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Emerging Trends , Opportunities and
Challenges for Agrochemicals Industry
Raju Kapoor
Business Unit Head AgrovetJubilant Organosys Limited
NOIDA
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Flow of the Presentation
1. Back ground
2. Emerging Trends
3. Opportunities for Agrochemical Industry
4. Challenges before the Industry
5. Conclusion
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Background
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Indian Agriculture Scenario
Agriculture was , is and would always remain themainstay of global economics - more so in developing
countries like India.
Meeting nutrition requirement of the population with
declining available land poses the real challenge .
In India alone, we would be short of 25MMT of food
grains by 2010-11 with the present growth rate of food
grains production.
Declining growth rate of food production poses
serious challenge as its growth rate would have to theliterally tripled to feed the ever growing population of
the country by 2010.
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Is Agricultural Revolution failing?
Projected Gap in Foodgrain Production
0
100
200
300
FoodgrainProductionmmt-
currenttrendvsdesir
edtrend
Food Prodn(current) 212 210 213 216 219 222 225 229
Food Prodn(Desired) 212 225 230 235 240 245 251 256
03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11
In India we would be short of 27 mmt of food grains by 2010-11
If the present growth rate of foodgrain production continues.
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Growth In Population and Foodgrain production
0.0%
5.0%
YEAR
CAGR
(Population
vsFo
odgrain
rod
uction
Population 2.0% 2.2% 2.2% 2.2% 1.9% 1.6%
Food Production 4.1% 4.1% 1.9% 3.1% 1.1% 3.2%
60-61 70-71 80-81 90-91 00-01 10-11
The food growth rate has to be higher than Population growth rate.
Agricultural Situation not very happy
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Growth rates (%) in output, input and value added in agriculture since 1950/51 at 1993/94 prices
Output Input Value added/ Farm income
I. Pre green revolution 1950/51 to
1964/652.51 2 2.62
II. Green revolution period
1965/66 to 1979/80 2.8 3.14 2.72
III. Wider technology
dissemination 1980/81 to
1994/95
3.22 2.64 3.38
IV. Post reforms 1995/96 to
2003/041.69 1.84 1.65
Source of basic data: National Accounts Statistics, GOI, New Delhi, Various issues
Growth rates post reform are falling
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Crop Productivities continue to be low
Comparison of Wheat Yield
27423832
2333 2410 2725
0
2000
4000
6000
yieldk
g/ha
Yield kg/ha 2742 3832 2333 2410 2725
India China Pakistan Banglade World
a i Paddy ield
2964
6350
3000 35863912
0
5000
10000
i
eldk
g/ha
Yield kg/ha 2964 6350 3000 3586 3912
India China Pakistan Banglade World
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Particulars 1981-83 1999-01 1881-83 1999-01
Annual public expenditure Rs.
Million at 2001 prices7808 17695 2169 6548
Public expenditure as % of GDP
agriculture 0.36 0.42 0.1 0.17
Share of Central Government 47.6 49.5 4.6 7.6
Share of State Governments 52.4 50.5 95.4 92.4
Source: Pal and Byerelee (2003)
Agricultural Extensiongriculture research and educatio
Public expenditure on Agriculture Research, Education and Extension
Public Expenditure is very low
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Biotech Crops
Global market value of $4.70 billion (15% ofthe $32.5 billion Global crop protection
market , and 16% of the global seeds market) India poised to be a major player (area under
Bt cotton up 400% between 2002 to 2004.
Use of such crops to alter agrochem use.
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Organic Farming
2.5 mha area under Organic farming in India-(IFAD),(Includes 2.43 mha area under wild herbcollection from forest areas in MP and UP)NPOP
332 new certifications issued last year.
Organic produce exported 6792 MT valued at Rs
71.23 Crores ,US sales 10.8 Billion USD , Europeansales 11 Billion euros (FIBL survey).
Total Indian Agri produce export Rs 14,184 Crores Fruit &veg Rs.1457 cr,processed F&V at 1125 cr.
