2008 FORECASTFEATURE
P
reliminary results in the first quarter In the crop protection segment, year-on-
of 2008 for the crop protection majors year growth for the same period was 13.1%,
have held little surprise under a backdrop giving a total of €1,622 million, while in the
of high crop commodity prices, food and environmental science and bioscience business
crop protection product shortages, changing sales rose by 1.1% to €356 million in 2008.
global consumption habits and international The company attributed this increase to many
biofuel production. The word ‘robust’ has different factors but mainly to substantially
featured heavily in the top six agrochemical higher volumes of sales and price increases.
manufacturers' lexis in reference to their first- According to Bayer, high prices for major
quarter 2008 results. agricultural crops because of low inventories
worldwide, combined with stronger demands
“General market conditions for crop protection for plants as an alternative energy source,
companies are far more positive than they have prompted farmers to increase their expenditure
been for some time, and this is reflected in the for high-quality seeds and innovative crop
first-quarter results of the major companies,” protection products. This reasoning resonated
believes Mathew Phillips of Phillips McDougall, across the industry as all six of the major
an industry consultancy . “The key factors are agrochemical conglomerates experienced high
higher crop commodity prices, resulting in sales growth during early 2008.
improved farm incomes and greater purchasing
power for crop protection products, despite Syngenta expects this growth surge to continue,
friedrich Berschauer, chairman of Bayer
higher fuel and fertiliser costs.” maintaining that while its “first-quarter
CropScience
growth rate may not be sustained throughout
All of the six leading R&D-based agrochemical the rising price of Chinese material have also the year… is a clear indicator of underlying
multinationals recorded sales growth in 2007, resulted in value growth in the market”. demand,” says Sabine Hoffman, media
with the top four, Bayer CropScience, Syngenta, relations manager at the company.
BASF and Dow AgroSciences, posting double- Reasons to be cheerful The company saw sales rise by 20% at
digit gains in dollar terms (see Table 1). “The probability is very high that we will have a constant exchange rates in the first quarter of
However, although sales picked up in 2007, very good year,” Friedrich Berschauer, chairman 2008 and it estimates full-year sales growth
the industry was still plagued by some of the of Bayer CropScience commented to Reuters in to be at least 10% in 2008. The underlying
factors that undermined sales growth in the March 2008. Bayer CropScience saw its sales driver of growth in all regions, Syngenta says,
previous year: the impact of higher input costs leap from €1,786 million in the first quarter is growers’ intention to maximise yield and this
such as fertilisers, which led to a switch in of 2007 to €1,978 million a year later, an will continue in the near term. The latter is
growing patterns to less input-intensive crops incremental increase of 10%. The currency- attributed to growers attempting to capitalise
such as soybeans, sugar cane and sorghum in adjusted increase was 17.8%. on higher commodity prices by maximising
the Americas.
Table 1: Agrochemical
1
sales of the leading companies
Compared with last year, 2008 poses a
2007 (2006) sales % change vs 2006
different challenge for the agchem industry as
2007 (2006) Reporting Reporting
market conditions have changed significantly in
Ranking Company US$
2
currency (million)
US$ currency
the last six months. Though ideal conditions
for growth are in place, the industry faces new
and more complex challenges. Of particular 1 (1) Bayer
3
7,458 (6,698) €5,444 (€5,358) +11.3 + 1.6
importance will be the impact of commodity
prices across the sector and whether higher 2 (2) Syngenta
4
7,285 (6,378) $7,285 ($6,378) +14.2 +14.2
production costs and higher fertiliser and fuel
costs will impinge on growth. 3 (4) BASF 4,297 (3,849) €3,137 (€3,079) +11.6 + 1.9
Secondly, the balance of crops grown for 4 (3) Dow 3,779 (3,399) $3,779 ($3,399) +11.2 +11.2
food and feed and biofuels, as food shortages AgroSciences
5
arise in developing countries, will be of
prime importance. The growth in demand 5 (5) Monsanto
6
3,599 (3,316) $3,599 ($3,316) + 8.5 + 8.5
for biofuels has had a “positive impact in
that it has resulted in a reduction in excess 6 (6) DuPont
7
2,369 (2,194) $2,369 ($2,194) + 8.0 + 8.0
crop production held in storage, resulting in
1
unless otherwise stated;
2
converted using average annual exchange rates for 2007 and 2006;
3
improved profitability for maize, oilseed rape
excludes BioScience sales of €382 million in 2007 and €342 million in 2006;
4
excludes seed sales of $2,018 million in 2007 and $1,743 million in 2006;
and palm oil production,” believes Mathew 5
includes undisclosed seed and trait sales;
6
year ended August 31st 2006/07 - includes some animal
Phillips. “Improved crop protection products health products - excludes seed and genomics sales of $4,964 million in 2007 and $3,978 million in
prices due to a stronger farm economy and
2006;
7
excludes seed sales, which amounted to $2,764 million in 2006. Source: WCPN No.539
www.agrow.com • July 2008 11
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