Global Outlook: The Future of Agchem
Sustainability and regulatory pressures continue to drive new products to the crop input market.
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By Dan Jacobs
Senior Editor
The crop protection industry, battling consumer and government scrutiny, has responded by developing solutions that are safer than ever. Despite all efforts to comply with demands, synthetic pesticides remain under threat.
Though, as every savvy business executive faced with roadblocks knows, those disruptions open possibilities.
“There has never been a more challenging time in agriculture; but there has also never been a time of greater opportunity,” says Livio Tedeschi, President, BASF.
Livio Tedeschi, President, BASF.
“At the same time, agriculture is facing challenges driven by climate change, an aging workforce, limitations in arable land, and an increased demand from the public for transparency and healthy, sustainable, and affordable food.”
The Council of Producers and Distributors of Agrotechnology (CPDA), sees various groups opposed to traditional pesticides pitting rules governing U.S. agencies that focus on environmental issues against one to limit or prevent bringing new products to market and in some cases eliminate old ones.
“The road ahead for the crop protection industry will be bumpy,” Scott Rawlins, CPDA Director of Government Affairs, told AgriBusiness Global.
Scott Rawlins, CPDA Director of Government Affairs
“Endangered Species Act restrictions, regulatory uncertainty, and the waning political influence of agriculture are driving changes. The demand for data-driven solutions will create opportunities. The big question mark is whether Congress will act to address real food security concerns.”
It might be difficult to underestimate the challenges these actions could impose on the crop input industry. Wilbur-Ellis Director of Regulatory Affairs Ethan Mathews, characterized it this way: “The EPA’s proposed ESA Workplan represents the greatest existential threat to U.S. agriculture. Realistically, the immense costs, lack of compliance options, and regulatory bottlenecks imposed by the Vulnerable Species Pilot and the Draft Herbicide Strategy will all but ensure many pesticide users are prohibited from using these vital crop protection tools in the future.”
And it’s not just a passing possibility. According to Mathews, the chances of this scenario playing out is a “high probability at this time.”
The battle the ag industry faces from political and environmental opponents is a concern around the world.
“The worst-case scenario for traditional chemistry and the industry would be if political and environmental ideologies restrict them faster and beyond what science dictates,” says Daniel Traverso, General Manager of Santiago, Chile-based Anasac International Corp. “The impact on agriculture, costs, and productivity would be significant, especially for small and medium-sized agriculture.”
Atticus Founder and CEO Randy Canady also expressed concern continued attacks on agchem.
“Value-collapse threatens our industry as it undermines the financial foundation for reinvestment,” he says. “Suppliers carry the weight of pipeline technologies and innovation while retailers shoulder the infrastructure and service requirements of the farm community. Short-term financial objectives are not a friend of our industry, but rather, its demise.”
The U.S. is by no means the only country facing legislative challenges to traditional crop inputs.
“In many geographies around the world there are ongoing discussions about the reduction of chemical inputs,” Tedeschi says.
Randy Canady, CEO, Atticus
“Interestingly, the fact that the debate is around reduction and not elimination shows the implicit recognition of the value chemical inputs bring to agricultural productivity on a large scale.
Behind the reduction request on the other side, there is a wish to further reduce residues in fresh produce and to avoid the effect of crop protection products on non-target organisms. As has been the case in the past, societal and regulatory requirements are often the very engine of innovation. At BASF, we are actively and strongly addressing these drivers by investing in new-generation active ingredients with a highly favorable regulatory profile and outstanding biological activity, as well as on digital systems that enable the targeted, timely application of chemicals.”
Product manufacturers continually adjust their strategies to accommodate society’s evolving attitudes and the regulatory environment. As the quality of traditional products has increased the amount needed has decreased. According to CS Liew, Managing Director at Pacific Agriscience, the reduction of traditional crop inputs will ultimately be in the long-term interest of the industry.
CS Liew, Managing Director, Pacific Agriscience
“We are still a long way to significantly replace even a moderate 25% of the chemical inputs with biofertilizers and biosolutions,” Liew says.
“Technologies and innovations in the biosolutions sector are certainly making advances particularly over the past decade.”
Corteva Agrisciences’ Vice President of Crop Protection R&D Ramnath Subramanian agrees with that assessment.
“Farmers need new solutions to meet changing food production demands and we believe biologicals will be a significant part of that solution.”
But despite the rise of biological products very few people think their synthetic counterparts will be going away any time soon.
Atticus’ Canady believes the industry is on the right track.
“It’s an exciting time to be on the forefront of alternatives to synthetic chemistries, and there are plenty of financial resources being committed to that race,” he says. “The challenges have proven extreme, but that is not to say the juice isn’t worth the squeeze. Ultimately, alternatives may position best as complements to traditional chemistries that have consistently delivered the agronomic performance to deliver today and tomorrow’s food supply at reasonable prices.”
