market forces driving progress

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Life Science Innovation in Agriculture

- Market Forces driving Progress -June, 5th 2020

Wiesbaden

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Yield / Productivity increase

Agro Chemicals input by industry

Genetics, driving force for seeds

Market Forces driving Progress - Innovation in Agriculture


2

Grain Corn

■ Leading starch crop

■ Globally standardized

Increasing Crop Productivity: Corn USA


3

Core Innovative Steps in Corn driving yield / acre:

■ Synthetic N fertilizer

■ Hybrid breeding; commercial since mid 30’s

■ Chemical weed control

■ GMO traits:

■ Insect resistance (Bt corn)

■ Herbicide tolerance

Other important impacts include

■ Mechanization

■ Concentration to Midwest

■ Soil tillage systems

Increasing Crop Productivity: Tech - Innovation driving Yield per Acre

GMO Traits

Hybrid breeding

Synth. Fertilizer

Herbicides


4

Core commodity markets

■ Driven by belief of plentiful supply

■ High interactivity between crops

Corn Prices fluctuate – close to Production Cost Level


5

Farmers face Oligopolies (1) – Downstream …

ABCD + C:

> 75% global market share

Competition on price among downstream players:

• Farmers are squeezed

Input Industry Food Co’s RetailerFarming Collection

GlobalOligopoly

Big 3/4

BayerSyngentaCortevaBASF

Fertilizer:Top 9

GlobalOligopoly

Big 4 - 5

ADMBungeCargillDreyfus

Cofco

Regionals /Locals

ContinentalOligopoly

EU

LidlTescoCarrefourAldiEdekaReweLeclercSm

allh

old

ers

, Fam

ily F

arm

s,

Co

op

era

tive

s, L

arge

far

ms

GlobalOligopoly

Big Brands

UnileverNestleMondelezMarsPepsicoCoca ColaDanoneKellogsGeneral Mills


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Source: Edward D. Perry et al.,

Genetically engineered crops and pesticideuse in U.S. maize and soybeans

Science Advances, Vol 2, No. 8, 2016

Market penetration of GMO traits in the USA over years

Insect resistant corn (Bt corn)

Herbicide tolerant corn

Herbicide tolerant soybean

Need for Productivity Increase drives Adoption of Technology


https://advances.sciencemag.org/content/2/8

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Agricultural Productivity: Steady Global Improvement


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County Pocahontas

Farmers grow Crops providing highest Return


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Fertilizer

■ High impact on yield since large scale synthesis of N-fertilizer

■ Almost totally generic today: innovation in intelligent application (Precision Agriculture)

Mechanization

■ Less labor requirement - and larger fields, lower number of crops

■ Precision Agriculture, Robotics

Chemical crop protection

■ Productivity increase by reduced yield loss and improved crop production

■ Less than 20% patent protected products (A.I.’s) today: fading innovative strength

Seeds

■ Constant innovation through breeding

■ GMO’s - providing innovative insect resistance and herbicide tolerance

■ Powerhouse of productivity increase since 1996

Use of Productivity increasing Technology


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Seeds

■ fastest growth segment

■ driving 1/3 herbicide use

■ well patent protected GMO

■ decisive segment for innovation

16 18 20

16 18 20

2628

31

41

51

61

0

20

40

60

80

100

120

140

2019 2025 2030

Insecticides Fungicides

Herbicides Seeds

70 bn / a

bn €

Source: Industry estimates, own calculation

Crop Protection and Seeds Markets


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Monsanto

Bayer

Syngenta

Dow Agro

BASF Agro

DuPont Agro

Adama

Arysta

UPL Ltd.

FMC

Cheminova

Sumitomo

Nufarm

Bayer

Syngenta / ChemChina / Adama

Corteva

BASF (incl. former Bayer Seeds)

UPL / Arysta

FMC / Cheminova

Sumitomo - Nufarm Co-operation

R&

D b

ased

co

mp

an

ies

Gen

eri

cs b

ased

co

mp

an

ies

Mergers and Acquisitions since 2016: from 13 to 7 Key Players


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Farmers face Oligopolies (2) - … and Upstream

Input Industry Food Co’s RetailerFarming Collection

GlobalOligopoly

Big 3/4

BayerSyngentaCortevaBASF

Fertilizer:Top 9

GlobalOligopoly

Big 4 - 5

ADMBungeCargillDreyfus

Cofco

Regionals /Locals

ContinentalOligopoly

EU

LidlTescoCarrefourAldiEdekaReweLeclercSm

allh

old

ers

, Fam

ily F

arm

s,

Co

op

era

tive

s, L

arge

far

ms

GlobalOligopoly

Big Brands

UnileverNestleMondelezMarsPepsicoCoca ColaDanoneKellogsGeneral Mills

Oligopolistic Ag-Input providers

■ Patented technology:

Pricing at value of biological efficacy = sharing benefit with farmer

■ Off-Patent technology:

Pricing moving to cost level


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Save the World by continuous productivity increase – to feed the increasing population

Farm productivity increase:

century old, proven success

Save the World by more sustainable, more healthy, more nutritious, locally produced food

Bio-production, Urban- / Vertical- / In-shop farming,

… requires technical innovation and new business

models

Two Approaches to Innovation in Agriculture


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Innovative tools:

1. Crispr based systems: enable precise changes in (plant) genomes

Find and edit a specific locus in a 16 GBP wheat genome

2. Genotyping / Sequencing: cost coming down, relevant information accessible

Sequencing becomes increasingly applicable in breeding

3. Metagenomics: new access to biological diversity, pool of attractive genes

Access to microbial diversity (soil, roots, …)

4. Bioinformatics: machine learning / KI applicable

Genetics: Science behind Seed Business


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Prediction from Genotype to field performance

“In silico” selection of field trial candidates

Discovery of gene networks driving important traits

Source: Computomics

“Machine Learning” Algorithms: predictive Power


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Large acre crops: productivity gain in today’s business system

Specialty crops (fruit, vegetables, …): certain innovation requires business model changes

Seed: remains fastest growing Ag-Input segment, driven by progress in genetics

Robotics: will be important, if/when more than just automation of today’s practise

Summary


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Contact

Dr. Lutz Krafft

Equity Partner

Bahnhofstraße 55-57D-65185 Wiesbaden

Telefon: +49 611 - 945 8486-0E-Mail: [email protected]: www.chemadvice.com

ChemAdvice GmbH

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