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The evolution in agrochemicals & its marriage
with biotechnology
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The
global agrochemicals industry continues to see significant shifts, including
consolidation. A broadening of capabilities to better serve agriculture is
evident in a slew of mergers and acquisitions that have taken place or in the
process of completion. The industry is also seeing divestments to satisfy the
needs of regulators who are concerned that the emerging industry structure
will reduce competition and lead to dominant market positions. Regulators in
charge of monitoring the industry have come under pressure to outlaw products
deemed unsafe.
Synthetic chemicals for tackling pests
Not
long ago, the business of agrochemicals was mostly about spraying the right
synthetic chemical at the right time to target a specific pest threatening to
afflict a particular crop. The products, typically innovated more than 50
years ago, and manufactured in significant tonnage even now, were designed to
eliminate one or more pests, but some have been shown to have undesirable
side-effects: toxicity – either directly or through degradation products – to
other species, including humans; persistence in the environment & food
products; and health risks ranging from cancers to neurological effects to
endocrine disruption, to name a few. All this served to give the industry a
bad rap.
Treating
with chemical pesticides still remains the dominant mode of tackling pests
for the simple reason that it is very effective. As a strategy, it will be
around for a long time, as the need to protect crops – pre- and post-harvest
– will be vital. Losses of crops to insects, fungal blight, rodents etc. is
substantial, especially in tropical countries, with some estimates pegging
just the post-harvest losses in India in the range of 20-30% of production.
This is unacceptable anywhere in the world, and more so in a developing
country that has only recently made the transition to self-sufficiency in
food.
There
are other aspects of the agrochemicals industry that are probably less known,
but just as important. The ability to selectively tackle rampaging weeds, for
instance, without affecting the desired crop is key to improving agricultural
productivity, as both crop and weed compete for limited nutrients in the soil.
Nutrients are expensive and made through processes that have high water,
energy and carbon footprints. The manufacture of urea – the world’s preferred
source of nitrogen – accounts for about 2% of global energy consumption, a
level unlikely to see much reduction given that the energy-efficiency of
modern urea plants is approaching theoretical limits.
Even
in a populous country as India, where labour is ostensibly cheap and widely
available, farmers increasingly prefer herbicides to backbreaking manual weeding.
Better specificity at lower dosages
While
synthetic chemicals still hold sway to tackle pests, these are now a very
different lot. Thanks to innovation in the industry – mostly in the developed
world – farmers have at their disposal highly specific chemical agents
effective against crops/pests at very low dosages. Indeed, it is not much of
a stretch to state that the mechanisms of action, environmental degradation
profiles and impacts on human health of modern agrochemicals are better
understood than is the case for several commodity chemicals used in
quantities that are, at times, thousands of times larger.
Formulation
technologies have also evolved to ensure less wastage of sprays, better
availability on the crop, and convenience of use at the hands of the farmer.
Speciality chemicals such as adjuvants have a role to play here. The industry
has moved a long way from using simple solutions in water, emulsifiable
concentrates in a petroleum-based solvents, or dusts & wettable powders.
Novel formulations, such as water-soluble packs, can also give products a
competitive advantage, add value or extend the lifecycle of active
ingredients.
Robust, responsive and transparent regulatory system – need of the
hour
Nearly
every country in the world has a regulatory system for steering the use of
pesticides, and assessing their impacts. They are in charge of churning the
portfolio permitted for use, in response to new science. This is vital as
pesticides resistance is common and needs to be countered by changing the
chemicals armoury.
In
India, the Central Insecticides Board is charged with laying down the rules
of the game: the active ingredients (technical, in industry parlance) that
can be used; the manner in which they can be formulated; the safety protocols
that need to be followed by the farmer; and the crops for which they are
approved. These rules must evolve on the basis of sound science, and the best
regulatory agencies are ones that are alert to findings that provide new
light in particular on impacts on human health. Even in the developing
countries this is a challenge. As example, read about the tussle to ban
chlorpyriphos – an old and well-studied molecule – in the US, with strong
arguments mooted on both sides of the debate!
