The Four Forces Reshaping the Crop Protection Industry and What Comes Next

Index

The global synthetic crop protection industry has been changing for years.

While the question has been whether it is structural or cyclical, the structural changes are hard to ignore.

The traditional model has been anchored in discovery, patented products and broad distribution influence and control, but that is being eroded from multiple sides.

We are seeing this in action with the news from the Corteva and splitting out their business units, the challenges for FMC and navigating the new landscape (link to Q3 Results) along with the Bayer challenges broadly.

There is no question farmers will continue to demand efficacious and easy-to-use crop protection products, which means new molecules will still drive revenue and margin for the traditional players ,like Syngenta, Corteva and Bayer, however, the relative number of them coming to market, the alternative tools available to farmers and the competition from generics and “tier 2 and 3” companies will change the ability for large innovation companies to maintain the same level of overhead, R&D investment and business structure as what they had in 1995, 2005 or 2015.

There are four macro dynamics that are influencing that structural shift (in no particular order).

Manufacturing capacity in India and China has scaled rapidly, lowering production costs while improving product quality.

These overseas firms possess the scale, formulation sophistication, integration downstream and upstream and contacts to compete globally, and arguably, the infrastructure is over built which means these companies are producing large amounts to spread out fixed costs and then move product to market. There are market dynamics that can slow this down, such as shortages or price spikes in intermediates, but the data suggests there are significant changes that will keep the big five companies challenges in the years to come.