Crop protection vital for economy
7 Sep 2014 9:43 PM GMT
The global market for conventional crop protection products [excluding sales of herbicide-tolerant (HT) and insect-resistant (IR) seed, as well as non-crop agrochemicals] is estimated to have increased by 9.4 per cent to $54.208 billion during 2013, according to results of market analysis of the crop protection sector and market research conducted in the majority of country markets. Sales of HT and IR seed in the crop protection sector increased by 8.7 per cent in 2013 to $20.1 billion.
With the impact of trade-weighted inflation and currency factors taken into account, the change in the overall market in real terms equated to an increase of 9.9 per cent over 2012. In 2013, the overall value of the agrochemical market for use of products in the non-crop sector is estimated to have grown by 1.7 per cent to $6,481 million.
Growth within the crop protection sector is directly linked to support for agriculture, crop commodity prices and farm incomes, though the non-crop sector is influenced more by the economic position of the major markets — with consumer purchasing being a significant factor. Growth within the GM seed market is predominantly driven by the introduction of new technology, with competition within the sector now intensifying as the number of available trait offerings continues to grow. Due to the positive growth of both the conventional crop protection market and the input trait sector, the value of the overall crop protection sector in 2013 is estimated to have increased by 9.2 per cent to $74,308 million.
From 1980 to 1998, the value of the global crop protection market essentially grew year on year, with the main exemptions being the downturns in 1983 and 1991-1993. These reductions rose from changes in governmental support for agriculture in one of the main markets, namely the implementation of the ‘Payment in Kind’ scheme in the USA (1983) and the introduction of set-aside in the EU following CAP reform (1991-1993).
Following the initial introduction of GM crops in 1996, the market experienced a period of decline in real terms between 1998 and 2006. This reflected the increase in uptake of GM technology, particularly in North America and Latin America where a rapid switch to crop varieties containing traits conferring glyphosate-tolerance and insect-resistance led to declines in selective herbicide and insecticide applications in cotton, canola, soybean and maize. In addition to the impact of GM technology, crop prices over the same period were relatively flat, resulting in a depressing effect on the overall demand for agrochemical products. However, in 2007 crop prices began to grow, and spiked at a very high level in 2008, subsequently creating a major improvement in the agriculture economy.
In 2009, crop prices fell back from their peak as the global economy experienced a severe downturn following the banking crisis in Europe and the Americas. This, coupled with a major reduction in glyphosate prices following increased supply from Chinese companies, resulted in the overall value of the global crop protection market declining.
During 2010, glyphosate prices remained low and with improving crop prices, the agrochemical market was more or less unchanged in real terms. Commodity prices increased in the early part of 2011, led by gains in wheat as a result of drought in Russia and flooding in Canada during 2010. Although glyphosate prices remained stable, significantly higher crop prices resulted in a buoyant agricultural economy and a significant rise in agrochemical demand in 2011. In 2012 the overall market experienced strong growth on the back of a continuation in the improvement of crop prices and this trend continued into 2013 when, in real terms, the market experienced 9.9 per cent growth over 2012.
‘Our agro-chemical business may be adversely affected by the increased use of biotechnology products, pest-resistant seeds, GM crops and other organic crop protection substitutes of formulations or generic active ingredients,’ according to R V Bubna, CMD of Sharda Cropchem Ltd, a crop protection-chemical company engaged in the global marketing and distribution of formulations and generic active ingredients which entered the Indian capital market with an IPO of 22.5 million equity shares at a price band of Rs 145-Rs 156 from Sept 5 to Sept 9 this year. Â
‘The adoption of the products derived through biotechnology or alternative pest management and crop protection measures could have a negative impact on traditional formulations or generic active ingredients. While the launch and wide commercial use of GM crops may take some time, GM crops are likely to have more resistance to insects, pests and disease than non-GM crops and may, therefore, require significantly less use of agrochemicals than non-GM crops. The growth and acceptance of such alternative pest management and crop protection products and measures by consumers may have an adverse effect on sales of formulations which may in turn affect our financial condition and of operation results,’ Bubna pointed out.
‘We do not own any manufacturing facility and rely on third party manufacturers, primarily based in China or India and, in some cases, on manufacturers in the local jurisdictions in which we intend to undertake the sale, for supply of the formulations and generic active ingredients in their finished form. We also rely on third party formulators, primarily, in Europe and the USA, to whom we outsource the preparation of formulations. We have historically derived a substantial portion of our revenue from operations in agrochemicals from Europe and Latin America,’ he added.
‘We derived 60.92 per cent and 42.92 per cent of our unconsolidated revenue from operations in agrochemicals from Europe for fiscals 2014 and 2013 respectively and we derived 19.84 per cent and 34.09 per cent of our unconsolidated revenue from operations in agrochemicals in Latin America for fiscals 2014 and 2013 respectively. As a result, our business, financial condition and operation results have been and will continue to be dependent on the prevailing agrochemical market conditions in Europe and Latin America.,’ said Bubna.
