{"id":56808,"date":"2016-01-05T11:41:59","date_gmt":"2016-01-05T16:41:59","guid":{"rendered":"https:\/\/www.agribusinessglobal.com\/?p=56808"},"modified":"2021-06-14T15:36:17","modified_gmt":"2021-06-14T19:36:17","slug":"handling-the-bumps-in-the-road","status":"publish","type":"post","link":"https:\/\/www.agribusinessglobal.com\/zh\/agrochemicals\/handling-the-bumps-in-the-road\/","title":{"rendered":"\u5904\u7406\u8def\u4e0a\u7684\u98a0\u7c38"},"content":{"rendered":"
\"Monsanto

Monsanto is gearing up to reinvigorate its crop protection division in India, and will seek to participate at a higher rate there. And, after years of focusing on seeds and traits, \u201cwe are looking at Africa in a totally fresh vein.\u201d –Louis Lucas, Monsanto<\/p><\/div>\n

The crop protection industry is not immune to the realities of this year\u2019s \u2013 and likely next year\u2019s \u2013 global economic challenges, but the dark clouds should not overshadow the bright prospects. There\u2019s a befitting quote by Winston Churchill: \u201cA pessimist sees the difficulty in every opportunity, but an optimist sees the opportunity in every difficulty.\u201d<\/p>\n

Adjusted for U.S. dollars, the industry has enjoyed robust growth the past few years at about 6%. That growth is expected to slow to about 3% during the next five years, as tough macroeconomic conditions including lower commodity prices and currency fluctuations continue to pressure the market, Dr. Bob Fairclough, head of Kleffmann Group\u2019s amis AgriGlobe service, told attendees at the FCI Business Seminar in Shennongjia, China.<\/p>\n

Louis Lucas, Global Glyphosate and Acetochlor Lead with Monsanto, said in an interview with AgriBusiness Global<\/em> in December, \u201cCorn [prices] have basically been cut by greater than half in the last two-and-a-half years and taken money out of system; growers around the globe are adjusting to those economic realities. Everybody is making adjustments, from cutting back in their herbicide program to changing to more economical insect-protection programs, and everything from seeding to fertilizer rates have been impacted.\u201d He reminded, \u201cAnybody who looks at the long term and the need for food and fiber as the population continues to expand, sees that demand is going to be there. Ag is still a good place to be. Right now we\u2019re going through the bumps and valleys of a cyclical business, and we all feel it.\u201d<\/p>\n

Ignacio Dominguez, Chief Commercial Officer, Adama, echoed Lucas: “The structural fundamentals underlying our industry remain strong: The growth of world population and the decrease in arable land are ongoing mega-trends and they require farmers to produce more using less resources. However, agriculture is a cyclical industry, and it is currently at a low point in the cycle due to low grain prices, following several successful years during which global inventories grew to some extent. While we expect the prices to stabilize in 2016, the agriculture market conditions are expected to remain challenging, as it would appear that this difficult cycle may be around for some time.”<\/p>\n

Global market share of post-patent products has grown a couple percent each year for the last several years and could reach 80% in the next year or two. That trend should continue for the next five years, after which it is set to reverse as very few active ingredients will be available to fall off patent, according to Fairclough.<\/p>\n

But until 2020, the industry expects crop protection molecules worth $6.3 billion to fall off patent unless special protections are granted \u2013 that could be a boon for post-patent companies that can capitalize on the opportunity.<\/p>\n

Eye on Inventory<\/strong>
\nIn the shorter term, the industry is battling a channel overflowing with inventory \u2013 to the tune of six to nine months\u2019 worth \u2013 which does not bode well for pricing, according to Stephen Pearce, Head of Global Procurement for Arysta LifeSciences.<\/p>\n

It is a problem dogging the larger manufacturers with capacities upwards of 50,000 metric tons such as Fuhua and Wynca, where the tap can\u2019t simply be turned on and off, Pearce says. \u201cWhat tends to happen in China for certain molecules is that people get excited, and there\u2019s this capacity to build, and more often than not we end up in an overcapacity situation, and it does become a bit disruptive.\u201d<\/p>\n

