Dialogue with Agrochemical Distributors in Brazil: Moving Forward in Their Exploration (Part 4)

Brazil is one of the largest agribusiness players in the world and also one of the biggest markets for agri-inputs products, such as seeds, fertilizers and pesticides. 

The agri-inputs distributor, as a part of the value chain, plays a very important role in the Brazilian agribusiness market. According to Kleffmann’s data, in 2017-2018, distributors were responsible for 45% of the US$ 11.17 billion of pesticides sold in the country. 

The agri-inputs distribution market in Brazil is relatively concentrated, with about 50 leading distributors and cooperatives occupying 35% of the market, although there are thousands of distributors and cooperatives in the country. The concentration is expected to be higher in the next few years, as consolidation in the industry will continue to increase. However, this is only one of the challenges facing distributors.

They have more challenges to face among which are: transformation of crop planting structure, the ever-changing agricultural regulations and policies, pressure brought by manufacturers that are squeezing market share and optimizing sales model, farmer's shift in the concept of product purchasing, application and new technology adoption. There are all reasons why distributors have to think about how they should cope with the changes and take action immediately. 

AgroPages invited some agri-inputs distributors and experts in Brazil to discuss together what the challenges were in the market and how they should react to these challenges. The interviewees are: Renato Seraphim, CEO at Agro100/AgroFerrari; Ruy Cunha, Patria PE Director and Chief Operating Officer at Grupo Lavoro; Thomas A. Unger, Director of Acrom Agroindustrial Ltda; Renato Guimarães, CEO of Grupo Sinagro and Ivan Paghi, Agronomist, Engineer, Director of IP - Consultoria Mercado Agro.

Here below is the interview with Renato Guimarães, CEO of Grupo Sinagro. We will put the other interviews online successively.

What have been the significant changes in the planting structure in Brazil in recent years? What are the main challenges facing farmers and agrochemical distributors?

Guimarães: The most significant changes in agribusiness in Brazil came from the expansion of the planted area on degraded pastures, the great increase in productivity through the use of more efficient and modern technologies, the increase in the efficiency of land use due to the growth of digital precision technologies, investment publicprivate infrastructure, and bilateral agreements signed with important international markets. The main challenges for Brazilian distributors are the high capital required by agribusiness and, consequently, the lines of financing necessary to manage the business, the professionalism and consolidation of the sector at all levels (producer/distribution/industry), a more professional governance model, by unlocking the public policy bureaucracy and the high taxes imposed on the sector.

The government approved an unprecedented number of pesticides in these two years. Does this mean that distributors/retailers and farmers have more options for pesticides? What are the recent changes observed in the demand for agrochemical products by Brazilian farmers? 

Guimarães: The government has accelerated the approval of a series of generic products, that is, products that can be released by similarity. We don't see any major differences in the approval process for new active ingredients. However, the greater number of brands on the market causes competitiveness to increase, benefiting distributors and producers by reducing the costs of agricultural inputs. The demand for agrochemicals follows the growth of the planted area in the country.

What are the recent changes in the distribution channels for Brazilian agrochemical products? In addition to mergers and acquisitions between companies, what are the changes that have occurred in the distribution model for agrochemical products? What are the new technologies and ideas driving the change in the industry?

Guimarães: There is a strong consolidation of distribution in Brazil, from the entry of investment funds, trading companies, and the chemical industry itself in the supply distribution chain. These companies already represent almost 15% of the sales of inputs in Brazil and are expected to double their position in the next five years. We note a professionalization of the sector, through the implementation of rough governance models, professionalized management, and great concerns with operational costs and working capital employed in the business.

Bio-solution is becoming more and more popular in Brazil. What about the acceptance of Brazilian farmers to biological products? Will biological products become mainstream products in this market in the future?

Guimarães: This specialty segment, which comprises leaf nutrition and organic products, is still small in Brazil but has been growing a lot in recent years. The environmental appeal means that biological products have special attention from the entire agribusiness chain, from manufacturers, through the government and to society. We believe that this movement is here to stay, and biological products will play an important role in preserving our chemical technologies and biotechnologies.

Precision agriculture and digital agriculture are developing rapidly around the world. What impact do you think this will have on the distribution of agrochemical products in Brazil? 

Guimarães: Digital technologies will develop even faster after the pandemic. The digital transformation is already a reality. The role of distribution will be to integrate technologies, making access to digital platforms simpler and easier for producers to use.

What development trends do you think the Brazilian agrochemical market will show in the next few years?

Guimarães: The world population will continue to grow and we will have to produce much more food. The growth will come predominantly from increased productivity, so new technologies will have to be employed in the coming years. We will enter the era of Agriculture 4.0, which will change the entire food chain, from small farmers to the food industry, and comes with the concept of Industry 4.0, which aims to make the sector's activities more productive, sustainable and resilient to the climate. We will see huge growth in investments from agtech. The digital transformation and the use of data and information will generate different types of knowledge for the producer. Consequently, we will have a consolidation of the production chain, where the professional management model will prove decisive for the survival of the sector.

About Grupo Sinagro

Throughout our history, we have learned over time that it has brought us challenges and taught us to be mature. It has taken us 20 years to develop and promote agriculture, providing solutions for the producer to face new challenges and guaranteeing his productivity. 

During this time, Grupo Sinagro became a reference in the agribusiness chain in the Cerrado, operating in the segments of Pesticides, Fertilizers, Seeds and grain origination, always offering products and services of the highest quality and with a high level of innovation. We are currently present in the states of Mato Grosso, Mato Grosso do Sul, Goiás and Bahia, Minas Gerais, Tocantins and Pará, with 28 Distribution Units, four Grain Origination and Commercialization Units, in addition to an agricultural area of 21,000 hectares for grain production.

Contact:

Tayara Magalhães

+ 55 62 98198-7289 

As an agri-inputs distributor, if you have interests to share your company's story with us, please contact:

Christina Xie

christina@agropages.com

This article was initially published in AgroPages '2020 Latin America Focus' magazine. Download it to read more articles.