Anasac’s Traverso agrees that reduction of traditional pesticides will ultimately be beneficial but offers a caution.
“It depends on the speed of change and the implementation of new technologies, which are not always aimed at increasing productivity but rather at enhancing sustainability,” Traverso says. “Let’s not forget that significant productivity in Latin America lies in medium and small-scale agriculture, where technological transfer is slower and more challenging. Additionally, as we know, traditional agrochemicals will persist over time and complement these new technologies.”
Though they will continue to persist, the growth rate for traditional agchem will slow as the growth rate for alternative solutions accelerates.
“What is being discussed in the market in general is that traditional chemistry will grow at around 2% to 3%, while new technologies will grow at around 10% to 15%,” Traverso says. “The crop protection market, which was previously dominated by 90% traditional chemistry, has now expanded based on other segments. However, in my opinion, traditional agrochemicals with lower toxicity and environmental impact will continue to develop and grow.”
Future View
Traditional crop inputs are expected to continue to face opposition on a variety of fronts. At the same time, the products continue to become more effective and safer to use.
“The discovery of new molecules and coming up with new and more effective modes of action will not diminish but will be more concentrated in hands of a small number of large multinational players,“ Liew says. “As a matter of fact, this trend has already been running its course over the past three decades, culminating with the current stage of just a handful of very large players and another handful of smaller Japanese players still actively engaging in these R&D efforts.”
Fewer products might make it to market, but Canady agrees that the dedication to bringing effective and safe solutions will continue.
“Discovery, development, and commercialization of pipeline chemistries becomes more challenging by the year when compressed between regulatory hurdles and financial thresholds,” Candady says. “However, this is a worthy battle as pests evolve be it diseases, insects, or weeds, so does the need for alternate chemistries.”
As those pests evolve so have the solution providers.
“They have already undergone transformations,” Traverso says. “They have acquired, merged with, and invested in numerous new companies with technologies in the field of sustainability, biorational lines, biostimulants, soil enhancers, new application techniques, etc., including new patents using CRISPR technology. These changes have been happening for many years, where solutions have evolved, improved, and market demands have increased in pursuit of more sustainable agriculture.”
While multinationals continue to deliver innovative solutions, Liew has seen a shift in the geography around R&D with the focus on bringing new molecules to market shifting to the East.
“Supplementing the global R&D majors and also the handful of smaller Japanese players is an emerging dozen or so Chinese players that have engaged in new molecule discovery and diversifying from pure generic manufacturing plays,” Liew says. “An early Chinese player already have products launched into the domestic market as far back as a decade or so ago. Some of the newer players will be launching their new molecules in the domestic market over the next one to two years.”
While those products might be available in China, shifting regulatory rules and requirements could make it difficult for some of these solutions to make their way outside of China.
“What is hampering these dozen or so Chinese players in getting their new molecules into the global markets is the fact that their regulatory authorities dictated that the toxicology studies be conducted in line with ‘Chinese national standards’ and ‘Chinese GLP protocols’ rather than GLP standards in accordance with OECD (Organization for Economic Co-operation and Development) guidelines that are adopted worldwide,” Liew says. “Having said that, the global players in new molecule discovery desiring to enter the large Chinese market will also have to fall in line by submitting studies done in accordance with the Chinese standards and guidelines.
With a divided world due to geopolitical rivalries, it is not inconceivable that some African, LATAM, and Southeast Asian countries will accept registration dossiers done according to Chinese GLP protocols and standards. Time will tell.”
Segment Drivers
“Our climate is changing, biodiversity is decreasing, the world’s population is rising, and available agricultural land is shrinking,” Tedeschi says.
“This, of course, has enormous implications for the future of agriculture. More food must be produced safely and sustainably on a limited amount of arable land – and at affordable prices. We should take all these facts into account when making decisions now for a sustainable agriculture of the future.”
“Over the coming decades, our agricultural-food system will undergo an accelerated transformation to provide access to enough healthy and affordable food for the growing population, and, at the same time, to mitigate its impact on our planet so that future generations can flourish,” Tedeschi continued.
The industry has certainly embraced a more eco-friendly approach to its new offerings.
“Applying sustainable innovation criteria aligned to the UN Sustainable Development Goals throughout the product development process allows us to ensure the products in our pipeline are continuously raising the bar as we strive to bring the leading sustainable solutions to farmers,” Subramanian says. “This enables us to go above and beyond the global regulatory requirements. Corteva also has internal decision criteria and processes, informed by lab and field testing, predictive assays, and models, that need to be achieved before designating a product as a sustainable innovation.”
Research Focus
The shift to a more sustainable approach has also changed how manufacturers develop their solutions.
