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How Brazilian government’s agility in approving crop protection products can increase profits for farmers
Oct. 14, 2019
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Renato Seraphim
Business Strategist / CEO
In the last 18 years, the total production cost of soybean in Brazil increased by 178% while productivity grew by 28%. Taking the cost of pesticides into account, this total production cost is even higher, reaching 234% in 18 years.
According to data on the ratio between the cost of pesticides and the total cost of soy production in various countries, Brazil came out on top. In 2017/18, agrochemicals accounted for around 20% of the total cost of soy production in Brazil, while in the United States (US) this percentage was 5%, and in Argentina, it was 7%. The same difference occurs in cotton, maize, sugar cane and other crops.
Brazilian farmers face greater challenges than farmers in other countries, and Brazil does not have the advantage of having a strong winter season, such as in the US and Argentina, that controls pests, weeds and various diseases. Brazilian soil also requires the use of higher quantities and varieties of fertilizers in shorter cycles, in order to harvest a second crop and increase profitability.
The competitiveness of agricultural producers is strongly influenced by production cost. Therefore, relevant strategies are required to reduce this cost and enable producers to continue doing business. The concentration of the sector is directly related to the low competitiveness of small and medium-sized producers, who sell their land to larger producers due to high costs.
Brazilian authorities take over eight years to approve new agrochemicals while in the US, the average time required by relevant regulatory agencies to approve the registration of a new product is about one year.
This flexibility in the US has reduced prices for farmers, and by analyzing the price of Imidacloprid-based products in the US, it can be noted that generics can cost up to 30% of the value of reference products, highlighting the considerable impact of these products on production cost.
In Brazil, the success of the drug sector is an example of the successful implementation of a comprehensive market strategy, and it is notable that the approval time of new generic drugs is half the time required to approve equivalent pesticides.
Generic drugs can currently cost only up to 30% of the value of branded drugs, and in most cases, the entry of a generic drug in the market causes a drop in the price of its equivalent branded drug, which needs to remain competitive.
The constant search for competitiveness and the sector’s technological development can have some negative consequences, as the significant costs of research and development and launching new products are passed on to producers, increasing their production costs and reducing their profits.
Despite the noise of NGOs, the media and influencers regarding the approval process for agrochemicals, the agility of the Brazilian government encourages the launch of more products, increases competitiveness, and reduces the costs of these inputs, making farmers more competitive and less concentrated. This strategy is more useful than simply distributing land and reducing competition.
Source: AgroNews
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