According to the official statistics released by Phillips McDougall, the global market size of crop pesticides from 2017 to 2021 is shown in Figure 1:
Figure 1. Global sales of pesticides for crops (unit: billion US dollars)
Source: Phillips McDougall
2017 is a key "turning year" for the agrochemical industry. During this period, most multinational giants in the first and second echelons of the world participated in mergers and acquisitions in different degrees, and the global pesticide industry pattern has taken shape. Due to the positive effects of the rebound in international crude oil prices, such as the rise in the prices of related basic materials and the improvement of weather conditions, the global sales of pesticides for crops began to rebound, with an increase of 2.7%. In the following five difficult years, the sales scale of global crop pesticide market still achieved steady growth. In 2018, the global agrochemical giants entered a new round of replenishment cycle, and the demand was gradually released. The sales of the global agricultural pesticide market was 60.3 billion US dollars, an increase of 11% year-on-year; In 2019, Asia-Pacific and Latin America were the main markets for pesticide demand, and the growth rate of Latin American market in 2019 was as high as 17.60%. On the whole, the global agricultural pesticide market leveled off in 2019 and 2018, and the development of agrochemical industry entered a low tide period.
In 2020, the COVID-19 epidemic broke out in an all-round way, and the supply chain and cost crisis, as well as the devaluation of the Brazilian real, the world’s largest pesticide country, became the main factors affecting the global pesticide market. In that year, the global sales of pesticides for crops reached US$ 62.04 billion, up 2.7% year-on-year. In the following year, in 2021, the sluggish circulation of raw materials and the shortage of logistics positions increased the production cost of agrochemical products, and the high price of bulk grain drove the enthusiasm of growers to invest in agrochemical products. The increase of cost and demand is gradually transmitted to the price of agrochemical products, which occupies a dominant position and drives the increase of market scale.
It can be seen from the above that in the past five years, the situation of the world economy and agrochemical industry is undergoing ups and downs. Market demand and the impact of supply chain cost caused by the COVID-19 epidemic are the main melody melody of the rising volume and price of agrochemical products. With the end of the epidemic in COVID-19 and the continuous warning of food security, what kind of future will the agrochemical industry face? The following article will take Syngenta Group, Bayer, BASF, Kedihua, UPL and Fumeishi as the research objects, and make a brief interpretation of their operating status in the past five years, with a view to bringing some thoughts to the industry.
I. Market and Changes of Plant Protection Business Enterprises
Figure 2. Sales of plant protection business of six multinational companies from 2017 to 2021 (unit: millions of US dollars)
Source: Financial reports of six multinational companies from 2017 to 2021 (exchange rate conversion in the same period)
In the past five years, the revenue of plant protection business of six multinational companies, such as Syngenta and Bayer, is shown in Figure 2. Syngenta and Bayer are far ahead in the sales of plant protection products, and have been firmly in the top two positions in the past five years. In 2021, they are also the only two companies with plant protection sales exceeding 10 billion US dollars. Syngenta, Kedihua, UPL and Fumeishi maintained sustained growth, while Bayer and BASF suffered some negative fluctuations in the plant protection business market in 2020, but resumed growth in 2021.
By comparing the changes of plant protection business and sales growth rate of various enterprises in the past five years, we can’t help but find several obvious changes: First, the sales growth of Syngenta’s plant protection business slowed down in 2019, but it showed a blowout growth in 2021; Second, whether the impact of supply chain and cost shocks caused by the COVID-19 epidemic in 2020 on major enterprises is different (Bayer and BASF’s sales have dropped significantly, and UPL and Fumeishi’s growth rate has slowed down); Third, the plant protection business of Kedihua has a relatively balanced growth rate.
1. Growth characteristics of Syngenta’s plant protection business
Figure 3. Details of Syngenta’s plant protection business from 2017 to 2021 (unit: million US dollars)
Source: Syngenta’s annual financial reports from 2017 to 2021.
