Top Stories Of The Next 20 Years
10 December 2008 Here are the results of our industry survey on the future of our business, and the stories that we think will dominate the headlines for the next two decades.
1. Discovery Slowdown
While that may be approaching, the discovery-based companies are still devoting large percentages of their budgets to research and development (R&D), and for now at least, their pipelines contain many impressive products.
Dr. Raymond Forney, global stewardship manager for DuPont Crop Protection, adds that despite the obstacles to discovery, the real trend of the next 20 years might be industry’s ability to overcome those obstacles. “Better to plan for success stories – new discoveries with phenomenal characteristics to exceed high hurdles, from novel approaches,” he says.
2. Subsidies And The Doha Round
Among those that most readily support the concept are ironically those that have subsidized their own farmers to the highest degree: the US and the EU chief among them. The charge from developing nations is that the subsidies provided by these countries to keep their own industries competitive have the effect of artificially lowering international prices, which hurts those countries that do not subsidize their ag industries.
While the US and EU have both voiced agreement that subsidies are distorting the global market, little has been achieved by either. National politics within the countries involved plays a role in the lack of action, and the ability to come to a reasonable phase-out plan for subsidies that all sides can agree on has been the other major stumbling block.
Still, the topic remains on the table, and all sides share similar goals. It’s just the matter of how to reach those goals that might take a long time to resolve.
3. Biofuels Alter Market Dynamics
However, with soaring gas prices and a huge build-up in investment and technology, the past year has been filled with talk about biofuels. The EU has set aggressive goals for their adoption of ethanol in passenger vehicles, and the US is pushing hard to become both a major producer and consumer of ethanol and biodiesel fuels. Brazil is expanding its capacity in order to export ethanol to these markets and others, including China and India, which themselves are committing to increased use of biofuel.
While some say the hype is overblown, and that it will be years before any real impact will be made by the biofuels industry, it has not stopped the plants from springing up and many major agricultural groups from formulating their biofuel strategies to ride the biofuel wave.
What is already clear is that crop patterns could, in time, be altered in huge ways as biofuel plants increase the demand for raw products. For example, ethanol industry demand for maize could force that crop to gain a lot of ground, which in turn could cut the amount of crop area devoted to soya produced globally, thus raising its price, as well.
There is a danger with getting too excited about biofuel, cautions Allen Underwood, director, global business development for Helena Chemical Co. Much like the bursting of the Internet “dot-com” bubble after rampant investment, Underwood sees what he calls “the potential for a ‘dot-Corn’ bust, related to the quickly expanding methanol production capacity vs. declining petroleum pricing.”
4. Resistance Management Becomes Global Concern
Pesticide resistance is not a new phenomenon. As Tom Bauman of Purdue University, US, puts it, “Any time you apply a product, you start down the road of weed resistance. It’s just a matter of how long it takes to get there.”
What makes glyphosate resistance particularly troubling is both the immense market penetration of RR and the behavior patterns of farmers that have been accustomed to managing RR maize or soya. As another researcher, Mike Owen of Iowa State University, US, has pointed out, “With the technology we have now, farming has become a lot easier – Roundup Ready has made some inefficient farmers look pretty damned good – but weed management has become a lot more complicated.”
In order to stop (or at least slow down) weed resistance to glyphosate and other popular herbicides, new programs and strategies are developing in the area of resistance management. In the coming years, these models, which involve using multiple modes of action, using properly timed treatments at the right dosage levels, and using varied crop rotations to avoid planting back-to-back seasons of RR crops are some of the first steps, and many products and programs are expected to emerge in the next few years to help farmers manage resistance before RR crops are made obsolete.
5. Energy And Input Costs Rise
High petroleum prices, which have been pointed to as a primary culprit in the rising cost of fertilizer, are not alone to blame. International demand for nitrogen (N), phosphorus (P), and potassium (K) has surged, and demand in Asia and South America is expected to maintain its growth levels for at least the short term.
The bright side has been the fertilizer industry’s ability to keep stride with rising demand. If the crunch remains on growers, however, they may not have the amount of leftover capital for other areas of farming to keep fields as productive as they could be.
6. Consolidation Continues
The same can be said for second- and third-tier companies. Traders, distributors, and smaller manufacturers and formulators are currently undergoing a similar transformation as companies look to grow their global footprints through acquisitions and mergers. With a skill set that is highly international – understanding which markets are underserved with which products, how to operate through different regulatory regimes, and who the important players are in the markets – many modern second- and third-tier companies have looked at expansion as a key strategy for growth. This also has helped to rein in the number of small suppliers and traders into more efficient companies, and improve the industry’s overall performance.
Like the Big 6, the question is when it will stop. How much will the middle tier transform and grow, and which companies will still be standing 20 years from now?
7. Technology Goes Mainstream
As it stands now, developed countries are the prime beneficiaries of these modern innovations. But there are signs that is changing, particularly where North American and European agricultural investors are taking stakes in the fields of South America and Eastern Europe, and bringing their management practices with them.
As the technology grows more refined, the profitability of it is gathering stacks of evidence. If this technology is easily transferable to other nations, where farmers and field workers will need to be trained and educated in its application, it could make a lot of headlines as it increases farming efficiency on a global level.
8. Special Interest Pressure Grows
In places where reactions against biotechnology are strong and organic agriculture is favored, many of the impressions that consumers have of the crops are created by special interest groups. Much of the information – or misinformation, depending on the particular message – that these groups impress upon the consumer is portrayed as environmentalism. However, most observers with knowledge of the industry see these groups as being in the business of feeding public fears in order to keep donation money flowing into their already-stuffed coffers.
The problem faced by industry is getting its voice heard over the questionable messages coming from these extremely well-funded groups. While associations are doing a good job representing industry and trying to educate consumers, they simply lack the resources of the large special interest groups. “The environmental activists cause all sorts of trouble over here – not just in GM activities, but in safety issues generally,” says Frances McKim, press manager for BCPC.
And as Joyce Tait of the University of Edinburgh, UK, pointed out at last year’s BCPC Conference, the two sides are often judged under different standards. “No matter how strong the pressures on industry are to gain regulatory approval for a new product, they have a very great deal to lose if their evidence should subsequently be proved to be false,” she said. “Pressure groups, on the other hand, do not seem to suffer when the evidence they put forward in support of a particular action turns out to be false.”
10. Non-Crop Markets Take Spotlight From Ag-Chem markets
Will that growth continue? All signs indicate that it will, with potential for tremendous growth in South America and Asia as quality of living standards improve. Products used in or near homes, offices, and parks are catching the eyes of more companies that formerly focused solely on agriculture.
An interesting aspect of this trend is that the chemistries used in these products are all old ag-chem active ingredients. As these markets continue to grow, that could change.
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