“Our trait discovery and seed breeding programs are focused on the identification of new varieties with high climate resilience, strong virus and disease resistance, and high nitrogen utilization efficiency,” Tedeschi says. “These lead to higher use efficiency of fertilizers and support optimized chemical inputs. From now on, companies will have to focus on addressing agriculture in a holistic way and connect technologies to help farmers achieving certain outcomes, rather than just delivering products.”
For several years now, the industry has seen a decrease in the number of new synthetic solutions reaching the market. That doesn’t mean companies aren’t working hard on new offerings.
“We, at Anasac, invest 3% of our annual sales in research every year, and a significant part of this investment goes into these new lines and digital technologies in agriculture,” Traverso says. “Previously, the entire investment amount was directed toward traditional products.”
While some of the research spend will shift to non-traditional solutions, there is still plenty of money being dedicated to synthetic solutions.
“Corteva Agriscience expects to launch 10 new AIs by 2035, representing hundreds of new products,” Subramanian says. “Corteva is focused on new AIs that improve productivity, increase yield, and are complementary to biologicals. We will continue to bring products to market that are sustainable and meet the expectations of consumers and farmers.
“We have a world class R&D machine with an industry-leading return on investment, creating the science and technology to help solve some of the world’s greatest challenges – including food security, climate change, and the energy transition,” Subramanian continues. “We’ve set a target to invest approximately 8% of sales in R&D and innovation by 2025, which translates into ~$400 million of additional investment.”
And it’s not just the inputs that are changing. These new offerings are being delivered alongside a host of new attitudes and approaches to agriculture throughout the supply chain.
“The transformation toward a more sustainable agriculture will not be achieved by reduction of crop inputs alone, but with the help of innovations from academia and the industry,” Tedeschi says. “To this end, we at BASF invest around €2.6 million euros per day in R&D only in the agricultural sector. Our approach is very holistic and focuses on faster digitization in agriculture, innovative chemical and biological crop protection products, targeted nitrogen management, and new breeding technologies.
“We continuously invest in our strong innovation pipeline with an estimated peak sales potential of more than €7.5 billion,” he continues. “In 2022, BASF spent around €940 million in research and development in the agricultural solutions segment, representing around 9% of the segment’s sales and around 4.4% more than in 2021 (~€900 million in 2021 and ~€840 million in 2020).”
Regulatory Issues
“Continuously evolving regulatory and societal requirements provide a great opportunity for the industry to constantly innovate in the effort to shape a sustainable agriculture and food production system for the future,” Tedeschi says.
Therefore, we should not only look at crop inputs, but also the other needs a farmer has not only today, but in the future, such as generating higher yields, lowering carbon emissions per ton of crop, reducing food loss and waste, and enhancing biodiversity.”
While companies looking to introduce a product to a given market must comply with that country or region’s laws, the challenges faced by one set of regulations are becoming a more global issue.
“There is no doubt that the agchem segment will continue to come under regulatory and consumer pressures going forward and this is particularly acute in the European Union that has adopted a Farm to Fork strategy,” Liew says. “It calls for a 50% reduction in chemical pesticide and a 20% reduction in chemical fertilizers usage by 2030.
“The EU is at the same time working on and pushing for a ‘mirroring clause’ where they want farmers from outside the EU growing food for exports to the EU adopt their crop inputs regime allowed for EU farmers,” Liew continues. “It means that whatever chemical pesticides that they banned will not be permitted to be used by farmers overseas if their crops are to be exported to the EU. Hence the regulatory pressure faced by farmers in the EU will have wider geographical implications.”
“The U.S, faces its own regulatory challenges. According to CPDA’s Rawlins non-governmental organizations have been using the Endangered Species Act against the Environmental Protection Agency to make it more difficult for new chemicals to enter the market. Despite the challenges, there are opportunities for companies that understand and manage the changes.
“For crop protection companies, the winners will be those who can best navigate the regulatory labyrinth created by three federal statutes and three federal agencies,” Rawlins says. “For basic research companies, success means an early stage focus on outcomes. Can we get our product through the new ESA/FIFRA tangle with a registration that has a reasonable return on our investment? If not, many products will die in the laboratory.”
Manufacturers aren’t the only members of the ag supply chain who can benefit from the new reality.
“For agricultural retailers, opportunities abound for those that can navigate the ESA/FIFRA new normal on behalf of their customers,” Rawlins says. “This means having a field-by-field knowledge of each customer and knowing precisely where ESA restrictions exist and where they don’t. With that information in hand, they can direct them to the products they can use without restrictions. And for products with restrictions, advising them on the mitigation measures needed to allow affected products to be applied.”
Despite the uncertainty Rawlins remains optimistic.
“Feeding a growing planet will require another green revolution that produces more on fewer acres while protecting species, improves water quality and soil health while simultaneously addressing climate concerns,” he says. “We have this.” •