Emerging Trends , Opportunities and

Challenges for Agrochemicals Industry

Raju Kapoor
Business Unit Head –Agrovet
Jubilant Organosys Limited
NOIDA
 Flow of the Presentation

1. Back ground

2. Emerging Trends

3. Opportunities for Agrochemical Industry

4. Challenges before the Industry

5. Conclusion
Background
 Indian Agriculture Scenario
•Agriculture was , is and would always remain the
mainstay of global economics - more so in developing
countries like India.
• Meeting nutrition requirement of the population with
declining available land poses the real challenge .
• In India alone, we would be short of 25MMT of food
grains by 2010-11 with the present growth rate of food
grains production.
•Declining growth rate of food production poses
serious challenge as its growth rate would have to the
literally tripled to feed the ever growing population of
the country by 2010.
 Is Agricultural Revolution failing?

Projected Gap in Foodgrain Production

300
Foodgrain Production mmt-
current trend vs desired trend

200

100

0
03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11

Food Prodn(current) 212 210 213 216 219 222 225 229
Food Prodn(Desired) 212 225 230 235 240 245 251 256

In India we would be short of 27 mmt of food grains by 2010-11

If the present growth rate of foodgrain production continues.
 Agricultural Situation not very happy
Growth In Population and Foodgrain production

5.0%
CAGR (Population
vs Foodgrain
production)

0.0%
60-61 70-71 80-81 90-91 00-01 10-11

Population 2.0% 2.2% 2.2% 2.2% 1.9% 1.6%

Food Production 4.1% 4.1% 1.9% 3.1% 1.1% 3.2%
YEAR

The food growth rate has to be higher than Population growth rate.
 Growth rates post reform are falling

Growth rates (%) in output, input and value added in agriculture since 1950/51 at 1993/94 prices
Output Input Value added/ Farm income
I. Pre green revolution 1950/51 to
2.51 2 2.62
1964/65
II. Green revolution period
2.8 3.14 2.72
1965/66 to 1979/80
III. Wider technology
dissemination 1980/81 to 3.22 2.64 3.38
1994/95
IV. Post reforms 1995/96 to
1.69 1.84 1.65
2003/04
Source of basic data: National Accounts Statistics, GOI, New Delhi, Various issues
Crop Productivities continue to be low

Com parison of Wheat Yield

6000
3832

yield kg/ha
4000 2742 2725
2333 2410
2000

0
India China Pakistan Banglade World

Yield kg/ha 2742 3832 2333 2410 2725

Com parison of Paddy Yield

10000
6350
Yield kg/ha

3586 3912
5000 2964 3000

0
India China Pakistan Banglade World

Yield kg/ha 2964 6350 3000 3586 3912

 Public Expenditure is very low

Public expenditure on Agriculture Research, Education and Extension

Agriculture research and education Agricultural Extension
Particulars 1981-83 1999-01 1881-83 1999-01
Annual public expenditure Rs.
7808 17695 2169 6548
Million at 2001 prices
Public expenditure as % of GDP
agriculture 0.36 0.42 0.1 0.17
Share of Central Government 47.6 49.5 4.6 7.6
Share of State Governments 52.4 50.5 95.4 92.4
Source: Pal and Byerelee (2003)
 Biotech Crops

 Global market value of $4.70 billion (15% of

the $32.5 billion Global crop protection
market , and 16% of the global seeds market)
 India poised to be a major player (area under
Bt cotton up 400% between 2002 to 2004.
 Use of such crops to alter agrochem use.
 Organic Farming
 2.5 mha area under Organic farming in India-
(IFAD),(Includes 2.43 mha area under wild herb
collection from forest areas in MP and UP)NPOP
 332 new certifications issued last year.
 Organic produce exported 6792 MT valued at Rs
71.23 Crores ,US sales 10.8 Billion USD , European
sales 11 Billion euros (FIBL survey).
 Total Indian Agri produce export Rs 14,184 Crores –
Fruit &veg Rs.1457 cr,processed F&V at 1125 cr.
Major Trends in Agrochemicals /
Agriculture
Emerging Trends affecting agrochemical industry in India.

