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 9-11]