New report: The global pesticide economy is undergoing tectonic shifts

This is part of ETC Group's report Food Barons 2022: Crisis Profiteering, Digitalization and Shifting Power.

Full report with citations is available here: https://www.etcgroup.org/content/food-barons-2022

Agrochemicals/Pesticides: Companies in the agrochemical sector manufacture and sell pesticides used in agriculture. ETC Group uses the word ″pesticide″ as a synonym for ″agrochemical.″ In the wake of recent mega-mergers, at least five of the leading pesticide companies also dominate the world market for commercial seeds and traits. With the commercialization of molecular biotechnologies in the mid-1990s (e.g., herbicide-tolerant genetically modified plants), the pesticide and seed sectors became inextricably linked. Today they are being further linked by Big Data strategies.

The global market for agrochemical products was US$62,400 million in 2020.
• ChemChina accounts for one-quarter of the global pesticide market – a share that is likely to expand rapidly following the 2021 merger of ChemChina + SinoChem.
• Top 2 global pesticide market = 41%
• Top 4 global pesticide market = 62%
• Top 6 global pesticide market = 78%

Commercial Seeds & Traits: The seed sector refers to crop seeds (primarily proprietary field crop and vegetable seeds) sold via the commercial market and genetically modified crop traits. However, ETC Group’s definition excludes farmer-saved seed and seed supplied by governments/public institutions. Despite the astonishing level of corporate concentration in the global commercial seed sector, the vast majority of the world’s farmers are self-provisioning in seeds, and farmer-controlled seed networks still account for an estimated 80-90% of seeds and planting material globally. Over the past 40 years, the world’s largest agrochemical firms have used intellectual property laws, mergers and acquisitions (M&As) and new technologies to take control of the commercial seed sector. Today, pesticides and commercial seeds are no longer distinct links of the industrial food chain. However, ETC Group continues to provide corporate rankings and market share for seeds and agrochemicals as separate sectors. The ‘pure-play’ seed company (that is, a company that focuses primarily on seeds) is a rarity among the leading companies. Vilmorin (#5) and KWS (#6) are exceptions.

The global market for seeds and traits reached $45,000 million in 2020.
• The top 2 companies control 40% of the global seed market.
• The top 6 companies control 58% of the global seed market.

Supersized Consolidation: Chemchina + Sinochem = Industrial Ag’s Newest Input Empire

The long-expected merger of SinoChem and ChemChina (both stateowned) was finalized in early 2021. The colossal Chinese merger creates not only the world’s largest chemical conglomerate, but also the leading industrial farm input business (seeds, pesticides and fertilizer assets) — all under the umbrella of the newly formed Syngenta Group. As a result of the merger, annual sales of the new Syngenta Group (which consolidates all of ChemChina and SinoChem’s ag input assets), will approach an estimated US$27 billion. The mega-merger is likely to spur even greater industry consolidation both within China and beyond.

In response to a surging demand for food (especially animal protein), a rapidly expanding middle class, and a diminishing pool of farm labour (80% of China’s population will live in cities by 2050), China is revving up domestic food production with a full-throttle embrace of high-tech, industrial agriculture and chemical-intensive inputs. With the acquisition of Swiss-based Syngenta in 2017, the Chinese state aims to ensure that a greater proportion of its industrial farm inputs, agribusiness technologies and intellectual property are China-owned and sourced, while simultaneously expanding export markets with a global reach.

Over the past 20 years, China has become the economic center for global pesticide production, use and export. Since 2008, Chinese pesticide exports grew 14% per year. Today, China manufactures more pesticide active ingredients than the U.S. or the E.U.. Chinese companies have traditionally focused on cheaper ways to manufacture off-patent ag chemicals, rather than invest in costly R&D to develop new active ingredients. But now, China is leading on all fronts. In addition to being the world’s leading manufacturer of off-patent and generic pesticides, the Chinese state owns a multinational ag input powerhouse (Syngenta) with R&D muscle and a global presence.

Post-Patent & Generics Drive Pesticide Proliferation
 
Among the most significant trends in industrial farm inputs: the meteoric rise of off-patent and generic pesticides, especially in the global South. The explosive growth of generic pesticides was fueled by the expiration of patents on best-selling pesticides (especially Monsanto’s glyphosate herbicide, in 2000).

During the same time period (2000-2020), multinational agrochem giants have been slower to develop new active ingredients for proprietary, high-value chemical products. The lag in innovation by multinational agrochem/ seed giants is, in large part, explained by the spiraling costs of bringing a new active ingredient to market. But economists also note that giant corporations operating in highly concentrated markets may have less incentive to innovate and invest in R&D. Moreover, with breakthroughs in ag biotech in the late 1980s and 1990s, the agrochem/seed giants pursued a different innovation pathway – opting to invest R&D in the genetic engineering of proprietary seeds that obliged farmers to buy more of the company’s agrochemicals. Herbicide tolerance, the trait found in the vast majority of all genetically engineered crops worldwide – is a classic ″technological lock-in″ that is designed to entrench chemical dependence in agriculture and amplify market power.

