States. Having been spreading for over a month as of this writing, there are now over 73,000 cases and at least 1,868 deaths reported.
The epidemic poses at least a short term if not longer term threat to agricultural chemical production, which could have a world-wide impact on agriculture. Exports account for two thirds of Chinese agricultural chemical production, and such exports constitute a significant portion of the supply for the US. In addition to the indigenous companies, many major international agricultural chemical companies produce in China. Of some 15,000 pesticide producing establishments registered with the U.S. Environmental Protection Agency, over 1,100, or some 7%, are located in China. That compares with 15% of FDA-registered pharmaceutical production facilities located in China. While only approximately thirty to forty pesticide establishments are in Hubei, the epidemic is presenting a nationwide threat to the industry supply chain.
The China Crop Protection Industry Association (“CCPIA”) recently released results of a member survey assessing the impact of the epidemic. The short term was uniformly pessimistic, and while holding to the hope that the interruption will not be long term, respondents were united in their belief that annual exports will decrease for 2020. Several major industry international trade shows, including the CAC Exhibition in Shanghai in late February, have already been cancelled.
Production has largely ceased nationwide, with only halting efforts at restarting production. While the Lunar New Year holiday is over, many Chinese citizens who did travel for the holiday are being impeded in their efforts to return home, many cities are confining residents to their homes. Some companies did anticipate this problem, and ramped up production prior to the onset of the virus. However respondents stated that logistical obstacles are rampant and at present even if there is product on hand, none is able to be exported. Both inbound and outbound trans-ocean shipping has been significantly disrupted. While not directly relevant to agricultural chemicals, a major backlog of refrigerated containers requiring electricity has caused shippers to unload containers at other than the intended ports in order to find available power supplies. Further delays are anticipated as facilities seeking to restart operations must first secure local government approval.
As of this writing the rate of expansion of cases has slowed, but the course of the epidemic remains uncertain. It is likely that the next weeks will reveal whether a pandemic erupts, which will likely further impair production and exports.
February 17, 2020