Agribusiness Multinationals Demonstrate Resilience and Growth in Latin America despite Headwinds

Overview of Latin American agriculture in 2022

Latin America's agricultural sector saw moderate growth in 2022, driven by increased production and exports of key commodities such as soybeans, corn, coffee and meat products. Investments in agricultural technology and infrastructure, such as digital agriculture, irrigation and port capabilities, have supported the development of agricultural production in the region.

Brazil and Argentina, the world's two largest soybean exporters, again posted record soybean output. Favorable weather and expanded acreage allowed Brazil to harvest a record 144 million tons of soybeans. In addition, corn production expanded in Brazil and Argentina due to high prices and strong import demand from China. Brazil is expected to export 41 million tons of corn in 2022/23. Adverse weather conditions, high agrochemicals prices, and political/economic challenges have affected crop production in some parts of Central America, including coffee and bananas.

From an economic and political perspective, high inflation in Latin American countries, particularly Brazil and Argentina, has increased production costs for farmers, including fertilizer, fuel, machinery and transportation, squeezing profit margins for some producers. Economic crises and political turmoil in countries like Venezuela, Nicaragua and Peru have disrupted agricultural production and trade. Rising costs of imported farm inputs have cut into profit margins for Latin American farmers.

Supply chain disruptions and higher transportation/logistics costs due to the Russia-Ukraine war have impacted agriculture across Latin America, increasing input and distribution costs.

Tight credit conditions and high interest rates in Brazil have made it harder and more expensive for farmers to get the financing they need for inputs such as seeds, pesticides and fertilizer. Import restrictions and foreign exchange controls in Argentina have also hampered farmers' access to agricultural inputs at reasonable prices, affecting productivity. Additionally, Argentina's fiscal and debt problems have limited public support and subsidies for the agricultural sector, leading to protests and strikes by the country's farmers.

The strength of the US dollar against Latin American currencies has increased the relative competitiveness of the region's agricultural exports in global markets. Currency devaluations in countries like Colombia and Chile (over 15% devaluation of the Chilean peso against the dollar in 2022) helped boost the competitiveness of dollar-denominated agricultural exports. High commodity prices provide a buffer for producers, shielding them from cost increases and economic challenges in the region.

In summary, while strong commodity prices supported Latin American agriculture in 2022, challenging local economic conditions, including inflation, weak currencies and supply chain issues, adversely affected many farmers, limiting production expansion. The region has benefited from export-oriented agriculture, but high costs are hurting the industry's profitability.

Big 6 grows by leaps and bounds in Latin America

Despite the complex factors affecting the industry, Latin America continues to be a rapidly growing market for agriculture. Looking at multinational companies that focus primarily on agricultural inputs, we can see that the leading companies in the sector achieved decent performance in Latin America in 2022.

As shown in table 1, the top six global agribusinesses all achieved double-digit sales growth in Latin America in fiscal year 2022, with each exceeding 20 percent growth. For several companies, sales in Latin America accounted for over 25% of total agricultural division sales, with Syngenta, UPL and FMC even exceeding one third. For all three companies, Latin America was the region that contributed the most to corporate revenues. For Bayer Crop Science, Corteva and BASF, Latin America is the second-largest regional contributor after North America. Overall, the importance of Latin America is apparent for the major multinationals.

Latin America becoming one of the most important markets for nearly all leading multinationals aligns very well with developments in the global crop protection market. Latin America has seen the strongest growth in the global market for crop protection chemicals. In the agricultural year ending June 30, 2022, Latin America completed $22.069 billion in agrochemical sales, up 16.8% year-on-year. Within this, Brazil was the largest market globally, with sales of approximately $13.8 billion.

Syngenta

In 2022, Syngenta's largest market was Latin America, accounting for around 39% of consolidated sales (2021: 33%). The company's crop protection sales in Latin America rose 43 percent, or 39 percent constant exchange rates. In addition to strong price increases in a market where demand was stretching supply, there was double digit volume growth in Brazil and Argentina with particular growth across non-selective herbicides.

Sales of seed sector were 27 percent higher, 24 percent at constant exchange rates, price increases and strong volume growth in corn in Brazil and Argentina。

In its financial report, Syngenta analyzed that the economic complexities in Latin America also had some impact on the company's business. Argentina continues to experience economic and financial difficulties, which have also impacted Brazil in previous years, and this at times has led to constraints in the availability of credit. In Argentina the economy has been hyperinflationary since the middle of 2018 putting pressure on liquidity. In Venezuela, exchanging local currency into US dollars to pay for imported goods continues to be difficult. 

