Agrochemical & Biotech Corporations Spur Global Growth of Pesticides

From Pesticide Action Network (International)
<http://www.pan-uk.org/pestnews/pn68/pn68p9.htm>

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Agrochemical markets soar – pest pressures or corporate design?

Six multinational companies dominate the agricultural input market. They are
critical actors in promoting, or preventing, the development of technologies
that shape the future of food and farming. Their strategies can influence
policies and practices that affect farmers worldwide. Barbara Dinham looks
at new figures that show a rapid upturn in pesticide sales in 2004, and the
company strategies driving these developments.

In 2004, a surge in the pesticide market led to record global sales of
US$32,665 (Euro 26,785, 2004 figures) million. This reflected a rise of
4.6% after inflation, the largest single year growth for 10 years(1). The
main beneficiaries were the six multinational corporations which control
approximately 80% of the agrochemical market. The same companies are
radically changing the face of agriculture through the promotion of
genetically modified (GM) crops, where they control the vast majority of
commercialised seeds. Is the corporate bonanza a result of unusually high
outbreaks of pests worldwide, or the outcome of strategies designed to
achieve this result? This article looks at some of the forces at work.

The pesticide market

Until 2004, the agrochemical market had been relatively static for almost 20
years, increasing in line with inflation. Leading industry analyst, Allan
Woodburn Associates (AWA) suggested the previous market peak was in 1998,
but the period of steep decline halted in 2003 with sales of US$29,390
million(2). Nevertheless, the growth in 2004 confounded market analysts. AWA
had forecast growth of 0.4% pa, and Cropnosis (formerly Wood MacKenzie)
0.1%. Others felt the market could contract.

The overall global increase in sales of 4.6% after inflation masks major
differences in trends although the main markets remain the US, Western
Europe and Japan (see chart 1). In 2004 sales in the Latin American region
rose by an impressive 25% in dollar terms building on increased sales in
Brazil of 7% and Argentina of 11% in 2003. Latin America is now a company
target. The region also has an active generic pesticide industry. With
relatively minor variations, the regional spread of product sales is similar
for all companies except Monsanto, whose dependence on GM technology means
its sales are strongly located in the North American market (59%) and Latin
America (20%)(3).

The apparently static long-term pesticide market, when measured by value,
has been the result of a variety of factors. Some of these are the planting
of GM crops; the lower cost of herbicides as a result of older products
coming out of their patent-protected period; lower commodity prices; some
reduction in farm subsidies; and increased use by farmers of lower-cost
generic products. It is important to bear in mind that not all these factors
indicate a reduction in pesticide use, but rather reflect higher sales of
lower cost products. In some regions, particularly in North and South
America, the expansion of GM crops might mean reduced use of insecticides,
but increased use of herbicides.

In 2004, herbicides accounted for 45.4% of the agrochemical market, followed
by insecticides 27.5%, fungicides 21.7% and other products 5.4%(4). The
market shares of herbicides, insecticides and fungicides have changed
slightly over the last 25 years. The most noticeable trend is the increased
share of herbicides and reduced share of insecticides. This generally
reflects changing use, and not a drop in sales (chart 2). Industry analysts
predict that future growth will come from fungicides. In general, herbicide
sales have remained high, driven by herbicide-resistant GM seeds and the
increase in no-till or conservation till agriculture in the Americas. As the
price of the most widely-used pesticide, glyphosate, has dropped, more
farmers are using herbicide products to reduce labour costs: meaning that
more herbicides are being applied, without being reflected in sales by
value.

Corporate control – big six dominate

The agrochemical market is dominated by six companies, who between them
accounted for 73% of the market in 2002, 81% in 2003, and 77% in 2004. The
Swiss company, Syngenta, was overtaken last year as the market leader by the
German company Bayer, and between them these two now control 37% of all
agrochemical sales.

The sluggish overall market for pesticides in recent years was largely
compensated for by sales of GM crops and seeds (see table 1). Over the five
years 2000-2004, Bayer grew by 172%, initially through the take over of
Aventis in 2001, but subsequently by increased sales and expansion into GM
technology. Over the same period, Syngenta sales grew by 2%, reflecting its
earlier concentration strategies. BASF showed the next most dramatic
increase in sales, 86%, with high sales of its fungicides and insecticides,
and expansion in the Latin American market. BASF benefited financially from
its purchase of fipronil products from Bayer in 2003 – a high income earner
in spite of a recent restriction on its use in France as a result of adverse
impacts on bees.

The significant drop in pesticide sales in Monsanto reflects its decision to
shift focus from agrochemicals to seeds and genomics, a transition made in
2003. The company profitability in the past was dominated by one product,
glyphosate (marketed as Roundup), which accounted for 36% of its total sales
and 60% of agrochemical sales. Among the strategies to defend its glyphosate
market, Monsanto had succeeded in getting European Union duties of up to 48%
(now 29.9%) levied against glyphosate imports from China(5). The transition
to a largely GM seed company is reflected in its domination of traits it has
developed, which account for over 90% of GM crops grown worldwide.

