SCUP Report

Table of Contents

Abstract

The world pesticide industry in 2001 was valued at about $40.9 billion, based on product sales at the end-user level. Herbicide products accounted for 53% of the total world market, insecticides for 27%, and fungicides for 20%. Other products including plant growth regulators, fumigants and nematicides, defoliants and desiccants are not included. The United States, Western Europe and Japan are the most intensive consuming regions, and accounted for about 46% of global sales.

This report focuses mainly on herbicides, insecticides and fungicides used in agriculture and less on home, garden, and turf products, or other pesticides. In terms of 2001 dollars, the overall market is not expected to grow during 2001–2006. Increased plantings of insect-resistant crops will decrease insecticide usage while increased plantings of herbicide-tolerant crops may increase the quantity of herbicides used, depending on the herbicide the crops are linked to and the herbicides that are displaced.

Twenty basic producers of pesticide active ingredients account for over 90% of global pesticide sales. Eleven of these firms have annual pesticide sales in excess of $500 million. The six largest producers—Syngenta, Bayer CropScience, Monsanto, BASF, Dow AgroSciences and DuPont—accounted for over 80% of total world sales and each has annual pesticide sales ranging from $2.0 billion to $6.0 billion. Three of the six largest producers are headquartered in Western Europe, and three are based in the United States.

Generally flat to falling pesticide prices (in inflation-adjusted terms), rising or contained costs and maturing products with saturated markets combined with pesticide product bans caused by the increasingly stringent regulatory environment have resulted in a significant decline in operating profits for the world industry. Some companies have left the business after careful evaluation of their pesticide business. The need to globalize operations, to redirect R&D funding to biotechnology, particularly in the case of proprietary pesticide producers, and to comply with environmental regulations has resulted in massive consolidation and marketing alliances. This trend is expected to continue through the decade.

In the mid-1990s the pesticide industry entered a new era in two diverging trends. In trend one, the largest pesticide producers with sales revenue exceeding $2 billion, noted for their production of proprietary pesticides, began expanding rapidly into biotechnology through direct investments and strategic alliances with new agricultural biotechnology firms. The fruits of research in the new approach include transgenic seeds incorporating herbicide resistance and insect pest resistance. The sales of the herbicide-tolerant seeds in turn increase the sales of broad-spectrum herbicides that the crops are immune to, while the insect-resistant seeds may instead act to decrease insecticide applications. Trend two was the rapid expansion of generic pesticide producers, primarily by acquisitions of both pesticide producers and mature product lines. The generic producers are noted by their relatively small size at substantially less than $1 billion in sales revenue, relatively low spending on R&D, and emphasis on low-cost manufacturing, though with low gross margins compared with the proprietary pesticide producers. Prominent examples of generic pesticide producer leadership include Makhteshim-Agan (headquartered in Israel) and NuFarm (headquartered in Australia).

Public concern over perceived health hazards and the environmental consequences of chemical pesticide applications continues to shape the market and influence the direction of R&D. Regulatory authorities in the United States and Western Europe are requiring reregistration of older pesticides in order to reassess the potential hazards arising from their currently registered uses. As a result, many older pesticide products are being removed from the market—either voluntarily by producers electing not to support them, or involuntarily as a result of the regulatory requirements for reregistration.

The EPA is encouraging the development and registration of new pesticides that pose lower risks to public health and the environment; for example, the EPA expedites the reviews of biorational pesticides. The agency also has set up a priority planning system that emphasizes risk-based criteria for sequencing the completion of reviews.

There are very large regional differences in the acceptance of biotechnology in the form of seed traits that include pest management properties. For example, while a significant portion of the major crops of the United States including corn, soybeans and cotton are genetically modified, the Western European market remains essentially closed to transgenic crops at least for the present. Future developments in the global markets for transgenic crops will impact the demand for chemical pesticides.

The United States remains the highest-value market for pesticides. End-user sales of herbicides, insecticides, fungicides and other pesticides in the United States totaled about $9.8 billion in 2001. Agricultural crop markets accounted for about 80% of total U.S. pest control product sales and noncrop markets accounted for 20%. Herbicides are the dominant product group with $6.1 billion in sales, followed by insecticides and fungicides. Herbicides are also the highest-value product group in the estimated $1.9 billion U.S. noncrop pest control sector, followed by insecticides.