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Major Trends in Agrochemicals /
Agriculture
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Emerging Trends affecting agrochemical industry in India.
Agrochemicals being part of the agriculture system getaffected by every event / action that affects Agriculture.
Major Trends are :
1. Stakeholders Expectations are higher and changing
2. Globalization One world One market.
3. Consolidation- LeanerMeaner and Smarter
4. Intervention of Biotechnology-Two way sword
5. Research and development- the cutting edge
6. Competition and value differentiation
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1. Farmers
2. Consumers of Agri Produce
3. Processors
4. Investors
5. Market
6. Government
7. Environment
Stakeholders Expectation
Who are the major stakeholders in agrochemicalIndustry?
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Lower cost ofinputs/favorable costbenefit ratio
Low pollution
Precision
Safety for user Knowledge
Easy Availability
Consistently goodQuality
Long duration controls
Disposal of containers Credit
Better value for hisproduce
Farmer
Stakeholders Expectation
Low residues
Traceability /Transparency
BetterNutritional value
Longerstorability
Knowledge
Cheaper pricefor agri produce
Remedial rights
Consumers of Agri produce
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Storability / shelf- lifeof produce
Consistency in quality
Lower residues Better Processability
Adequate availabilityof feed stock aroundthe year
Processors of Agri
Produce
Stakeholders Expectation
Better wealth creation
Cleaner images
(Responsible citizen)
Respect and Profit
Lowest possible risk /
liability
Sustainability of business
Value creation through
differentiation
Legal / Regulatory
compliances.
Investors
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Better margins
Lower responsibility
Training
Stronger brand pull Increased Credit
Least harassments
Lower inventories
Quicker deliveries
Range
Channel Partners
Better revenues
Quality compliance
Regulatory Compliance
Agri is a political subject soleast negative impact.
Transparency
Government
Stakeholders Expectation
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Lowest possible emissions
Low residues in Soil / Food
chain Disposal of expired stocks /
containers etc
Ground water safety
Safety to user / transporter /
producer
ENVIRONMENT
Stakeholders Expectation
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Globalization- One world One market
Global economies are forced to open -Need for Indian
farmer to produce and deliver world quality at globallymost competitive cost . Manchesters and Muktsars to becompeting global markets
Indian agriculture to undergo major reform and maturity.
Same trend to be applicable to Agchem industry.
Tariff barriers to tumble- non-tariff barriers to multiply
Customers to use IT to make information driven decisions.
Disproportionate export subsidies to fade soon.
Consolidation of land and operations economies ofscale technology up-gradation
Uniformity in global regulatory environment
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Global Agrochemicals Markets-Trends
Until 2004 Global Agchem Market growth near flat.
2004 surge takes market to US$ 32,665 Million, up 4.6%after inflation(2003 US$ 29,390 million)
Latin America up 25% (Brazil 7% , Argentina 11%)
Pre 04 static market by value was primarily due to
Planting ofGM crops
Lower cost of herbicides post patent
Lower commodity prices
Increased use of lower cost generic products
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Global Agchem sales by region
Global Agrochemical Sales by Zone 2004
North America
26%
Latin America
14%Asia Pecific
26%
Western Europe
24%
Rest of World
10%
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Usage trend changing slowly
Agchem Usage pattern over last 25 years
Herbicide
Insecticides
Fungicides
Others
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Global Industry consolidation 1994-2004
Similar are the trends in India,since all the Big 6 are present here
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Sales of leading Global Companies 2000-04
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Big Six takeover the world
Top six companies held 73% 2002, 81% 2003 and 77% in
2004. Syngenta overtaken by Bayer as mkt leader .Between them
they control 37% of all agrochem sales.
