Mar. 15, 2023
In early 2023, we invited our columnists to participate in a survey designed to get their perspectives on the most influential events or trends in the agri-inputs industry in 2022 and what they expect to see in 2023. We had the enthusiastic participation of 11 experts. Here are some trends and predictions we compiled based on their responses.
International Marketing Manager at INTERMAG Ltd.
Chairman cum Managing Director at Krishi Rasayan Group
Business Development Director of Peters and Burg Agrochemical Holding
Owner and CEO at Cooper Investment and Consulting
CEO & founder
of AgriConsult LATAM
Founder and former Director of Marrone Bio Innovations
President and CEO
Futureco Bioscience S.A.
Chief Marketing Officer at UPL Brasil
Formulation Consultant &
Expert Witness at AgroFormula
CAM FOR AGROCHEMICALS
A look back at 2022 trends
Transformation of agricultural practices and food production accelerated under uncontrollable factors
In 2022, when much of the world was slowly recovering from the impact of COVID-19, the conflict between Russia and Ukraine suddenly broke out in February. Everyone involved in agriculture has been affected to a greater or lesser degree.
″Last year was very difficult and unstable for agricultural business. This was mainly due to two factors: struggling with the effects of the pandemic and the outbreak of the war in Ukraine. Disturbed supply chains and the rising cost of raw materials and energy had greatly impacted prices and sales of agri-input products. However, due to the high prices of soil fertilizers and their instability, some farmers were forced to reduce the dose of fertilizers per hectare or switched to crops, which require less fertilization (e.g. leguminous crops) instead of high fertilizing demanding crops (e.g. corn),″ said Anna Konieczny, International Marketing Manager at INTERMAG Ltd, ″The situation forced farmers to look for methods, which would allow them to reduce the impact of lower soil fertilization on crops and to pay more attention to the solutions increasing nutrient use efficiencies like biostimulants or bioproducts.″
Rafael Juncosa, President and CEO at Futureco Bioscience, holds a similar view, saying, ″The uncontrollable factors set the trend towards a food production system less dependent on conventional fertilizers and chemical pesticides, and thus more environmentally sustainable. In these times, the resistance of the primary sector has become clear, but it also needs to accelerate the transformation of agricultural practices and food production towards more sustainable models. It is now essential to use the minimum of resources and to rely on innovation and technology to maintain production levels in agricultural fields.″
High inflation and its consequences
Inflation is a keyword mentioned a lot in this survey. Rafael Juncosa said that high inflation was a significant factor affecting the market in 2022, especially in the food sector. This factor is changing the future structure of agri-input distribution, which is moving towards a more straightforward manufacturer-retailer-manufacturer user structure, shortening the distribution chain. This phenomenon will minimize middlemen's margins, and thus inputs will reach the farmer at lower prices.
Jorgelina Lezaun, CEO & founder of AgriConsult LATAM, mentioned that the war between Russia and Ukraine had a negative impact on agribusiness market due to the main role of both countries as grain producers, mainly corn, wheat and sunflower. The war generated a sharp upward movement in prices. Soybeans, corn and wheat came to trade near their historical highs at the Chicago grain market, although that trend was tempered with the year’s advance. Locally in Argentina, due to a local inflationary scenario, a "Wheat Stabilization Fund" was created, a trust subsidized with an increase in withholdings on soybean meal and oil. It was used to reduce the domestic wheat flour prices to the mills. In terms of political decisions, the launch was also an Export Increase Program (PIE) in which farmers arranged a different exchange rate to promote soybean sales.
