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Agrimarketing : October 2012
16 Agri Marketing October 2012 Chemical did the weed burndown before the PPI's were applied in a variety of crops and life was good. DISTRIBUTION In the 1980s most agchem sales were made to farmers by small retail dealers and county co-ops who purchased products from large national and regional distributors with names like Helena, Wilbur Ellis, Farmland Industries, Cenex, Growmark, Van Diest Supply, Universal Co-op and United AgriProducts and a three-step system existed. In most of the U.S., distributors sold about 70% of their product line to retailers, only about 30% was sold directly to farmer customers. Then came the distribution game changer ... the paradigm shift. The AgriCenter system was formed by American Cyanamid in 1986 while riding on an IMI high allowing retail dealers to purchase agchem directly from the manufacturer at just above distributor cost. The system upset the apple cart but allowed Cyanamid to increase IMI market share quicker than under any other system. In 1980 there were about 16,000 retail farm outlets operated by about 1,300 owners. By 2010, there were less than 8,000 year round outlets operated by likely less than 600 owners. About 1995, the IMI empire started to collapse and the use of soil applied herbicides decreased. The bulk tank wars were over because Roundup was in most of the tanks. Roundup was one of the few products that could be used as its own rescue treatment. The distribution system was changing dramatically. In the 1980s most distributors sold to dealers but by 1990 the system switched 180 degrees with the primary sales target being growers eliminating the AgriCenter system. Growers were also consolidating and expanding. 5,000 and 10,000 acre farmers began appearing throughout the U.S. This was the era of a changing farm philosophy, farming no longer meant land ownership, in 1985 about 40% of all farmland was not farmed by the land owner and by 2000 nearly 50% of all U.S. farmland was not farmed by the land owner, today it is likely near or over 60%. As distribution grew new and expanding market opportunities along grew adjuvants and surfactants primarily used as buffers, stickers, spreaders and drift reduction agents sold mostly by specialty companies and some distributors through their chain of company stores or directly to farmers primarily to offset low chemical margins on maturing supplier products. In the early years lots of additive products of questionable value were sold but today the business has become much more sophisticated and a valuable part of the distributors and retailer 's tool box especially drift control agents and micronutrients. NEW TECHNOLOGY Enter the age of advanced genetics the era of genetically modified organisms (GMOs). No other technology has changed worldwide agriculture more than the introduction of Monsanto's Roundup Ready soybeans in 1995. Roundup was already a 20 year old product but if you think the technology is mature, wait and see the changes in the next 20 years. The dramatic expansion of the fungicide market started in the mid 1990s with the development of the strobiurins family of fungicide chemistry. Fungicides such as dusting sulphur had been used for centuries but they always made up a small portion of the U.S pesticide market sales. The new leaders BASF, Syngenta and Bayer, grew sales and transferred herbicide market sales loses from GMOs to fungicides on corn, wheat and other crops. Seed treatments with fertilizers and pesticides has been actively done for decades but with the dawn of GMOs and the move to fewer chemicals and less pounds on the ground led to the rise in seed treatments, a perfect market for retailers selling seed. Today most Midwest retailers treat and sell seed. By the late 1990s Roundup, the pyrethroids, and the Bt crops covered most of the major market crop protection opportunities. Few new active ingredients were being introduced and the rise of the generic pesticide companies was in full swing. By 2008, five companies dominated the worldwide generic market: MANA, NuFarm, Cheminova, UPI and Sipcam. By 2002, 70% of all U.S. crop protection A.I.'s were off patent, today nearly 75% of all A.I.'s are off patent. The rush for label expansions with existing chemistry in specialty crops was underway. Hello California and Florida. Crop input sales in 2008 were up in volume from 2000 but crop protection chemicals were not, the generics were taking their toll on prices and margins. THE FUTURE What does tomorrow hold? More consolidation in U.S. CROP PROTECTION MARKET $ at Manufacturer level (in millions) 1990 1995 2000 2005 2010 Herbicides $3,000 $4,500 $4,300 $4,100 $3,600 Insecticides $920 $1,200 $1,200 $1,300 $1,400 Fungicides $329 $476 $494 $716 $987 Other $241 $334 $319 $365 $316 CROP $4,500 $6,600 $6,300 $6,500 $6,300 NON-CROP NA NA NA NA $1,800 TOTAL $5,300 $7,800 $7,900 $8,300 $8,100 BIOTRAITS NA NA NA $3,900 $8,700 Sources: 1988-2003 CropLife America, 2004-2010 Phillips MacDougall (more on page 18) Crop Protection Industry | Overview | continued from page 14
November December 2012