In 2019, the growth of Syngenta’s plant protection business slowed down, with a growth rate of only 2.1% compared with the previous year. From Syngenta’s market structure, we found that the sales growth rate of fungicides, pesticides and seed treatment agents were all between 3% and 8%. The herbicide business, especially the sales of selective herbicides, decreased by 7%. Over the years, Syngenta’s herbicide business has dominated the plant protection business structure, which has slowed down Syngenta’s sales growth in that year, and the main reason behind it is that the bad weather conditions in North America delayed the arrival of the planting season in 2019, which affected the sales of products. On the other hand, the nonstandard agricultural credit environment in some parts of Eastern Europe also makes the sales of herbicides in this region decline.
In 2021, Syngenta’s plant protection business ushered in a blowout growth, with a growth rate of 18.7%. Its herbicide sales increased from $3.784 billion to $4.462 billion, an increase of 17.9%. Fungicides and pesticides also increased by 15.1% and 15.8%. Syngenta’s core growth products mainly focus on herbicides: Callisto series, Touchdown, Dual, Axial, etc. Fungicides: Amistar, Ridomi and Milravis；; And pesticide products: Actara, Durivo, Karate, etc. For example, the strong growth of the herbicide Touchdown in Latin America and Asia-Pacific has boosted the sales scale of Syngenta’s non-selective herbicides, while Milravis, as an innovative fungicide against extreme weather, has also seen strong growth in North America and China. It is worth mentioning that in 2020, Syngenta Group continued to push forward its acquisition strategy, and acquired Valagro, a biopharmaceutical company, consolidating its position in the rapidly growing biopharmaceutical market. In 2021, the sales of Varaglo biological agents reached US$ 222 million, a year-on-year increase of 282.8%.
2. The growth differences between Bayer and BASF, UPL and Fumeishi in the face of the impact of COVID-19 epidemic.
Compared with the growth of plant protection business of Syngenta and Cordihua in 2020, Bayer, BASF, UPL and Fumeishi seem to be not optimistic. From the external operation of enterprises, the production capacity of enterprises is limited due to the tight supply of global raw materials, poor circulation channels and blocked industrial chain caused by the COVID-19 epidemic. From the perspective of internal management of enterprises, labor costs and shortages have affected the product structure of enterprises. Although Bayer, BASF, UPL and Fumei have adopted the adjustment strategy of enterprise management distribution and price cost transfer measures to a certain extent, Bayer and BASF still show a slight decline in plant protection business, while UPL and Fumei actually show a slowdown in performance growth rate.
Figure 4. Details of Bayer’s plant protection business from 2017 to 2021 (unit: million euros)
Source: Bayer’s annual financial reports from 2017 to 2021.
Figure 5. Details of BASF’s plant protection business from 2017 to 2021 (unit: million euros)
Source: BASF’s annual financial reports from 2017 to 2021.
The main business of Bayer’s plant protection is herbicide, and the changes of Bayer’s bactericide and insecticide market tend to be flat from 2019 to 2021. However, the annual output of herbicide business dropped significantly in the outbreak of COVID-19, with a drop of 7%, while the sales of Bayer’s plant protection business decreased by 3.7% as a whole. At present, Bayer’s main herbicide products include: Roundup, Adengo, Alion, Corvus, etc. Over the years, BASF’s herbicide and fungicide business accounted for about 84% of the plant protection department, but the volume of herbicide and fungicide business was almost the same, and the same decrease and the same increase of their market performance were the main influencing factors of BASF’s changes in 2020 and 2021. BASF’s main herbicide products include: Basta, Dimethonamid-P, Engenia, Finale, etc., while the main fungicide products include: initium, metiram, Metrafenone, Revysol, etc.
Figure 6. Details of Fumeishi’s plant protection business from 2017 to 2021 (unit: million US dollars)
Data source: 2017-2021 Fumeishi’s annual financial report.
The plant protection sales of UPL and Fumeishi showed a slowdown in growth rate in 2020, and ushered in a substantial increase in 2021. Fumeishi’s main business is pesticides. Even with the negative impact of the COVID-19 epidemic, Fumeishi’s pesticide business has maintained a sustained growth, and the decline of herbicide business in 2020 will slow down its overall growth. The core product of Fumeishi lies in diamide insecticides. From 2017 to 2019, the sales of two diamide pesticides Rynaxypyr and Cyazypyr of Fumeishi increased by about 45%. In 2021, the sales of Fumeishi pesticides reached $3.02 billion, accounting for 60% of the company’s total sales of $5.045 billion, and the market volume of Fumeishi diamide pesticides accounted for 89.21% of the total market.
