Markets

The agrochemical industry, based on the production of chemicals for crop protection, largely came into being after the Second World War with the commercialisation of the first truly selective broadleaf weed herbicides: 2,4-D (1945) and MCPA (1946). These non-toxic molecules were effective at low doses and were cheap to produce. Furthermore, they became available when maximum food production was essential and farm labour was scarce. Their success stimulated European and North American chemical companies to invest in research that led to the discovery of the wide range of herbicides now available. Early successes created a market value approaching US$3 billion in 1970 and an average of 6.3% real growth per annum was recorded over the following decade. By 1980 it had slowed to 4.5% per annum, averaged 2.2% growth during the 1980s and was predicted to average below 2% for the 1990s. By 1998 the market had become static, with only 0.1% real growth, but one still worth US$31 billion.

While global agrochemical sales rose by 3.8% in 2005, the market remained flat in real terms, after accounting for inflation and currency differences (Table 2.1) (Agrow, 2006). Comparison with 1988 data (cited by Cobb, 1992) shows that since 1998-2005, the fungicide share of the market has risen from 20.5% to 23.0%, herbicides from 43.6% to 45.8%, while the insecticide share has fallen from 29.7% to 26.3% (Table 2.1).

Real growth in recent times is noted in North America, Northern and Eastern Europe, and in China, although the market is truly global (Table 2.2).

Table 2.1 World agrochemical market (from World Agricultural Market, Agrow, 2006).

Percentage of market (%)

Value (US$ billion)

Herbicides

45.8

15,389

Insecticides

26.3

8,387

Fungicides

23.0

7,728

Others (including plant growth regulators,

4.9

1,646

nematicides, fumigants and biopesticides)

Totals

100.0

33,600

Table 2.2 World agrochemical sales (%), by region (from World Agricultural Market, Agrow, 2006).

Europe

26.0

North America

25.6

Asia

24.3

Latin America

1 6.8

Rest of the world

2.3

Total

1 00.0

What has caused this slowdown in market growth? Five contributing factors have emerged. First, past successes in chemical crop protection have led to a near-maximum market penetration in all the major crops, especially in Western Europe and the USA. Thus, there is an increasingly competitive market place for agrochemical companies to operate in. Second, new active ingredients are taking longer to discover, develop and register. Stricter legislative requirements have also led to delays in returns from investments, so that product profitability has declined. Indeed, estimates of at least US$250 million are often given for the cost of bringing a new product to the market (Figure 2.1). Third, the agro-chemical arsenal is becoming increasingly mature as fewer examples of new chemistry acting at novel target sites are reported. Fourth, due to the successes of modern intensive agriculture in recent decades, there has been an overcapacity in farming and a marked decline in commodity prices. Consequently, sales of agrochemicals have declined. Fifth, the growth of the 'green' lobby and the more recent introduction of genetically modified (GM) crops have led to increasing consumer opposition to agrochemical use.

Consequently, the agrochemical industry itself has contracted significantly in recent years. The following chemical companies were involved in discovery research and development in the 1980s, but are no longer active: Celamerck, Chevron, Diamond Shamrock, Dr Maag, Duphar, Mobil, PPG Industries, Shell, Stauffer, 3M, Union Carbide and Velsicol. Mergers in the 1990s saw the agrochemical interests of Schering and Hoechst form AgrEvo, which in 1999 itself merged with Rhône-Poulenc to form Aventis, now a part of Bayer CropScience. In the USA, Dow and Eli Lilly formed DowElanco, now Dow AgroSciences, and the Swiss companies Ciba Geigy and Sandoz merged to become Novartis, which has now merged with Zeneca to form Syngenta, creating the biggest player in the crop protection industry with combined sales of over US$8 billion and a quarter of the global market.

The agrochemical industry is now dominated by six major multinational companies: Syngenta, Bayer, Monsanto, Du Pont, BASF and Dow, which invest between 8 and 11% of their sales in Research and Development including the search for new active ingredients. However, Monsanto has recently ceased this activity, preferring to focus

Figure 2.1 Typical cumulative cash flow for a successful new herbicide (updated, from Finney, 1988 and Ruegg et al., 2007).

on the use of glyphosate in genetically modified (GM) crops. Further consolidation is predicted as other global players consider offloading their agrochemical divisions to concentrate on what is perceived to be the more lucrative and buoyant pharmaceuticals market. Only time will tell how many agrochemical companies will survive this new wave of restructuring within the industry. What is clear is that the survivors will be those who have adapted best to change by embracing new technologies and innovative marketing, while at the same time providing competitively priced products that enable profitable farming.

All is not doom and gloom, however, and a significant market for crop protection products awaits the slimmed-down industry. There are expanding agricultural markets in Eastern Europe and Asia to be penetrated and there is much new technology to exploit. For example, the precise delivery of more optimally formulated agents will lead to lower chemical inputs into the environment, and recent developments in agricultural biotechnology are already changing both farming practices in general and agrochemical use in particular. Indeed, the ability to transfer genes for favourable traits to crops by recombinant DNA technology will undoubtedly transform agriculture and crop protection into totally new directions in the next decade.

While the first decade of GM was focused on the gene products controlling weeds (e.g. glyphosate resistance) and insects (via the BT toxin), the next decade is predicted to identify perhaps hundreds of genes that may secure increased yields in our key crops. Furthermore, it is interesting to note that in 2007 BASF and Monsanto agreed to collaborate to fund the search for stress-tolerant strains of maize, soybean, cotton and oilseed rape using GM technologies. The companies agreed a joint budget of €1.2 billion to find unique genes for stress-tolerant traits (Evans, 2010).

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