Agrochemical industry – Propelling the Agrarian Growth
The agrochemical industry is a vast field that deals with the manufacture and distribution of pesticides and fertilizers in order to increase crop yields. Despite persistent challenges, the agrochemicals market appears to be on the rise, owing largely to rising demand for products that reduce crop losses and increase yields.
Since the beginning of the year, there has been an increase in opportunities to accelerate transformations in the food and agrochemical sectors in order to build resilience in the face of numerous challenges, including climate change. While the pandemic posed significant challenges for every other business sector, it has largely unaffected the agrochemical industry in the long run.
In 2021, the agrochemical industry saw significant advancements and product developments. Even in difficult times, the adoption of faster and more cost-effective analytical methods has given the sector a significant boost. Despite rising input prices, income has increased dramatically due to higher output prices and higher output volumes. Continuing this trend, producers are all striving to set a standard through transformed methodologies in fertilizers, agrochemicals, and other products.
Read More: Top 4 Agritech Trends Driving Growth in 2022
Trends and Changes
New developments such as integrated pest management (IPM), precision farming, and off-patent products, all of which have the potential to reduce agrochemical revenues, are shaping the agricultural chemical industry outlook significantly. Long-term developments such as genome editing, food waste management, improvements in animal feed digestibility, declining biofuels demand, and the growing popularity of indoor farming are also causing disruption.
Rising Food Demand
Given global population growth, the growing need to protect against crop losses and increase yields, rising consumer demand for sustainably produced food, and the role of agrochemicals in combating climate change, the future of agrochemicals appears bright.
Genome editing, food waste management, improvements in animal feed digestibility, declining biofuels demand, and the growing popularity of indoor farming will all likely pose challenges to agrochemicals’ long-term growth potential. However, because most agrochemicals companies are also seed investors, they can use these novel gene editing techniques to introduce selective genetic modifications that will not affect demand for their leading agrochemicals products.
Expansion and Innovation
Creating differentiation through innovation, expanding geographical presence through Merger and Acquisition (M&A), and capturing additional value through deeper farmer engagement will most likely continue to be key strategic themes in the future. The outlook for the agricultural chemical industry will remain dependent on strategies for dealing with future disruptions that impact current revenue streams.
Agrochemical companies can also learn from what other chemical companies are doing to potentially shorten the time it takes to commercialize a new product. For example, BASF recently acquired a quantum computing start-up, which could assist it in solving complex problems and shortening the product introduction lead time.
Strategies Developing Growth
Large agrochemical firms have undergone significant portfolio optimization and consolidation through M&A in recent years. Apart from expanding the current product portfolio, many of these M&A transactions have sought to expand the acquirer companies’ geographical presence, particularly in markets where these companies did not have a strong distributor network.
While M&A can be an effective tool for acquiring a new product line (as in the case of BASF, which acquired Bayer CropScience’s seeds business), developing and scaling external partnerships or collaborations can be critical. Major agrochemical producers have already transitioned from being simple suppliers of farm inputs to complex providers of integrated product offerings, with digital as a key component.
The narrative may shift to “doing more with less” as the arable land deficit grows and agricultural practices become more efficient. Furthermore, with renewed interest in sustainability, farmers, governments, and consumers can expect a more diverse mix of agricultural practices that can increase the longevity of arable land without irreversibly harming the environment.
Inferring On The Note..
On the surface, the future of agrochemicals may appear daunting to established players, but many changes are underway that are likely to completely transform it. A future focused on sustainability, “doing more with less,” and digital technologies may force agrochemicals players to reconsider their long-term business plans, leading to lengthy boardroom discussions.
There are no easy solutions to the industry’s challenges, but with growth and opportunity on the horizon, agrochemicals companies will have many strategic options to consider as the agricultural chemistry industry’s promising future unfolds.