Agrochemicals

AgrochemicalsBy-Akanksha Gupta(06)

Isha Sharma(27)MBA (oil & gas),

UPESBatch :– 2012-2014

• Agrochemical (or agrichemical), a contraction of agricultural chemical, is a generic term for the various chemical products used in agriculture.

• refers to the broad range of pesticides, including insecticides, herbicides, and fungicides.

• also include synthetic fertilizers, hormones and other chemical growth agents, and concentrated stores of raw animal manure.

• Government-issued permits for purchase and use of approved agrichemicals may be required. Significant penalties can result from misuse, including improper storage resulting in spillage.

Agrochemical

The growing importance of agrochemicals • The agrochemicals industry is developing a

growing range of products designed to help produce more and better food for today’s hungry world.

• Innovative solutions can enable farmers to increase yields, preserve crops from pests, diseases and weeds, and take advantage of the latest developments in gene-splicing technology.

• More people and a shift to Western diets• Growing pressure on food resources• Rising food prices and shortages• Innovations in today’s agrochemicals• Industry trends

World’s Six biggest Agrochemical Industries

Global Market-Overview

• Overall sales were nearly $105.6 billion in 2008 which increased further to $119.6 billion in 2009.

• By 2014, it is projected to increase to $196 billion, for a 5-year compound annual growth rate (CAGR) of 10.4%.

• The fertilizers market was nearly $59 billion in 2008; this further increased to $68.4 billion in 2009, this projected to reach $117.8 billion in 2014, for a 5-year CAGR of 11.5%.

• Sales in the pesticides market amounted to $46.7 billion in 2008 which increased to $51.2 billion in 2009.

Contd..

• This is projected to increase to $78.3 billion in 2014, for a 5-year CAGR of 8.9%.

Indian Market – Overview

• India is the fourth largest producer of agrochemicals globally, after United States, Japan and China.

• The Indian agrochemicals market grew at a rate of 11% from USD 1.22 billion in FY08 to an estimated USD 1.36 billion in FY09.

• India’s agrochemicals consumption is one of the lowest in the world with per hectare consumption of just 0.58 Kg compared to US (4.5 Kg/ha) and Japan (11 Kg/ha).

Contd..

• Indian population is increasing and the per capita size of land decreasing, the use of pesticides in India has to improve further.

• Also the exports by the Indian Agrochemicals Industry can be doubled in the next four years if proper strategies and sophisticated technologies are adopted by the industry.

• The Indian agrochemicals market is characterized by low capacity utilization.

• The total installed capacity in FY09 was 146,000 tons and total production was 85,000 tons leading to a low capacity utilization of 58%.

Contd..

• The industry suffers from high inventory (owing to seasonal & irregular demand on account of monsoons) and long credit periods to farmers, thus making operations ‘working capital’ intensive.

• India due to its inherent strength of low-cost manufacturing and qualified low-cost manpower is a net exporter of pesticides to countries such as USA and some European & African countries.

• Exports formed ~50% of total industry turnover in FY08 and have achieved a Compounded Annual Growth Rate (CAGR) of 29% from FY04 to FY08.

Key Segments

• Insecticides: Insecticides are used to ward off or kill insects. Consumption of insecticides for cotton has come down to 50% from 63% of total volume after introduction of BT cotton.

• Fungicides: Fungicides are used to control disease attacks on crops. The market share of fungicides has increased from 16% in 2004 to 20% in 2009.

• Herbicides: Herbicides are the fastest growing segment of agrochemicals. Their main competition is cheap labor which is employed to manually pull out weeds. Sales are seasonal, owing to the fact that weeds flourish in damp, warm weather and die in cold spells.

Contd..

• Bio-pesticides: Bio-pesticides are pesticides derived from natural substances like animals, plants, bacteria and certain minerals.

• Others: Plant growth regulators, Nematocides, Rodenticides, Fumigants etc. Rodenticides and plant growth regulators are the stars of this segment.

Market Trends• Focus on developing environmentally safe

pesticides by the industry as well as the Government - The Department of Chemicals has initiated a nationwide programme for “Development and production of neem products as Environment Friendly Pesticides” with financial assistance from United Nations Development Programme (UNDP).

