Reforms in the global agrochemicals industry

2 min read

Mordor Intelligence’ publication on the global agrochemicals market, hinted at new opportunities and offered critical insights on the agrochemicals industry. Here, we look at how reforms in the industry proliferated the growth of agricultural inoculants and non-traditional agrochemicals.

Recently, the business landscape of agricultural inputs market witnessed a drastic change, with the entire agrochemicals industry undergoing drastic reforms, The last two years recorded a considerable rise in the overall productivity of farm areas. However, the use of agrochemicals witnessed a sharp decline, by 8.2%, globally, which has led to a growing anxiety in the agrochemicals industry.

Most major players are trying to overcome this anxiety and move towards both micro and macro level reforms. This sudden reformation has triggered certain trends and patterns in the global market. Recent mergers and acquisitions are one critical aspect of this reformation. The projected value of all these mergers and acquisitions was around USD 5 trillion in 2015. In the agrochemicals industry, the Dow-DuPont deal is the biggest to date, valued at USD 130 billion. Other big players like Monsanto, ChemChina and Syngenta are also in talks over mergers.

Such acquisitions help organizations attain better market reach, and enhance innovation through R&D processes. Other benefits include market expansion, business diversification and close-competition elimination of similar-sized players. M&A also affects the business portfolio and internal organizational structure. Moreover, companies could also venture into business diversification for e.g. Syngenta’s ventures with companies like AgBiome, AgriMetis and Phytech to gain expertise in agricultural research and agricultural data solutions, while continuing their regular agro inputs business. Monsanto did the same thing in 2015 by collaborating with Novozymes, an industrial enzyme and agricultural inoculants manufacturer, and Climate Corporation, a weather information and crop weather insurance company to gain expertise in these areas.

While the use of traditional agro inputs is declining, the non-traditional agrochemicals market, on the other hand, is witnessing a surge. Consequently, agricultural inoculants (microbial solutions for problems like soil infertility, reduction in soil health and soil losses) increasingly gain importance, and top players such as BASF, Bayer and Monsanto are now investing heavily in these markets.

The agricultural inoculants market is expected to grow at a CAGR of 9.5% during the period 2015-2020. The market is projected to reach a value of around USD 399 million by 2020. Similarly, the nematicides market, which was previously estimated to account for only a small portion of the agrochemicals industry, is anticipated to be worth USD 1.3 billion by 2020.

For a detailed analysis on the agrochemicals industry, go over to our report.

A few companies, which are not part of any agricultural-related business, but remain eager to invest in this sector. Google, invested in CropX Smart Irrigation Services, a farmer’s business networks internet service company, and Granular, an agricultural software company. These companies are directly related to the agriculture and farming society. Furthermore, the long-term reformation of the agricultural industry hinges on the inclination of such companies to invest in it.

Most modern commodity and agrochemical organizations are adopting the ancient practice of barter system. Bunge, CHS (commodity trading), BASF, Bayer and Syngenta (agrochemical) have barter contracts. Agrochemical companies provide pesticides and fertilizer to contract farmers on behalf of commodity trading companies. These agrochemical companies collect agricultural produce from farmers, cut their share and sell the remaining to commodity traders. This system has had a positive impact on agri-business, with no fear of currency fluctuation, better market area coverage and high customer retention when recovery of capital is becoming very certain.

These pieces of evidence point towards the prompt reaction of agri-business companies (especially agro-input companies) towards upcoming changes. The impending reforms will lead to a new, completely different agrochemicals industry shortly.

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