FCI Trade Summit Addresses Agriculture 3.0
2 September 2014 
Agriculture’s steady evolution has been a boon for post-patent companies in the past two decades. Consolidation of multinational research companies has led to a vast deregulation of the post-patent industry and prosperity for a segment that has doubled in value since 2003.
“If you look at the Big 6, virtually all of them are down in market share over the past 10 years, and the post-patent players gained that market share,” economist Dr. Jim Budzynski told a capacity crowd during his keynote talk Aug. 26. “As an industry, we had further deconsolidation. Big 6 sales went up $16 billion, but the industry as a whole doubled in that time, so post-patent players have a huge opportunity.”
This post-patent opportunity is part of an era Budzynski calls Agriculture 3.0, which represents the current environment in which agriculture trends are converging to potentially shift the market dynamics throughout the agriculture value chain.
Agriculture’s first iteration began with the domestication of crops through the green revolution. Agriculture 2.0 represents the period of consolidation of farm sizes in the West and consolidation of the various suppliers that support them. Agriculture 3.0 is what happens next, Budzynski said, including the continued migration of manufacturing to low-cost countries. But as market dynamics continue to shift, low prices won’t lead to more market share for most producers.
The success of post-patent products were driven initially by low manufacturing costs and subsequently lower product costs, but things have changed. Wages, exchange rates, labor productivity and energy costs largely have curtailed some of the savings enjoyed by early post-patent companies.
As a result, the easy-money period is over, and now generic producers must heighten the quality of their products, services and support to remain competitive in a crowded and lucrative global landscape. Budzynski, managing partner of investment firm MacroGain Partners, says mid-sized and small companies must focus on how to drive value for trading partners in their business instead of focusing on being a low-cost producer.
Additionally, Budzynski said it is imperative for companies to strengthen their supply and distribution relationships with companies that will be able to weather the uncertainties of crop prices, farm incomes and trade/tariff challenges. Companies that have too many loans might not be able to overcome temporary revenue fluctuations.
“As suppliers, it is important that we are lined up with people who have a stable balance sheet,” Budzynski said.
This need for stable trading partners has never been more important as the industry continues to reel from supply shortages in China that began during the enforcement of environmental regulations earlier this year. The FCI Trade Summit offers a venue for companies to source products, vet companies and gather to share business intelligence on a rapidly changing industry.
Budzynski’s full presentation along with full conference materials are available to FCI Trade Summit Attendees. Non attendees can contact Editor David Frabotta for details on how to obtain.
The FCI Trade Summit – Americas was developed to help fortify value chain relationships and help companies navigate the uncertainties inherent in global trade. The eighth-annual event was held at the Green Valley Ranch Resort in Las Vegas. About 100 exhibitors, 700 attendees and more than 300 companies from 40 countries attended to meet new suppliers, exporters, importers and distributors of crop inputs. The FCI Sourcing Summit will take place in Delhi, India, Dec. 8-9.
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