Agrochemicals being part of the agriculture system get

affected by every event / action that affects Agriculture.
Major Trends are :
3. Stakeholders’ Expectations are higher and changing
4. Globalization – One world One market.
5. Consolidation- Leaner Meaner and Smarter
6. Intervention of Biotechnology-Two way sword
7. Research and development- the cutting edge
8. Competition and value differentiation
 Stakeholders’ Expectation

Who are the major stakeholders in agrochemical

Industry?

1. Farmers
2. Consumers of Agri Produce
3. Processors
4. Investors
5. Market
6. Government
7. Environment
 Stakeholders’ Expectation
Farmer Consumers of Agri produce
 Lower cost of • Low residues
inputs/favorable cost • Traceability /
benefit ratio
Transparency
 Low pollution
• Better
 Precision
Nutritional value
 Safety for user
• Longer
 Knowledge
storability
 Easy Availability
• Knowledge
 Consistently good • Cheaper price
Quality for agri produce
 Long duration controls • Remedial rights
 Disposal of containers
 Credit
 Better value for his
produce
 Stakeholders’ Expectation
Processors of Agri Produce
 Storability / shelf- life
of produce
 Consistency in quality
 Lower residues
 Better Processability
 Adequate availability
of feed stock around
the year
Investors
• Better wealth creation
• Cleaner images
(Responsible citizen)
• Respect and Profit
• Lowest possible risk /
liability
• Sustainability of business
• Value creation through
differentiation
• Legal / Regulatory
compliances.
 Stakeholders’ Expectation

Channel Partners Government

 Better margins • Better revenues
 Lower responsibility • Quality compliance
 Training • Regulatory Compliance
 Stronger brand pull • Agri is a political subject so
 Increased Credit least negative impact.
 Least harassments • Transparency
 Lower inventories
 Quicker deliveries
 Range
Stakeholders’ Expectation

ENVIRONMENT
 Lowest possible emissions
 Low residues in Soil / Food
chain
 Disposal of expired stocks /
containers etc
 Ground water safety
 Safety to user / transporter /
producer
 Globalization- One world One market
 Global economies are forced to open -Need for Indian
farmer to produce and deliver world quality at globally
most competitive cost . Manchesters and Muktsars to be
competing global markets
 Indian agriculture to undergo major reform and maturity.
 Same trend to be applicable to Agchem industry.
 Tariff barriers to tumble- non-tariff barriers to multiply
 Customers to use IT to make information driven decisions.
 Disproportionate export subsidies to fade soon.
 Consolidation of land and operations – economies of
scale –technology up-gradation
 Uniformity in global regulatory environment
 Global Agrochemicals Markets-Trends

 Until 2004 Global Agchem Market growth near flat.

 2004 surge takes market to US$ 32,665 Million, up 4.6%
after inflation(2003 US$ 29,390 million)
 Latin America up 25% (Brazil 7% , Argentina 11%)
 Pre 04 static market by value was primarily due to
– Planting of GM crops
– Lower cost of herbicides post patent
– Lower commodity prices
– Increased use of lower cost generic products
 Global Agchem sales by region