The history of market concentration, which halved the number of major
players between 1984 and 2003, is shown in table 2. For a brief number of
years during the period of intense concentration, the industry presented
itself as the ‘life sciences’, aiming to build on synergies between
agrochemical and pharmaceutical interests. This strategy has been dropped.
Most of the companies have either spun off their pesticide division as an
independent company, or separated the links. The common approach is to
promote a ‘plant science’ or ‘crop science’ industry.

A strategy of all six companies is to reduce their product portfolio and
retain only the most profitable. Some governments are requiring pesticides
to undergo re-registration, a process requiring companies to submit
up-to-date data. The cost of this process is a major factor persuading
companies to slim down their portfolios. For example, the European Union
re-registration programme (carried out under directive 91/414/EEC) accounts
for an average of three out of every ten euros spent on research and
development. By May 2004, 471 of 907 active ingredients formerly on the EU
market were due for withdrawal, mostly because they were dropped by
companies. BASF, for example, reduced its product portfolio from 300 to 170
active ingredients, including selling off its phenoxy herbicide business and
phasing out many uses of its older organophosphates ethion, dimethoate,
phorate. Syngenta aims to have core range of just 17 active ingredients,
each with annual sales of over $100 million by 2006, which will include its
controversial paraquat and atrazine products.

Table 1. Agrochemical sales of leading companies, 2000-04, ranked by order
of sales in 2004 (US$ million)
Company
2000
2001
2002
2003
2004
2004 additional
sales

Bayer(1) (German)
2,252
2,418
3,775
5,394
6,120
+€989 environmental and
bioscience sales

Syngenta(2) (Swiss)
5,888
5,385
5,260
5,421
6,030
+US$1,239 seed sales

BASF (German)
2,228
3,105
2,787
3,569
4,141

Dow (US)
2,271
2,612
2,717
3,008
3,368
agrochemicals (approx.
90%), seeds, biotech

Monsanto(3) (US)
3,885
3,755
3,088
3,031
3,180
+$2,277 seed and GM
sales

DuPont (US)
2,009
1,814
1,793
2,024
2,211
+$2,618 seed sales

Sales of top six
$22,234
$23,034
$19,420
$22,447
$25,050

% of global sales
76
85
73
81
77

Total market(4)
$29,200
$27,104
$26,561
$27,791
$32,665

1. Bayer took over Aventis (see table 2) in 2001, and 2002 represents
combined sales.
2. Figure for 2000 is estimated from combined sales of Novartis and
AstraZeneca.
3. Decline in agrochemical sales reflects strategic shift to sales of GM
crops.
4. Total market figure includes Japanese companies and generic producers,
but omits Indian,
Chinese and Latin American generic producers.
Sources: Agrow 381 27 July 2001; Agrow 421, 28 March 2003; Jarvis and Smith
2003, Agrow 469 8 April 2005.

Table 2. Agrochemical market concentration, 1994-2004

Beginning 1994
By 1997
By 1999
2000-2004

BASF (EU-G*)
BASF
BASF
BASF is the largest chemical company in the world, with 11% of its sales in
agrochemicals in 2004.

Cyanamid (US) [took over Shell Agriculture (UK / Dutch) in 1993]
Cyanamid bought by AHP, 1994 (US)
Cyanamid (US), purchase completed in 2000.

Bayer (EU-G)
Bayer
Bayer
Bayer CropScience (G) accounted for 20% of the proceeds of the Bayer group
in 2003. Took over Aventis in 2002

Hoechst (EU-G)
AgrEvo
Aventis
Schering (EU-G)
Rhône-Poulenc (EU-Fr)
Rhône-Poulenc
DowElanco (US) – incorporating Eli Lilly
DowElanco –
incorporating Eli Lilly
Dow AgroSciences
Dow AgroSciences accounts for 9.2% of Dow Chemical sales. In 2001, it
purchased Rohm and Haas’s Ag products and Union Carbide.
Rohm & Haas (US)
Rohm & Haas
Rohm & Haas
DuPont (US)
DuPont
DuPont
DuPont Crop Protection has 15.5% of DuPont sales
Monsanto (US)
Monsanto
Monsanto
Monsanto Pharmacia bought 80% in 2000; became independent again in 2002
Ciba Geigy (Swiss)
Novartis (Swiss, merger 1996) (acquired Merck)
Novartis
Syngenta AG (Swiss) formed in 2000
Sandoz (Swiss)
Zeneca
(ex-ICI)(EU-UK)
Zeneca
AstraZeneca (UK-Swedish) (1999)
Source: Agrow’s Top 20: 2003-2005. * G = Germany

Factors influencing the market

Behind the global figures, many factors are at work influencing company
strategies and their impact on agriculture. These partly reflect climatic
conditions, but also improved product prices, increased plantings of major
crops, national economic conditions, and the movement between direct
pesticide sales and the planting of GM crops.

