Regional Growth Opportunities in the Crop Protection Industry
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Editor’s Note: This article will outline three significant developments in the crop protection industry in each of the key global regions, looking at: Europe, North America, Latin America, Asia, and India. These opportunities outline factors that will currently, or in the near future, influence the value of the crop protection market in these regions, providing an overview on potential impacts.
By Derek Oliphant
Co-Founder AgbioInvestor
Europe
Innovation Within Conventional Chemistries
The rate of product loss has accelerated in Europe in recent years with many products from important classes of chemistry losing registrations, including key neonicotinoid insecticides and broad-spectrum organophosphate insecticides. This has led to widespread implementation of emergency use authorizations to tackle outbreaks of particular pests for which there are few alternative control options, such as the case with cabbage stem flea beetle (CSFB) in oilseed rape, in particular. The table below outlines some of the major insecticide crop protection products to be regulated out of the market in recent years.
Within herbicides, non-selectives, such as glufosinate and diquat have long since left the market, leaving glyphosate as the last remaining broad spectrum, non-selective herbicide. In September 2023, the European Commission proposed that EU countries authorize the renewal for glyphosate for another 10 years, but the road ahead remains uncertain, potentially meaning that there could be a further loss of a widely used tool for food production in the region, with no single replacement product on the horizon.
For fungicides, the situation is similar in recent years, with the loss of several key products, particularly those with broad-spectrum activity and low cost, such as the EBDCs (ethylene bisdithiocarbamate) mancozeb, thiram, and propineb. There has also been the loss of key active ingredients within the SBI: triazoles, as well as prochloraz (SBI: Imidazoles) and fenpropimorph (SBI: Morpholines).
Although copper fungicides are significant products in Europe, particularly in viticulture, and hold EU registrations, they have been marked as candidates for substitution in the region, meaning that if any product with a similar spectrum of action and efficacy can be demonstrated to be effective in the same crops, then the product registration should be denied. Given the low cost, broad spectrum and multisite nature of copper fungicides, it seems unlikely that a suitable substitution is available at this time. However, permitted usage rates have been lowered in recent years.
Concerns over heavy metal accumulation has led to significant debate over the safety and use of copper-based products, particularly in organic cultivation where relatively few disease control options exist. As such, copper has attracted regulatory concerns primarily due to its tendency to accumulate in soils. As copper salts are generally perceived as natural products, they are often approved for use in organic production systems, where they are used in significant volumes.
Clearly, the scale of product removals from the EU market provides market opportunities for alternatives with a recent example of strong success in this area being the introduction of mefentrifluconazole for Septoria control in cereals, where existing triazoles, such as epoxiconazole, have been regulated out of the market.
Biologicals
Sustainability targets and loss of conventional pesticides is likely to create further opportunities for the launch of the most efficacious biopesticides (biocontrol agents) and biostimulants in Europe.
Targets to reduce overall pesticide usage and increase the organic farming area are likely to further stimulate the development of the sector in Europe. Although the regulatory landscape remains complex for biologicals, the potential for gaps in the market to emerge in conventional crop protection, coupled with increasing investment and scale, is expected to continue driving the uptake of new bio-based products. Increasing M&A and licensing activity by the large multinational agrochemical companies is likely to drive innovation and new product launches over the next decade. This will potentially have the impact of making it harder for smaller independent biologicals companies to enter the market.
For biostimulants, the fertilizer reduction targets that are part of the Farm to Fork Initiative are expected to aid growth of the market. However, while Europe has made great strides toward adopting more consistent regulatory processes and definitions for biostimulants, particularly which components fall under the regulations, and the need for efficacy studies, this ultimately increases the overall complexity of bringing new biostimulants to the market in the region. The benefits of such developments in biostimulants regulation do, however, come with the benefit to growers of greater transparency of product composition and efficacy. As with biopesticides, the market will likely become increasingly competitive as consolidation of biological companies continues, and as the industry majors build scale, market reach, and innovation in this segment.
