AGROCHEMICALS
INDUSTRY:
A LOOK INTO 2020 AND BEYOND
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TABLE OF CONTENTS INTRODUCTION PEST CONTROL
Production Animal Health Pest Control Market Forecasts a CAGR of 4% through 2023
SEED TREATMENT
Seed Treatment Market Drivers
CROP PROTECTION
The U.S. Crop Protection Industry
NEMATICIDES
Nematicides Market Drivers
MOSQUITO CONTROL
Dengue Outbreak in Southeast Asia Set to Increase Mosquito Control Insecticide Sales
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Introduction By 2050, we’ll need to feed 10 billion people—2 billion more than now. With the exploding global population and the need to feed it, there will be an increasing demand for products that protect against crop losses and help increase yields. Seed treatment and crop protection products and technologies are crucial for sustainable agriculture and protecting food production. Moreover, assuring global food supply with healthy livestock also plays an important role in keeping the
world’s population well-nourished. To maintain farm animal health, farmers need to control pests that could be potential disease carriers, driving the growth of the global market for insect and rodent control products. In addition, with the need to fight various disease threats, including mosquito-borne Dengue fever or Zika, the growth of mosquito control insecticides are estimated to grow rapidly.
By 2050 the world’s population will likely increase by more than 35%
+35% population by 2050 To feed this population, crop production should double
Crop needed in 2019 Crop needed in 2050
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Production Animal Health Pest Control Market Forecasts a CAGR of 4% through 2023 This growth will be driven by several major trends, including the increasing demand for meat, favored by demographic changes, or new threats to health due to the spread of infectious animal diseases. Brazil and the United States are the two largest country markets, accounting for 60% of global sales. Among the various insects studied, flies rank as the number one species that must be controlled.
The beef production industry is the largest segment of global animal health pest control,
accounting for more than 40% of total sales. Other segments profiled are dairy, poul-
Kline’s survey of animal producers in the United States found their pest control usage over the past two years has remained consistent. However, the few cultural changes expected in the next two years include use of more combination products, use of more chemical rotation, and greater emphasis on sanitation.
On animal-based pest control treatments are the leading type used in the segment, with products such as sprays, pour-on, foggers, and dips accounting for almost 70% of product sales.
try, sheep, and hog.
Top 10 Global Fly/Ectoparasite Control Product Shares By Active Ingredient
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Seed Treatment Market Drivers Higher seed costs
Branded combinations – allow a single product for complete protection
Risk management
Farm size
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GMO traits drive costs
Higher seed rates has become too expensive Early seedling protection offers a lower cost insurance
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Larger farms leads to new management practices Earlier planting dates necessary, increasing seedling damage potential
Seed revenue opportunity all along the value chain •
Seed companies, distributors, retailers, all find opportunity in seed treatment
Globally, quality seeds more often purchased (not necessarily GMO) • • •
Offer potential for seed treatment by supplier/channel More reason for grower to protect investment Especially true in fast growing markets like India and China
Seed treatment continues to be a growing segment of crop protection and is playing an increasing role in adding value and differentiating seed offerings. Since several of the major seed treatment suppliers are both crop protection and seed companies, it makes sense
to leverage the supply of seed genetics with seed and seedling protection. The seed has become the delivery point for genetics and chemicals to ensure an optimal plant stand and maximum yield.
THE SEAD TREATMENT INDUSTRY HAS EVOLVED FROM A SINGLE COMPANY FORMULATING ACTIVE INGREDIENTS SUPPLIED BY OTHERS TO A SELF-STANDING INTEGRATED BUSINESS WITH FOUR MAIN PLAYERS, USING A COMBINATION OF CAPTIVE AND GENERIC ACTIVE INGREDIENTS
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Environmental concerns by the governments in the United States, Europe, and many other countries ensure that the use of any chemical product is carefully scrutinized. The ban on neonicotinoids use outdoors in EU countries is an example of concerns over declines in bee populations.
Alternatives to Conventional Seed Treatment A sustainable alternative to conventional treatment, biological seed treatments are still minimal in France in 2018, as they often require a specific way of use and can be priced higher. In addition, farmers can be reluctant to use biological products if they can use available efficient and well-established products.
