7201372 agro chems indian agrochemical industry

8/9/2019 7201372 Agro Chems Indian Agrochemical Industry

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Emerging Trends , Opportunities and

Challenges for Agrochemicals Industry

Raju Kapoor

Business Unit Head AgrovetJubilant Organosys Limited

NOIDA


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Flow of the Presentation

1. Back ground

2. Emerging Trends

3. Opportunities for Agrochemical Industry

4. Challenges before the Industry

5. Conclusion


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Background


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Indian Agriculture Scenario

Agriculture was , is and would always remain themainstay 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 theliterally tripled to feed the ever growing population of

the country by 2010.


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Is Agricultural Revolution failing?

Projected Gap in Foodgrain Production

0

100

200

300

FoodgrainProductionmmt-

currenttrendvsdesir

edtrend

Food Prodn(current) 212 210 213 216 219 222 225 229

Food Prodn(Desired) 212 225 230 235 240 245 251 256

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

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

If the present growth rate of foodgrain production continues.


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Growth In Population and Foodgrain production

0.0%

5.0%

YEAR

CAGR

(Population

vsFo

odgrain

rod

uction

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%

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

The food growth rate has to be higher than Population growth rate.

Agricultural Situation not very happy


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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

1964/652.51 2 2.62

II. Green revolution period

1965/66 to 1979/80 2.8 3.14 2.72

III. Wider technology

dissemination 1980/81 to

1994/95

3.22 2.64 3.38

IV. Post reforms 1995/96 to

2003/041.69 1.84 1.65

Source of basic data: National Accounts Statistics, GOI, New Delhi, Various issues

Growth rates post reform are falling


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Crop Productivities continue to be low

Comparison of Wheat Yield

27423832

2333 2410 2725

0

2000

4000

6000

yieldk

g/ha

Yield kg/ha 2742 3832 2333 2410 2725

India China Pakistan Banglade World

a i Paddy ield

2964

6350

3000 35863912

0

5000

10000

i

eldk

g/ha

Yield kg/ha 2964 6350 3000 3586 3912

India China Pakistan Banglade World


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Particulars 1981-83 1999-01 1881-83 1999-01

Annual public expenditure Rs.

Million at 2001 prices7808 17695 2169 6548

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)

Agricultural Extensiongriculture research and educatio

Public expenditure on Agriculture Research, Education and Extension

Public Expenditure is very low


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Biotech Crops

Global market value of $4.70 billion (15% ofthe $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.


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Organic Farming

2.5 mha area under Organic farming in India-(IFAD),(Includes 2.43 mha area under wild herbcollection 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 , Europeansales 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.


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Major Trends in Agrochemicals /

Agriculture


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Emerging Trends affecting agrochemical industry in India.

Agrochemicals being part of the agriculture system getaffected by every event / action that affects Agriculture.

Major Trends are :

1. Stakeholders Expectations are higher and changing

2. Globalization One world One market.

3. Consolidation- LeanerMeaner and Smarter

4. Intervention of Biotechnology-Two way sword

5. Research and development- the cutting edge

6. Competition and value differentiation


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1. Farmers

2. Consumers of Agri Produce

3. Processors

4. Investors

5. Market

6. Government

7. Environment

Stakeholders Expectation

Who are the major stakeholders in agrochemicalIndustry?


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Lower cost ofinputs/favorable costbenefit ratio

Low pollution

Precision

Safety for user Knowledge

Easy Availability

Consistently goodQuality

Long duration controls

Disposal of containers Credit

Better value for hisproduce

Farmer


Low residues

Traceability /Transparency

BetterNutritional value

Longerstorability

Knowledge

Cheaper pricefor agri produce

Remedial rights

Consumers of Agri produce


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Storability / shelf- lifeof produce

Consistency in quality

Lower residues Better Processability

Adequate availabilityof feed stock aroundthe year

Processors of Agri

Produce


Better wealth creation

Cleaner images

(Responsible citizen)

Respect and Profit

Lowest possible risk /

liability

Sustainability of business

Value creation through

differentiation

Legal / Regulatory

compliances.

Investors


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Better margins

Lower responsibility

Training

Stronger brand pull Increased Credit

Least harassments

Lower inventories

Quicker deliveries

Range

Channel Partners

Better revenues

Quality compliance

Regulatory Compliance

Agri is a political subject soleast negative impact.

Transparency

Government



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Lowest possible emissions

Low residues in Soil / Food

chain Disposal of expired stocks /

containers etc

Ground water safety

Safety to user / transporter /

producer

ENVIRONMENT



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Globalization- One world One market

Global economies are forced to open -Need for Indian

farmer to produce and deliver world quality at globallymost competitive cost . Manchesters and Muktsars to becompeting 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 ofscale technology up-gradation

Uniformity in global regulatory environment


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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 ofGM crops

Lower cost of herbicides post patent

Lower commodity prices

Increased use of lower cost generic products


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Global Agchem sales by region

Global Agrochemical Sales by Zone 2004

North America

26%

Latin America

14%Asia Pecific

26%

Western Europe

24%

Rest of World

10%


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Usage trend changing slowly

Agchem Usage pattern over last 25 years

Herbicide

Insecticides

Fungicides

Others


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Global Industry consolidation 1994-2004

Similar are the trends in India,since all the Big 6 are present here


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Sales of leading Global Companies 2000-04


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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 andentry into GM technology. Same period Syngenta grew 2%

BASF 86% growth ( high sales of fungicide andinsecticides,entry in latin America and takeover of Fipronil)

Monsanto sales dropped ,focus on Genomics andseeds,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 17Actives of US $ 100 million each by 2006.

All six have GM projects going.


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Monsanto buys Seminis becomes largest seedcompany.