UPL’s business core area is in Latin America, accounting for 39% of its business volume in 2021, and the volume of North America, Europe and India is similar to other regions. In 2021, UPL’s Indian market began to be strictly blocked due to the COVID-19 epidemic, but the increase of plant protection products in all channels led to record sales in the first quarter, which increased by more than 20% compared with the beginning of 2020. As a result, UPL’s overall performance in fiscal year 2020-2021 was still good, with sales of main brands including Ferio, Sweep Power and other glyphosate products increasing, and sustainable solutions and new products were also released at an accelerated pace. In the fiscal year 2021-2022, UPL’s sales in Latin America increased by 21% year-on-year to 180.4 billion rupees, and the herbicide and pesticide business in Brazil was the first to bear the brunt.
3. The balanced growth of Kedihua since its establishment three years ago
At the beginning of the establishment of Kedihua in 2019, the annual sales of plant protection business was 6.256 billion US dollars, and in 2021 it was 7.253 billion US dollars, with an average annual increase of 7.95%. Herbicide is the main part of Kedihua’s plant protection business. The main reason for the sales growth of Kedihua’s plant protection business in the past three years is the continuous penetration of new product research and development, especially the products of Enlist? weed control system, Rinskor and Arylex herbicides. Of course, the pesticide product Isoclast also played an important role.
A core driving force for the growth of Kedihua’s plant protection business is the cooperative effect of plant protection products and their main genetically modified seed products. One of its core products, Enlist corn, can tolerate 2,4-D choline, glyphosate, glufosinate and FOP herbicides, while the matched Enlist herbicide has near-zero volatility, reduced physical drift, wide application window, no deadline or temperature limit, and can be used to control late-season broadleaf weeds, occupying the market scale in this form. Based on seeds, plant protection products and digital agricultural services, Kedihua’s scheme portfolio is increasingly influential in the market. More than 30 kinds of plant protection products with more than 100 kinds of effective ingredients have been launched in China market.
Figure 7. Details of Kedihua’s plant protection business in 2020-2021 (unit: million US dollars)
Source: Cody Hua’s annual financial reports from 2020 to 2021.
Second, the development of the "multi-strong pattern" of the seed market
In 2016-2019, under the background of falling global agricultural product prices, transnational capital promoted international giants’ mergers and acquisitions and resource integration, and the world seed industry pattern was reshuffled. Dow DuPont merged and spun off the agricultural division-Kedihua, which was listed separately on the New York Stock Exchange in June 2019. China Chemical acquired Syngenta, Bayer acquired Monsanto, and BASF formally entered the global seed industry through the acquisition of seed business spun off by Bayer, forming four groups headed by Bayer, Kedihua, Syngenta and BASF.
1. Bayer, the global leader in seed industry.
Figure 8. Details of Bayer’s seed business from 2018 to 2021 (unit: million euros)
Source: Bayer’s annual financial reports from 2018 to 2021.
In June 2018, Bayer completed the acquisition of Monsanto, and its original seed business was sold to BASF. This acquisition established Bayer’s leading position in the global agricultural field. In 2018, Bayer’s seed business was basically the same as that in 2017 after exchange rate adjustment, among which Intacta RR2Pro performed well in South America, and corn seed and trait business increased year-on-year. Monsanto has brought Bayer an absolutely leading seed brand.
In 2017, Bayer’s seed sales were 1.503 billion euros. After the acquisition of Monsanto in 2018, the seed market reached 3.637 billion euros. The business of maize seed-traits and soybean seed-traits both soared, with the increase rates reaching 185.6% and 76.6% respectively. In terms of crop layout, corn seeds are Bayer’s main business sector. Corn income mainly comes from character licensing fees and seed sales income, of which North America is the main market, followed by South America; In Europe, Bayer sells conventional corn varieties in major markets in France, Italy, Hungary and Germany. The VTPro series of dwarf maize seeds is Bayer’s main growth point. The introduction of VTPro4 and SmartStax PRO has further enriched the product selection of corn underground pest control. In the following three years, Bayer’s corn seeds-characters all maintained a market scale of about 5 billion euros.