2000-2004 Bayer grew 172%,through takeover of Aventis andentry into GM technology. Same period Syngenta grew 2%
BASF 86% growth ( high sales of fungicide andinsecticides,entry in latin America and takeover of Fipronil)
Monsanto sales dropped ,focus on Genomics andseeds,defended Glyphosate market by getting duty to 48%(now 29.9%)imposed on imports from China to Europe.
Industry moves from life science tag to crop science.
All six pruning product portfolio to avoid cost of re registration
Eg BASF from 300 to 170 actives ,Syngenta to have only 17Actives of US $ 100 million each by 2006.
All six have GM projects going.
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Monsanto buys Seminis becomes largest seedcompany.
Syngenta GM crop account for 3% of sales,seeds16% of sales.Sales up 75% inQ105
Du pont owns Pioneer Hibred BASF and Dow expanding into Seeds market
GM market to grow at 8.2% to reach US$ 5776 Millionin 2007
Big Six takeover the world
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1. Development of new pesticide molecules is highlycost and time intensive, because of same globally theR&D base is shrinking with only ~ 25 company's left inDrug Discovery.
2. Biotech. (Che.+ Genetics) is taking place of
chemistry. in Pesticide R&D for development of apotential and commercially viable platform.
3. Focus shifting from synthetic to natural productbased precursor.
4. Usage of non-crop value added agrochemical is
increasing globally @ 4-5%.
5. Various agrochemicals getting off patented incoming 5-yrs offering manufacturers new opportunities
6. More impetus on GM crops and safety
Trends in global agriculture
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Implications /opportunities for Indian Agchem industry
Consolidation in players, markets ,crops tothrow up large opportunities in the area of Contract manufacturing
Contract research
Access to Products hitherto not available due topatents / monopolies
Global vision and strategies
Strategic alliances in India and overseas
Value added formulations market
Lower supply chain costs.
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Shift from Input Suppliers to Solution Providermindset .Newer Solution Delivery Systems must beinnovated to gain leadership.
Identification of and focus on core strength areas
Restructure to enable focus move away from non-
core Create synergies to cut costs / transfer costs to
remain globally competitive.
Higher respect for environmental norms
Development of environment friendly formulations
Create differentiated value platform-keep innovating Channel innovation with lower cost of solution
delivery will determine leadership.
Implications /opportunities for Indian Agchem industry
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Corporate farming and crop diversification to increasescope for higher technology adoption and application.
Strategic tie ups with other input suppliers to offer /becomepart of the package to the farmer
Subsidy restructuring of fertilisers to limit use ofinsecticides.Lower N use.-Integrated Nutrition management
Develop knowledge platforms such as patents , andcapability to manage patents of others.
Develop new solutions around Indias core strength i.eHerbals, ayurvedics and naturopathy.
Develop Global leadership and vision
Create global talent pool for manpower and managementskill a la IT.
Become the global HUB for biotech solutions developedwithin .
Implications /opportunities for Indian Agchem industry
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Research at Knowledge Institutions to be market andfuture oriented , Industry to bear cost and share profits.
Acquire strategic companies abroad.
Learn to manage foreign companies.
Become the bridge between financial institutions andcustomers to manage working capital .
Develop fine chemical capabilities to feed the globalcompanies.
Application of fermentation technology to agri solutions a
la Pharma. Develop capability on data generation , dossier
preparation and registrations overseas.
Implications /opportunities for Indian Agchem industry
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All the opportunities have challenges built in Brand India to be established as global quality product and
service
Leadership and vision
Economies of scale
Global cutting edge research development andintegration of and with various sub-systems.
Cost leadership
Wealth creation for investors
Global business orientation , benchmarking
Patent management
Value chain integration
Ability to unlearn
Avoidance of shortcuts
Challenges for Indian Agchem industry
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Summary
Indian Agchem industry is at an interestingcrossroad facing huge growth opportunities.
It must gear up for and facilitate agriculture
revolution in the country and outside. Focus and market orientation is must
Need for wealth creation for investors
Has opportunity to hold the future in its hands
Commitment and discipline could provide Globalleadership.