With adoption of herbicide tolerant crops and massive use of chemical weedkillers (on both genetically engineered [GE] and non-GE crops), more than 250 weed species across 70 countries have evolved resistance to at least one herbicide formula, leading farmers to spray more frequently or use multiple weedkillers. Taking just one example: in 1990, U.S. farmers applied an average of 1.8 herbicide sprays to each acre of corn. By 2018, farmers sprayed 3.4 herbicides, on average, per acre of corn. In 2021 Bayer introduced XtendFlex soybeans that are engineered with triple chemical tolerance (to glufosinate, glyphosate, and dicamba herbicides). And if that genetic arsenal doesn’t pack a lethal punch, Bayer plans to develop six-way herbicide tolerant crops by 2030.

Over the past 25 years, as patents on blockbuster proprietary products began to expire, more nimble pesticide manufacturers – especially in China and India – have created huge markets by churning out cheaper formulations of post-patent products. Generic agrochemicals overtook proprietary and off-patent pesticides for the first time in 2002, and the cheaper off-patent and generic products have dominated the global market ever since. By the end of 2013, off-patent products accounted for more than 77% of the total pesticide market, and that share has continued to grow an average 2% to 3% each year. Today, China supplies almost half of all herbicide global exports, with glyphosate chief among them. India’s herbicide exports (largely glyphosate) grew 19% per year between 2003 and 2015. Notably, the world’s fifth largest agrochemical firm, UPL Ltd. (India), derives 71% of its 2021 FY revenues from generic pesticides.

According to industry analysts, between 2017 and 2023, patents will expire on more than 100 agrochemical products – valued at US$11 billion. Although multinational pesticide giants have been slower to innovate with new active ingredients, they’ve managed to bolster their oligopoly market power, in part, by reformulating existing active ingredients into ″profitable agrochemical cocktails.″ The multinational giants also rely on negotiating strategic licensing deals, including access to registration data, for their products that will soon go off-patent.

Big Ag’s Digital Turf Grab
 
The world’s largest agrochemical/seed firms have fortified their market control via consolidation and mega-mergers; now they are feverishly investing in high-tech and digital technologies that can further expand their already-solid oligopoly. They are not alone; other corporate titans, sitting atop their own sectors – fertilizer giants, ag equipment manufacturers, big tech – are muscling their way into the digital ag arena.

In the past half-decade, the biggest players in global agriculture consolidated to produce the Fat Four (Bayer, Corteva Agriscience, Syngenta Group/ChemChina, BASF) amid a dramatic onslaught of digital technologies that invite – almost require – cross-sectoral convergence. ″Data is the new soil″ – now a common metaphor to suggest digital information’s ubiquitous and foundational role – also points to the reality that Big Data is becoming the prerequisite, the milieu and the means of producing agricultural commodities. The world’s biggest data companies – Apple, Alibaba, Amazon, IBM, Google, Baidu, Microsoft, among others – are now tightly entangled with industrial food production.

The reach of digital food and ag is rapidly expanding to peasant and smallholder agriculture in the global South. Digital technologies offer new forms of control and value extraction that threaten to further usurp farmer autonomy and decision making while facilitating and expediting a new era of land grabbing.

The justifications for using Big Data to advance and ultimately realize ″precision agriculture″ are already familiar and vary little from the arguments pushing for the acceptance of GMOs more than a generation ago: we are told that food production is inefficient, unpredictable and imprecise and so we must leverage newly-available technologies to produce more food more reliably (i.e., increase yields) for a growing global population – without increasing the need for land and while reducing negative environmental impacts from agriculture. Data-driven decision-making, it is claimed, will allow farmers to increase yields even while reducing herbicide- and fertilizer-use because input-prescriptions will be meticulously accurate, down to the level of the field, the row, and even the individual plant. These automated prescriptions will, ostensibly, save farmers time, money and labour – and the environment wins, too.

Always More Room for Profit: Critics of Big Ag are rightfully dubious that the world’s largest input producers are working hard to find ways to sell less product. We can be sure, in any case, the Fat Four won’t sacrifice profitability and they will aim to offset reductions in traditional input sales – if, indeed, there are any reductions – with increased sales of other products, which may include ‘tailored’ or site-specific inputs developed using collected, on-farm data. As Mao Feng, chief brand manager for Syngenta Group’s MAP (digital agriculture platform in China, see Table below) explains: ″Before, we sold pesticides, seeds and fertiliser. Now we’re a farm services company – we sell service and technology…selling individual products, we had hit the ceiling, there was no more room.″ The new business model is vertical integration under the rubric of farm management services: instead of limiting sales to seed plus a linked-herbicide (Roundup Ready corn seed and Roundup, for example), seed/pesticide firms are now selling (the promise of) high-yielding, weed-free, bug-free fields. To that end, the products for sale may include data-driven input recommendations by a company-linked consultant/agronomist (increasingly referred to as a ″trusted advisor″), modelling of potential profits based on pre-dicted weather plus the application of additional proprietary products, soil sampling via in-field sensors and field-scouting via drone on a fee-per-pass basis, etc. The aim is not to profit, necessarily, from the sale of digital tools or app subscriptions – BASF’s xarvio Field Manager app, for example, is free to download from the App Store; the aim is to sell data-driven farm management services – including traditional inputs – while collecting valuable on-farm data.

Read more at https://www.etcgroup.org/sites/www.etcgroup.org/files/files/01_agrochemicals.pdf