Although conventional chemistry R&D, and indeed chemical crop protection as a whole has undergone increased scrutiny in Europe in particular, there will still remain a need for the use of many existing AIs. There will be opportunities for the complementary usage of both biological and conventional products, either as part of overall spray programs across a season; in tank mixes; or in combination hybrid products. Innovation will play an important part here, with investment in developing the most complementary formulations and efficacious products being a prerequisite for future company growth in biologicals.
Digital / Precision AG
Pesticide and fertilizer reduction targets in Europe also have the potential to create opportunities for the further adoption of digital and precision ag technologies. Pesticide volume reduction targets and the uptake of variable rate application methods have created some concern within the industry related to the overall impact on product revenues, however the effects are expected to be at least partially offset by overall increases to the cost per unit application supported both by higher priced formulations and by the marketing of closed transfer systems.
The below charts show the application rate (g/ha) and cost per hectare ($/ha) for key herbicides by year of active ingredient introduction. The trend for more recently introduced herbicides appears to indicate that despite a drop off in application rates for newer products, these newer products are typically being positioned at a higher cost per hectare.
Digital ag also has the potential to create opportunities for companies to target product recommendations of novel conventional chemistries and biological products. Digital agronomy services can provide tailored crop protection control options for growers, and there is the potential opportunity for companies to use these platforms to exclusively market their own, or their licensing partners’ products.
The digital ag market has been shown to be highly competitive in recent years, particularly in the most developed ag economies such as Europe and the U.S. A key consideration for smaller crop protection companies in particular will be to target outward licensing of intellectual property into such systems in a bid to enhance market access and scale.
North America
Herbicide Resistance
Herbicide resistance development in weeds continues to be a significant issue in crop cultivation around the world. Despite this, no new herbicidal modes of action had come to the market in around 30 years, until very recently. Driving this lack of innovation has been the increasing importance of GM herbicide tolerant crops such as Roundup Ready (glyphosate tolerant) and LibertyLink (glufosinate tolerant), and conventional varieties such as Clearfield (imidazolinone tolerant) and TT (triazine tolerant). This, combined with the rising cost of discovery and development of new crop protection molecules, has impacted the market for selective herbicides, dissuading research in this field.
According to the International Herbicide-Resistant Weed Database, there are currently 523 unique cases (species x site of action) of herbicide resistant weeds globally, with 269 species (154 dicots and 115 monocots). Weeds have evolved resistance to 21 of the 31 known herbicide sites of action and to 167 different herbicides. Herbicide resistant weeds have been reported in 99 crops in 72 countries, including the U.S. and Canada. The table below lists the number of species resistant to each site of action.
A recent survey conducted by the Weed Science Society of America identified the top 10 most common and most troublesome weeds among broadleaf crops, fruits, and vegetables in North America in 2022. Included in the results are a number of weed species, which have developed resistance to at least one herbicide.
*Includes alfalfa, canola, cotton, fruits & nuts, peanut, pulse crops, soybean, sugar beets, vegetables-cole crops, greens; vegetables-cucurbits; vegetables-fruiting; and vegetables-other.
Recent examples include the confirmed presence of Group 14 (PPO inhibitor) resistance in common ragweed in Ontario, Canada, while in the U.S., a recent study by researchers at North Dakota State University indicated that some kochia populations have likely developed resistance to two commonly used herbicides, carfentrazone, and saflufenacil.
As can be seen from the above table, herbicide-resistant weeds are prevalent across a number of crops throughout North America. In the U.S., some of the highest numbers of herbicide-resistant weeds have been recorded in maize and soybean crops, at 28 species each. High numbers of resistant weeds have also been found in rice, wheat, and cotton. In Canada, many resistant weeds have been identified in maize and wheat, with soybean, spring barley, and canola also affected.
Despite rising discovery and development costs and the wide adoption of GM herbicide tolerant crops, a significant selective herbicide market has continued to develop in crops where no herbicide tolerant solutions exist, while glyphosate resistance development has necessitated the application of other modes of action in RR crops. A clear opportunity exists for companies who can bring novel herbicides to markets in which resistance development has occurred.
