The agrochemicals sector is quite literally a key growth market for LANXESS and its Advanced Intermediates segment
By: Andy Brice, London
Even in the face of the economic gloom that swamped the markets five years ago, the agrochemicals sector continued to show stability and is now in a period of sustained growth.
Global megatrends, combined with the desire for innovative new technologies, products and processes have become instrumental in driving the agrochemicals industry, and the prospects are looking increasingly positive. Consumption of agrochemicals has risen exponentially in recent decades, the market growing from around $1bn (€750m) in 1960 to $53.7bn in 2012, according to UK-based consultancy Phillips McDougall AgriService.
These megatrends, particularly the need to increase food production for a burgeoning population and to meet the demands of rising incomes among a growing middle class, require extremely high yields and crop protection techniques. While crop production is imperative for guaranteeing food supplies, the emphasis on biofuels in recent years means this is also important as an energy resource.
APPETITE FOR AGROCHEMICALS
UN statistics show that the world’s population is expected to leap from current levels of around 7bn to 9.3bn by 2050. As a result, food production needs to increase significantly over that timeframe, by 70% to meet the additional demand. More efficient agriculture is becoming paramount, especially given the effects of climate change and the anticipated 14% reduction in land available for cultivation – from 2,100sqm to 1,800sqm per capita – over that period.
Modern agriculture is heavily influenced by changing consumer habits, notably from developing markets such as China and India. By the end of the decade, another 800m people in the BRIC (Brazil, Russia, India and China) nations are expected to fall within the middle income bracket. As a consequence, diets will change significantly. Increased meat consumption, especially in developing countries, is expected to heap even more pressure on food supplies and require even greater crop yields for animal feed.
Statistics from the UN Food and Agriculture Organisation (FAO) show that meat consumption per capita in China underwent significant increases from 1980 to 2005 – and nearly doubled in Brazil. By 2050, the FAO expects global meat consumption to rise by 73%. In 2010-2050, poultry will likely see gains of 125%, lamb of 78% and beef of 58%.
With around 2.5kg of grain required to produce 1kg of chicken, and 7kg of grain needed for just 1kg of beef, the scale of the problem is clear.
Among the main challenges facing the industry is how best to increase crop yields without damaging the environment; farmers are having to grow more with less. Although chemical use in agriculture is already far lower than in recent decades, agrochemical firms are charged with producing formulations and active ingredients that are far more potent and sophisticated than in the past.
“We believe that growth perspectives for the period from 2014 to 2018 are looking promising”
ROBUST AND RESILIENT
“If you compare this sector with other areas of the chemical industry in those three years, I would say this is a very positive development,” says Wolfgang Schmitz, CEO of LANXESS subsidiary and custom synthesis specialist Saltigo. “We believe that growth perspectives for the period from 2014 to 2018 are looking promising”
Agrochemical consumption is likely to experience the most significant gains in Asia-Pacific and Latin America, with both set to see growth of around 4%/year through to 2017, he says.
“Commodity prices have reached an historical peak so farmers are making more money and have more to spend and to invest. This certainly has contributed to a very positive trend, which from our point of view is not just a short-term scenario,” says Joerg Schneider, Saltigo’s head of marketing.
According to Phillips McDougall AgriService, developing markets such as Brazil, Argentina and Russia are enjoying increased planted acreages and increased intensity of agrochemical usage with more sprays per hectare, and are trading up to more advanced technologies. Therefore, these markets are enjoying both volume and value growth. In the more developed markets, growth is more driven by value because of the acceptance of new solutions for pest, weed and disease control.
“Productivity is a key driver in this segment to secure the food supply chain so there will be an ongoing demand for agrochemicals and our services. The agrochemical market is challenged to develop new products which can cope with drought or other climate impacts,” adds Schneider.
“I believe this will remain a key growth industry because the growth of the world’s population is a given. Every year an additional 80m people are born and this will automatically increase demand. On top of this, the positive developments in the emerging countries like Brazil, Russia, India and China mean they are becoming bigger consumers. The challenge is keeping up as more production is needed,” he says.