Drivers of Agricultural Multinationals’ Growth against Trend in LATAM Market

Since 2021, the global pesticide market has experienced unstable but positive growth. Latin America (LATAM), one of the most critical strategic regions in the global pesticide market, has also achieved remarkable market performance in the past year because of the participation and competition of major multinationals.

In 2021, the global crop protection market sales grew by 8% to reach US$65.8 billion, of which the LATAM market has contributed 30%. The market performance of the pesticide industry is always influenced by the macroeconomy, weather, market demand, cost and other complex factors.

From a macroeconomic point of view, in 2021, with the excessive global liquidity resulting from the Federal Reserve’s quantitative easing operation, the currencies of most countries and regions in the world moved higher against the US dollar from the third quarter, which influenced the agrochemical industry in two ways.

On the one hand, it raised the demand for imported agri-inputs in critical countries and regions (such as LATAM, etc.) to a certain extent. On the other hand, global commodity prices kept rising influenced by the dollar exchange rate and the supply chain problems caused by the pandemic. Moreover, the increase in farmers’ income also influenced the conductive effect of investment in agrochemical inputs.

From the perspective of natural conditions, there was a huge contradiction between agricultural planting demand and the situation of severe diseases and pests in Brazil in 2021. The extreme weather also pushed up the agrochemical market demand again.

Amidst the unfavorable macro situation, the LATAM market appeared as both a challenge and an opportunity for significant multinationals, thanks to the rising market demand and aggressive product pricing strategies. Unsurprisingly, large multinationals have achieved relatively good performance in the LATAM market. For example, Corteva’s sales in LATAM in 2021 reached $3.545 billion, up 26% year-on-year; Bayer's crop protection division’s sales in LATAM in 2021 reached €5.098 billion, up 13.2% year-on-year. Other companies such as Syngenta and UPL also achieved double-digit gains in LATAM.

So, how did these agrochemical giants achieve leap-forward growth in LATAM with their advanced technologies and product power? What strategic moves have they taken in 2021? With these questions, the author conducted an in-depth analysis of the performance of Syngenta, Corteva, BASF, Bayer, FMC, UPL and Sumitomo Chemical, to find the reasons for the multinationals’ growth against the trend in the LATAM market.

I. Plant protection products - strong product power and innovation programs

As one of the most important markets in the global agrochemical industry, the LATAM pesticide market has a direct influence on the international pesticide market. In 2021, these multinationals achieved remarkable results in the sales of insecticides, fungicides and herbicides in LATAM, which is closely attributable to their intensive product development and marketing strategies. The competition among these companies is especially intense in Brazil and Argentina. In addition to more players and products and the use of more biotechnology, the rising market demand and prices are also the main drivers behind the boom of the LATAM pesticide market.

Let us look at these companies’ products with a strong performance in 2021 and their product innovation plans.

Table 1 Important product of multinationals in recent years (LATAM)

(1) In the insecticide segment, Bayer Group’s sales in LATAM increased significantly in 2021, to which the company’s Curbix™ product is a significant contributor. The new insecticide Curbix 200 SC (active ingredient: ethiprole) has a strong knockdown and long-lasting effect. The demonstration field harvests show that soybean yield per hectare has increased by 1.5 bags compared to with the traditional methods used by growers. This product is highly recommended for insecticide resistance management programs for soybean growers during the 2021-2022 harvest season.

For Syngenta, the insecticide Durivo (active ingredients: chlorantraniliprole and thiamethoxam) outperformed the company’s other products in LATAM. Syngenta Crop Protection also launched the new PLINAZOLIN® technology last year, with its innovative active being registered preliminarily. Products based on this technology will be marketed in Argentina under the brand name VIRANTRA™.

(2) In the fungicide segment, the product strategies of companies such as Syngenta, Corteva, BASF, Bayer, FMC and UPL are focused mainly on soybean planting. According to the consultancy Datagro, soybean production in South America is expected to reach 212 million tons in 2021/2022, ranking first in the world. The huge demand generated by soybean planting in South America has dramatically contributed to the growth of the fungicide business of these multinationals. The sales of Corteva and FMC increased by 26% and 18.15% in 2021, respectively, and for BASF, the fungicide business even accounted for 30% of its crop protection business.

Regarding product strategy, Bayer upgraded its number one position in soybean fungicides in LATAM with Fox® Supra (active ingredient: inpyrfluxam), a next-generation product under Fox with unmatched efficacy in controlling soybean rust.

Syngenta’s Solatenol™ also demonstrated strong product power in LATAM with some benefits, including longer-lasting residual control, broad-spectrum control and good tank-mix compatibility. The company’s products marketed under Trivapro brand (active ingredients: Solatenol + azoxystrobin + propiconazole) have remarkable control effects on soybean diseases such as Frogeye leafspot, brown spot, aerial web blight, and anthracnose.