Another alternative is genetically modified organisms (GMO). GMO crops are grown in several countries, inWhile biologicals are limited as of now in commercial cluding the United States, India, and Denmark, to inuse globally (at least in the field crops that Kline cov- crease both yields and disease resistance compared ers), an exception has been seen in the United States. to conventional varieties. However, GMOs are banned There, the increasing use of Bacillus firmus in corn, from use in France, and the government is not expectMycorrhizae in vegetables and fruits, and Rhizobia in ed to allow their use in the near future. As a result, cursoybeans indicates growing commercial success. rent research efforts are focused on the development of hybrid non-GMO seed varieties. The concept of a combination of living organism and chemical has many merits, and several combination Is Biological Seed Treatment the Answer to a products like Poncho/Votivo are finding growing suc- Challenged Market in France? cess. In 2018, biological seed treatment is still an emerging market in France, accounting for an estimated 0.6% Impact of Regulations on French Seed Treatment of the overall seed treatment in value in the country. Market Currently, all biological seed treatments registered can Gradually implemented regulations are strongly im- be used for both conventional and organic farming. In pacting the overall plant protection products market in 2018, wheat and potatoes are the only crops where biFrance. To ensure better control of the pesticides used ological seed treatments have been registered. in the country, the French government implemented Certiphyto certification, a provision of the national Ecophyto plan. Since 2015, all professional users of While the biological seed treatment marpesticides must get the Certiphyto certification to use ket is still emerging, Kline predicts a CAGR all types of chemical seed treatments. of nearly 22% from 2018 to 2028.
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The U.S. Crop Protection Industry Crop protection market drivers in brief In general, continued soft commodity prices negatively • Throughout 2018, this bout of top-tier shuffling affect the demand for crop protection applications and continues and appears to have almost achieved fiforce growers to look for ways to cut expenses, includnalization. ing reducing spending on crop protection chemicals. • R&D expenses, along with technical, product, and • New chemistry from several of the major research sales support, prohibit major research-based commanufacturers continues to enter the market to panies from pricing at or below generic products. control resistant weeds. The U.S. crop protection chemical market holds ap• Companies have increased their interests in the de- proximately 20% of the global total. velopment of biopesticides as they begin to show In the past, U.S. crop protection sales have experienced effectiveness either alone or combined with tradi- very substantial one-year movements among crops tional chemistry. and within product categories. For example, in 2013, crop protection industry sales were up 11% from the • DowDuPont has completed its merger and created previous year. Corteva Agriscience, a company totally devoted to agriculture. Currently, however, the most significant movement was in seed treatment sales, showing a 7.9% increase • M&A activity has continued, with final develop- in 2018 in the United States. Seed treatment has bements in the Monsanto and Bayer merger and oth- come a standalone crop protection category. er companies picking up spun-off product lines.
INDUSTRY CONSOLIDATION
BIOPESTICIDE MARKET GROWTH
AGTECH INVESTMENT IS ON THE RISE
LARGER FARMS ARE EXPECTED
WEAKNESS IN COMMODITY PRICES
Mergers and acquisitions continue to . play out as manufacturers look for a way to grow their business .
The dollar value of biopesticide use in the United States is expected to grow this year.
The AgTech gold rush has continued since Monsanto purchased Climate Corp. Areas to watch are the rise of unmanned aerial vehicles, variable-rate seeding services, field mapping, and yield monitor analysis and satellite imagery .
The USDA projects that the average farm will continue to increase in size this year, with economies of scale providing advantages to larger farms as they can maximize labor costs and capital allocations .
Lower prices for major row crops such as soybeans and corn have made growers cautious about the cost of inputs.
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Growing importance of generic crop protection manufacturers Crop chemical sales remain concentrated among 10 of the largest companies. These 10 companies are comprised of five major research-based, two specialty research, and three generic manufacturers. In 1999, there were no generic crop protection manufacturers among the top 12 companies in the United States 20 years later, generic manufacturers collectively capture nearly 24% of the market. Generic manufacturers continue to aggressively price products that make them attractive to growers, and they increase their market share. Specialty research-based manufacturers see an 8.4% increase in sales, due in part to insecticide acquisitions by FMC. Major research-based manufacturers experience the final chapters of industry merger upheaval in 2018. Leading Distributor and Retail Trends on the U.S. Crop Protection Market Among the factors driving the U.S. crop protection chemical industry at the distributor level are flat to declining major planted crop acreage, low commodity prices on most of the major crops, and new chemistry from several major research manufacturers for resistant weeds. Ag retailers continue to adopt and market biopesticides as they increasingly show effectiveness, either alone or combined with traditional chemistry and as consumer demand for organically produced food grows. Leading Distribution Trends Growth within the distribution channel is currently shaped by market drivers, such as identifying efficiencies, managing new regulations, customer relationships, adopting new streams of revenue, and mergers and acquisitions. Among the three types of distributors in the United States, national distributors have the largest share of the total market. The “Big Four� national distributors
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are Tenkoz, Nutrien Ag, WinField United, and Helena. Nutrien Ag Solutions was formed in July 2018 when Agrium merged with Potash Corporation. The second group, regional distributors, are developing different strategies, depending on if they are with retail groups or without. This is driven primarily by crop protection seed strategies but also fertilizer assets, as well as proprietary product lines of crop protection chemicals.
