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Dr. Matthew Phillips, Phillips McDougall AgriService

The Biological Pesticide Market

The last few years has seen a significant level of investment from conventional agrochemical companiesin the biological pesticide sector. This investment has encompassed new product development andexpenditure on new facilities, as well as a number of significant product and company acquisitions.

Acquisitions Involving Biological Pesticides (2010-present)

Company Year Acquisition

Plant Health Care 2010 Intellectual property portfolio of Myconate from Bayer CropScience

MAI 2010 Plant growth regulator Talent, based on the active ingredient Carvone,from Formuchem

Becker Underwood 2010 Biological Control Products (BCP), a producer of biological cropprotection products based in South Africa

Bayer 2010 Biofungicide Shemer from Israeli company AgroGreen

Bayer 2010 A Varroa mite (Varroa destructor) control product from Exosect

Tessenderlo Kerley 2011 Purfresh Inc’s crop protection sun screen business and product line

Syngenta 2012 US-based company Pasteuria Bioscience

Novozymes 2012 US-based biological pest control company Natural Industries

MGK 2012 Assets related to the biological insecticide Veratran-D

Koppert 2012 Brazilian bioproducts company Itaforte Bioproducts

CBC Group 2012 Italian biopesticide company Intrachem Bio Italia

Bayer 2012 US-based biological crop protection company AgraQuest

BASF 2012 US-based biological products company Becker Underwood

Andermatt Biocontrol 2012 24.9% stake in the Germany biopesticide company Abitep

De Sangosse 2013 Equity stake in the UK-based company Alpha Biopesticides

Bayer 2013 German biological crop protection company Prophyta

Amvac 2013 29.46% ownership position in the US-based biological insecticidecompany TyraTech

Novozymes 2013 TJ Technologies

FMC 2013 Acquired CAEB, a division of the North-Carolina based companyRTI International

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For the purposes of this review the termbiological pesticide is taken to include biologicallybased herbicides, insecticides, fungicides and otherproducts, including organisms, with actions thatare used in the crop protection sector. Based on thisdefinition there are four main types of productsconsidered to be in the sector:

A. Macrobials

Macrobial biological products that are used in cropprotection comprise living organisms that are eitherpredatory or parasitic in their action against pests,usually insects.

Products in this category include parasiticinsects such as wasps that lay their eggs withinan insect pest; predatory insects such as ladybugs,lacewings and insect larvae that are predators ofinsect pests; and nematodes that act as naturalparasites on insect larvae.

B. Microbials

Microbial pesticides comprise microorganisms,usually a bacterium, virus, fungus or protozoan,applied directly to plants that have activity againsta particular crop pest. Commercially the mostimportant microbial pesticides are varieties ofBacillus thuringiensis: these are active in the controlof several important lepidopteran larvae.

C. Semiochemicals

Semiochemicals used in crop protection comprisepheromones that act by modifying insect behaviour.These products are used to interfere with insectmating or act as attractants for insect traps.

D. Natural products

Products within this category include fermentation-based products with activity as crop protectionagents, as well as naturally derived products thathave activity against pests and diseases.

Based on our analysis of the products,companies and markets that make up the sector,the overall value of the market for biologicalpesticides as defined above was estimated to havebeen $1813 m. in 2012. Within this value the most

significant product category commercially in 2012was natural products, which accounted for $1,148m., equivalent to 63.3% of the overall biologicalmarket. Thereafter the most significant producttype was microbial-based biopesticides, whichaccounted for a further $479 m.

Quantification of the Current BiologicalProduct Market by Product Type

Product type Sales (US $m) % of total

Macrobials 138 7.6

Microbials 479 26.4

Semiochemicals 48 2.7

Natural Products 1148 63.3

Grand Total 1813 100

In contrast to natural products and microbials,biological pesticides based on macrobials andsemiochemicals are commercially less significant,contributing a value of $ 138 m. and $ 48 m.respectively.