The core product of soybean seed-trait is intacta2xend transgenic soybean, which is the successor product of Monsanto’s traditional glyphosate-tolerant soybean Intacta RR2 Pro. It has the characteristics of glyphosate tolerance, resistance to some lepidopteran pests, and dicamba tolerance, and is the most advanced soybean seed technology for Bayer to ensure farmers’ productivity. The new generation of research and development and renewal of genetically modified seeds is the core growth factor of Bayer in recent five years.
2. "Breaker" of reorganization and listing-Kedihua
Figure 9. Details of Kedihua seed business in 2020-2021 (unit: millions of US dollars)
Source: Cody Hua’s annual financial reports from 2020 to 2021.
Since Kedihua’s independent listing in 2019, the sales of seed business has reached 7.59 billion US dollars. Through the integration of the original brand and strategic development, the seed business has been greatly expanded. Specifically, it includes: (1) Pioneer, the global flagship brand; (2) regional brands, such as Dairyland Seeds, Alforex Seeds; (3) Seed retail brands, such as Mycogen Seeds, Brevant Seeds, etc. In addition, seeking opportunities for authorization and distribution of some brands, such as Enlist E3 Soybeans and Alforex Seeds, the seed sales of Kedihua reached $8.402 billion in 2021.
The core soybean product of Kedihua’s seed industry growth is Enlist series soybean, and Enlist E3?1 soybean represents the first scalable weed management substitute for growers in the past 30 years. At the same time, Kedihua will upgrade Enlist E3 trait platform in all soybean combinations of brands and improve technical iteration. As for the cultivation of corn seed varieties, Pioneer brand gradually introduced Qrome? corn products in the United States, and further expanded in Canada. In 2020, Kedihua introduced Brevant? seeds in the United States, providing a variety of seeds including corn, soybeans, sunflowers and rapeseed.
3. "The Road to Rebirth" seed giant-Syngenta
Figure 10. Details of Syngenta’s seed business from 2017 to 2021 (unit: million US dollars)
Source: Syngenta’s annual financial reports from 2017 to 2021.
Syngenta’s corn and soybean seed business has shown a balanced growth trend in the past five years, with an average annual growth rate of about 7.5%. Among them, corn seed is the main business segment of Syngenta. In 2021, corn revenue reached 1.4 billion US dollars, up 16.2% year-on-year. Corn income mainly comes from character licensing fees and seed sales income, and South America and North America are the main markets. Syngenta has the world’s leading insect-resistant transformants and herbicide-resistant transformants. After many years of field experiments, Syngenta 901 trivalent compound insect-resistant corn (ZL) is highly resistant to LEPIDOPTERA pests such as meadow moth and corn borer. Other main products include corn & soybean brands such as Agrisure? and Golden Harvest, and other field crops also include NK oilseeds series.
4. The seed industry "rising star"-BASF
In 2018, BASF officially entered the global seed industry through the acquisition of Bayer’s seed business spun off. The obtained seed business includes almost all Bayer’s soybean seed and rape seed business, global cotton seed business except India and South Africa, all vegetable seed business, LibertyLink trait technology, research and development capabilities of all the above seeds and research and development platform of hybrid wheat.
In 2021, the scale of BASF seed industry increased rapidly, from 1.495 billion euros to 1.641 billion euros, an increase of about 9.8%. BASF’s typical products mainly include "300 series" ″InVigor? rape varieties, which effectively improve the yield per mu, crack resistance and clubroot resistance. LibertyLink? yellow-seeded rape provides a new rotation choice for wheat growers in arid areas of North America, effectively resisting drought and high temperature stress in rape planting environment. The promotion of E3 cotton is also a full value chain expansion model from growers to retailers.
Figure 11. Details of BASF’s seed business from 2019 to 2021 (unit: million euros)
Source: BASF’s annual financial reports from 2019 to 2021.