Renato Seraphim, Chief Marketing Officer at UPL Brasil, said, ″At the end of 2022, we saw an appreciation of the exchange rate (it reached R$5.32 on December 12), and we know that we will have a complex year with lower economic growth, still high inflation and interest rates making investments more expensive. So, it is essential to evaluate the results and what lies ahead so that Brazil can receive large international investments.″
Yehia Hamada, Product Manager at CAM FOR AGROCHEMICALS, introduced the situation in Egypt. ″The Egyptian agricultural market recovered after COVID-19 in early 2022, but Egypt was affected by a sharp rise in the exchange rate of currency US dollar to EGP since the beginning of June 2022. The war between Russia and Ukraine led to inflation and imbalance in the prices of pesticides, fertilizers, and seeds, as the processing of fertilizers and pesticides in Egypt depends mainly on raw materials imported from China and India,″ Yehia said.
Positive and negative voices on biopesticides
″In 2022, we saw a continuous rise in the use of biopesticides for sustainable agriculture, including microbial biopesticides, biochemical biopesticides, and PIPs (Plant Incorporated Protectants/Genetics), said Roy Chen, Formulation Consultant & Expert Witness at AgroFormula.
Renato Seraphim said that the biologics market continues to grow with the emergence of several companies and the increase in the production of biologicals by farmers. The opportunity to enter this market has been a great challenge. This is one market with attractive margins (~40 to 50%), and he expects that for the next 10 years, the segment should grow at an impressive rate of 20 to 25% p.a.
He also shared some figures: in 2022, the Brazilian agriculture authorities released the registration of 136 newly formulated products with low impact, including 79 products with an authorized use for organic agriculture. ″Low-impact products have been registered, which have biological, microbiological, biochemical ingredients, with a lower toxicological level. Great job by the Ministry providing more sustainable alternatives to crop management and the biggest registration of generic pesticides that is very important to reduce market concentration and increase competition, resulting in fairer trade and lower production costs for Brazilian agriculture,″ Renato said in conclusion.
However, Alexandre also expressed a different view, ″In the case of biological products, we had a growth in use, but Brazilian producers still do not have great confidence in such products, especially in large crops where traditional products are still preferred due to their confidence and in controlling diseases and pests.″
More capital and M&A opportunities tilt towards the biostimulant/bionutrient sector
The year 2022 impressed Pam Marrone, Founder and former Director of Marrone Bio Innovations, most of which continued M&A activity, especially in biostimulants/bionutrients to address the desire for chemical fertilizers and greenhouse gas emission reductions and improvement of soil health globally.
Atul Churiwal, Chairman-cum-Managing Director at Krishi Rasayan Group, expressed similar sentiments. He said, ″The global trend seems to offer more emphasis on crop nutrition and biological products. More companies are looking into this space, and all major M&A globally has happened in this space alone.″
Guy Cooper, Owner and CEO at Cooper Investment and Consulting, while agreeing that M&A in the biological sector was a notable feature in 2022, also raised his concerns. He thinks that the consolidation of biostimulant companies will require regulators to take a deeper look at the very different regulations governing crop protection and crop nutrition since it is increasingly clear that lax regulation is driving this consolidation more than anything else (biopesticide regulation is much stricter).
″What we now see is crop protection giants buying biostimulant companies instead of biopesticides which are much more expensive and time-consuming to develop. Reversing this trend would heavily depend on regulators adopting a more harmonized approach towards biopesticides regulation (versus biostimulants). Currently, I see minimal evidence of this happening. The scarcity of biopesticide solutions on the market also limits crop protection companies’ ability to reduce chemical loads in the field. Not only do they have fewer chemical products to sell they also have fewer biopesticides to integrate into the spray programs. This severely limits farmer choices across many pests, diseases, and weeds in multiple crop scenarios. In an attempt to continue growth, crop protection companies are relegated to acquiring biostimulants and adding them to their portfolios. In fact, these products don’t solve the same problems,″ Cooper explained.
Latin America shows great resilience
Agriculture in Latin America, particularly Brazil, has shown remarkable resilience against a gloomy global political and economic backdrop. Pam Marrone specifically mentioned the continued double-digit growth in her response, especially in Brazil, as growers become more aware of the biological category and better understand how to use them.