\u201cThere\u2019s probably one exception to the rule in terms of elasticity of demand,\u201d he adds. \u201cThat\u2019s really chlorothalonil right now; that\u2019s in really short supply \u2026 Obviously the commodity markets are very soft. I think in 2016 we\u2019re in for a tough year.\u201d<\/p>\n

Global glyphosate inventories are, by and large, seasonally appropriate, according to Lucas. However, \u201cprices coming out of China are very low right now, below $3.10\/kg,\u201d he says, which delays buying decisions as people try to find the bottom \u2013 a trend seen now in North America, Europe, and even Africa. A handful of plants in China have added capacity, including Hedang, which appears to be operating at much lower than 100%, according to Lucas, and others have idled capacity.<\/p>\n

The growth rate for glyphosate has slowed to below 5% from levels well exceeding that in the last five to seven years, with global consumption expected at 820,000 to 855,000 metric tons, Lucas says. Weather will be the main variable in consumption reaching the upper end of that range in 2016.<\/p>\n

\u201c(Glyphosate) is one of the number-one purchases by farmers, and that hasn\u2019t changed in the last 12 months. There is a shift in how they\u2019re using the product because of resistance. Economics have certainly caused the grower to look very hard at their herbicide choices, and manufacturers are not immune,\u201d Lucas says. If a U.S. farmer used two applications in-crop and is now combining a residual in front of a soybean crop, for example, he may be down to 1.5 applications.<\/p>\n

\u201cGlobal demand for this product is still there,\u201d Lucas adds. \u201cI am optimistic from a volume standpoint, but it will be challenging from an income standpoint. We are managing costs very aggressively.\u201d<\/p>\n

Additionally, Lucas says, Monsanto is gearing up to reinvigorate its crop protection division in India, and will seek to participate at a higher rate there than it has in the past. In Africa, it is also reconsidering its approach due to the continent\u2019s impressive double-digit agricultural growth rates in the last five to seven years. After years of focusing on seeds and traits, \u201cwe are looking at Africa in a totally fresh vein.\u201d<\/p>\n

Brazil and Consolidation<\/strong>
\nRabobank expects the Brazilian farm inputs sector to see a \u201cslight recovery\u201d in 2016 in terms of sales volumes, but cautions that stocks and currency rate volatility will remain a risk.<\/p>\n

\"Victor

Victor Ikeda, Rabobank<\/p><\/div>\n

Increasing cases of glyphosate-resistant weeds and new pests recently identified in Brazilian fields, such as Melanagromyza sp<\/em>, Helicoverpa punctigera<\/em>, and Amaranthus palmeri<\/em>, have boosted the need for control management alternatives, according to Rabobank analyst Victor Ikeda.<\/p>\n

In facing the currency devaluation in Brazil, using extreme care in how you manage your supply chain and how you react to demand signals is crucial, says Pearce.<\/p>\n

\u201cIt\u2019s really mapping out and planning the demand cycle in a very detailed way to make sure that you\u2019ve got the optimum amount in inventory to serve your customer needs, but at the same time you\u2019ve got the optimum amounts (in transit for export) on the water. There\u2019s nothing cheaper than floating inventory. You\u2019re managing your lead times in an optimal way,\u201d Pearce advises. \u201cThat\u2019s the only way you can manage a situation where you\u2019ve got a rapidly depreciating currency, because you have to wait a long time in Brazil for your money.\u201d<\/p>\n

\"Rodrigo

Rodrigo Gutierrez, Adama<\/p><\/div>\n

Dominguez says Adama decided to take proactive steps to reduce the negative effects of the environment in Brazil, including a decision not to fulfill certain outstanding orders and thereby partially limit sales in the country. In addition to that, it reduced sales in low-margin products, which improved margins.<\/p>\n

Adama\u2019s Rodrigo Gutierrez, Vice President Brazil, added that he expects the challenging situation in Brazil to continue into early 2016. Brazilian growers\u2019 business is still profitable, despite lower commodity prices, because there was a significant increase in the exchange rate, giving them more competitiveness in their fixed costs.<\/p>\n

