Sep. 10, 2008
Bayer CropScience is boosting its research and development into pesticide active ingredients. It is to inject €2,700 million ($3,980 million) in the search for new ais until 2012. The company had previously sought to lower its annual crop protection research spending to below €500 million ($740 million) by 2015 while raising overall R&D expenditure for the division to €750 million.
Chairman of the board of management Dr Friedrich Berschauer emphasises a key role for agrochemicals in his call for a second “green revolution”. That follows the public investment of the 1960s and 1970s that brought substantial yield increases but since neglected, he adds. “We believe that conventional crop protection still has considerable potential for boosting agricultural yields by up to 70%,” Dr Berschauer says. Such results would require the use of other technologies from irrigation to plant biotechnology, he warns.
Bayer is to introduce ten new ais and safeners to market over the next four years. They include: the herbicides, thiencarbazone-methyl, which was recently approved in Romania, and pyrasulfatole, as Huskie; and the insecticide, spirotetramat, as Movento.
Thiencarbazone-methyl will be marketed in combination with the “newly developed” safener, cyprosulfamide, as Adengo. It should be available in the US, Argentina and the EU in 2009, Bayer says. Spirotetramat received its first approval in Tunisia in 2007, and is undergoing a shared review by the authorities in the US, Canada and the EU. It has been recommended approved by the Canadian authorities as Movento 150 OD and Movento 240 SC for use on a range of fruit and vegetable crops, grapevines and hops against sucking pests. Huskie is in the launch phase in the US, Canada and Australia.
The company expects to launch the fungicides, fluopyram, bixafen and isotianil in 2010, and has three further unnamed ais due for market introduction in 2011-12.
Dr Berschauer underlines his and the company’s commitment to new product development in crop protection. “Three or four years ago, there were proposals at Bayer to cut our R&D expenditure heavily, but I resisted, arguing that the market demands innovative modes of action and subsequent experience has vindicated the stance”.
Resistance management, increasingly stringent environmental and health regulations, such as for residue levels, are driving company policy on R&D investment, Bayer says. The drive for improved profit margins is another factor. New pesticides have 20% higher margins than those from older portfolios, the company adds.
The company complains that moves to revise the EU agrochemical re-registration Directive (91/414) are unfairly focused on hazard criteria. However, it says that “modern” R&D companies will survive and even increase market share in Europe following the Directive’s measures, as the some generic companies will not endure.
Bayer’s new crop protection investment accounts for almost 80% of the division’s €3,400 million R&D budget, compared with the 66% targeted in 2006. Bayer was seeking to reduce its crop protection division business and shift resources towards its seeds and traits BioScience concern.
Dr Berschauer laments the fall in public investment in agriculture. He believes that there is a looming food crisis that demands more resources to improve technology in food production. The Bayer chief said last year that a “new agricultural economy” was on the horizon, with rising demand for food, feed and fuel. “The prediction has come true – and sooner than we expected,” he says.
The company’s sales of “innovative” ais have boomed. Bayer’s target of €2,000 million ($2,950 million) of peak sales for pesticide products launched since 2000 is two years ahead of schedule. It expects to reach the mark by the end of next year with 23 ais having been introduced. The company speculates that potential annual sales of those products could reach in excess of €2,500 million ($3,690 million). The share of sales for “innovative” products in Bayer’s sales has “almost doubled” in three years. Such products will account for 50% of crop protection sales by 2012 against the present 35%, Bayer says.
Bayer has set new goals. “We prefer to focus on the [ten] newer molecules that are in the pipeline for the next four years, for which we see a combined peak [annual] sales target of €1,000 million ($1,470 million).” Spirotetramat, fluopyram and bixafen are each projected to achieve peak annual sales in excess of €150 million.
The company is raising its investment in capital. It will expand its production capacity “to meet the higher demand without overextending”, the Bayer chief says. “It [the expansion] is not going to be a sudden jolt up that could leave us exposed to a downturn in demand or even of lower demand growth”.
The company is investing €280 million ($413 million) in 2008 in modernising existing production plants and building new facilities, up from €223 million ($329 million) last year. Some €70 million will be dedicated to glufosinate-ammonium herbicide production. The largest project is the €60 million ($88 million) construction of a plant to manufacture precursors to the herbicide in Knapsack, near Cologne, while two US plants will come on stream. Some €15 million ($22 million) will fund new facilities at the company’s Brazilian “hub” production plant at Belford Roxo.
Bayer says it has modernised and consolidated its production plants since 2000, and that it is largely “taking out bottlenecks”. It restructured its production in 2006, aiming to cut staffing by 1,500 and production facilities from 50 to 35 by 2009. Bayer is down to 40 plants, it says. Such cuts seem to have been reversed. “We will only invest in our own [plants] as we have invested in technology,” Dr Berschauer adds. He cites the example of the company’s Indian plant. Bayer has taken full ownership of the former joint venture that ran the site.
Dr Berschauer’s analysis of the crop protection industry is nevertheless restrained and he does not see repeats of this year’s “stellar” results. “Other companies and company chairmen have made bullish comments about market growth for the sector. That is for them, but I don’t think continuing double-digit growth is likely”. The Bayer chief considers 2008 to be an exceptional year. “This year has been unexpected and remarkable, but from 2009 maybe 3-5% or possibly 6% growth is more likely.” Agrochemical market growth in 2008 should top 10%, while Bayer targets a portfolio-adjusted sales increase of “well above 10%” – driven by volumes and price rises. Sales in the first half were up by 21%.
South America will lead growth and Brazil gains particular attention. Sales rose by 30% in the Latin America/Middle East/Africa region. Bayer echoes recent comments from Makhteshim Agan Industries and the market research firm, Kleffmann, that Brazil threatens the US status as the world’s largest agrochemical market.