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As part of a 'Day After Tomorrow' blue-skies thinking
exercise we present some tentative thoughts about where the global
crop protection sector may next be heading as it gradually looks
beyond the initial impacts of COVID-19.
Summary
The key market trends would seem to be a continued sustained
shift to biological solutions and decline in conventional Active
Ingredients; and an increased predominance by China and India in
the global Crop Protection market, particularly through generics
and products coming off-patent.
There is also likely to be a spurt in protectionist measures and
'de-globalisation'. New technology development and adoption might
be accelerated, albeit tempered by reduced availability of R&D
finance. Farmland consolidation looks set to continue, which again
might propel the growth of digital agriculture.
Key trends
Increased trends towards sustainability and environmental
solutions - such as biologicals. The COVID-19 pandemic might have a
short-term impact on market growth but is likely to boost
investment in biologicals as part of a wider shift to interest in
food security and sustainable crop production and ensuring more
robust supply chains. This should in turn drive interest in new
product formulations for biopesticides and biostimulants.
Size of the Global Biologicals Market - estimated at
almost US$5 billion in 2020 (IHS Markit)
Accelerate the loss of many existing Crop Protection products,
especially in European Union. The requirement to re-register Active
Ingredients (AIs) has been in place since 1991 (Council Directive
91/414/EC). However, this directive was replaced by stricter
regulation in 2009 which instructed that any ingredient deemed to
be mutagenic or carcinogenic at any level is withdrawn. Another
important factor is efficacy. Whether the UK will diverge will
depend on the type of Brexit deal with the EU and US that
eventually emerges.
Many major companies outside India/China will likely place less
capital into R&D in the short-medium term - they will instead
focus on getting most promising actives in late-stage to market.
Continued decline in the rate of new product introductions, growth
of off-patent manufacturers and reduced share of new molecules in
the market. Further stimulation of Indian generics production (once
plants are fully back to capacity although exempted) and further
out, increasing adoption of proprietary chemistries. This might
stimulate domestic R&D efforts (already underway from a small
base).
In the short term we will likely continue to see Chinese generic
AI supply issues, that will to a small extent stimulate the use of
proprietary formulations/patented chemistries. Once generic supply
issues have improved, the economic impacts of COVID-19 will have
begun to hit farm economics, so there will be significant downwards
pressure on overall CP industry. Potentially this will be
detrimental to innovation in the medium term, possibly delaying the
uptake of biologicals and precision agriculture.
In addition to growth in proprietary formulations/patented
chemistries, could there also be a stimulation in the demand for
domestic generics? This would be particularly so in the US where
President Donald Trump has regularly branded COVID-19 as the
"Chinese virus". Will this lead to some farmers boycotting Chinese
generics in the country, boosting the attractiveness of local
manufacturers such as Albaugh/Gowan?
Or, on the other hand, will there be a recovery in the rate of
introduction of new Crop Protection products as a result of new
discovery technologies such as artificial intelligence and
computational biology, such as faster development and application
of gene-editing and CRISPR technology. There is likely to be some
acceleration in the Chinese adoption of biotech, again already
underway with the Syngenta acquisition by ChemChina acting as a
stimulus, plus recent GM approvals.
Gene-editing will become mainstream in developing improved crop
varieties, especially for qualitative traits, to increase the
consumption of fruits and vegetables, and plant-based food in
people's diet. Thus, the breeding company might be separated into
trait design platform (which might be disrupted by a few boutique
AgTech firms) and actual breeding operation contractors (the bread
and butter of traditional seed companies). Acceleration of Digital
Solutions is seen - especially to replace manual labour and weeding
of crops in fields. This could reduce herbicide volumes with
'see-and-spray' robotics, and also attract new market entrants e.g.
Bosch, Sony.
Consolidation of farms and farmland is likely to see an uptick
after COVID-19. This may also drive the adoption of precision
agricultural practices due to economies of scale. A longer-term
trend may be towards 'domestic food security' which might involve
more farm subsidies which then begin to increase proprietary market
share again and the use of newer technologies such as biologicals
and precision AgTech. This might have a flattened adoption curve,
which may then accelerate later.
The digital platform currently owned by the seed/CP company
might become independent since a more open and connected platform
is important in order to maximize farmers profit. The more data fed
into its algorithm, the deeper its reach. Contractors will also
become an integral part of the platform who will provide the
service to farmers or landlord, so the professional farmer may not
own any land, but just own the production process affiliated with
the platform.