\u201cThe main issue growers are suffering is a consequence of the huge change in credit availability. The financing sources left the market, and once you have an investment plan and your financing source is not there anymore, you as a farmer are placed in a difficult situation,\u201d he says. \u201cI believe that the first semester of 2016 will be extremely tough, but farmers will adapt and start using more barter operations to finance themselves for the 2016-2017 season. Farmers, dealers, co-ops and Adama will have to \u2018bridge\u2019 until 2017, using a lot of common sense and goodwill.\u201d<\/p>\n

Syngenta Chief Operating Officer Davor Pisk tells AgriBusiness Global<\/em> that the company will compensate for the real\u2019s depreciation through price increases in the coming seasons. \u201cWe are selectively extending credit to some customers in the knowledge that their underlying profitability remains high,\u201d Pisk says.<\/p>\n

Yet one more factor to consider ahead: the wave of consolidation that is imminent not only among the multinationals but at all levels of the value chain, says Fairclough. Dow and DuPont unveiled their mega-merger on Dec. 11, while Monsanto and ChemChina have pitched bids to Syngenta over the last several months, unsuccessfully thus far.<\/p>\n

\u201cEverybody is very focused on consolidation right now,\u201d says Dr. Sara Olson, analyst with Lux Research in Boston, and it\u2019s likely that a second major acquisition could follow the Dow-DuPont announcement before things quiet down. And that is not necessarily a bad thing.<\/p>\n

\u201cAnything the agrochemical companies can do to consolidate and use existing value chains to lower costs, I think that\u2019s going to drive sales and give growers access to chemicals they need for potentially lower prices, which I see as a win-win for the industry,\u201d Olson says.<\/p>\n

East-West partnerships, such as the Adama-ChemChina deal, will also become more prevalent, Fairclough says.<\/p>\n

Further Down the Value Chain<\/strong>
\nIn the U.S., the picture for growers is mixed. Some new products will fill a void, while the El Ni\u00f1o weather effect inspires hope of drought relief in specialty crop-dominated California, and prices of high-value vegetables in the Southwest remain buoyant. In the row crop-ruled Midwest, the outlook is bleaker. Heftier costs to fight pest resistance and low commodity prices mean switching out brand names for generics, opting for non-traited varieties, and cutting back on insurance sprays will become more prevalent in 2016, industry experts say.<\/p>\n

\u201cGuys are going to have some tight belts for a year or so, maybe a little longer, but they\u2019re going to be better managers when it\u2019s over, and there\u2019s nothing wrong with that. But, it\u2019s too bad they have to go through economic hardship to do that,\u201d says Bruce Potter, Integrated Pest Management Specialist at the University of Minnesota.<\/p>\n

Pressure from environmental and beekeeper groups on pollinators continues to rattle the regulatory environment both in the United States and Europe.<\/p>\n

\"Dominic

Dominic Reisig, North Carolina State University<\/p><\/div>\n

U.S. Environmental Protection Agency\u2019s cancellation of sulfoxaflor \u201cis sort of a first warning shot of maybe what\u2019s to come,\u201d says Dr. Dominic Reisig, Extension Specialist at North Carolina State University.<\/p>\n

Chlorpyrifos is also on the brink: EPA has proposed to revoke all food residue tolerances for the insecticide; the comment period on the proposal runs through the end of January.<\/p>\n

In Europe, the ban on neonicotinoids has caused substantial crop losses to growers. That trend is on track to continue in 2016. One example: in the UK, oilseed rape yield lost 60,000 hectares due to pests while foliar insecticide spraying shot up four-fold, according to Copa-Cogeca.<\/p>\n

Utz Klages, spokesman for Bayer CropScience, the largest manufacturer of imidacloprid, says, \u201c(Restrictions) are not only a challenge for our customers, but also for an innovation-driven company like Bayer. Our experts in R&D are working hard to find new solutions but this will take years and outcomes are uncertain, especially with regard to the regulatory approval process, due to the still-pending requirements for registrations of seed treatment products in the European Union.\u201d<\/p>\n

New Product Watch<\/strong>
\nThe multinationals, for their part, are entering a new cycle of AI introduction and development.<\/p>\n

