AgbioInvestor Gives Outlook for 2023 Crop Protection and Seed Markets
18 December 2022 Allister Phillips and Derek Oliphant, Co-Founders of AgbioInvestor, presented the webinar, Future Development of Crop Protection and Seed Markets as part of the AgriBusiness Global LIVE! webinar series. Analyzing trends and offering forecasts for the crop protection and seeds markets, Phillips and Oliphant provided crucial information for going into 2023. AgriBusiness Global continued the conversation from the webinar by posing some audience questions to AgbioInvestor. The full webinar can be watched here.
ABG: Do you have any thoughts or forecasts on the potential growth of reduced stature corn in the United States (U.S.)? What percent of corn acres could it reach?
AI: History has shown that U.S. farmers are very accepting of new seed technologies, whether it be input traits, output traits, or refuge in the bag technology, if it offers greater profitability. Input traits such as herbicide tolerance and insect resistance lower the cost and use of herbicide and insecticide inputs, output traits improve the performance and quality of production, while reduced refuge and refuge in the bag technology aims to lower fuel and labor costs. Short stature corn offers greater standability, protecting against lodging, as well as greater planting densities, resulting in potentially greater yield.
The adoption of short stature corn, at least in the short term, is likely to be dependent on a number of factors: seed price and the prevailing price of traded grains and oilseeds, technology and trait mix available, and licensing and competing technologies.
It is assumed that short stature corn will come with a price premium, to reflect the theoretical yield improvement and greater production, which will put off some growers from purchasing, especially if there is expected poor weather which has the potential to impact crop development.
In the short term, there may be low availability of all technology and trait mixes available in short corn varieties, limiting grower choice.
One potential ceiling to adoption rates is the outward licensing strategy of the developing companies. When developing and launching an input trait, it has been commonplace for the developing company to outward license the technology to as many seed companies as possible. However, in output traits, such as drought tolerance, it is common for the developing company to retain the technology for its own use, as a product differentiator. If Bayer and Corteva do not outward license short stature corn, then potential adoption is capped at their summed cultivated area market share.
ABG: Do you have any data for the forecast in Central America?
AI: For 2023, it is still too early to have a view on market development in terms of value, however it would be our expectation that product usage in Central and South America will be positive in 2023, based on continuing demand for crop exports, particularly to China with China now also entering into an agreement to ramp up Brazilian maize imports. The higher areas of maize and soybean in Brazil are also a positive, while pest pressure is expected to be sustained in the country, with Asian soybean rust being detected relatively early in the country.
However, the value of market could be impacted by the declining agrochemical prices, particularly in the case of glyphosate and glufosinate, and expectations for a continuation of La Niña conditions could lead to dryness in southern parts of South America.
ABG: Can pricing for differentiated crop protection products hold up in 2023 even as crop prices decline? Or will they decline like generic products? Historically, have we seen pricing of differentiated products hold up better?
AI: With commodity prices declining and grower incomes expected to fall, this could lead to less spending on crop inputs, such as crop protection products. However, the lower crop prices could be offset by the anticipated declines in fertilizer and fuel costs. In general, if the market is negative in terms of crop prices, weather, other factors etc., then the lower-cost generic side of the industry tends to benefit, which could result in weakness in differentiated product pricing.
However, with Europe being a significant hub for the manufacture of differentiated (proprietary) active ingredients, through companies such as BASF, Bayer and Syngenta, there could be issues around cost and product supply due to high energy costs and the ban on the manufacture of active ingredients not registered in the EU in certain countries in the region (e.g. France, Germany) and in Switzerland. These factors could essentially prevent any sharp price declines for proprietary products.
ABG: It seems the ag industry is not taking into consideration farmer profitability. Are you looking at a future shift in farm ownership and management, such as a change from private to corporate farm ownership forced by increasing input, protection, and technology costs?
AI: Farm profitability is strongly linked to crop commodity pricing, which is something we touched on in the presentation. Profitability is also influenced strongly by input prices, such as fertilizer, seed, crop protection products and also fuel and energy. With energy, fertilizer, and agrochemical prices all expected to decline from the very high levels of 2022, farmer profitability could still be maintained despite the reduction in crop commodity prices.
ABG: With Mancozeb getting phased out from the market, do you anticipate a growth in market value on the resistance management segment as farmers would end up spending more on high value products?
AI: Mancozeb leaving the market does provide opportunity for the use of other high value products, as a number of products utilizing different modes of action would be required to provide the same efficacy and resistance management properties as mancozeb. However, there is also potential for alternative multi-site fungicides to gain from any removals of mancozeb, such as sulphur (for example UPL positioning a liquid formulation of sulphur as a biofungicide alternative to mancozeb) and folpet, with the latter having made strong gains in the EU in recent years as a chlorothalonil replacement.
ABG: Do you see an opportunity for seed treatment market increase in China following the use of genetically modified (GM) tech for maize and soybean?
AI: Yes, we do see potential for an increase in the seed treatment market in China as GM adoption takes place, as has been the case with other markets where GM is prevalent such as the US and Brazil.
ABG: Who do you see as leading the efforts in bioherbicides? Most companies are focused in yield enhancement and disease control, is that your perception as well? Secondly, are any of the companies working on traits for new modes of actions in their mega herbicide-tolerant (HT) stacks?
AI: The main companies with involvement in the sector currently are Belchim and Sumitomo Chemical, while many of the majors are involved, particular through pelargonic acid, often in combination with glyphosate. Much of the short-term growth in bioherbicides from existing products is expected to be limited to specialty crops such as orchards, vineyard, and other fruits and vegetables, as well as in non-crop situations, with pelargonic acid and acetic acid being the main products currently. We expect further growth in the longer term when bioherbicides, including new products and advancements in formulation technology, effectively become field crop ready and area expansion and true chemical replacement can take place. Currently, the market for biological products is more focused on insecticides and fungicides, however, there remains a strong requirement for effective bioherbicides in the market, and as such we expect R&D efforts to intensify in the coming years. This will also be driven by continuation and ramp-up in consolidation in the bio side of the crop protection industry, with this expected to accelerate in the coming years.
The first herbicide tolerant technologies in soybean were GM traits for tolerance to glufosinate and glyphosate, as well as non–GM ALS and STS tolerance. Since then, several new HT traits have been developed, namely providing tolerance to dicamba, 2,4-D, mesotrione and isoxaflutole. PPO herbicides, PPO tolerance traits and resulting seed products are currently being developed by Bayer/Sumitomo and BASF/Corteva.
ABG: North American growers have seen an increase in fungal problems over recent years and are increasingly factored into farm protection costs. Will you address that in the future?
AI: In 2022, we expect fungicide use to have been impacted by the dry weather conditions in key fruit and vegetable markets – a significant outlet for fungicide use – in California and other western regions. Any alleviation of this dryness and more favorable conditions in 2023 would be expected to result in an uplift in fungicide sales moving forward.
ABG: What do you think drone technology’s impact with be on the future of crop protection business?
AI: It is our view that much of the volume loss through increased use of more precise application technologies could be offset by associated higher values, including advanced formulation technologies or higher margins related to lower levels of competitiveness in the space. For example, additional authorizations are required for drone application in most countries, which would come with associated costs, thereby leading to higher cost of use.
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