Profit From Brazil’s New Demands
19 July 2013 
If there is any market that will keep you on your toes, it’s Brazil. Wildly rich with agricultural opportunity, its thorn is a perplexing, costly regulatory system that can effectively serve as a deterrent to foreign investment. And yet you cannot possibly ignore it. Here is a look at a few factors to consider in the world’s No. 1 crop protection market.
Foliar micronutrients and specialty products such as biostimulants and elicitors have experienced exponential growth in the last decade and are expected to grow even faster in the coming years, said Flavio Matarazzo, product manager for agriculture with De Sangosse Group in Brazil.
Yield growth for Brazil between 1990-91 and 2010-11 soared 129% for corn, 84% for soy, 93% for wheat and 108% for cane ethanol. The four biggest crops cover 86% of the country’s planted area. GM adoption has been swift, now standing at 83% for soybeans, 67% for corn and 52% for cotton, according to USDA.
Increasing yields point to greater crop protection needs, Matarazzo said in an interview at the International Symposium on Adjuvants for Agrochemicals 2013 conference in Iguassu Falls in April. It is becoming harder to kill weeds such as buva and bitter grass, and growing Bt resistance and secondary pests such as maize aphids compound growers’ challenges.
There is bigger disease pressure, too, with increasing cases of Asian rust, white mold and soil-borne fungi contributing to a 25% leap in fungicide sales in 2012. Soybean worms and cotton worms are also becoming bigger problems, Matarazzo said.
Fungicides, although a smaller category by sales volume, have easily outpaced both insecticide and herbicide growth in Brazil in the last six years, which each gained 21% and 11% respectively, according to data from AENDA, the Brazilian Generic Pesticides Industry Association, and SINDAG, the Brazilian Agrochemical Trade Association.
Sales of niche products including plant growth regulators, ripeners, pheromones, biologicals, molluscides, defoliants and adjuvants showed a robust 25% compound annual growth rate since 2006.
Heeding Brazil’s fungicide demand, BASF said last month it would bankroll a formulation plant for its Xemium carboxamide product, which is in its final stage of registration in Brazil, as well as expand another plant for its Boscalid fungicide. A new plant to formulate the herbicide Heat, to be completed by the second half of 2014, is also in the works.
“The Brazilian pesticide market, like other markets around the world, is highly concentrated among a few R&D companies, and generic products have a role to minimize this situation of oligopoly with competitively priced post-patent products,” Tulio Teixeira de Oliveira, AENDA chief executive, told Farm Chemicals International.
Don’t assume that Brazilian ag’s already staggeringly huge numbers imply an impending slowdown. It’s just the opposite, and growth opportunities for pesticides are on track to rise because of the low prices introduced by generic products, Oliveira stressed.
Pricing pressure on generics? It’s heavy.
Valdemar Luís Fischer, Nufarm’s Latin America South lead, said in an interview that the company is seeing larger customers in the market with more buying power: “There is a logical pressure on prices, but on the other hand we have also seen an increase in some costs in the international market. We have to pass on that cost increase. That will continue, and it’s nothing new. The number of competitors has been growing in the last few years.”
Generics make up about 30% of Brazil’s agchem market; 70% is branded. In spite of Brazil’s regulatory framework, off-patent products are expected to make more headway as the speed of the introduction of new molecules slows.
Chris Moore, international business manager at Loveland Products, said Brazil’s regulatory hoops for crop protection products are so problematic that Loveland chose instead to carve out a niche in adjuvants and nutrients there.
“No one is interested in spending $400,000 for a full data package for propiconazole, which is as generic as the day is long. We’re focusing on specialty nutrient products – for example, we are going to register a product with inositol that is able to mobilize nutrients better from the soil and within the plant itself.”
This year in Brazil, Loveland expects to sell close to a million liters of LI 700, its soy lecithin-based adjuvant manufactured in Greeley, Colorado.
One thing to remember, however, is that this is watch-over-your-shoulder territory.
LI 700 is derived from soybean oil, a natural product, and has been registered in the country since 1999 and sold since 2004. Yet demands from Brazilian authorities for more methodologies, testing and certificates persist, Moore explained.
“It’s very frustrating, very expensive and scary. You might invest $150,000 or $200,000 and it’s year five or six and you will not have anything, who knows? [Brazilian authorities] are also cracking down as hard as they can,” Moore told FCI.
The Elusive Regulatory Fix
Federal authorities in charge of regulating pesticides in Brazil – MAPA, ANVISA and IBAMA – are battling internal problems related to personnel structure and increasing regulatory demands for pesticides, said Fabio Domingues, director of Vigna Brasil. Adjuvants, for their part, are not being treated as a priority.
A simple registration or export license takes two to three or even four years to obtain. To help remedy the situation, a group of companies and researchers represented by AENDA are at work creating clearer procedures and new legislation criteria.
“Let’s see if the authorities will accept our suggestions and start an open discussion about the issue,” Domingues told FCI. “Such a situation is not good for anybody – not companies, contract research organizations or the authorities – and it is affecting our business in regulatory, strategic and R&D support. We look for clear and objective regulatory procedures in Brazil.”