For Brazil, Renato Seraphim has done a detailed analysis for us. Brazil is showing incredible resilience in agribusiness; despite internal events such as the political scenario, weather conditions, price fluctuation and exchange rate, Brazilian agriculture has broken many records. For this season, the expectation is for a record production of 312.2 million tons, 15.0% higher than harvested in the last cycle. As for the area, it estimates that 77.0 million ha will be cultivated. Remember that Brazil has more than 150 Mio ha in degraded pastures. This is one of the reasons that the pasture market for crop inputs is already among the fifty most important in Brazil. The crop-livestock integration is one reality, and this reality helps Brazil to be one of the most sustainable agricultural countries in the world.
According to the latest data from the Ministry of Agriculture, Brazilian agribusiness exported US$148 billion in 2022, with China being the primary market for Brazilian agricultural products, accounting for 1/3 of the exports. Another trmendous positive achievement of the Brazilian government in 2022 was to open more than 200 markets in more than 50 countries.
″After starting 2022 with several fears about the global fertilizer supply, especially after the conflict between Russia and Ukraine, Brazil managed to fill up properly. However, the high prices and the worsening exchange ratio caused the average use of fertilizers in 2022 to be lower than in previous years. The Brazilian government, led by Tereza Cristina, acted very quickly and guaranteed imports of fertilizers, establishing prices and consequently good planting conditions,″ Renato said.
Jorgelina Lezaun tells us about the market situation in Argentina. The incomes of dollars from the Argentinean agribusiness had been the largest in history, similar to the previous season with a good harvest production in terms of volume and quality and high international prices. Due to its dynamism, Argentinean agriculture is the primary sector to explain a record result of high-value exports. However, in 2022 it was not exempt from the obstacles in imports, which impacted the supply of fertilizers, phytosanitary products, and agricultural machinery.
Regarding climatic conditions, it should be highlighted that 2022 had adverse conditions with negative results in crop production. It was the third year of the phenomenon La Niña. In Argentina, in the last 30 years, there has been no precedent to the severe drought. The year started with a historic heat wave that left crop yield parameters severely damaged and fires reported along productive areas and natural resources reserve areas. There were also late frosts and headwinds against winter cereals, wheat, and barley production.
Jorgelina also mentioned that as good news, after two years of downturn, 2022 would remain a pleasant memory due to the return of face-to-face events and congresses.
Agrochemical prices fall and supplies normalize
After a surge in the price of agri-inputs, experts say prices have been falling recently and are close to a reasonable range. Alexandre Quesada, Executive Director at SmartTox Ltd. told us that in Brazil, in the case of crop protection, the lack of selective herbicides such as glyphosate, diquat, and glufosinate created a shortage of those products. This caused a price increase for some major herbicides. Fortunately, these prices are already being reduced due to the normalization of its supplies. The same thing happened in the plant nutrition sector too.
Renato thinks that for the rural producer, the new reality of margins and low pace of sales advance gives signals of precaution to trade grain and crop inputs.
″Looking at production costs (inputs, leasing and others) the trend is that commodity prices remain at good levels, investments in the field should grow, and there is a need for caution in decision-making. Crop Input prices continue to fall, but smaller margins for farmers are predictable: After two years of high margins, the next harvest marks the beginning of the transition to ″normal margins″ in soybean and corn production. Admittedly, the increase in fertilizer prices worsened the trade ratio for soybean and corn production in 22/23, but expectations of lower prices in 2023 should also limit the producer’s margin,″ he added.
Consolidation on the distribution part will continue
Guy Cooper believes that 2023 will reverse the temporary decline of investments in innovation we saw in 2022, which was primarily driven by economic and political instability. ″I believe the deal size will increase, but valuations will probably not return to 2021 levels,″ Guy said.