Syngenta GM crop account for 3% of sales,seeds16% of sales.Sales up 75% inQ105

Du pont owns Pioneer Hibred BASF and Dow expanding into Seeds market

GM market to grow at 8.2% to reach US$ 5776 Millionin 2007

Big Six takeover the world


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1. Development of new pesticide molecules is highlycost and time intensive, because of same globally theR&D base is shrinking with only ~ 25 company's left inDrug Discovery.

2. Biotech. (Che.+ Genetics) is taking place of

chemistry. in Pesticide R&D for development of apotential and commercially viable platform.

3. Focus shifting from synthetic to natural productbased precursor.

4. Usage of non-crop value added agrochemical is

increasing globally @ 4-5%.

5. Various agrochemicals getting off patented incoming 5-yrs offering manufacturers new opportunities

6. More impetus on GM crops and safety

Trends in global agriculture


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Implications /opportunities for Indian Agchem industry

Consolidation in players, markets ,crops tothrow up large opportunities in the area of Contract manufacturing

Contract research

Access to Products hitherto not available due topatents / monopolies

Global vision and strategies

Strategic alliances in India and overseas

Value added formulations market

Lower supply chain costs.


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Shift from Input Suppliers to Solution Providermindset .Newer Solution Delivery Systems must beinnovated 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.



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Corporate farming and crop diversification to increasescope for higher technology adoption and application.

Strategic tie ups with other input suppliers to offer /becomepart of the package to the farmer

Subsidy restructuring of fertilisers to limit use ofinsecticides.Lower N use.-Integrated Nutrition management

Develop knowledge platforms such as patents , andcapability to manage patents of others.

Develop new solutions around Indias core strength i.eHerbals, ayurvedics and naturopathy.

Develop Global leadership and vision

Create global talent pool for manpower and managementskill a la IT.

Become the global HUB for biotech solutions developedwithin .



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Research at Knowledge Institutions to be market andfuture oriented , Industry to bear cost and share profits.

Acquire strategic companies abroad.

Learn to manage foreign companies.

Become the bridge between financial institutions andcustomers to manage working capital .

Develop fine chemical capabilities to feed the globalcompanies.

Application of fermentation technology to agri solutions a

la Pharma. Develop capability on data generation , dossier

preparation and registrations overseas.



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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 andintegration 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

Challenges for Indian Agchem industry


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Summary

Indian Agchem industry is at an interestingcrossroad 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 Globalleadership.

Industry to transform from Killer to Enabler


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Thanks .


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Population Growth

Reduction in available land

Quality of available land

Nutritional self sufficiency v/s food grainsuffering

Local requirement v/s Globalrequirement.

Food V/s feed

Food Requirement


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Growth could be brought by managing wastelands better

Geographical

area

Net sown

Area wastelands

WL as % of

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%

Land Utilisation Pattern in different Zones

Area (mha)


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Population and Income Growth will FuelPopulation and Income Growth will FuelIncreased Food DemandIncreased Food Demand

Increased food demand matrixIncreased food demand matrix

CaloricCaloric

shiftshiftto meatto meat

productsproducts

HighHigh

MediumMedium

LowLow

Population X income growthPopulation X income growth

Year 2020Year 2020Demand +75%Demand +75%

Population growthPopulation growth+45%+45%

Increased meatIncreased meat

consumption +30%consumption +30%

Shift to healthyShift to healthyand specializedand specialized

foodsfoods

LowLow MediumMedium HighHigh

6161%% 8888%% 147%147%

51%51% 76%76%

Base CaseBase Case

100%100%

39%39% 61%61% 88%88%

ProjectionProjection

((7575%)%)

Source: IFPRI, FAO

In India, the gainsfrom the Green

Revolution are

getting saturated


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Revolution in AgricultureRevolution in Agriculture

UnderwayUnderway

agriculturalagriculturalsectorsector

Information availabilityInformation availability(precision agriculture)(precision agriculture)

Increasing demand,Increasing demand,

especially outside theespecially outside the

U.S.U.S.

BiotechnologyBiotechnology

GrowerGrower

consolidationconsolidation

Effects ofEffects ofdiscontinuitiesdiscontinuities

DecliningDeclininggovernmentgovernment

subsidiessubsidies

Larger, sophisticatedLarger, sophisticatedgrowersgrowers

Higher yieldsHigher yields Value shift fromValue shift from

chemicals to seedschemicals to seeds Differentiated cropsDifferentiated crops Integration of industryIntegration of industry

participants:participants:-- SeedSeed-- ChemicalsChemicals-- BiotechnologyBiotechnology-- Food ingredientsFood ingredients

-- Food processingFood processing New relationshipsNew relationships

with growerswith growers


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Area (in M a)

ZoneGeographic l

Area

e o n

Areaallo l nd ores s el nds

s 68 05 22 72 4 75 21 94 14 81

nor h 66 85 26 74 2 21 9 42 24 58

ou h 64 45 29 1 7 99 13 18 9 99

es 129 37 62 54 10 05 24 87 15

o al 328 726 141 099 24 992 69 408 64 377

Land t sat n patte n n d ffe ent nes


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TOTAL 14 Billion lb $ 2.5 Billion 163 Million lb ai

CURRENT CROPS 4 Billion lb $ 1.5 Billion 46 Million lb ai

FUTURE CROPS 10 Billion lb $ 1.0 Billion 117 Million lb ai

Yield Increase Net Economics Pesticide Reduction

Overall Impact of Biotechnology in Pest Management 40 Case Studies

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

CURRENT AND POTENTIAL IMPACT FOR IMPROVING

PEST MANAGEMENT WITH PLANT BIOTECHNOLOGY

Higher Yields Grower Savings Less Pesticide Use


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Sources: United Nations Population Division and Population Reference Bureau

7201372 agro chems indian agrochemical industry

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