Debon Securities: The US EPA proposes to approve the product of glyphosate, which is expected to reverse at the bottom

According to Zhitong Finance APP, Debang Securities released a research report stating that due to the drift damage issue of glyphosate, the United States previously restricted the use of glyphosate. On July 23, the U.S. EPA proposed to approve three products containing the herbicide glyphosate, and the demand market for glyphosate is expected to reopen. According to Baichuan Yingfu, as of July 24, the price of glyphosate has fallen below 54,000 yuan/ton, which is at a historical bottom level. There is approximately 1.69 times the price increase potential compared to the highest price of 145,000 yuan/ton in 2014, and related companies have significant profit elasticity.

The main points of Debang Securities are as follows:

Event: According to market media reports, on July 23, the U.S. EPA proposed to approve three products containing the herbicide glyphosate (the federal court will ban its use in 2024), believing it will not pose significant harm to human health or the environment. Environmental organizations have claimed that there is a drift damage issue during the use of glyphosate formulations by glyphosate-resistant cotton and soybean growers, harming neighboring plants.

Demand: The U.S. market is expected to open a new demand market

Glyphosate, also known as glyphosate, was first registered in Canada in 1963 and is a highly effective, low-toxicity herbicide with selective and systemic properties. The main applications of glyphosate can be divided into traditional and genetically modified fields. In traditional fields, the demand for glyphosate is concentrated on monocotyledonous plants, with demand growth benefiting from the elimination of highly toxic pesticides; in the genetically modified field, the demand for glyphosate mainly comes from the promotion of glyphosate-resistant crop seeds (mainly soybeans, corn, cotton, etc.).

The U.S. market for glyphosate continues to expand. The U.S. has widely promoted the planting of glyphosate-resistant genetically modified crops, with glyphosate-resistant soybeans accounting for about 43% in 2018 and glyphosate-resistant cotton planting area reaching 69% in 2019, driving the market scale growth of the herbicide glyphosate. Due to the drift damage issue of glyphosate, the U.S. previously restricted its use, and on July 23, the U.S. EPA proposed to approve three products containing the herbicide glyphosate, and the demand market for glyphosate is expected to reopen.

Formulation technology breakthrough. Glyphosate, as a mixture with glyphosate, can kill glyphosate-resistant weeds that have developed resistance due to long-term use of single glyphosate, becoming one of the main methods to address glyphosate resistance, significantly improving the herbicidal effect. Under the leadership of the world's largest herbicide, the potential growth space for glyphosate is expected to open up.

The "14th Five-Year Plan" proposes replacing highly toxic and high-risk pesticides with efficient and low-toxicity pesticides. Glyphosate, as an efficient, low-toxicity, and selectively safe herbicide, is expected to benefit from product replacement.

Supply: Overall supply is relatively concentrated

Abroad, it is mainly dominated by BASF. In 2018, BASF expanded its glyphosate production capacity from the original 8,000 tons/year to 16,000 tons/year in Beaumont, Texas. China's production capacity is mainly concentrated in Jiangsu and Zhejiang, with Yangnong Chemical having a capacity of 20,000 tons/year; Changqing Co., Ltd. has a glyphosate raw material project with an annual output of 6,000 tons that began trial production in December 2021. According to the 2024 annual report, Changqing Co., Ltd. has an existing capacity of 8,000 tons/year; SINO-AGRI UNION has a capacity of 2,000 tons/year Risk Warning

Policy expectations not met, demand expectations not met, overseas exports not met