(3) The major conventional herbicides in LATAM are glyphosate, 2,4-D, and triazines. In 2021, the price of glyphosate tripled, leading to a higher proportion of herbicide sales in total revenue for many multinationals. For example, the main contributing factor to the growth of herbicide sales of Bayer Group was the price increase of glyphosate-related products. In addition to Bayer, of course, there are many more companies whose products deserve our attention.

In April 2021, UPL launched Lifeline-Sync, Brazil’s first mixture of glufosinate and S-metolachlor for soybeans, corn and cotton. Lifeline-Sync is effective against sourgrass (Digitaria insularis), goosegrass (Eleusine indica), slender amaranth (Amaranthus viridis) and Benghal dayflower (Commelina benghalensis). It is also indicated for managing of Mexican fireplant (Euphorbia heterophylla) and alexandergrass (Brachiaria plantaginea). The product was well recognized by the market after it was launched.

Sumitomo Chemical launched a new herbicide Terbyne Max containing flumioxazin and terbuthylazine in Argentina. Combining of the two active ingredients provides a synergistic effect, a burning effect, and greater residuality. Terbyne Max also has excellent compatibility with other herbicides, such as hormonal ones, graminicides (e.g. S-metolachlor) or desiccants (e.g. paraquat).

II. Bioproducts - the bio-driven transformation of agrochemicals

According to QY Research, the global biopesticide market was valued at about RMB31.3 billion in 2021 and could reach RMB67.1 billion in 2028, with a compound annual growth rate (CAGR) of 11.4% during 2022-2028. The three largest biopesticide consumers are Mexico, the U.S. and Canada, who consumed 44% of biopesticides worldwide, followed by Europe’s 20%. LATAM has a large gap compared with Europe and the US, but its market size is still rising.

For the product strategies of major multinationals in LATAM, there is an increasingly apparent bio-driven trend for agrochemical products. Biological formulations are emerging as one of the hot spots for pesticide development and are seizing a growing proportion due to their broad spectrum, high efficiency, safety and environmental compatibility.

In August 2021, Sumitomo Chemical launched the Aveo bionematicide (Bacillus amyloliquefaciens) in Brazil, a new biological solution for nematode control in which the bacteria colonize plant roots, creating a bio-barrier that prevents nematode penetration of the roots. Nematodes are one of the major problems affecting soybean yields in all regions of Brazil. This new product from Sumitomo Chemical can provide a better soil environment for the early growth of soybean seeds due to its safety and efficiency.

Similarly, since 2013, FMC has been building a world-class Biologicals business with over 50 bioproducts that protect a wide range of high-value specialty and row crops in 50 countries. In 2021, FMC launched Provilar™ biofungicide in Brazil.

In the field of biostimulants, Corteva Agriscience signed an agreement with Elemental Enzymes to develop abiotic stress mitigation technology in 2021. According to the agreement, Corteva receives an exclusive license to Elemental Enzymes’s Waterflux^® technology, which includes an optimized osmoprotectant blend that provides plants with small organic molecules to help crops overcome abiotic stressors such as soil salinity, drought, and extreme temperatures. Corteva will offer this technology through a family of products to be branded under the name Sosdia™ Abiotic Stress Mitigator/Biostimulant. Upon completion of registration, Corteva will launch both products in various regions, including LATAM.

Although chemically synthesized pesticides will remain dominant for a certain period, with the enhancement of environmental protection awareness, the improvement of laws and regulations and the penetration of modern high technology in the field of agricultural production, biological formulations are seeing rapid development in LATAM, where the demand for agrochemical supplies is strong.

III. GM seeds - the market competition for commercial expansion

In 1996, genetically modified (GM) soybeans were officially commercialized in Argentina. In the context of industrial agriculture, the GM practice has been in use in LATAM for 26 years. The competition between Bayer and Corteva in GM seeds market in 2021 is a topic that cannot be ignored. The two companies are trying to convince Brazilian growers to switch to their new generation of GM seed varieties they have developed that are tolerant to new herbicides because this is a matter of billions of dollars of seed and herbicide sales to the Brazilian market each year.

Until the 2021 planting cycle, Bayer's Intacta soybeans were used on around 80 percent of soybean acreage in Brazil. In this region, Bayer has a dominant position thanks to its extensive network of salespeople from earlier years and its long-standing ties with Brazilian farmers, seed developers and manufacturers. Furthermore, Intacta 2 Xtend™ soybeans have been approved and successfully introduced in Brazil for the 2020/2021 growing season. Bayer continues to strengthen its Intacta soybean franchise. The launch of next-generation technology Intacta 2 Xtend™ offers soybeans with more significant trait advantages such as dicamba and glyphosate tolerance and insect resistance. Intacta soybeans can yield approximately 2.9 bushels per acre, more than similar varieties on the market. With the third-generation project in Phase 3, Bayer announced the fourth generation is moving to Phase 1, cementing Bayer's position as an industry leader in protecting soybean yields from insect and weed pressure.

