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Article: Our intention is to share weather-related risks with farmers
03 September 2020
Sanjiv Rana talks with Syngenta's manager, agronomic risk
mitigation, Peter Steiner, about AgriClime - the company's
weather-related risk sharing offer to farmers.
Peter Steiner, Syngenta
Sanjiv Rana (SR): What is the offer made by Syngenta to
farmers under AgriClime?
Peter Steiner (PS): AgriClime is essentially Syngenta's offer to
farmers to share their weather-related risks. We all know that
climate change is happening and farmers are facing more and more
risks linked to climate change in their operations. With AgriClime,
farmers can invest with confidence in Syngenta's technology, no
matter the weather. That means if the weather is bad, the farmer
gets back a portion of his investment in Syngenta's products. It
works for risks such as drought, excess rain, heat stress, frost
and wind. In some countries, we offer AgriClime to farmers, whereas
in some countries, we offer it to the channel partner.
SR: How long has AgriClime been running? Where was it first
introduced?
We started around five years ago and have been scaling it up and
expanding it to other countries. We began in Australia, followed by
Ukraine and Kenya. The mindset in starting in Australia was that if
we could make it happen in one of the driest areas in the world,
then it would easily work in countries where we don't face such
weather extremes.
SR: In how many countries is the scheme available?
We are currently offering AgriClime in 14 countries and are
about to scale it up to 20 countries for 2021. The 14 countries are
Argentina, Australia, Brazil, Bulgaria, Canada, Hungary, Kenya,
Paraguay, Russia, Spain, South Africa, Thailand, Ukraine and the
US.
SR: Does AgriClime cover the entire product portfolio on
offer in the country or are only certain active ingredients
included within it?
PS: That all depends on the country and their marketing and
sales teams. We work strongly together with our local teams to
shape as good a product offer as possible. Depending on the
strategy in a particular country, AgriClime could only be launched
for a specific crop and products.
To give you an example, in the US, we have two fungicide
products for corn [maize]: Quilt (azoxystrobin + propiconazole) and
Trivapro (benzovindiflupyr - trade-marked as Solatenol). Quilt is
based on older technology and Trivapro is our newest technology.
The investment per acre for Quilt is lower than for Trivapro and
there is a 44% price differential between the two.
Fungus generally comes up when it's wet, which means that in a
rainy year, a fungicide makes the most sense. In a rainy year,
Trivapro gives the farmer an increase in production of around 5-6
bushels an acre although in a dry year, the increase is not that
high. As these products are mainly protectant and need to be
applied before the disease appears, it is difficult when corn
prices are low, for a grower to make this decision.
In a rainy year, let's say that with a corn price of $3.80 a
bushel, the farmer would earn around $13-15 more per acre, by using
our latest technology. That enhanced earning calculation already
includes the price differential.
In a dry year, let's say with a corn price of $5 a bushel, the
farmer would run out flat or could even lose a little bit if it's
very dry and corn prices drop lower.
With AgriClime, we can provide the confidence to invest in our
premium technology. In a rainy year, the farmer gets the full
upside potential by having the very best fungicide protection, and,
in a dry year, we are behind the farmer and can provide, for
example, 30% cash-back of his investments in Trivapro. That means,
he will always earn much more by investing in the newest and best
technology no matter what the weather.
SR: What is used as the rainfall benchmark in order to
calculate overall rainfall being less or more?
PS: AgriClime is using gridded data sets to measure parameters
such as rainfall, temperature (min, max, average) and wind speeds.
The gridded data sets we are using are on a 0.05° spatial
resolution (in other words, 5km x 5km weather blocks). We have such
data globally available with more than 20 years' historical records
without any anomalies in the time series and no missing data. The
starting point of a payout is calculated based on a probability
model of the past historical years for individual locations around
the world.
SR: Is AgriClime available to farmers in every year
irrespective of impending weather conditions? Or do you gauge your
own risk first by using weather modelling before opening this
offer?
PS: AgriClime does not hold the entire risk on its own account.
We work with a pool of risk takers, which allows us to offset the
financial risk, which we guarantee to our farmers. Of course, this
comes with a cost. Every year, we calculate the premium from
scratch. Different combinations arise from many weather blocks,
different planting dates, different maturity groups and cover
lengths (protection window). Also, we consider trends.
SR: Is AgriClime intrinsically related to your digital apps
in order to predict weather and pest infestation?
PS: At the moment, AgriClime is not linked to our digital apps
but we are working to combine the models we use in our prediction
models to also provide a financial hedging to come along with it. I
will give you an example of [Asian] soybean rust in South America.
One aspect of it is to understand the prediction and the pressure
that's existing and to give advice to the farmer. However, as we
all know, models and forecasts can also change very quickly.
Therefore, a financial coverage and risk mitigation for the farmer
is always very valuable and an important factor in the relationship
as a partner. Our intention is to share the risk with the farmer on
the field. It should be a win-win experience to work with Syngenta
and our newest technology.
SR: AgriClime is a risk-sharing model. Does Syngenta also
have outcome-based pricing models being operated in similar
schemes?
PS: We know that there is demand for outcome-based pricing
models. However, after many market research projects that we did in
several big farming countries, it always came to the point that
unpredictable weather, and the risks coming along with it, is the
biggest pain point by far seen from farmers. Also, from a
scalability perspective, we can run the whole world digitally, for
all crops and climate zones. Therefore, we see much more potential
in further helping farmers mitigate their biggest pain point, which
is weather risks.