The table below highlights examples of herbicides claiming new modes of action (MOAs) recently launched or in the development pipelines of research-driven organizations.
New Uses on Herbicide-Tolerant Crops
There also exists potential for companies to position their products for use in crops containing tolerance traits, particularly as herbicide-tolerant weeds become an increasing issue. The use of these technologies has become widespread in countries such as the U.S., where 93% of the total maize crop and 95% of the soybean crop utilizes some form of GM technology. The resultant increase in use of the products associated with these tolerance traits (e.g., higher glyphosate use associated with the utilization of Roundup Ready crops) has in some cases contributed to a rise in the number of weeds developing resistance to these products. Consequently, growers employing these trait systems may need to use alternative existing herbicide technologies in an effort to effectively control weeds.
As an example, the crop protection company Albaugh recently received approval from the U.S. EPA for the herbicide Caballero (clopyralid / flumetsulam), with the product registered for use on herbicide-tolerant (including Roundup Ready or LibertyLink) and conventional field maize and silage maize.
Source: USDA, Economic Research Service using data from USDA, National Agricultural Statistics Service (NASS), June Agricultural Survey
There remain opportunities in the market for herbicides that can gain registrations for use on herbicide tolerant corps, or that can act as then herbicide component of tolerance traits. For example, Bayer and Sumitomo Chemical are jointly developing a PPO herbicide tolerance trait system together with the herbicidal component, with market introduction anticipated by 2028.
The table above shows the most significant application types for nematicides across North America. As can be seen, fumigants remain the leading method of nematode control in the region, although seed treatment use is becoming increasingly important. This reflects the increasing spend by growers to protect high-value GM seed, which is widely adopted across North America. In addition, many commercially available GM seed products have several treatments pre-applied, with nematode control increasingly becoming a more desirable part of the overall seed protection package.
New introductions, such as fluazaindolizine from Corteva and cyclobutrifluram from Syngenta, are expected to drive growth in the nematicide market in the coming years, with nematodes being a significant pest in a number of high-value crops, such as maize and soybean, which are notoriously difficult to control effectively. Seed treatment use could be a key driver of future growth for these products, with nematodes increasing in importance in key markets such as the USA.
Opportunity potentially exists for non-fumigant active ingredients with curative control of a wide range of species. Fluopyram and Bacillus firmus, both widely used seed treatment AIs, are labelled primarily for suppression of nematodes but are not generally applied to soil for direct control. In extreme infestations, growers often turn to fumigants for curative nematode control, however methyl bromide is now removed from the market and combinations of 1,3-D, chloropicrin and/or metam are now commonplace, but with restrictions on usage to protect groundwater. A new in-furrow product with curative activity could potentially benefit from the lack of competition in the field crop sector as a result.
Latin America
Over the short term, Agbioinvestor expects growth in South America to be led by countries where further market development is anticipated, and by countries where the market is expected to continue to expand based on a continuation of recent growth drivers, specifically Brazil. Some key opportunities in the region arise from continued market growth of developing markets with continued demand for exports, including maize and soybean as well as fruit and vegetables; increased pest pressure due to weather conditions; and an increasing focus on biological crop protection products.
Growth in Brazil
Sustained growth in value and increases in planted areas for key crops within Central and South America present an opportunity in the crop protection market. Recent estimates from the Brazilian Ministry of Agriculture suggest that the gross value of agricultural production (GVP) in Brazil will increase by 5% in 2023 to R$1.249 trillion (approximately $238 billion), which, if realized, would represent the highest value achieved since records began. The value of crop production in Brazil is expected to increase by 8.9% to reach R$887.7 billion (approximately $168 billion), with soybean and maize crops expected to contribute most significantly to growth, representing 43.6% and 18.3% of total crop GVP respectively. Growth is also projected for rice, banana, potato, cocoa, beans, oranges, and cassava. This is expected to be supported by favorable weather conditions in crop production regions in the North and Northeast, Midwest, and South. In terms of planted area in Brazil, increases are forecast for several key crops. In the most recent and final forecast of 2023 for the planted area and production of major crops, the Ministry of Agriculture outlined higher expectations for the areas of wheat (+11.8%), soybean (+6.2%), cotton (+4%) and maize (+3.2%). With sustained growth in the value and planted areas for key crops in Brazil, there is likely to be an increased demand for crop protection products. As the agricultural sector expands and the production of key crops increases, farmers will require effective solutions to protect their crops from pests, diseases, and weeds. Crop protection companies can capitalize on this growing demand.
