Working Together Or Apart
24 June 2008 It would be nice to believe this is simply a matter of customer service; of companies sharing technologies and marketing abilities to ensure that farmers are well served. However, it might be a bit naive to think that these businesses would enter into such agreements without positive profit potential for all parties. This is not an indictment of any company; a business cannot run without keeping its bottom line in mind.
But today’s agriculture is a vastly different animal than it was in past years. Even with strong sales and record financial performance, there are a great number of hurdles facing crop protection companies. Costs rank high among them: not just raw material costs, but registration costs, and the expense of discovery. Already, FCI readers are well aware of some of the effects of the increased cost of discovery, including a slowdown in product introductions, fewer options for farmers, and consolidation.
Could it also be leading to a scenario where, even as separate entities, discovery based companies begin to act as a more integrated group? From the activities of the past few years, there is little doubt that more resources are being pooled, more cross-licensing and marketing agreements are being inked, and in some cases, registration costs shared.
Increased costs and competition from generics manufacturers displacing competition between multinationals are two reasons for the binding of the Big 6. But it is also reflective of a more tightly wound offering to farmers: seed is as integral to crop protection as ag chems, and systems are in development as complete solutions. If this means pairing a certain company’s fungicide with another’s biotech seed to ultimately increase the market (and profit) of both, it makes sense to combine efforts.
On the other hand, it may also lead to fully-packaged solutions that choke out competitors, and in the end, prevent farmers from gaining access to more affordable products. Farmers do still want choices, and while a fully integrated crop protection system may be very helpful, it may also force the farmer’s hand in ways he doesn’t wish to be pushed, and it may make it even more difficult for marketers of alternative products or off-patent products to gain traction in some markets.
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