AGROCHEMICALS


B


y early 2018, the six big companies will likely be reduced to four (C&I, 2017, 8, 15). The biggest driver of


the current wave of agro industry consolidations is the market price of corn (maize) and soya beans, say consultants Alex Polinsky, formerly with Syngenta, and Jim DeLisi, from Fanwood Chemical. The price of corn, for example, has fallen from $8.00/ bushel in 2008 to $3.00/bushel in 2016 – resulting in a loss in value for the ag market of $15bn between 2008 and 2016. This loss affects all the industry’s


suppliers – equipment, chemicals, seeds and fertilisers etc. And, in addition to reduced commodity prices, growers are also seeing weeds and pests becoming resistant to pesticides faster than the industry appears to be able to innovate. ‘Growers require innovation to improve yields and profits. A strong competitive landscape is vital for this to occur,’ reported Polinsky and DeLisi.


With new product development


and registration costs for both seeds and chemicals in the range of $300m-$500m, Polinsky and DeLisi pointed out: ‘Only the largest companies have the resources and leverage to both finance and then recapture this level of investment.. [to] stay ahead of the weeds and the bugs.’


Mergers have been chosen as the path to increased revenues to allow for more R&D expenditures, while protecting shareholder value. But the recent rash of mergers is nothing new, noted DeLisi: ‘Major mergers in this sector have occurred about every 15 years since 1970 – and this trend will continue. It will result in a “new order” for agchem companies, as the largest will gain better efficiencies. Smaller companies will benefit from large company spin-offs and divestitures as well as market demands for competition.’ In all cases, except the ChemChina/Syngenta merger, divestitures are expected, with BASF and Syngenta itself likely to be the potential acquirers. Indeed, less than a month after these comments in Charleston, BASF announced that it is acquiring what were described as ‘significant assets’ in seeds and chemicals from Bayer CropScience, following its planned


12


Length of time – in years – to develop transgenic crops, at a cost of ca $150m


ca $286m


The average cost to develop a new herbicide which take around nine years


$59bn


The value of the global pesticide market in 2014, following compound annual growth of 9% since 2014, and forecast to rise to $83bn by 2020


2.1m


Growers require innovation to improve yields and profits. A strong competitive landscape is vital for this to occur


Alex Polinsky and Jim DeLisi Fanwood Chemical


merger with Monsanto (C&I, 2017, 9, 15). As a result of the Dow/ DuPont merger, DeLisi identified necessary divestitures as DuPont’s R&D pipeline and suchorganisation, except seed treatments, nematicides and late stage R&D programmes, with Philadelphia headquartered speciality company FMC Corporation acquiring insecticides and cereal herbicides.


So what will the sector look like


in 2018 following this period of consolidation? The combined Bayer CropScience/Monsanto business will be number one, followed by ChemChina/Syngenta, with Dow/ DuPont a close third. BASF will rank fourth, but although DeLisi described it as a distant fourth, he recognised that BASF has funds available for acquisitions, like those from Bayer. In fifth place comes FMC, he believes. It is estimated that the


combination of Bayer and Monsanto will be a €23.1bn company, 60% based on chemicals and 40% seeds, while Syngenta/ChemChina, will be worth €14.8bn, split 85% chemicals and 15% seeds, just ahead of Dow/DuPont at €14.6bn, split 45% chemicals and 55% seeds. BASF was estimated at €5.8bn, and all chemicals, until the acquisition of the Bayer assets. The next companies in the


Number of US farms, with 3.2m farmers - less than 1% of the population


top players include Australia’s Nufarm; India’s United Phosphorus (UPL); Platform Ag, based in the US, and planning to split into two companies: agricultural solutions and performance solutions, making the former a possible acquisition for UPL; Albaugh, also US based, and rumoured to be up for sale; Sumitomo Agrochemicals, headquartered in Japan; and AMVAC, also US based and believed to be looking for acquisitions. DeLisi added that the next five companies in terms of size are likely to all be China- based.


There are also other potential


competitors in this market. For example, generic agrochemical suppliers, including Drexel, Gowan and PBI Gordon, which have their own production and/or formulation facilities. In addition, Polinsky and DeLisi see traders such as Farm Trade and Farmers Business Network as having an impact in future, potentially ‘flattening’ the supply chain to start an Amazon-like approach for grower supplies.


New technologies needed This changing agchem sector needs to be heavily focused on innovation, according to Jerry Green, from US- based Green Way Consulting. ‘Are we at the twilight of the pesticide era?’, Green asked, while warning that the weeds are striking back ‘and we are running out of herbicides that are effective against, for example, amaranthus (pigweed) – it is a crisis’. No new herbicide mode of action has been developed since 1982. In the meantime, weeds have already developed resistance to as many as four ‘sites of action’, a situation exacerbated by the repeated use of herbicides, at higher rates and in mixtures. Industry consolidation and


cooperation, Green believes, should help to promote the discovery and co-development of new herbicide modes of action and herbicide- tolerant crops. However, he warned that one new mode of action will be insufficient as weed resistance can evolve in six cycles and cross- resistance from non-target site resistance mechanisms can eliminate utility before use. ‘Transgenic crops take over 12 years to develop and cost an average of $150m, and the process must be done for each crop and genetic combination, while a new herbicide takes nine years and costs $286m,’ he pointed out. The development of new


formulations and adjuvants can extend the life of existing chemical products. Meanwhile, companies are also re-examining old products to improve their performance by producing different versions and mixtures, like Monsanto’s Roundup Extend with Vaporgrip technology, using a new formulation and salts: the diglycolamine salt of dicamba and the monoethanolamine salt of glyphosate. The use of dicamba in the


32 09 | 2017


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52