Bayer Crop Science

Bayer Crop Science's revenue in Latin America increased by 29% in 2022 compared to the previous year. According to the company's analysis, price and volume growth in herbicides, particularly glyphosate products, had a significant impact on overall results. Sales at insecticides increased, primarily due to higher volumes and prices for our Curbix™ product in Latin America. Additionally, on the seeds side, Bayer harvested higher licensing incomes in Latin America.

Corteva

Corteva achieved sales growth of 25% in Latin America in 2022, primarily reflecting the impact of product price increases and the value added by the company's differentiated technologies. Volume growth was aided by continued penetration of new products, including Enlist and Arylex herbicides and Isoclast insecticides, with new product volumes increasing 33% compared to the prior year period.

UPL

UPL's revenue in Latin America increased by 22% in 2022, mainly benefiting from growth in the Brazilian herbicide and insecticide business, good performance in the Argentine herbicide business, and robust growth from the company's NPP BioSolutions in Mexico and other Latin American countries.

The crop protection market in Latin America saw a strong recovery in the past year. Brazil, being the largest market, benefitted from improved weather conditions, leading to substantial increases in corn yields.

The soybean market in Brazil showed good growth, driven by expanded areas, high product pricing and an upsurge in export demand. In Argentina, the market experienced growth fuelled by robust corn areas and favourable product pricing.

Latin America is a market that UPL has focused on in recent years. The company has simultaneously stepped up investments in business expansion, product launches, farmer services, channel penetration, digitalization and third-party partnerships in the region, boosting Latin America's revenue contribution to the group to 41 percent.

BASF

BASF stated that sales in South America, Africa and the Middle East reached €2.712 billion, an increase of 36% over the previous year, which were driven by significantly higher prices and positive currency effects, both primarily in Brazil. Slightly higher volumes, especially for herbicides and seed treatment products, also contributed to the positive development.

FMC

FMC achieved a 25 percent revenue growth in Latin America in 2022 driven by strong volume growth and price increases for its products. Looking at the company as a whole, new products contributed significantly to the sales performance. About $600 million in sales came from products launched in the past five years, representing 10% of total revenue in 2022. Sales from new products launched in 2022 were around $100 million.

Growth in the region was primarily driven by Brazil and Argentina. Double digit gains across all segments were driven by commodity price and acreage increases. The company investments in market access also contributed to growth in the region.

New product launch strategy: leveraging strengths, focusing on hot areas

Continued new product launches are critical for multinationals to remain competitive in the Latin American market, which is more receptive to new products. As shown in table 2 (based on information we collected in 2022-2023), the products launched by the major companies include both innovative offerings that build on the company's strengths and distinctive products designed to capture market share in certain segments.

BASF, for example, has continuously introduced fungicide products, with a wide range of single-agent and combination products based on its innovative molecules Mefentrifluconazole and Fluxapyroxad, with applications in field crops as well as high-value crops such as fruits and vegetables. FMC continues to introduce new products around its insecticide cyantraniliprole, with applications in more crops. 

Corteva has focused on launching biological products, recently introducing the bioinsecticide Tezpetix Beauve for corn, bionematicide Lumialza, and biofungicide/bionematicide Inlayon for soybeans and cotton and Inlayon Eco for sugarcane.

Bionematicides are an area of focus for major companies. In addition to Corteva, Syngenta also launched bionematicide ARVATICO for soybeans, corn, cotton etc., and CERTANO for sugarcane. UPL introduced Nimaxxa for soybeans, corn and cotton; BASF launched Elenquo for soybeans.

In addition to continuously bringing new products to the market, these companies are actively preparing future product lines, resulting in increased investment, R&D and third-party collaborations.

Syngenta Crop Protection and Scheffer announced a ten-year collaboration agreement, which stipulates that the two companies will jointly utilize their complementary capabilities. The aim of the agreement is to jointly develop biological products derived from microorganisms and specifically adapted for Brazilian farms, most notably bacteria and fungi that control the major pests and diseases affecting soybeans, corn and cotton.

UPL invested US$500,000 to expand and modernize its research and development center in Pereiras, in the interior of São Paulo, Brazil. The unit will now have seven laboratories and help generate innovations in phytosanitary defense and biosolutions for Brazilian and global agriculture by becoming the company's global nematode R&D center.

BASF’s Agricultural Solutions division announced it will launch around 150 crop protection solutions in Latin America over the next seven years. BASF said the solutions will include biotech products and digital tools in addition to seeds for soybeans, cotton, rice, fruits and vegetables. The innovation pipeline is projected to have potential sales with a peak value of more than €7.5 billion, through solutions that will be launched to the market over the next ten years.