• Focus by larger companies on brand building by conducting awareness camps for farmers and providing complete solutions.

• Increase in strategic alliances among large players for greater market reach and acquisitions of smaller companies globally to diversify product portfolio. Example: Rallis has a marketing alliance for key products with FMC, DuPont, Syngenta, and Bayer.

Technology Trends

• Increased R&D expected for development of new molecules and low dosage, high potency molecules.

• Focus on R&D in bio-pesticides segment with increasing preference for environmentally safe products in the market.

• The lack of patents deprived the Indian agriculture sector from the benefits of newer and more effective pesticides, India developed competencies in the generics market and is now a net exporter of pesticides.

Key Challenges

1. High R&D costs: R&D to develop a new agrochemical molecule takes an average of 9 years and ~ USD 180 Mn Indian companies typically have not focused on developing newer molecules and will face challenges in building these capabilities, while continuing to remain cost competitive.

The overall costs of discovery and development of a new crop protection product increased by 21.1 percent, from US$152 million in 1995 to US$ 256 million in 2008.

For development, the greatest rise was seen in the costs of field trials, which were shown to have risen by 116 percent from 2000 to US$54 million in 2008.

Contd…

2. Threat from Genetically Modified (GM) seeds: Genetically modified seeds possess self-immunity towards natural adversaries which have the potential to negatively impact the business of agrochemicals. 3. Need for efficient distribution systems: Companies have been directly dealing with retailers by cutting the distributor from the value chain thereby reducing distribution costs, educating retailers on product usage and offering competitive prices to farmers.

Contd..

4. Support for Integrated Pest Management (IPM) & rising demand for organic farming: Promotion of IPM, zero budget farming and usage of bio-pesticides by Indian Government and NGOs is gaining momentum.

5. Counterfeit Products: The spurious pesticides market size in India is estimated to be USD 233 Mn in 2009. This negatively impacts the revenues of the organized sector.

Pesticide Formulation

• A pesticide formulation is a mixture of chemicals which effectively controls a pest.

• Formulating a pesticide involves processing it to improve its storage, handling, safety, application, or effectiveness.

Definitions

• Active Ingredient (Ai) - the actual chemical in the product mixture that controls the pest

• Inert Ingredient - other materials added with the AI when the product is formulated

• Phytotoxicity - plant damage

• Adjuvant - product added to spray tank to assist pesticide in its application

Some Formulations

• A - Aerosol• B - Bait• D - Dust• DF - Dry

flowable• E, EC -

Emulsifiable concentrate

• FL - Flowable• G - Granule• M -

Microencapsulated

• P - Pellet• RTU - Ready-to-

use• SP - Soluble

powder• ULV - Ultra-low-

volume concentrate

• WP - Wettable powder

• WDG - Water-dispersible granule

Contd..

• The pesticide formulation is a mixture of active and other ingredients (previously called inert ingredients).

• An active ingredient is a substance that prevents, kills, or repels a pest or acts as a plant regulator, desiccant, defoliant, synergist, or nitrogen stabilizer.

• Pesticides come in many different formulations due to variations in the active ingredient’s solubility, ability to control the pest, and ease of handling and transport.

Major players in the industry

• BASF SE is the largest diversified chemical company in the world headquartered in Ludwigshafen, Germany

• It is currently expanding its international activities with a particular focus on Asia

• The company produces fungicides, herbicides and insecticides and also researches on Nutrigenomics (the study of the effects of foods and food constituents on gene expression)

• In May 2009, an accidental discharge of chromium from BASF Plant in Hannibal, Missouri into the Mississippi River contaminated the drinking water. BASF worked with the Missouri Department of Natural Resources (MoDNR) to resolve questions regarding the elevated chromium level.