Global Agrochemical Sales by Zone 2004

Rest of World
10% North America
26%
Western Europe
24%

Latin America
Asia Pecific 14%
26%
Agchem Usage pattern over last 25 years

Herbicide

Insecticides
Fungicides

Others

Usage trend changing slowly

Global Industry consolidation 1994-2004

Similar are the trends in India,since all the Big 6 are present here
Sales of leading Global Companies 2000-04
 Big Six takeover the world
 Top six companies held 73% 2002, 81% 2003 and 77% in
2004.
 Syngenta overtaken by Bayer as mkt leader .Between them
they control 37% of all agrochem sales.
 2000-2004 Bayer grew 172%,through takeover of Aventis and
entry into GM technology. Same period Syngenta grew 2%
 BASF 86% growth ( high sales of fungicide and
insecticides,entry in latin America and takeover of Fipronil)
 Monsanto sales dropped ,focus on Genomics and
seeds,defended Glyphosate market by getting duty to 48%
(now 29.9%)imposed on imports from China to Europe.
 Industry moves from ‘life science’ tag to ‘crop science’.
 All six pruning product portfolio to avoid cost of re registration
 Eg BASF from 300 to 170 actives ,Syngenta to have only 17
Actives of US $ 100 million each by 2006.
 All six have GM projects going.
 Big Six takeover the world

 Monsanto buys Seminis becomes largest seed

company.
 Syngenta GM crop account for 3% of sales,seeds
16% of sales.Sales up 75% inQ1’05
 Du pont owns Pioneer Hibred
 BASF and Dow expanding into Seeds market
 GM market to grow at 8.2% to reach US$ 5776 Million
in 2007
 Trends in global agriculture
1. Development of new pesticide molecules is
highly cost and time intensive, because of same
globally the R&D base is shrinking with only ~
25 company's left in Drug Discovery.
2. Biotech. (Che.+ Genetics) is taking place of
chemistry. in Pesticide R&D for development of
a potential and commercially viable platform.
3. Focus shifting from synthetic to natural
product based precursor.
4. Usage of non-crop value added agrochemical
is increasing globally @ 4-5%.
5. Various agrochemicals getting off patented in
coming 5-yrs offering manufacturers new
opportunities
6. More impetus on GM crops and safety
Implications /opportunities for Indian Agchem industry

 Consolidation in players, markets ,crops to

throw up large opportunities in the area of
– Contract manufacturing
– Contract research
– Access to Products hitherto not available due to
patents / monopolies
– Global vision and strategies
– Strategic alliances in India and overseas
– Value added formulations market
– Lower supply chain costs.
Implications /opportunities for Indian Agchem industry

 Shift from Input Suppliers to Solution Provider

mindset .Newer Solution Delivery Systems must be
innovated to gain leadership.
 Identification of and focus on core strength areas
 Restructure to enable focus –move away from non-
core
 Create synergies to cut costs / transfer costs to
remain globally competitive.
 Higher respect for environmental norms
 Development of environment friendly formulations
 Create differentiated value platform-keep innovating
 Channel innovation with lower cost of solution
delivery will determine leadership.
Implications /opportunities for Indian Agchem industry

 Corporate farming and crop diversification to increase

scope for higher technology adoption and application.
 Strategic tie ups with other input suppliers to offer /become
part of the package to the farmer
 Subsidy restructuring of fertilisers to limit use of
insecticides.Lower N use.-Integrated Nutrition management
 Develop knowledge platforms such as patents , and
capability to manage patents of others.
 Develop new solutions around India’s core strength i.e
Herbals, ayurvedics and naturopathy.
 Develop Global leadership and vision
 Create global talent pool for manpower and management
skill a la IT.
 Become the global HUB for biotech solutions developed
within .
Implications /opportunities for Indian Agchem industry

 Research at Knowledge Institutions to be market and

future oriented , Industry to bear cost and share profits.
 Acquire strategic companies abroad.
 Learn to manage foreign companies.
 Become the bridge between financial institutions and
customers to manage working capital .
 Develop fine chemical capabilities to feed the global
companies.
 Application of fermentation technology to agri solutions a
la Pharma.
 Develop capability on data generation , dossier
preparation and registrations overseas.
 Challenges for Indian Agchem industry
 All the opportunities have challenges built in
 Brand India to be established as global quality product and
service
 Leadership and vision
 Economies of scale
 Global cutting edge research –development and
integration of and with various sub-systems.
 Cost leadership
 Wealth creation for investors
 Global business orientation , benchmarking
 Patent management
 Value chain integration
 Ability to unlearn
 Avoidance of shortcuts
 Summary

