Russian subsidiary of Syngenta to raise prices 12% as of Sept 1

MOSCOW. Aug 16 (Interfax) - Syngenta LLC, the Russian subsidiary of Swiss-based seed and pesticide producer Syngenta AG, plans to raise prices for its products in two stages, a source familiar with a letter sent to distributors on August 14 told Interfax.

The company intends to hike prices by 12% as of September 1 and by another 10% as of January 1, 2024.

The company said in the letter that it needs to raise prices because the ruble's recent depreciation against the U.S. dollar, which is the parent company's balance sheet currency, has "significantly devalued the Russian business for headquarters and created serious risks for maintaining it going forward." In light of this, the company is forced to increase prices "in order to partially offset the negative forex financial effect since December last year."

The company said it is raising prices in two stages in an effort to "make this process less painful for agricultural producers," the letter said.

The company has not yet responded to requests for comment.

The source said Syngenta's announcement of a price hike "looks a lot like retaliatory measures in a standoff with the government and Agriculture Ministry over new requirements for localization of seeds."

"The reference to the dollar as the balance sheet currency of the parent company looks contrived against the backdrop of Syngenta's attempts to position itself as a company from friendly China. It is more likely that such an excuse is needed to formally justify its departure from the Russian market. But it's not quite clear why they would slam the door in doing so," the source said.

In February, three foreign companies, including Syngenta, sent their customers letters notifying them of the suspension of seed supplies to Russia and their upcoming exit from the market. However, Syngenta later disavowed this statement, First Deputy Agriculture Minister Oksana Lut said in parliamentary hearings in the State Duma in March.

A Russian government resolution that establishes rules for localizing seed production in the country goes into effect on September 1. "It's not a fact that everyone will like this," Agriculture Minister Dmitry Patrushev said in early July.

"We will continue to work with foreign [companies], but we will develop work on certain, special conditions. According to the new rules, localization of seed production must be, as they say, complete, starting with the transfer of source technologies to us," Patrushev said.

Syngenta AG was established in Switzerland in 2000 as a result of the merger of the agriculture divisions of Novartis AG and AstraZeneca Plc. Chinese state company ChemChina acquired Syngenta AG in 2017 in a $43 billion deal. The company operates in 90 countries.

Syngenta LLC has branches and divisions in more than 30 Russian cities. The company reported that its net profit rose to 2.6 billion rubles in 2022 from 1.4 billion rubles in 2021 on revenue up to 53.4 billion rubles from 38.9 billion rubles.

The managing partner of Russian seed selection and growing company Ruseed, Mark Gecht questioned the grounds for such a price hike. "It's doubtful that the production cost of seeds that foreign companies produce in Russia, as well as chemicals that, as they claim, they also produce in Russia, depend 100% on imports. It is necessary to check if we're not talking about another increase of one's own revenue for the benefit of international capital at the expense of farmers' incomes," he said.

Amid the volatility of the currency situation, it is extremely important to reduce the share of production costs due to imports, Gecht said. "The current monopoly position of foreign companies on the seed market forces farmers to accept unfavourable conditions to the detriment of their own incomes," he said.

Ruseed became one of the founders of the National Seed Selection and Growing Consortium in 2023.