Another core growth point of BASF seed industry expansion lies in the new digital function drive. BASF takes xarvio digital agricultural service platform as the link and brings its latest pesticides and seed products to market with xarvio? Healthy Fields. At present, users of xarvio platform series products have spread all over the world in more than 100 countries, which greatly promoted the layout expansion of BASF seed industry.
III. Digital agriculture and sustainable development
In recent years, the demand of agrochemical industry in planting field is gradually reflected in optimizing production and agricultural materials e-commerce. The transformation and upgrading of leading enterprises in the industry is creating acceleration for global agricultural digitalization. In 1997, the American Academy of Sciences and the Academy of Engineering formally put forward the concept of digital agriculture, which has developed into four stages. From the use of sensors, cameras, smart wearable devices, etc., the agricultural objects, environment and the whole process are visually expressed, to the period of integrated management of agricultural Internet of Things, from the implementation of precision agriculture, to the deep integration of modern information technology and agricultural production such as AI and big data. In the past five years, Syngenta, Bayer, BASF and other agrochemical giants are deepening their digital strategy to seize new tracks.
Bayer relies on its market advantage in the field of agrochemical inputs to help its core digital product Climate FieldView? be widely promoted around the world. The characteristics of its digital agriculture strategy are mainly manifested in globalization, value chain carrier and consideration of carbon business model. In the past five years, Bayer has continuously distributed the Climate FieldView? platform to Argentina, South Africa and other countries based on the complementary advantages of its special seed products and platform technology. At present, it has become the largest digital agriculture platform in the world, and it has been popularized in more than 200 million acres (about 80 million hectares) in 23 countries around the world.
The carrier of its value chain is mainly manifested in the partner mode. At present, there are more than 70 partners on the Climate FieldView? platform, which are mainly promoted through distributors and partners. Its cooperative manufacturers include major manufacturers in image, sensor, grain, soil, agricultural finance and other industries. This model can integrate all parties’ brand-new infrastructure and capabilities, improve efficiency and support the sustainable development of the whole value chain, and achieve a win-win situation for all participants in the value chain.
Bayer has also made great achievements in the digital exploration of carbon business model. In 2021, Bayer launched the Project Carbonview in the United States to create low-carbon feed, fuel and fiber products. Through technical development in cooperation with Bushel and Amazon Cloud Computing Services (AWS), relying on Climate FieldView?, ethanol producers can declare, analyze and evaluate their carbon footprint in the end-to-end supply chain, effectively control carbon emissions, and at the same time carry out carbon asset service functions.
Syngenta’s digital strategy mainly focuses on the integration of agricultural full value chain services. In 2017, Sinochem Group fully implemented the modern agricultural service platform business model (MAP), focusing on the China market. In the following 2019, relying on the digital agriculture architecture system and technical application of MAP mode, the whole quality control traceability "MAPBESIDE" was launched. The whole process of quality control and traceability of MAP beSide realizes the continuity of traceability data through the online and offline management of crops before, during and after production, and builds a whole process of quality control and traceability system for agricultural products. Until 2021, MAP and digital agriculture business expanded rapidly, with more than 1.5 million acres of service land and 350 technical service centers, and its operating income increased by more than three times year-on-year.
In overseas markets, Syngenta Group has continuously expanded its technical reserves and market influence through development and acquisition procedures. Typical business behaviors include: in 2017, Syngenta acquired Strider, the leader of Latin American digital agriculture market, and absorbed and developed its pest monitoring and satellite imaging technology; In 2018, Sinochem invested in digital technology and became Syngenta’s fastest growing business in the US market by integrating the whole farm management platform of satellites and drones; In 2020, Syngenta operated a new digital platform Cropwise in the Brazilian market, providing farmers with farm management, agronomic data and intelligent decision support, highlighting its influence in the Latin American digital agriculture market.
In 2018, BASF acquired part of Bayer’s assets and business, which formed a strategic complement to its existing crop protection, biotechnology and digital agricultural business, including the acquisition of a full set of digital agricultural platforms-Xarvio. Since then, BASF has been at the forefront of agricultural digital transformation through xarvio? digital agriculture solution. Xarvio?, based on the analysis of field data in specific areas, cooperated with the precise application of innovative products for sustainable crop protection, such as sharp harvest series fungicides, Axalion series insecticides and Luximo series herbicides, and provided optimized sowing suggestions for Ideltis hybrid wheat.