“We hope that this system will become controlled by just one registration body, with a unique command,” AENDA’s Oliveira added.
Another sticky issue is the pirate adjuvants flooding the Brazilian market. These are typically surfactants that help spread droplets on a leaf. If registered properly, the process would take three to five years and at least $200,000 and maybe more. But, add some nitrogen to the mix and presto: you have a “foliar fertilizer.” This shortcut means gaining registration and access to the market in as little as three to five months.
Domingues assured that while many companies are jumping on the black-market bandwagon, on the flip side, “there are many important international adjuvant companies that are still seeing the Brazilian market as a good opportunity, and they are preparing to register their products according to the legislation in force.”
Last Laugh in the Northeast
Agrium, Loveland’s mother company, last year purchased Util Fertil, an NPK blending facility in São Paolo state. Moore said in the near future, Agrium might expand into chemicals, adjuvants and foliars, and possibly even acquire retail locations in the country.
Meanwhile, the rise of Brazil’s northeastern markets continues despite being ignored for years in favor of the Shangri-La, Mato Grosso. A standout example is Nufarm’s deal with Agripec. In 2007, the Australian company completed its purchase of the 50-year-old Agripec, which has a formulation plant close to Fortaleza and at the time, was Brazil’s largest locally owned crop protection company. Just six years ago, it was viewed by some as a foolish buy.
But it’s Nufarm that has the last laugh.
Nufarm’s Fischer explained: “The reason it seemed odd is that most of our competitors have plants in southeastern Brazil, and Agripec was far away from major markets. But since then agriculture has actually moved in that direction. Now the fastest-growing areas for soy, corn and cotton are in Bahia, Maranhão and Piauí, and of course, the area also has a very strong fruit and vegetable export industry.”
How did Nufarm manage the steep costs of getting goods to market? Fischer said foremost, it focused on becoming more efficient in logistics, selecting the right partners and planning.
“We have been sending full truckloads of products directly to the South to distributors and co-ops. We are setting up distribution centers in the major ag centers in Brazil – that’s the way we handle the high transport costs that we have up there. We started to export products like high-load formulation glyphosate, chlorpyrifos and tebuconazole from Fortaleza to Argentina and Colombia.”
Nufarm, which should end 2013 with more than 100 in-country sales reps, has steadily gained market share to 4%, and it plans to increase that share to 7% in the next five years, Fischer said.
All of South America is becoming more important for the company precisely because of the double-digit growth in the agchem market in Argentina and Brazil over the last three years, Fischer added.
“We reorganized our operations in 2010, invested more in the front end of the organization, such as adding more sales reps, tech reps and marketing folks. We selected distributors that support the positioning of our products, segmented the market and selected the crops we wanted to compete on. We also selected third-party products to fill gaps in our portfolio to have a complete solution for these chosen crops. So we managed to achieve growth rates ahead of the market.”
In contrast to the southern states of Paraná and Rio Grande do Sul, where the co-op is king, in the Central-West state of Mato Grosso, distribution is an anomaly: half the market is sold directly to end user. One grower might have 40,000 hectares with little time to waste on a distributor or dealer.
Oliveira noted the upcoming possible cancellation of several registered products in Brazil.
“It is happening because these products have the same purpose – the same crop and same biological target – but they have toxicological and/or environmental hazard classification more restrictive than other products,” he said.
A lawsuit over acetamiprid-based products is currently in court, and the Public Ministry is recommending that ANVISA cancel the toxicological classification evaluation for all products under this condition.
According to AENDA, there are 2,298 pesticides registered in Brazil as of March 2013, of which 851 are technical products and 1,442 are formulated products.
For more information on breaking into the Brazilian market, go to page 2.
Considering Breaking into Brazil? Top 3 Things to Watch Out For
By Tulio Teixeira de Oliveira, CEO, AENDA, Brazilian Generic Pesticide Industry Association
- The registration system is very complex and time-consuming. There are three regulatory bodies that analyze the process independently and have different views; they are: the Ministry of Agriculture (MAPA), the National Health Surveillance Agency (ANVISA) and the Brazilian Institute of Environmental and Renewable Resources (IBAMA). In addition to the confusion of having three processes, there is the influence of misinformed public opinion that considers pesticides as “the villains of the agribusiness.” To explain the situation, we calculated the average number of the registration processes for equivalent products analyzed per year, since the implementation in 2003 until March of 2013. The average is 41.5 processes per year. Considering that in March 2013, there were 132 processes under assessment and 372 processes in the queue to be assessed (total of 504 processes); if the current pace is kept, the last product in the queue would be finally registered 12.1 years from now. Among the other kinds of processes for finished products, in March there were 802 processes in the queue; and amendments in post-registration that equaled 616 at the same period.
- Long-term sales. As there is no government financial aid that covers all of growers’ needs each season, the money used to buy pesticides is typically funded by the suppliers or via grain trading, which deliver pesticides and only get paid after the crop is harvested. The deadline of this transaction is between six and nine months.
- Congested distribution system. Brazil is a country with enormous geographic dimension, and because of it, a company needs a lot of sales points and distribution centers, which usually already have agreements with the major companies.
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