More than 36% of all crop protection chemicals, including specialties, are sold through some connection with a buying group. The main buying groups of crop protection products include Tenkoz, IAP, Aligned Ag, and WestLink Ag. The buying groups are refocusing on high margin specialty products, such as defoliants, soil amendments, inoculants, nitrogen stabilizers, safeners, and spray oils. Another trend is their better alignment with manufacturers of biopesticides.
Leading Retail Trends There are estimated to be over 10,000 agricultural retail outlets or storefronts in the United States, serving major and specialty agricultural markets, not including retailers in professional non-crop markets and not including lawn and garden market retailers selling to consumers. There are also around 6,100 retail locations with bulk or mini-bulk crop protection sites, according to the Agricultural Retail Alliance. Kline’s distribution studies estimate about 5,000 retail locations with dry/ liquid fertilizer blending capabilities. Commodity prices continue to be a major influencer for retailers. Among other change drivers are environmental regulations, which are adding to costs and complexity to their operations, as well as falling incomes of farmers, which they are seeking to compensate by cutting costs in inputs, including fertilizers or increasing farm sizes. The situation for agricultural retailers currently remains stable with sales revenue and margins up slightly, as the industry has gone through several turbulent market conditions over the past 10 to 15 years. It is anticipated that the market will remain relatively stable in the near future until commodity prices start to increase. Mergers will continue as the larger distributors and dealers look to acquire those that are struggling financially. Crop Protection Programs Effectiveness for Distributors, Retailers, and Growers The average supplier program incentives in 2018 for distributors, retailers, and growers is estimated at just under 30% for the research-based companies and 27% when adding mid-majors and generic volumes. Program incentives are based on the maximum potential, not actual payouts, and are calculated at EDI sales value. The biggest rebates appear to be in the Midwest corn markets. Within incentives, EDI reporting is generally a requirement of the major suppliers and is included in program payments. All major suppliers participate in all these programs; however, generic suppliers, such as Adama, target a minimum of programs – distributor at net price or private label, mainly off-patent products.
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The insights and suggestions on programs from distributors and retailers show that distributors like the option to private label, a portion of off-patent product business. It is being offered by most suppliers and is best when supplier reps are not penalized for what goes in their market area. Most surveyed also included top loyalty programs that have realistic share goals in the top three programs. However, it becomes problematic when brand shares are so high that distributors are caught with concerns about losing business with their customers who want generic or lower price options. Blackbox or hidden rebate programs were the most disliked by those surveyed.
Global Nematicides Market Drivers Among key nematicides market drivers are an increase in commodity demand with declining acreage, growth of high-value crops which justifies high-cost nematicides, changing regulations, and consolidation in the market. The total growth forecast for the global nematicides market is high (for the countries and crops Kline covers) at a CAGR of 4.4% through 2028.
Monsanto is reported to be introducing an RNAi technology in 2019 that may replace the need for chemical and microbiol nematicides.
Regulatory bodies have limited the use of low-cost products such carbofuran, cadusafos, endosulfan, phorate, and broad-spectrum methyl bromide, 1,3‐dichloropropene. The phase-out and use restrictions of certain nematicides already exist across Europe, the United States, China, and India. Regulatory threats are currently impacting Argentina and Brazil. On the other hand, they create new opportunities for actives with a favorable beneficial insect profile and strong target pest control.
What Drives a Triple-Digit Growth of the Nematicides Market in China? The nematicides market in China registers a triple-digit growth in 2018. In 2018, fosthiazate and abamectin are the leading active ingredients used for nematicides, together accounting for 70% of the total sales of nematicides.
With a desire to replace toxic nematicides, several biological nematicides have been developed. Biological nematicides are currently estimated at 8% of sales.
China is estimated to surpass the United States as the leading country for nematicide use with almost USD 500 million by 2028.
The Ministry of Agriculture of China has accelerated the pace of eliminating utilization of highly toxic chemicals in agricultural production in the past few years.
Dengue Outbreak in Southeast Asia Set to Increase Mosquito Control Insecticide Sales Mosquitoes are notorious for being a nuisance pest countries have reported a higher incidence of Dengue generally during the summer season. However, control fever. India, Thailand, Malaysia, and Indonesia are all of mosquitoes extends beyond just personal care and increasing protection measures. is an integral aspect of global public health safety, as these small insects are vectors of many deadly diseases. The 2015 outbreak of the Zika virus in South America, Central America, and the United States galvanized countries to increase vector control measures to quickly reduce mosquito populations. In 2019, another disease outbreak is anticipated, as many Southeast Asian www.Klinegroup.com
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