The era of mega-mergers in the global crop protection industry may be over, but more regional M&A activity continues, observes market research company Kynetec. The major challenge facing the sector is “green” regulation.
Kynetec’s principal consultant on ag market insights, Dr Bob Fairclough, was speaking at a recent online outlook for the crop protection market. Future mergers will be to gain share in developing markets, he said, pointing to the recent move by Japan’s Mitsui and Nisso to jointly acquire a controlling interest in India’s Bharat Insecticides – “a positive linking of Japanese innovation, trading and distribution strength and India’s chemistry production skill sets”.
Dr Fairclough noted a move towards new proprietary active ingredients over the last five to six years. “Whilst we are not at the same levels of new active ingredient introductions seen two decades ago, the increased rate of new product introductions has the capability to reduce the market share held by off-patent chemistry for the first time in decades,” he stated.
At the same time, “disruptive technologies” are leading to distribution chain evolution, while a more volatile politics affects currency movements. But he believes that the most significant potential threat to the whole agricultural industry is over-regulation. “The ‘greening; of policies globally is now of major concern – it is no longer just an EU27 issue,” Dr Fairclough observed. “Agriculture – long known to be “recession proof” and, according to Kynetec’s latest impact survey, largely COVID-19 resilient – will ride out those storms as growers adapt. However, the over-regulation aspect is largely out of the control of growers.
“What is needed is much more balanced and science-based holistic appreciation of the value of crop protection products in the whole global food security debate,” he said.
Turning to the short-term market outlook, Dr Fairclough said the outlook for full year 2020 and 2021 remained positive, despite significant headwinds. Figures show half year 2020 sales for most companies are up from 2019 – aggregated Q1 and Q2 sales of the leading companies are up by 1.7% in 2020 from the prior year.
Kynetec/Kleffmann’s Ag Market Insights December 2019 forecast of 1.8% growth for 2020 over 2019 remains valid. But Q3 sales development could be affected by changes in the Latin American market.