 Indian Agchem industry is at an interesting

crossroad facing huge growth opportunities.
 It must gear up for and facilitate agriculture
revolution in the country and outside.
 Focus and market orientation is must
 Need for wealth creation for investors
 Has opportunity to hold the future in its hands
 Commitment and discipline could provide Global
leadership.
 Industry to transform from Killer to Enabler
Thanks .
 Food Requirement


Population Growth
 Reduction in available land

 Quality of available land

 Nutritional self sufficiency v/s food grain

suffering
 Local requirement v/s Global

requirement.
 Food V/s feed
 Land Utilisation Pattern in different Zones
Area (mha)
Geographical Net sown WL as % of
area Area wastelands GA
East 68.05 22.72 14.81 22%
North 66.85 26.74 24.58 37%
South 64.45 29.1 9.99 16%
West 129.37 62.54 15 12%
Total 328.72 141.1 64.38 20%

Growth could be brought by managing wastelands better

 Population and Income Growth will Fuel
Increased Food Demand

Increased food demand matrix

High
61% 88% 147% Year 2020
Demand
Projection +75%
Caloric (75%) •Population
shift growth +45%
to meat Medium 76%
51% 100% •Increased meat
product Base Case consumption
s +30%
• Shift to
Low “healthy” and
39% 61% 88% specialized foods
•In India, the gains
from the “Green
Revolution” are
Low Medium High getting saturated
Population X income growth
Source: IFPRI, FAO
 Crop diversification since 1970/71 as revealed by share in area and output value
Crop Group 1970-71 1980-81 1990-91 2000-01
Share in gross cultivated area %
Foodgrains 74.97 73.39 68.81 63.75
Oilseeds 10.04 10.20 13.00 12.37
Sugarcane and cotton 6.17 6.08 5.99 6.85
Others 8.82 10.33 12.20 17.03
Share in value of output of crop sector %
Foodgrains 49.2 44.2 41.61 43.69
Oilseeds 9.88 8.7 13.27 6.83
Sugarcane and cotton 9.19 11.28 10.08 9.9
Others 31.73 35.82 35.04 39.58
Fruits and vegetables 15.55 16.89 18.04 23.18
Source : National Accounts Statistics, GOI, New Delhi, Various issues
 Revolution in Agriculture
Underway
Information  Larger, sophisticated
availability
(precision agriculture) growers
Grower  Higher yields
consolidation  Value shift from
chemicals to seeds
 Differentiated crops
Declining agricultura Effects of  Integration of industry
governme l sector discontinuitie participants:
nt s
- Seed
subsidies - Chemicals
- Biotechnology
Biotechnology - Food ingredients
Increasing - Food processing
demand,  New relationships
especially outside with growers
the U.S.
 Land utilisation pattern in different zones Area (in MHa)
Geographical Net Sown
Zone Fallow land Forest Wastelands
Area Area
East 68.05 22.72 4.75 21.94 14.81
north 66.85 26.74 2.21 9.42 24.58
South 64.45 29.1 7.99 13.18 9.99
West 129.37 62.54 10.05 24.87 15
Total 328.726 141.099 24.992 69.408 64.377
 CURRENT AND POTENTIAL IMPACT FOR IMPROVING
PEST MANAGEMENT WITH PLANT BIOTECHNOLOGY

Overall Impact of Biotechnology in Pest Management 40 Case Studies

Yield Increase Net Economics Pesticide Reduction
CURRENT CROPS 4 Billion lb $ 1.5 Billion 46 Million lb ai
FUTURE CROPS 10 Billion lb $ 1.0 Billion 117 Million lb ai
TOTAL 14 Billion lb $ 2.5 Billion 163 Million lb ai

Gianessi et al, 2002. Plant Biotechnology: Current and Potential Impact for Improving Pest Management in US Agriculture.
An Analysis of 40 Case Studies. National Center for Food and Agricultural Policy. www.ncfap.org

Higher Yields Grower Savings Less Pesticide

Use
Sources: United Nations Population Division and Population Reference Bureau