GM technology and the seed market

GM technology is now integral to the strategies of all the big six.
Plantings increased year-on-year, but were still limited in 2004 mainly to
14 countries (with small areas in a further three). The area under GM crops
in 2004 was 13.3 million hectares. The US is by far the largest, followed by
Argentina, Canada, Brazil, China, Paraguay, India, South Africa, Uruguay,
Australia, Romania, Mexico, Spain and the Philippines(6). In the US in 2004,
herbicide-resistant varieties were expected to constitute 86% of all soybean
hectares and 40% of maize(7).

The rapid spread of GM crops is the most controversial and significant
technological development in agriculture since the introduction of
pesticides in the 1950s. Company analyst Cropnosis suggests that on present
trends the GM seed market will grow at 8.2% a year, rising from US$3,656
million in 2002 to reach US$5,776 million in 2007. Growth is expected to
remain largely in North America, which currently accounts for 74% of GM seed
sales, followed by Latin America and Asia.

Much is made of possible future contributions of GM traits to enhance crop
or nutritional characteristics. But expansion is likely to be based largely
on ‘more of the same’: herbicide-resistance based largely on resistance to
glyphosate (RoundUp), and insect-resistance based on the Bacillus
thuringiensis (Bt) gene. Monsanto remains the major developer of the main
crop traits and accounts for over 90% of GM crops grown worldwide. Expansion
is likely to be led by the four crops currently dominating sales: soybeans,
maize, cotton and oil seed rape, with possible introductions of GM rice,
wheat and sugar beet.

One consequence of GM technology is the race to buy seed companies, further
concentrating the agricultural input sector. In 2004, Monsanto bought the
vegetable and fruit seed company Seminis, adding to its ownership of maize
and soybean seeds and likely to make it the world’s largest seed and trait
supplier(8). Syngenta’s GM crops and biotechnology account for around 3% of
its sales, but the proportion is increasing, and seeds (both GM and non-GM)
now contribute to 16% of its sales. In 2004 a Syngenta spending spree on US
seed companies increased its seed sales by over 75% in the first quarter of
2005 compared to the previous year(9). DuPont owns Pioneer Hi-Bred (PHI) –
the world’s largest seed company, and while slower than others to introduce
GM traits, 2003 saw the start of the largest technology launch in its
history with 20 new soybean varieties and 74 new maize hybrids. BASF is
expanding into the seeds market, emphasising seed treatments, and Dow is
increasing its activities in seeds and biotechnology.

Environmentalists and industry cannot agree on whether the increasing growth
in GM crops will increase pesticide use. There is some evidence that in the
short term Bt crops have reduced the use of other insecticides, but an
increase in herbicide use is associated with the adoption of
herbicide-resistant GM crops.

Market growth in Latin America

The Latin American market is a target for sales of both pesticides and GM
crops. A dramatic increase of 30% between 2003-2004 took sales to US$5.4
billion, and this could reach $7.5 billion by 2009, according to analyst
Gautam Sirur(10). The growth is expected to come from expanding crop areas,
an increase in GM planting, and the expansion of speciality crops. Brazil is
by far the largest market in the sub-continent, accounting for 63% of sales.
Three companies, Bayer, Syngenta and BASF between them have a 61% share of
the Latin American market. Many of the older, more hazardous, products
account for a high proportion of sales in the region, including 2,4-D,
paraquat, methamidophos, methomyl, endosulfan, chlorpyrifos(11).

While increased sales benefit the agrochemical industry, it is bad news for
Latin American farmers. One factor driving their pesticide purchases is an
outbreak of Asian soybean rust (Phakopsora pachyrhizi). The disease first
appeared in Paraguay in 2001 and has rapidly developed, now affecting nearly
all soybean growing areas in Brazil, where farmers are applying possibly
twice a season, increasing fungicide usage by over six-fold between
2003-2004(12). While globally fungicides account for 21% of sales, in Latin
America they accounted for 35% in 2003. For BASF, whose strobilurin
fungicide pyraclostrobin has 40% of the market, this is potentially a
billion dollar market(13).

No-till agriculture – the herbicide connection

No till, or conservation tillage, agricultural strategies, which reduce or
eliminate ploughing, have been rapidly adopted in the US and Latin America
over the last 15 years. In terms of hectares planted, it increased 20 times
in Latin America and four times in the US between 1987 and 1997. As a
percentage of national cropland, no-till has continued to grow, and by 2000
it accounted for 55% of cropland in Paraguay, 45% in Argentina and 39% in
Brazil. In 2004 it accounted for 23% of US cropland(14).

