Within the next two years, three of the top 10 crop protection manufacturers will be put up for sale, merged, or will create new alliances with their current competitors. That's one of the predictions a crop protection executive made to attendees at the 2001 annual meeting of the Mississippi Entomological Association.
“Any major technology shift in an industry creates an era of unprecedented change,” says Mike Borel, president of Valent USA. “Right now, we've got two technology shifts going on simultaneously in agriculture with both biotechnology and information technology driving a tremendous amount of change in the industry. The good thing about change, though, is that it presents opportunity.”
Borel, who was the featured speaker at the 48th Annual Conference of the Mississippi Entomological Association in Starkville, Miss., says up to now agricultural biotechnology has mainly benefited farmers through the replacement of inputs or increased production efficiency. These input traits include herbicide and insect tolerance, disease and virus resistance, and drought tolerance.
The next phase of biotechnology, he says, will focus on output traits that offer benefits to consumers and other industries. This includes the ability to produce pharmaceutical products in plants, and the ability to produce crops that offer enhanced food or feed value, such as high-oil corn. Other biotechnology-enabled output traits could include enhanced nutritional values, improved processing traits, new food ingredients and improved industrial materials and fibers.
Value to growers
“One of the difficulties the major players in biotechnology are having is that the first fruits of biotechnology were all on the input side and had a value to growers, but the consumer didn't see or feel that. This area will be what changes the attitudes of people around the world about biotechnology,” he says.
By 2005, Borel estimates that value-added transgenic crops will add $50 billion to the value of U.S. agricultural production.
“Biotechnology has been changing agriculture rather dramatically in the past four or five years, and it's probably only starting with what I think is possible and what's going to happen in the future,” Borel says.
“Biotechnology and information technology really represent a technology shift and will together have the most profound impact on agriculture in terms of driving change in the next decade, and really within the next two to three decades.”
Like biotechnology, information technology has driven a tremendous amount of change very rapidly. From computers to the Internet, to precision farming tools and cell phones, consumers are quickly embracing each new product of information technology.
“It took the telephone darn near 50 years to reach 10 million users. The Internet did it in less than five years and Personal Digital Assistants (PDAs) have made it to that level in three years,” he says. “This is an area that's got a number of segments that are driving change, and it's the area that will help drive costs down in the agricultural industry.”
Another factor driving change in agriculture is the rapid consolidation occurring in virtually every segment of the industry.
Although there are a total of approximately 2.1 million farmers and ranchers in the United States, 300,000 of those producers are responsible for 80 percent of production, and the expectation is that number will continue to decline, according to Borel. “The decline is coming out of the mid-sized farms, because the number of hobby farms is increasing and the big farms are getting bigger. It's the ones in the middle that are getting squeezed out.”
The same is apparently true for other segments of the industry.
On the distribution side of the industry, 5,000 retail locations currently do about 80 percent of all sales, and 75 percent of that 80 percent are owned or controlled by a total of four companies.
“There's been a tremendous amount of consolidation already, and the expectation is that within these next few years the number of locations will drop by at least another thousand and the business that is controlled by that number will actually increase,” Borel says. “If you look at the manufacturers, technology developers and suppliers, five of them represent 75 percent of all business today, and in crop protection alone there were 27 companies that were at least significant when I joined the industry.”
The industry, he says, has changed dramatically in a short amount of time, and both horizontal and vertical integration are now occurring at virtually every level.
“There's currently an unbelievable amount of consolidation and structure change going on in the industry. However, if we were to step back, start with a blank sheet of agriculture, and begin from scratch figuring out what we need in terms of producers, in terms of people needed to advise and supply, and in terms of what we need in terms of technology developers, then frankly there's a lot more consolidation that needs to go on. That's a sobering thought, but one that I think we need to be aware of,” he says.
Other drivers of change in agriculture, according to Borel, include consumer preference, influence and population; government policy and regulations; and the agricultural economy.
While Borel says chemical technology is not expected to be the major driver of change it was in the period between the 1950s and the 1980, he believes it will continue to be very important for crop protection. “New products will be more specific, and will require more information, programming and service. They will also be more benign relative to their potential impact on people and the environment.”