Corteva’s market action in Brazil is just at the beginning. In 2021, Corteva launched Enlist, which is tolerant to glyphosate, glufosinate and 2,4-D choline, and Conkesta E3, which has resistance traits to most lepidopteran pests, in addition to tolerance to these three herbicides.

Bayer and Corteva have respective competitive advantages and disadvantages. In terms of market share, Bayer currently has an overwhelming superiority. Corteva has a limited amount of Enlist sown in Brazil, though it occupies 35% of the soybean acreage in the US, a percentage which may take five to ten years for Corteva to reach Brazil. However, as dicamba products are currently facing a review and litigation controversy in the US, which may spread to the Brazilian market, it is possible for Brazilian soybean growers to turn to Corteva's Enlist products. Enlist is the key point for Corteva to gain market share from Bayer in the Brazilian market.

The competition between Bayer and Corteva in the Brazilian GMO soybean market will profoundly impact the strategic layout of the two companies in the LATAM market. We will keep a close eye on it.

IV. Digital agriculture - technology productivity-driven smart agriculture

Due to the limitation of macro environment and pest and disease stress on productivity in LATAM, it is increasingly urgent for multinationals to accelerate the establishment and improvement of sustainable agricultural development systems. Multinationals’ presence in digital agriculture in LATAM is supported by innovative agricultural technologies and ecological development concepts. The performance of seeds and crop protection products largely depends on the environmental and management conditions in which they are used, and digital solutions for agriculture, especially artificial intelligence, can significantly contribute to more efficiency, profitability and less negative externalities in agriculture. In 2021, multinationals achieved outstanding results in the digitalization process in LATAM.

The FieldView™ digital farming platform is Bayer's digital farming product that made a big splash in 2021. With FieldView™, farmers can customize product recommendations for each plot by gaining insight into specific crop planting areas. In this way, the value offered by Bayer’s seed and chemical product portfolio to farmers’ planting behavior can be maximized, and Bayer can be motivated to develop digital business models and new growth opportunities. FieldView™ has an eye-catching growth of influence in Brazil, where the number of hectares monitored jumped from 12.8 million in 2020 to 22 million in 2021, an increase of 72%. Further, by the end of 2021, the platform was adopted in more than 20 countries, with 20% more land monitored in 2021 than in 2020, specifically, from 60 million hectares to 72 million hectares. With the industry's largest database of growers and field trial seed performance, the FieldView™ digital farming platform continues to help farmers improve their operations and optimize yields. Meanwhile, in February 2021, Bayer partnered with Horsch, a leading on-farm technology manufacturer, allowing farmers in LATAM to connect their Horsch seeders and other implements to the FieldView platform to facilitate production.

BASF is also ambitious for the agricultural digitization market in LATAM. BASF and Bosch have jointly developed a Smart Spraying Solution to control weeds through precise application. This technology combines the agronomic intelligence of BASF's Xarvio® digital farming solution with Bosch’s high-tech image sensing technology to provide real-time, automated pre-emergence and post-emergence weed identification and management. Through targeted applications based on the current situation of arable land and weeds, this technology can reduce herbicide use by up to 70%. BASF’s Smart Spraying Solution is expected to be launched officially in Brazil within 18 months.

In precision agriculture, FMC is also broadening its Arc™ farm intelligence platform, a proprietary mobile solution that helps farmers better understand and manage pest pressure through predictive modeling based on real-time and historical data, entomological models, hyper-local weather information and in-field sensors. Arc™ farm intelligence system, available in more than 25 markets, including LATAM and covering 16 million acres, allows farmers to address pest pressure more efficiently and achieve more sustainable goals.

V. Summary and outlook

The year 2021 is a challenging year for the global agrochemical market. The lingering COVID-19 pandemic, rising energy costs and increased extreme weather events put multinationals under intense operational pressure. However, proactive supply chain strategies, growing market demand and positive price trends enabled multinationals to deliver a solid to positive performance in 2021, with their operations in LATAM showing optimistic potential for growth.

For the product landscape of multinationals in LATAM, the sharp price increase of glyphosate, the targeted layout of fungicide products for soybean planting, the transformation trend of bio-driven agrochemical products, and the dramatic drop of transaction costs due to the adoption of digital farming platforms are contributing factors for the high growth of multinationals’ agrochemical business in LATAM.

In 2022, the volatile international political situation and food security issues are bringing unprecedented challenges to the global agrochemical industry on both the demand and supply sides. But no matter what the future will be, adaptable supply chain strategies, intelligent industrial restructuring, and constant product innovation will always be the cornerstones of multinationals to overcome obstacles.

This article was initially published in AgroPages' '2022 Latin America Focus' magazine.