Additionally, in March 2023, BASF announced an investment of €2.5 million to increase capacity by 30% at its inoculant and biological plant in Santo Tomé, Argentina. At the plant, inoculants and biologicals are produced with state-of-the-art technology and equipment, meeting the highest quality standards and most stringent safety protocols to assure solution efficacy from lab to field. Since 2015, BASF has increased production at the plant by over 10% year-over-year, prompting further investments in expanding capacity since 2019. 

Meanwhile, FMC sees pheromones as an important opportunity. After acquiring BioPhero, a Denmark-based specialist in pheromone development, for $200 million in July 2022, FMC quickly expanded its biocontrol and biostimulant product portfolio. The company is working on the technique for use against fall armyworm, Spodoptera frugiperda, Helicoverpa and other pests. An FMC executive stated: Although the biological area had existed in the company for several years, it had not been given the focus, resources and energy that is being given now. FMC has also set ambitious goals for the division: By 2025, FMC's Plant Health Division will achieve sales of US$150 million in Latin America. Currently, they are at US$80-90 million annually.

‘Closer with farmers’ is a key concern and action direction

Multinationals also place great emphasis on farmers' services in the Latin American market. Juan Pablo Llobet, LATAM President of Syngenta Crop Protection, said: "We believe it is very important to stay closely connected with farmers by ensuring they can meet their needs using our portfolio of products and services."

In Brazil, Bayer opened its first and only physical store in the world for the sale of agri-inputs directly to consumers. The objective is for this unit to function as a ″new channel to ensure that farmers in the region have access to seed and biotechnology solutions, crop protection products, and digital tools.″

Moreover, the company launched Barter+ powered by FieldView, while still in the pre-commercial phase, a business model that aims to customize transactions made through this sales modality, according to the productivity of each farmer.

In August 2022, Syngenta announced an agreement to acquire Agro Jangada, an agri-inputs distributor located in the state of Mato Grosso do Sul, Brazil. This acquisition allows Syngenta to bring its latest innovations and technologies to customers, as well as further growth in the region, relying on the skills and presence of Agro Jangada in collaboration with the current distribution network.

In June 2022, UPL announced a new partnership with global agribusiness company Bunge to increase productivity, profitability and sustainability for farmers in Brazil. UPL and Bunge will establish Orígeo, a new company providing end-to-end solutions to farmers in Brazil’s MAPITOBAPA macro-region, drawing on its highly qualified technical team’s understandings of each producer’s needs from crop planning to harvest. Orígeo will combine Bunge’s expertise in financing, trading, and logistics matched with UPL’s comprehensive sustainable agricultural inputs, solutions, and services portfolio.

In partnership with the startup, AgriAcordo, UPL has become part of the marketplace that connects agro-input wholesale industries, resellers and distributors for business-to-business (B2B) transactions. On the platform, the multinational can offer and negotiate part of its portfolio, which has 14,000 records distributed between biological and traditional crop protection solutions.

In October 2022, BASF has announced an innovative partnership with NaanDanJain, one of the largest companies in the field of irrigation technologies in the world. Combining BASF's portfolio solutions, which feature crop protection, seeds and digital tools, with NaanDanJain's innovative irrigation technologies, is expected to deliver profitable and sustainable growth for the farmer. The perspective is that it will benefit from a more conscious use of water, optimizing water resources, nutrients and inputs, reaching the most significant potential for productivity and land use with a reduction of water per ton produced. 

2023 Outlook

In South America, growth is expected to weaken significantly in 2023, forecast BASF in its 2022 Annual Report. Private consumption in Brazil will no longer be supported by fiscal measures as in the previous year. Given the generally weak global economy, export demand is not expected to provide any additional strong stimulus either. The Argentinian economy is suffering from very high and rising inflation rates. In addition, the scope for additional government spending is severely restricted by the debt restructuring program. 

The global economic slowdown will also put pressure on raw materials prices. South America is unlikely to benefit from significantly rising export prices for industrial and agricultural commodities in 2023. Overall, BASF expected GDP in the region to grow by 0.8% in 2023 (2022: +3.7%).

Bayer foresees continued growth for the global seed and crop protection market in 2023 (+3%), albeit at a slower pace than in the previous year (2022: +12%). The company expected a major growth contribution from prices as seed prices will continue to reflect the elevated crop commodity environment. 

Agrochemical prices are expected to rise, reflecting continued inflationary cost pressures. With respect to nonselective herbicides, however, glyphosate prices are projected to normalize. In addition, the ongoing war in Ukraine will result in sustained high energy costs and supply chain constraints.

This article was initially published in AgroPages' '2023 Latin America Focus' magazine.

If you would like to share your company's story. Please contact Christina Xie at christina@agropages.com