Pest Pressure
Pest pressure is expected to boost crop protection usage in Central and South America. In Brazil, pressure from key pests such as Asian soybean rust and corn leafhopper have been an issue this season, while in Argentina, high Fusarium pressure was detected in wheat in some regions. According to a survey conducted by Sindiveg, during the first quarter of this year, the Brazilian crop area treated with pesticides increased by 13.4%, due to a 4% larger soybean area and greater pest pressure. Sindiveg also reported that incidences of corn spittlebug have increased by 177% over the past two years, with this pest reported to be responsible for significant losses in previous maize harvests, including impairing ear development, resulting in the disease known as the stunting complex. In addition to corn leafhopper, rust, and stink bugs (soybeans), whiteflies and boll weevils (cotton), and white mold (beans) were also noted to be significant pests impacting cultivation in those crops. The need to control these pests creates an opportunity for the crop protection market in the management of this rising pest pressure.
Biological Opportunities
The Central and South America region accounts for more than 20% of the total biopesticide market value, second only to Asia Pacific and growing at a rate higher than that of Europe and North America, having increased by more than 19% in U.S. dollar terms year-on-year in 2022. This growth has been driven by high agrochemical pricing, supporting biological market uptake, and higher planted areas for most crops, as well as increased pest pressure due to weather conditions. Biopesticide usage on fruit and vegetables in markets in countries such as Peru, Chile, and Mexico has been driven by demand for high-value fruit and vegetables for export, particularly with Mexico from its position as a key exporter of this produce to the U.S. The biopesticide market in Central and South America is expected to continue to expand over the coming years, reflective of positive changes in grower sentiment toward biological products and an increased focus on usage in row crops.
Asia
Proliferation of GM Seed Technologies
The uptake and utilization of GM seed technologies in the Asia Pacific region is expected to increase in the near to mid-term, driven predominantly by increased adoption in China following recent approvals for commercial cultivation of GM maize and GM soybean varieties, and to a lesser extent by increased utilization of GM technologies in Indonesia, Vietnam, and the Philippines.
In terms of the prospects for the crop protection market, this could be a negative factor for overall value development, as GM usage is generally associated with a transition toward usage of lower cost broad spectrum weed control strategies based around glyphosate. However, as has been observed with the proliferation of GM technologies in the Americas, increased GM utilization correlates strongly with uptake of seed treatment products, as highlighted in the chart below.
Manufacturers of seed treatment products are likely to benefit from the pending increase in GM utilization in China, with Syngenta particularly well positioned. The company currently has the most valuable seed treatment portfolio and can also benefit from its position in the Syngenta Group following the 2020 consolidation of the Chinese state-owned entities Sinochem Group and the China National Chemical Corp (ChemChina).
Changing Dietary Demands
Changing dietary habits in the Asia Pacific region, driven predominantly by economic development and increased household incomes, have the potential to alter crop protection usage in the coming years. The OECD’s projections for meat consumption over the next five years indicates the fastest growth in the Asia Pacific region, most notably in China. Increased demand for meat products is expected to have a pull through effect on feed crop demand, specifically maize and soybean, supporting crop commodity prices and the crop protection market.
Increased demand for feed crop commodities is expected to present opportunities for major producers such as the U.S. and Brazil to the benefit the crop protection market. However, with respect to the Asia Pacific region, recent softening of trade restrictions between Australia and China is likely to drive export opportunities for Australian growers. Furthermore, local production is also likely to grow in response to increased demand for feed crops in efforts to alleviate the reliance on imported produce, further supporting local crop protection markets.