Since 2018, BASF has started a series of explorations in the field of digital agriculture with xarvio? digital agriculture solutions as the center. In September 2019, BASF reached a cooperation with Nutrien Ag Solutions to help growers and agronomists identify weeds and pests in the field immediately and accurately through machine learning and data sharing with xarvio?APP. In 2020, Xarvio Digital Farming Solutions also launched Souting, Field Manager and Healthy Fields, with users in more than 100 countries around the world.
Compared with Bayer, Syngenta and BASF’s global agricultural digital layout. Codification, UPL and Fumeishi have also explored their own technical fields. In 2018, Kedihua cooperated with Planet, an aerospace and data analysis company, through its software business Granular, and combined the daily satellite data of Planet with Granual’s mature crop modeling technology and data sets to provide farmers with digital agricultural software solutions. In 2021, Kedihua launched a new mobile application Corteva? FarmFundi to provide farmers in Africa and the Middle East with a digital pest identification guide. UPL’s digital agriculture transformation mainly focuses on the field of sustainable development. In 2021, nurture.farm, a digital platform serving growers, agricultural communities and food systems, joined the OpenAg? network to support farmers in the agricultural life cycle of retail, trade and sustainability. In the first quarter of 2021, Fumeishi launched the Arc? farm intelligent platform, which has been successfully piloted in Greece, Spain and Brazil. Subsequently, Fumeishi cooperated with Nutrien Ag Solutions to use Arc? Farm Intelligent Platform to predict diamond moth pests in California. During the pilot period, the Arc smart farm platform covered nearly 4 million acres of land in six countries and continued to expand.
IV. Summary
Under the new global macroeconomic situation, enterprises are facing new strategic adjustment of business structure. From the perspective of pesticide industry chain, the end of COVID-19 epidemic will greatly relieve the global supply pressure of raw materials and intermediates, and the adjustment of enterprise’s production capacity structure and inventory changes will usher in a new situation. On the other hand, geopolitical conflicts and the increasing global food security problems will certainly drive the agricultural growers’ willingness to produce, which will lead to the expansion of pesticide demand. Changes in supply and demand and cost-price strategies will also be opportunities for the pesticide industry.
Different enterprises in the plant protection market have different characteristics, but the fierce competition in herbicide business is the most important. Herbicides are the biggest players in the plant protection market of Syngenta, Bayer, Kedihua and BASF. During the global epidemic period, the sales change of herbicides affects the performance growth of plant protection business of enterprises to some extent. Of course, enterprises should always keep their own core direction. Besides the heterogeneous competition in the field of herbicides, BASF’s fungicide business almost maintains the market scale similar to its own herbicides, and Fumeishi’s position as a diamide pesticide is also the industry leader.
The industrial chain integration of seed industry is obvious, and the core of market expansion is the continuous iterative variety renewal and technical barriers matched with plant protection products. Business divestiture, acquisition and reorganization among seed enterprises are the main means for enterprises to enter the market. Technical iterations of Bayer’s VTPro series corn seeds, Kedihua’s Enlist series soybeans, BASF’s E3 cotton and other products are all core products that occupy market heights, and the synergistic effect of plant protection products and their main transgenic seed products has also injected new growth momentum into the plant protection market of various seed giants.
The layout of digital agriculture shows the business accumulation of each enterprise from 0 to 1 and from 1 to infinity. From the merger and acquisition of agricultural science and technology enterprises with different technical expertise in the industry to the construction of comprehensive agricultural monitoring and management platform, Bayer, BASF and other agrochemical giants have accumulated technology from 0 to 1, and Bayer’s expansion from its own comprehensive agricultural management platform to the full value chain carrier partner model has shown you a "from 1 to infinity" exploration direction. On the other hand, the layout of digital agriculture also provides new ideas for sustainable development, the development of carbon assets and carbon economy.
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This article was first published in AgroPages’ latest 2022 Annual Review magazine.