The following table outlines the sales of theleading six biological pesticide products. Four of theleading biological pesticide products are classifiedas natural products, with the leading product beingabamectin with sales of $ 360 m. in 2012, followedby spinosad with sales of $ 260 m. In total the sixleading products accounted for a sales total of $1175 m., equivalent to 64.8% of the biologicalpesticides market.

Sales of Leading Biological Pesticides in 2012

Product Active 2012 Sales

type Ingredient (US $m)

Natural Products Abamectin 360

Natural Products Spinosad 260

Natural Products Emamectin benzoate 180

Natural Products Spinetoram 165

Microbials Bacillus thuringiensis 160

Microbials Bacillus subtilis 50

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Whilst the major companies have duringperiods in the past made some entrances into thebiological products sector, it was not until theexpansion of abamectin for use as a nematicidalseed treatment to great success that a major interestin this sector started. Abamectin as a seed treatmentwas soon followed by Bacillus firmis, again as anematicidal seed treatment, with a number of recentacquisitions also driven by activity in this particularsector. All of the products in the above list haveinsecticidal activity, except for Bacillus subtilis

which is used for the control of bacterial and fungaldiseases on a range of crops, but particularly oilseedrape, vine and potato.

For the biological pesticide sector as a whole,the most important crop outlet is believed to be theconglomerate fruit and vegetable market, in partreflecting the use of these products in relativelyenclosed environments. Thereafter the mostimportant individual crop sector is estimated tohave been cotton, followed by rice, with maizegaining in importance. The biological products withactivity as nematicidal seed treatments have thegreatest impact in maize and cotton.

Sales of Biological Pesticides Split by LeadingCrop Sector – 2012

Quantification of the Current Biological Productmarket by Region

Region Sales % of Total

(US $m)

NAFTA 503 27.8

Latin America 207 11.4

Europe 252 13.9

Asia 782 43.1

Middle East& Africa 69 3.8

Grand Total 1813 100.0

Although the leading regional market forbiological pesticides is estimated to have been Asia,the leading country market is the USA, with anestimated value of $ 438 m. in 2012, followed byChina ($ 233 m.), Japan ($ 203 m.), Brazil ($ 137m.) and India ($ 96 m.).

Overview and Outlook

A key concern regarding biological products hasalways been reproducibility of activity in open fieldsituations, as a result at present the major marketsare on fruit and vegetables, particularly those grownin glasshouses in controlled environments. However,this situation is now changing, with increasingusage of biological seed treatments, also a controlledenvironment when products are encapsulatedaround the seed. This is expanding the usage ofbiologicals in row crop sectors. A noticeable linkbetween a number of the recent mergers andacquisitions has been product opportunities such asseed treatments, particularly with nematicidalactivity.

Whilst the market for biological products isimproving from a relatively low base, it is unlikelythat the sector will achieve high growth rates untilreproducibility of action in the field can be proven.Interestingly, Europe has a relatively low share ofthe sector at present, although this is likely tochange in the near future, with a higher proportion

From a regional perspective the leading marketfor biological pesticides is Asia, which accounted fora total value of $782 m., equivalent to 43.1% of thetotal market, followed by North America with a27.8% share.

Other crops 24.4%Fruit and

vegetables 56.2%

Cotton 9.0%

Rice 6.8%

Maize 3.6%

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of the products awaiting Annex 1 approval nowbiologicals. Also, 1107/2009, the current EUagrochemical product registration legislation, callsfor ‘comparative assessment of products andreplacement with safer alternatives’; a saferalternative may well be a biological solution. Underthe most recent amendment to the commonagricultural policy, which was agreed in mid-2013,for farmers to sustain direct subsidy paymentsthey are obliged to embrace integrated pest

management, which again should provide a marketopportunity for biological products.

A key factor is likely to be greater R&Dinvestment in the area now that many of the majoragrochemical companies have an interest in thesector; this coupled with the market opportunitieslisted above suggests that the biologicals sectormay perform ahead of the crop protection sector asa whole, which is expected to grow by 2.3% p.a. involume terms through to 2017.