Regulators
need to take a balanced view of the data available to them and submissions
made, including by environmental groups and NGOs some of who want all
pesticides outlawed. Pesticides regulation is, therefore, a tricky exercise,
not immune to the pulls & pressures of lobby groups, including industry
(which has an interest in maintaining the status quo) and disruptive
environmentalists seeking drastic changes. It would be naïve to presume that
regulation of agrochemicals (or for that matter anything) happens in a
vacuum, bereft of influence, but the answer does not lie in just mistrusting
the regulator, but instead equipping them with officials of high integrity
& capability, and holding them accountable to their decisions.
Transparency is key, and opening their functioning to the glaring lights of
public scrutiny can be a powerful tool to ensure balanced decision-making.
India’s
regulators – not just in the agrochemical industry – have a long way to go in
this regard.
Agrochemicals & biotechnology – synergies
The
agrochemical industry is increasingly being shaped by biotechnology, and the
two are now seen as synergistic tools that can lead to safer and more
sustainable crop care.
The
ability to tinker genes in plants to better yields, improve tolerance to
stresses (drought, salinity, pests etc.) or improve crop characteristics are
well known, and aside of some geographies, genetic modification is now
accepted as a viable & safe option for enhancing food security. India has
embraced GM cotton in a big manner, despite messengers of doom warning of
dire consequences, and the benefits in terms of cotton yields and quantum
& nature of pesticides sprayed has been significant.
Till
the advent of BT-cotton – the GM form with the genes of a natural bacterium
toxin built-in – cotton accounted for a disproportionately large share of
insecticides sprayed. Much of these were older generation products – used in
high dosages and less discriminate in the pests they attack. That has now
changed and is a pointer to the benefits agri-biotech can bring and the way
in which it can shape the agrochemicals industry.
But
the marriage between agri-biotech and agrochemicals is best illustrated by
the herbicide glyphosate and GM crops (soybean, corn) with innate resistance
to it. The combination allows for glyphosate to be used for tackling weeds
without harming the crops, and has taken the herbicide to top-spot in terms
of agrochemicals produced and used. The technology has since been embraced
for other combinations and the approach is reshaping the structure of the
agrochemical, seeds and agri-biotech companies.
Seed treatment – promising growth area
Another
strategy that shows much promise is seed treatment, in which pesticides are
applied to the seed prior to planting. This can achieve exceptionally high
efficiencies, in terms of effective dose-transfer to a crop, and can be seen
as an extension of the strategy to do more with less. A typical seed coating
can include a nutrient layer, containing nitrogen, phosphorus, and potassium;
a rhizobial layer, containing symbiotic bacteria and other beneficial
microorganisms; and a fungicide (or other chemical) layer to make the seed
less vulnerable to pests.
Seed
treatment is roughly a $6-bn business today, growing at 10% or thereabouts –
levels likely to be maintained for the mid-term at the least. It is a
high-skill business with potential for generating higher returns than the
commoditised space of agrochemicals or plain seeds.
Consolidated plays
The
leading players in agrochemicals – the likes of Bayer CropScience, Syngenta,
Dow AgroSciences, ChemChina etc. – clearly see a consolidated play spanning
conventional chemical treatment, biopesticides, seed treatment and
agricultural biotechnology as the future. They are investing to meet gaps in
their portfolios and/or buying into other companies to make up for what they
lack. This explains Bayer’s bid for Monsanto and ChemChina’s bid for
Syngenta. BASF is possibly the only exception to this approach; it does not
have any portfolio in seeds and seems to have no desire to change the
situation. Instead, it is strengthening its portfolio of chemical pesticides
by buying significant businesses others have to dispose to meet concerns of
competition authorities.
The
business of agrochemicals is evolving and the line between biological and
chemical treatment is blurring. Indian agrochemical companies – focussed
largely on generics – will need to take cognisance of these changes to stay
relevant.
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- Ravi Raghavan
CHWKLY 31OCT17
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