Industry to transform from Killer to Enabler
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Thanks .
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Population Growth
Reduction in available land
Quality of available land
Nutritional self sufficiency v/s food grainsuffering
Local requirement v/s Globalrequirement.
Food V/s feed
Food Requirement
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Growth could be brought by managing wastelands better
Geographical
area
Net sown
Area wastelands
WL as % of
GA
East 68.05 22.72 14.81 22%North 66.85 26.74 24.58 37%
South 64.45 29.1 9.99 16%
West 129.37 62.54 15 12%
Total 328.72 141.1 64.38 20%
Land Utilisation Pattern in different Zones
Area (mha)
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Population and Income Growth will FuelPopulation and Income Growth will FuelIncreased Food DemandIncreased Food Demand
Increased food demand matrixIncreased food demand matrix
CaloricCaloric
shiftshiftto meatto meat
productsproducts
HighHigh
MediumMedium
LowLow
Population X income growthPopulation X income growth
Year 2020Year 2020Demand +75%Demand +75%
Population growthPopulation growth+45%+45%
Increased meatIncreased meat
consumption +30%consumption +30%
Shift to healthyShift to healthyand specializedand specialized
foodsfoods
LowLow MediumMedium HighHigh
6161%% 8888%% 147%147%
51%51% 76%76%
Base CaseBase Case
100%100%
39%39% 61%61% 88%88%
ProjectionProjection
((7575%)%)
Source: IFPRI, FAO
In India, the gainsfrom the Green
Revolution are
getting saturated
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Revolution in AgricultureRevolution in Agriculture
UnderwayUnderway
agriculturalagriculturalsectorsector
Information availabilityInformation availability(precision agriculture)(precision agriculture)
Increasing demand,Increasing demand,
especially outside theespecially outside the
U.S.U.S.
BiotechnologyBiotechnology
GrowerGrower
consolidationconsolidation
Effects ofEffects ofdiscontinuitiesdiscontinuities
DecliningDeclininggovernmentgovernment
subsidiessubsidies
Larger, sophisticatedLarger, sophisticatedgrowersgrowers
Higher yieldsHigher yields Value shift fromValue shift from
chemicals to seedschemicals to seeds Differentiated cropsDifferentiated crops Integration of industryIntegration of industry
participants:participants:-- SeedSeed-- ChemicalsChemicals-- BiotechnologyBiotechnology-- Food ingredientsFood ingredients
-- Food processingFood processing New relationshipsNew relationships
with growerswith growers
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Area (in M a)
ZoneGeographic l
Area
e o n
Areaallo l nd ores s el nds
s 68 05 22 72 4 75 21 94 14 81
nor h 66 85 26 74 2 21 9 42 24 58
ou h 64 45 29 1 7 99 13 18 9 99
es 129 37 62 54 10 05 24 87 15
o al 328 726 141 099 24 992 69 408 64 377
Land t sat n patte n n d ffe ent nes
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TOTAL 14 Billion lb $ 2.5 Billion 163 Million lb ai
CURRENT CROPS 4 Billion lb $ 1.5 Billion 46 Million lb ai
FUTURE CROPS 10 Billion lb $ 1.0 Billion 117 Million lb ai
Yield Increase Net Economics Pesticide Reduction
Overall Impact of Biotechnology in Pest Management 40 Case Studies
Gianessi et al, 2002. Plant Biotechnology: Current and Potential Impact for Improving Pest Management in US Agriculture.
An Analysis of 40 Case Studies. National Center for Food and Agricultural Policy. www.ncfap.org
CURRENT AND POTENTIAL IMPACT FOR IMPROVING
PEST MANAGEMENT WITH PLANT BIOTECHNOLOGY
Higher Yields Grower Savings Less Pesticide Use
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Sources: United Nations Population Division and Population Reference Bureau