BASF – Environmental record

• In 2006 BASF was praised by the Climate Leadership Index for their efforts in problems with climate change and greenhouse gases in the world

• A large portion of their R&D budget on resource conservation

• One of their recent developments has been creating filters for wastewater treatments plants that help to reduce emissions

• Recently it has formed a partnership with Columbia University for further research on “environmentally benign and sustainable energy sources”

BASF headquarters, Ludwigshafen, Germany

DOW Chemical Company

• As of 2007, it is the second-largest chemical manufacturer (after BASF) in the world by revenue headquartered in Midland, Michigan, United States

• Its Annual R&D spending exceeds $1 billion• It is called the “chemical companies' chemical

company" since most of its sales are to manufacturers rather than end-users

• The company today has seven major operating segments, agricultural chemicals being one of them

• The Bhopal disaster is the world's worst industrial catastrophe, caused by a leak of methyl isocyanate in1984 at a pesticide plant owned by Union Carbide India Limited. The plant is now owned by DOW

DOW Products

• The Performance Chemicals (17% of sales) segment produces materials for water purification, pharmaceuticals, paper coatings, paints and advanced electronics

• Dow Chemical's water solutions business unit manufactures Filmtec reverse osmosis membranes which are used to purify water for human use in the Middle East. The technology was used during the 2000 & 2008 Summer Olympics

• Dow AgroSciences provides 7% of sales and is responsible for a range of insecticides (such as Lorsban), herbicides, fungicides and genetically modified plant seeds

DUPONT

• It’s an American chemical company that was founded as a gunpowder mill headquartered at Wilmington, US

• DuPont introduced phenothiazine as an insecticide in 1935

• The agriculture division, “Dupont Pioneer” makes and sells hybrid seed and genetically modified seed

• In 2005, DuPont was ranked as the best-practice leader in cutting the carbon gas emissions for the Climate Group

• DuPont is widely known for its sponsorship of NASCAR driver Jeff Gordon and his Hendrick Motorsports No.24 Chevrolet Impala

Original DuPont powder wagon

BAYER• It is a German chemical and pharmaceutical

company headquartered in Leverkusen, well known for its original brand of aspirin

• To separate operational and strategic managements, Bayer AG was reorganized into a holding company in Dec 2003

• The core businesses were transformed into limited companies, named Bayer CropScience AG, Bayer HealthCare AG, Bayer MaterialScience AG and Bayer Chemicals AG along with 3 service Ltd companies

• Controversies-HIV infected blood products,French & Nova Scotian beekeepers claim Bayer's seed treatment imidacloprid kills honeybees, Bayer's anticholesterol drug Baycol killed 52 peopleAdvertisement

Bayer Crop Science

• Bayer CropScience is one of the world's leading innovative crop science companies in the areas of crop protection, nonagricultural pest control, seeds and plant biotechnology.

• In addition to conventional agrochemical business, it is involved in genetic engineering of food

• It is involved in a joint project with Archer Daniels Midland Company and Daimler AG to develop jatropha as a biofuel

• In 2006, the U.S. Department of Agriculture announced that Bayer CropScience's LibertyLink genetically modified rice had contaminated the U.S. rice supply. In 2011 the co. agreed to a global settlement for up to $750 million

SYNGENTA• Headquartered at Basel, Switzerland it is a large

global Swiss specialized chemicals company which notably markets seeds and pesticides. It is involved in biotechnology and genomic research

• It was formed in 2000 by the merger of Novartis Agribusiness and Zeneca Agrochemicals

• The company is a leader in crop protection, and ranks third in total sales in the commercial agricultural seeds market

SYNGENTA (Contd.)• Syngenta has eight primary product lines:

Pesticides: Selective Herbicides Non-selective Herbicides Fungicides Insecticides Professional Products

Seeds: Field Crops Vegetables Flowers• In 2003, more than half of Syngenta sales came

from selective herbicides and fungicides

MONSANTO

• Headquartered at St. Louis, Missouri it is an American multinational agricultural biotechnology corporation

• It is the world's leading producer of the herbicide glyphosate which is used to kill weeds

• Mosanto was the first to genetically modify a plant cell in 1982, the first to conduct field trials of genetically modified crops in 1987, and awarding of the 2001 Nobel Prize in Chemistry to William S. Knowles for his research

• It brought into agriculture the standard biotechnology industry business model