No-till strategies without herbicide use are possible but are being
overshadowed by herbicide promotion, and driven up by herbicide-resistant
crops. In the US in 2000, the two crops where herbicide tolerant technology
was most widely adopted – soybeans and cotton – accounted for half of the
total no-till acres planted(15). A 2003 study by the Cotton Foundation
found that 78% of US cotton farmers who adopted conservation tillage
practices since the 1997 had done so specifically because
herbicide-resistant cotton varieties had made it more feasible(16). One
worrying element for farmers is the concomitant rise in herbicide resistant
weeds, now a global problem. Between 2000 and 2005, herbicide resistant weed
biotypes increased from 235 to 296, and to 178 species(17).

There are undoubted benefits in no-till agriculture, particularly in terms
of reducing erosion, and sediment and agrochemical load in run-off. However
one result of industry-led no-till is the plethora of studies demonstrating
its benefits, but almost none that count the wider costs of the external
input – massive increase in herbicide use.

Conclusion

Much of market growth in pesticides may be reduced with better access to
information and training for farmers. There have been demonstrated successes
with Integrated Pest Management strategies for rice, vegetables and cotton
that have reduced pesticide dependence suggesting that many farmers are
using unnecessarily large amounts of pesticides(18). The problem lies in
the lack of readily accessible alternative strategies and technologies for
pest control. The research budgets of the six research-based agrochemical
companies dwarf the funds for publicly funded research, particularly in
developing countries. Policy makers need to reflect on whether more needs to
be done to help farmers address pest management problems using a range of
techniques, and not only by relying on the market to provide products, many
of which are adversely affecting human health and the environment.
Agrow Reports

The Agrow Reports are an invaluable source of sound analysis of market
developments and comprehensive up-to-date material on the agrochemical
industry. This article has drawn heavily on information in Agrow’s top 20:
2004 and 2005 Editions. All reports cost £495, and are available in print or
electronically. For full details see

http://www.pjbpubs.com/agrow_reports/index.htm. Recent reports include:
• Agrow’s Top 20: 2005 Edition, by Arthur Dewar, T&F Informa UK Ltd,
March 2005.
• The Future of the European Crop Protection Market, by Martin
Redbond, Market Scope Europe Ltd, PJB Publications Ltd, July 2004.
• Agrow’s Top 20: 2004 edition, PJB Publications Ltd, March 2004.
• US Crop Protection Markets, by Duncan Allison, PJB Publications
Ltd, March 2004.

1 euro = US$1.22, US$1 = 0.82 euro

1. Allan Woodburn Associates ‘Agrochemicals – Executive Review’, reported in
‘First growth in global agrochemical market for a decade’, Agrow No 466, 18
February 2005, p17.
2. Dewar, A, Agrow’s Top 20: 2005 edition, T&F Informa UK Ltd, March 2005.
3. Ibid, company chapters.
4. ‘First growth in global agrochemical market for a decade’, Agrow 466, 18
February 2005.
5. Ibid, p292.
6. James, C, Executive Summary, Preview Global Status of Commercialised
biotech/GM crops: 2004. www.isaaa.org.
7. http://www.afaa.com.au/news/news-1525.asp
8. Monsanto buys Seminis, The New Farm, 22 February 2005,
http://www.newfarm.org/features/2005/0205/seminisbuy/index.shtml.
9. ‘Syngenta seed buys boost sales’, Agrow No 471, 6 May 2005, p4.
10. Latin American agrochemical growth assessed, Papers presented at
IUPAC/CICA-UCR/SFE-MAG Workshop on Crop Protection Chemistry in Latin
America, Costa Rica, 14-17 February 2005, reported in Agrow 468, 18 March
2005, p 15.
11. Ibid.
12. Beer, A, BASF opens up to new opportunities, Agrow 471 6 May 2005, p7.
13. Latin American agrochemical growth assessed, Papers, op cit 10.
14. Conservation Technology Information Centre,
http://www.ctic.purdue.edu/CTIC/CTIC.html
15. Trends Link Biotech, Conservation Tillage, Conservation Technology
Information Center (CTIC), West Lafayette, Ind., p3.
16. Biotech Boosts ‘con Till’, March, 2003 Progressive Farmer, quoted in
Agrifood News Archive http://www.afaa.com.au/news/news-1525.asp
17. International Survey of Herbicide-Resistant Weeds,
http://www.weedscience.org/in.asp
18. Pretty J (Ed), The Pesticide Detox: Towards a more sustainable
agriculture, Earthscan, London, 2005, 293pp.

[This article first appeared in Pesticides News No. 68, June 2005, pages
9-1