BASF says demand for crop protection products remains resilient, with farmers continuing to buy fungicides, herbicides and seed treatments despite ongoing pressure on farm profitability.
The German chemicals and crop science company reported a slight increase in earnings for its Agricultural Solutions division in the second quarter of 2026, helping lift group EBITDA before special items to €2.4bn, up €854m year-on-year.
However, unlike BASF’s Chemicals, Materials and Industrial Solutions businesses, Agricultural Solutions continued to face declining prices.
On the company’s earnings call, management highlighted a clear trend emerging across the crop protection market: volumes are rising, but pricing remains under pressure.
Agricultural Solutions delivered volume growth in all regions during the first half, while maintaining an EBITDA margin before special items of around 29%, close to the level achieved a year earlier.
“While sales declined slightly on account of currency headwinds and slightly lower prices, we captured volume growth in all regions,” CEO Markus Kamieth told investors.
Volumes increased particularly in fungicides, herbicides and seed treatment products, helping offset weaker pricing.
Farmer economics and generics weigh on prices
BASF executives acknowledged that pricing conditions are unlikely to improve significantly in the near term.
Responding to analyst questions, CFO Dirk Elvermann pointed to weak farmer incomes, challenging agricultural commodity economics and intensifying generic competition as the key factors weighing on market prices.
Management said pricing pressure is expected to continue because of “weak farm economics and generic competition”, while Kamieth later reiterated that prices would remain under pressure for the rest of the year.
Agricultural Solutions carve-out gathers pace
The business also remains on track to achieve IPO readiness by mid-2027 as BASF continues its strategy of creating standalone businesses capable of unlocking greater shareholder value.
“The next key milestone for our largest and most profitable standalone business is reaching IPO readiness by mid-2027, and we are well on track to achieve this,” Kamieth said during the earnings call.
The company is already putting in place the infrastructure required for a separately listed business. During the Q&A session, CFO Dirk Elvermann said BASF is implementing new ERP systems and building dedicated corporate functions within Agricultural Solutions, including an investor relations team.
Weather and farm profitability remain concerns
Management highlighted several factors that continue to cloud the outlook for crop protection demand.
These include drought and adverse weather conditions across parts of Europe and other agricultural regions, alongside persistently weak farmer incomes and commodity prices that remain relatively subdued despite recent gains.
While BASF reported no evidence of demand destruction so far, executives acknowledged that the market environment remains challenging.
Nevertheless, the company said current trading trends remain stable and July performance was broadly in line with expectations.
Geopolitical risks continue to cast a shadow
A recurring theme throughout the earnings call was the impact of geopolitical volatility on global markets.
Executives said the escalation of conflict in the Middle East and disruption around the Strait of Hormuz altered buying patterns during the second quarter, prompting some customers to secure supplies early amid fears of shortages.
Kamieth said BASF’s global manufacturing footprint and “local-for-local” production strategy enabled the company to benefit from customers seeking reliable supply partners during the disruption.
However, management warned that uncertainty remains elevated.
Despite raising its full-year EBITDA guidance to €6.9bn-€7.7bn, BASF maintained a wide forecast range because of what it described as continuing geopolitical uncertainty.
Supply chains adapting to a ‘new normal’
BASF believes supply chains are gradually adjusting to prolonged disruption in the Middle East, although executives warned that challenges have not disappeared.
Elvermann said portions of Middle Eastern chemical production capacity could remain unavailable for an extended period and that global supply chains were still “in the course of readjusting”.
While markets have adapted better than during the initial stages of the conflict, BASF expects volatility to remain elevated for some time.
The company believes its regional production network and diversified sourcing capabilities provide a competitive advantage should further disruptions occur.
Inflation risks remain in focus
Perhaps the most cautious comments from management related to the broader economic outlook.
Although BASF said it has not yet seen signs of weakening demand, executives warned that inflation and fragile consumer confidence could weigh on economic activity in the second half of the year.
“There is a risk that inflation, further disruptions that undermine the confidence of consumers, etc., are going to have a negative drag on industrial growth, economic growth, and consumer spend in the second half,” Kamieth said.