In 2016, new products from the Big 6 will consist heavily of premixes of old chemistries, but some big-impact technologies should finally see commercialization in the United States, pending approval of exports to China: Dow AgroSciences\u2019 2,4-D-based Enlist Duo system as well as Monsanto\u2019s competing dicamba-tolerant Roundup Ready 2 Xtend cropping system, which is paired with BASF\u2019s dicamba-based Engenia chemistry.<\/p>\n

In an eleventh-hour move in late November, EPA sided with environmental groups in a lawsuit over \u201cpotential synergistic effects\u201d between Enlist\u2019s glyphosate and 2,4-D actives on non-target plants, and acted to revoke its registration. EPA had already greenlighted the product more than a year earlier, as growers seek out much-needed alternative solutions for glyphosate-resistant weeds.<\/p>\n

\u201cIt\u2019s possible that we could see some changes to use conditions on the existing Enlist Duo label,\u201d says Tim Hassinger, Dow AgroSciences President and Chief Executive Officer. \u201cHowever, based on the ongoing dialogue with EPA, we do not expect these issues to result in the long-term cancellation of the Enlist Duo product registration. We continue to prepare for commercial sales of Enlist Duo for the 2016 growing season, with enthusiastic grower adoption.\u201d<\/p>\n

Pre-orders for Monsanto\u2019s Roundup Ready 2 Xtend system have poured in and it is on track to sell out, spokesman John Combest says. The company expects the dicamba-tolerant seed traits and herbicide system to create more than 250 million acres of incremental demand for dicamba, up from current market production capacity of around 40 million acres.<\/p>\n

\u201cWe continue planning for a capital investment of more than $1 billion in dicamba manufacturing capacity,\u201d Combest says, which would target between 80 million and 100 million acres of capacity and give the company up to 35% of the mature market.<\/p>\n

Adama’s Yossi Goldshmidt, Vice President China, India, Middle East and Africa, says the company has an extensive development plan in India, and every year it is launching two to three unique products in the country. The company also recently announced it will become the exclusive distributor in China for five domestic companies from the ChemChina group: Hubei Sanonda, Jiangsu Anpon Electrochemical, Shandong Dacheng Pesticide, Anhui Petroleum Chemical Group and Jiamusi Heilong Agrochemical. “This move will allow Adama to accelerate its entry to the Chinese market, by providing it with access to hundreds of product registrations, as well as significantly bolstering its market access, commercial network and customer reach,” he tells AgriBusiness Global<\/em>.<\/p>\n

For Syngenta, its lauded Acuron preemergent corn herbicide is projected to make a bigger impact in 2016 following its debut year, as it is tough on broadleaf weeds, which have soared 50% in the Midwest over the last four years.
\nIn Latin America, the company sees its SDHI fungicide Elatus topping $400 million sales in 2016. Soletenol, the product\u2019s active ingredient, received U.S. EPA approval in September.<\/p>\n

Syngenta\u2019s Pisk says its European business proved resilient in 2015, and in the CIS it successfully put through price increases to offset currency depreciation. In 2016, it will further expand its Hyvido hybrid barley and expects to achieve EU registration for Solatenol.<\/p>\n

Bayer CropScience has high hopes for the latest insecticide to emerge from its labs, Sivanto (active ingredient: flupyradifurone). Originally targeted at the horticulture markets, adoption in the 2015 launch year was strongest in sorghum and alfalfa; it is highly effective in controlling the newest pest in U.S. sorghum, the sugarcane aphid. With its honey bee-safe profile it will add to the range of treatment options available to growers.<\/p>\n

In November 2015, the product reached a key milestone toward a rollout in Europe with the approval of its AI by the European Commission. Sivanto has already been launched in the USA, Mexico, Nicaragua, Guatemala, Honduras, and the Dominican Republic, and received regulatory approval from the Canadian PRMA.<\/p>\n

\"\u201cIt\u2019s

Frank Rittemann, Bayer CropScience<\/p><\/div>\n

Frank Rittemann, Bayer CropScience Horticulture Product Manager, commented to Agribusiness Global<\/em> on the importance of integrated resistance management. \u201cThe industry is under more scrutiny today than it was in the past, which in many aspects is a good thing … Looking to the future, it is difficult to bring new tools as quickly as we seem to be using old. We need to make good and responsible use of the tools we have today.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

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