‘In addition to distribution of formulations and generic active ingredients through third party distributors as part of our strategy, we have undertaken forward integration of our operations in Europe, Mexico, Colombia, South Africa and India and propose to grow our business through forward integration in these and other jurisdictions,’ he informed.
In response to a question, Bubna said that his company markets its products to 70 countries, including Asia (26.6 per cent) and Europe (25.1 per cent). Europe drew 45 per cent sales in 2012 to rise to 61 per cent in 2014 and the company is now poised to leverage its growing portfolio in untapped markets. With China giving free land to nurture its industries, he expects no shortage in the production line over the next five years. ‘We are not doing contract manufacturing but, instead, sourcing and selling under our name to our distributors while slowly going into the retail market, alongside distribution of our business from less developed (and less profitable) countries to more developing and profitable countries,’ he concluded.
Farming remains India’s prime source of employment & rural demand
Agriculture is the principal source of livelihood for more than 58 per cent of the Indian population and provides the bulk of wage goods required by the non-agriculture sectors as well as most raw materials for the industrial sector. The agriculture and allied sectors contributed approximately 13.9 per cent of India’s GDP last fiscal (2013-14).
There has been a continuous decline in the share of agriculture and allied sectors in GDP from 14.6 per cent in 2009-10 to 13.9 per cent in 2013-14 at 2004-05 prices. The drop is the expected outcome of a fast growing and structurally changing economy. The growth performance of the agricultural sector has been fluctuating, with an average of rate of 4.8 per cent between 1992 and 1997. However this average dropped to 2.5 per cent in 1997-2002 and 2.4 per cent in 2002-07. The crippling growth in agriculture against a robust annual average growth rate of 7.6% for the economy during the 10th Five-Year Plan period was clearly a cause for concern.
The demand for food and processed commodities is increasing due to the growing population and rising per capita income. Food grains demand is projected to increase from 192 million tonnes (mt) in 2000 to 345 mt in 2030. Hence, in the next 20 years, food grains production needs to be increased at the rate of 5.5 mt annually, according to the Indian Council of Agricultural Research (ICAR).
Growth within the crop protection sector is directly linked to support for agriculture, crop commodity prices and farm incomes. However, the crop sector is influenced more by the economic position of major markets, with consumer purchasing being a significant factor. Due to the positive growth of both the conventional crop protection market and the input trait sector, the value of the overall crop protection sector increased by 9.2 per cent to $74.308 billion in 2013.
With the impact of trade-weighted inflation and currency factors taken into account, the change in the overall market in real terms equated to an increase of 9.9 per cent over 2012. In 2013, the overall value of the agrochemical market for use of products in the non-crop sector is estimated to have grown by 1.7 per cent to $6,481 million.
Growth within the crop protection sector is directly linked to support for agriculture, crop commodity prices and farm incomes, though the non-crop sector is influenced more by the economic position of the major markets — with consumer purchasing being a significant factor. Growth within the GM seed market is predominantly driven by the introduction of new technology, with competition within the sector now intensifying as the number of available trait offerings continues to grow. Due to the positive growth of both the conventional crop protection market and the input trait sector, the value of the overall crop protection sector in 2013 is estimated to have increased by 9.2 per cent to $74,308 million.
From 1980 to 1998, the value of the global crop protection market essentially grew year on year, with the main exemptions being the downturns in 1983 and 1991-1993. These reductions rose from changes in governmental support for agriculture in one of the main markets, namely the implementation of the ‘Payment in Kind’ scheme in the USA (1983) and the introduction of set-aside in the EU following CAP reform (1991-1993).
Following the initial introduction of GM crops in 1996, the market experienced a period of decline in real terms between 1998 and 2006. This reflected the increase in uptake of GM technology, particularly in North America and Latin America where a rapid switch to crop varieties containing traits conferring glyphosate-tolerance and insect-resistance led to declines in selective herbicide and insecticide applications in cotton, canola, soybean and maize. In addition to the impact of GM technology, crop prices over the same period were relatively flat, resulting in a depressing effect on the overall demand for agrochemical products. However, in 2007 crop prices began to grow, and spiked at a very high level in 2008, subsequently creating a major improvement in the agriculture economy.
In 2009, crop prices fell back from their peak as the global economy experienced a severe downturn following the banking crisis in Europe and the Americas. This, coupled with a major reduction in glyphosate prices following increased supply from Chinese companies, resulted in the overall value of the global crop protection market declining.