Demand for locally produced fruit and vegetable crops is also expected to increase, further supporting the development of local crop protection markets.
Internet of Things and Adoption of Digital Agriculture
The use of advanced disruptive technologies within agriculture is politically favored in many of the key markets in the Asia Pacific region, most notably in Japan and China, in order to address challenges such as labor shortages due to aging populations and increased urbanization, as well as to improve yield performance and production efficiency.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes numerous signatories from the Asia Pacific region, contains within it policies to address decreases in human resources, including subsidies for those who implement the use of new technologies in farming machinery, such as drones.
Furthermore, the Japanese government recently published its Green Food System Strategy (GFSS), which is a cross-discipline initiative designed to improve environmental, social, and economic outcomes throughout supply chains through to 2050. Contained within the policy are measures to reduce by 50% the risk-associated with pesticide use, which is expected to be supported by policies that promote the use of drones in pesticide applications.
The graph below illustrates Japan’s Ministry of Agriculture, Forestry and Fisheries figures for crop areas treated by drones for the period between 2016 and 2020. Over the period the total crop areas treated by drones increased by an average rate of 264% per annum, and the government indicated its intention to increase drone treated areas to over 1 million hectares.
Furthermore, between 2019 and 2022, the MAFF has increased the number of pesticide products registered for drone applications from 646 in 2019 to 1,050 in 2022, representing an increase of over 62%. In 2022, the rice and barley crop sectors accounted for 54% of pesticide products registered for drone use, with vegetables accounting for 24%, indicating demand for products in these crop sectors, and as such companies could look to develop formulations that are suited to drone applications for these crop sectors.
India
The chart below highlights the 10-year compound annual growth rates of the crop protection market in the leading Asia Pacific country markets. As can be seen, India has achieved the most significant rates of average annual growth over the last decade, while the market in Japan has declined in value during this timeframe.
This growth, which has been driven by a number of contributing factors, is anticipated to continue in the coming years, providing significant opportunity for companies with activity in the country. Here will discuss three significant drivers in the expectations for future growth.
Increased Intensity of Product Usage
Growth in the Indian market has benefited from rising demand for domestically grown crops, increased government support for agriculture, and economic growth. This has resulted in an increase in intensity of product usage, with a higher number of farmers being able to afford crop inputs. However, as it currently stands, the crop area in India, which is treated with crop protection inputs is still very limited, lagging some way behind other leading crop protection country markets. The figures below highlight the disparity in planted areas and crop protection product usage between India and other Asian countries.
The charts show that in the case of rice, while India has the highest planted area, only Thailand and Pakistan of the major crop protection markets in the region have a lower average spend per hectare on the crop. For cereals, India also has the highest planted area, however, spend per hectare is lower than all other major Asian crop protection country markets.
The table below shoes the value potential that could be unlocked in the Indian market if spend per hectare was the equivalent to that of China.
*If India’s spend per hectare on crop protection products was at the same level as China’s, the value of the market would increase significantly
Clearly as Indian growers become more technologically savvy and move toward increased usage of crop protection products, as expected, there is significant value potential simply from treating more of the crop, and/or super-treating more area with multiple sprays. This can be expected to also result in improved yields and could unlock vast potential for Indian growers in producing higher exportable surpluses, to the benefit of both the ag economy and the overall economy in the country.
Technification in Agriculture
Agricultural practices in India have undergone a significant shift in recent years, with more focus being placed on the utilization of modern technologies, including e-platforms, drones, and field mapping, stemming from the benefits of labor saving and increased responsiveness to grower requirements.
The 2020 pandemic led to widespread labor shortages and concerns over food security in the country, and it is from these concerns that the use of technologies such as satellites, remote sensing and drones accelerated rapidly in efforts to improve tracking of planting progress, areas, crop health, weather, and pest incidences. There was also a rapid uptake in the use of e-platforms, with the traditional face-to-face interaction between grower and retailer or agronomist being curtailed by lockdown restrictions. This has led to a shift in purchasing patterns in many cases, with growers now more readily purchasing from e-retail platforms, and agronomic advice being provided online.
