FCI Global Sourcing Summit: Global Crop Protection Industry Overview

sourcing-summit-webThe sourcing of crop protection chemicals has changed dramatically in the past few years. The industry has seen unpredictable consolidation, capacity reductions and disruptions in the global trade of crop protection products from supplier to buyer to distributor to farmer. The FCI Global Sourcing Summit (Dec. 8-9 in Delhi, India) provides an unprecedented opportunity to share information and explore strategies for navigating what has become a volatile market for sourcing intermediates, tech and formulated products.

Below is an overview of the global crop protection industry. I will discuss this in further detail at the FCI Global Sourcing Summit.

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The global market for crop protection chemicals, in terms of value at the ex-manufacturer level is estimated at about $57.3 billion in the harvest year 2013 (Kleffmann amis AgriGlobe, 2014) and is expected to surpass $60 billion in harvest year 2014. The 2013 growth, compared to 2012, at close to 10%, is a continuation of a cycle of growth, which on average, exceeded 5% per annum for the last five years in nominal terms.

Sector wise, in 2013, herbicides accounted for the bulk of the value at over $25 billion with fungicides and insecticides amounting to $15 billion and $16 billion respectively in round figures. Plant growth regulators and fumigants accounted for the remainder of the market value.

On a regional basis the Asian markets, with a diverse crop and geographical spread, dominate with an excess of $16 billion; Latin American markets continue to surpass European markets by some small margin at just over $14 billion each with the North American region accounting for a dwindling proportion at less than $10 billion. The Middle East & African market continues to grow significantly albeit from a smaller base and this region continues to offer good potential for the generic industry.

Going forward, prospects for the generic company section of the industry will be influenced by the changing commodity prices, the continual consolidation within the agrochemical industry resulting in fewer but larger companies and the continual pressure on older chemistries particularly in markets where re-registration programs are ongoing.

More recently, China’s new federal pollution regulations have created supply chain issues that have had a global impact and have, by some small measure, redressed the dominance of China as a low-cost producer of technical material. This has opened up opportunities for generic producers elsewhere that were and are able to react accordingly. On the other hand, the increased focus by the multinationals on existing chemistries and the ability of those companies to “bundle” seed and crop protection products as the acreage planted to herbicide tolerant and insect resistant crops develops, particularly in the Americas, is likely to limit some market opportunities available for many generic producers.

Generic companies continue to respond to this changing market with acquisition strategies of their own aimed at bringing a proprietary nature to their product range. Much of this in recent years has focused on unique and improved co-formulations as well as superior formulation technologies. Acquisition of distribution potential and utilising this increased market presence to attract third-party products also remains a growth strategy, although one that is increasingly difficult to execute.

A significant number of active ingredients recently off-patent or soon to become off-patent continue to offer fantastic potential for the generic sector but at the same time competition, including that by the multi-nationals themselves, is making this space ever more competitive. What remains as important as ever, if not more so, is a full understanding of the market dynamics in order to avoid costly mistakes, especially in registrations, in what is a continually evolving global market place.