″An event that marked 2022 and still continues in 2023 is the distribution market concentration, and the so-called "dealers", mainly with investment funds,″ commented Alexandre Quesada. ″With that, a change in the distribution process is taking place, generating greater competition with many stores of distribution being opened in the main Brazilian agricultural centers, increasing competitiveness among intermediary distributors, generating a reduction in profit margins and product prices.″
Alexandre continued, ″more consolidation in the sector of distribution of crop inputs is yet to come. The year 2022 was one with many consolidation moves and promising signs for the next few years. Beyond the funds, private equity, input industries, and players companies are remodeling market access strategies, especially for small and medium producers, bringing great challenges and opportunities to the sector. Large producers are also consolidating, increasing direct sales from the industry to the farmer. The use of marketplaces and digital contacts will also increase.″
Soil health matters
Sustainable agriculture must constantly look for innovative products that improve plant nutritional status and ensure higher yield and better yield quality. This enables farmers to produce healthy food while minimalizing the negative impact of agrochemicals on the environment. Intensive plant cultivation, unbalanced fertilization and limited crop rotation contribute to the decrease of soil biodiversity and soil microbial activity, consequently leading to soil degradation. In addition, degraded soil cannot create optimal conditions for plant growth and development. Therefore, one should pay attention to developing and implementing solutions, which prevent soil degradation, promote soil regeneration, allow plants to use fertilizers more efficiently and support plant health, enabling farmers to rationalize utilization of chemical plant protection products.
″Such solutions are products containing selected strains of beneficial microbes, which have a multidirectional effect on plant growth and development. For this reason, we should pay more attention to their use in agriculture. For example, bioproducts based on bacteria, which produce cellulolytic and pectinolytic enzymes, boost and accelerate the decomposition of crop residues, thus increasing the content of humus in the soil and improving soil properties. In addition, formulations containing selected strains of bacteria activating unavailable nutrients in the soil, e.g., phosphorus, zinc or even silicon, increase the efficiency of nutrient utilization by plants and improve plant nutritional status,″ highlighted Anna Konieczny.
Symbiotic and non-symbiotic atmospheric nitrogen-fixing bacteria can help farmers in rational nitrogen management in crop cultivation. Moreover, microbes can support plant health by occupying space on plant surfaces, using food resources or even demonstrating antibiotic properties against perpetrators of plant diseases. They synthesize biologically active compounds e.g., enzymes, plant hormones, and siderophores, stimulating plant growth and development. Due to the variety of positive effects of microbes on soil and plant, agriculture should pay more attention to introducing microbial products, based on beneficial bacteria, fungi, or mycorrhiza, into crop nutrition, biostimulation and protection programs.
″An exciting innovation is also enriching fertilizers, either granular or liquid, with the beneficial microbial component, which combines the capabilities of natural soil microbes with the benefits of fertilizer application,″ Anna said.
Promising areas worth watching
Bursevich Veranika, Business Development Director of Peters and Burg Agrochemical Holding, commented that: ″The biggest trend is the development of small start-up agribusiness companies, which focus on developing precision agriculture software and niche biological products. Development of precision agriculture technologies, field mapping and pesticide/fertilizers applications with drones.″
Roy Chen mentioned nanopesticides and smart sprayers, which he believes are promising sectors.
″Nanopesticide (NP) is a new emerging trend that deserves our attention. It expands the use of conventional pesticides for protecting crops and plants in homes and gardens. However, there is a learning curve in NP technology, especially in understanding the interaction mechanism between NP and plants and soil and its potential impact on the environment,″ Roy explained.
He continued, ″It is also exciting to see the modern Smart Bot technology gradually catching up with the agrichemical spray arena. The current champions for the US market are John Deere and BASF/Bosch. Their objective is for the Spray Bot to see and spray on the spot, picking weed from the crop! The ultimate goals are to reduce herbicide use and slow down the development of herbicide resistance. This technology development is worth watching.″
This article was initially published in AgroPages' 'Annual Review 2022' magazine.
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