This increasing focus on precision and digital technology and the labor shortages caused by the pandemic, coupled with a general decline in the average farming age and increased tech-savvy population, accelerated the modernization of Indian agriculture, which had been hampered somewhat by widespread use of low-cost generic agrochemicals and relatively inexpensive labor. There has also been rapid advancement in the use of drones, both for scouting and for pesticide application.
India has adopted a series of measures to promote the country’s emerging drone industry and has expressed a desire to become a global drone hub by 2030. These measures include:
- The establishment of the production-linked incentive (PLI) scheme for drones and drone components.
- A ban on drone imports, except for R&D, defense, and security purposes.
- Implementation of the Drone Shakti initiative to support drone start-ups and promote the drones-as-a-service business model.
In 2021, the Indian government released its standard operating procedure (SoP) for using drones to spray pesticides on agricultural crops. The SoP for drone regulation covers aspects such as statutory provisions, flying permissions, distance restrictions, weight classification, overcrowded area restrictions, drone registration, safety insurance, piloting certification, operation plan, air flight zones, and weather conditions.
India has approved several active ingredients for application via drone, with the key active ingredients being listed below.
Product Choice
While low-cost commodity products have long been a mainstay of Indian crop protection, product choice will become more limited in the coming years. In 2020 the government issued a draft order, Banning of Insecticides Order 2020, which prohibits the import, manufacture, sale, transport, distribution, and use of 27 pesticides: acephate, atrazine, benfuracarb, butachlor, captan, carbofuran, chlorpyriphos, 2,4-D, deltamethrin, dicofol, dimethoate, dinocap, diuron, malathion, mancozeb, methomyl, oxyfluorfen, pendimethalin, quinalphos, and sulfosulfuron. An addendum was later applied allowing the manufacture of these 27 pesticides for export purposes. A similar draft order has also been issued for the fungicide tricyclazole and the insecticide buprofezin. In addition, the Government of Punjab ordered a ban on the sale and use of nine agrochemicals, aimed at protecting the quality of paddy rice, with immediate effect. The ban prohibits the order, sale, stocking, distribution, and use of acephate, triazophos, thiamethoxam, carbendazim, tricyclazole, buprofezin, carbofuran, propiconazole, and thiophanate methyl. These moves could accelerate adoption of newer, higher-priced technologies in the crop protection sector, to the benefit of the overall value.
Improved intellectual property legislation, which incentivizes the introduction of proprietary technologies should also bring value to the market, with any product patented post-1995 gaining additional protection in the form of companies having to gain manufacturing approval from the registration holder. This has led to a positive environment for the introduction of new products and has helped to alleviate some issues of resistance to older chemistries.
Resistance development also provides opportunity for new products, with brown planthoppers showing resistance to commonly used neonicotinoids such as imidacloprid, fipronil, and ethiprole. The growth in IPM programs and the use of resistant hybrids has led to some shift in insecticide use; however, key pests such as leaf rollers, stem borers, and nematodes remain as significant issues. Recent introductions, which have been introduced to good success, include UPL’s Imagine (flupyrimin) for the control of rice stem borer and brown plant hopper; and Nihon Nohyaku’s Orchestra 10 SC (benzpyrimoxan) for the control of planthoppers and leafhoppers, also being observed to target species that have built up resistance to existing products.
The cultivation of Bt cotton crops, is widespread in the country, with the Indian Department of Agriculture & Farmers Welfare estimating that over 90% of the country’s total area consists of these varieties. However, there have been reports that the insect pest pink bollworm is no longer fully controlled by Bt insect-resistant traits. This situation may benefit the cotton insecticide market in the coming years.
To summarize, crop protection product choice is expected to shift in the country in the coming years, driven by older products being regulated out of the market; improved intellectual property legislation incentivizing the introduction of patented products; and increasing problems related to resistance development, requiring alternative control methods. •