During 2010, glyphosate prices remained low and with improving crop prices, the agrochemical market was more or less unchanged in real terms. Commodity prices increased in the early part of 2011, led by gains in wheat as a result of drought in Russia and flooding in Canada during 2010. Although glyphosate prices remained stable, significantly higher crop prices resulted in a buoyant agricultural economy and a significant rise in agrochemical demand in 2011. In 2012 the overall market experienced strong growth on the back of a continuation in the improvement of crop prices and this trend continued into 2013 when, in real terms, the market experienced 9.9 per cent growth over 2012.
‘Our agro-chemical business may be adversely affected by the increased use of biotechnology products, pest-resistant seeds, GM crops and other organic crop protection substitutes of formulations or generic active ingredients,’ according to R V Bubna, CMD of Sharda Cropchem Ltd, a crop protection-chemical company engaged in the global marketing and distribution of formulations and generic active ingredients which entered the Indian capital market with an IPO of 22.5 million equity shares at a price band of Rs 145-Rs 156 from Sept 5 to Sept 9 this year. Â
‘The adoption of the products derived through biotechnology or alternative pest management and crop protection measures could have a negative impact on traditional formulations or generic active ingredients. While the launch and wide commercial use of GM crops may take some time, GM crops are likely to have more resistance to insects, pests and disease than non-GM crops and may, therefore, require significantly less use of agrochemicals than non-GM crops. The growth and acceptance of such alternative pest management and crop protection products and measures by consumers may have an adverse effect on sales of formulations which may in turn affect our financial condition and of operation results,’ Bubna pointed out.
‘We do not own any manufacturing facility and rely on third party manufacturers, primarily based in China or India and, in some cases, on manufacturers in the local jurisdictions in which we intend to undertake the sale, for supply of the formulations and generic active ingredients in their finished form. We also rely on third party formulators, primarily, in Europe and the USA, to whom we outsource the preparation of formulations. We have historically derived a substantial portion of our revenue from operations in agrochemicals from Europe and Latin America,’ he added.
‘We derived 60.92 per cent and 42.92 per cent of our unconsolidated revenue from operations in agrochemicals from Europe for fiscals 2014 and 2013 respectively and we derived 19.84 per cent and 34.09 per cent of our unconsolidated revenue from operations in agrochemicals in Latin America for fiscals 2014 and 2013 respectively. As a result, our business, financial condition and operation results have been and will continue to be dependent on the prevailing agrochemical market conditions in Europe and Latin America.,’ said Bubna.
‘In addition to distribution of formulations and generic active ingredients through third party distributors as part of our strategy, we have undertaken forward integration of our operations in Europe, Mexico, Colombia, South Africa and India and propose to grow our business through forward integration in these and other jurisdictions,’ he informed.
In response to a question, Bubna said that his company markets its products to 70 countries, including Asia (26.6 per cent) and Europe (25.1 per cent). Europe drew 45 per cent sales in 2012 to rise to 61 per cent in 2014 and the company is now poised to leverage its growing portfolio in untapped markets. With China giving free land to nurture its industries, he expects no shortage in the production line over the next five years. ‘We are not doing contract manufacturing but, instead, sourcing and selling under our name to our distributors while slowly going into the retail market, alongside distribution of our business from less developed (and less profitable) countries to more developing and profitable countries,’ he concluded.
Farming remains India’s prime source of employment & rural demand
Agriculture is the principal source of livelihood for more than 58 per cent of the Indian population and provides the bulk of wage goods required by the non-agriculture sectors as well as most raw materials for the industrial sector. The agriculture and allied sectors contributed approximately 13.9 per cent of India’s GDP last fiscal (2013-14).
There has been a continuous decline in the share of agriculture and allied sectors in GDP from 14.6 per cent in 2009-10 to 13.9 per cent in 2013-14 at 2004-05 prices. The drop is the expected outcome of a fast growing and structurally changing economy. The growth performance of the agricultural sector has been fluctuating, with an average of rate of 4.8 per cent between 1992 and 1997. However this average dropped to 2.5 per cent in 1997-2002 and 2.4 per cent in 2002-07. The crippling growth in agriculture against a robust annual average growth rate of 7.6% for the economy during the 10th Five-Year Plan period was clearly a cause for concern.
The demand for food and processed commodities is increasing due to the growing population and rising per capita income. Food grains demand is projected to increase from 192 million tonnes (mt) in 2000 to 345 mt in 2030. Hence, in the next 20 years, food grains production needs to be increased at the rate of 5.5 mt annually, according to the Indian Council of Agricultural Research (ICAR).
Growth within the crop protection sector is directly linked to support for agriculture, crop commodity prices and farm incomes. However, the crop sector is influenced more by the economic position of major markets, with consumer purchasing being a significant factor. Due to the positive growth of both the conventional crop protection market and the input trait sector, the value of the overall crop protection sector increased by 9.2 per cent to $74.308 billion in 2013.
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