After maintaining some semblance of market share leadership for the past few years, crop protection has given up the top spot.
September 12, 2008
Since CropLifeÂ® magazine (and its predecessor, Farm Chemicals) first started tracking information on the nation's best-selling inputs among top retailers 23 years ago, crop protection products have consistently led the pack. As recently as 2000, the crop protection products segment represented just under half of all crop input sales. In the 2005 CropLife 100 survey, the category increased 3% to $6.1 billion, continuing an upward trend that began in 2004.
Despite these winning years, however, there were signs that the crop protection products category was beginning to lose some of its market steam. In 2003, for instance, revenue fell 2%. Sales were equally uneven in 2001 and 2002 as well. For the most part, retailers blamed the down years on a continuing trend by grower-customers to replace crop protection products with seed traits. Many market observers were on record predicting that the time would eventually come when the segment would lose its leadership spot among its fellow crop inputs. That time has apparently arrived.
Based upon the data collected in the 2006 CropLife 100 survey, the crop protection products category saw its sales drop 13% from the 2005 total — down a steep $821 million. Market share now stands at 39% — below the percentage for fertilizer for the first time since the 2000s began.
"In 2006, we finally saw what we had been fearing — a mass shift and decrease in crop protection," says Jim Shelton, agronomy division manager for Landmark Service Cooperative, Cottage Grove, WI. "We saw a $1.2 million shift from preemergence products to post-glyphosate products, plus a nearly $1 million decline in sales."
Other retailers reported a similar experience with their crop protection sales in 2006. "There was big pressure on margins this year," says Peter Vail, president of Carolina-Eastern Vail, Inc., Niverville, NY.
To illustrate just how widespread and gloomy things were for the crop protection products category in 2006, consider the performances of its individual segments — herbicides, fungicides, and insecticides. In the 2005 CropLife 100 survey, all three segments recorded healthy sales upticks. According to retailers in that year's survey, fungicide sales were up for 72% of respondents, 56% recorded insecticides sales increases, and 53% had herbicide sales growth.
The numbers weren't near as kind in 2006, however. Performing best was still the fungicide segment, where 44% of retailers recorded some kind of sales increase compared with 30% seeing sales declines and 26% having neither an increase or decline. Based upon the data, the fungicide segment continues to benefit from fears of a serious outbreak of Asian soybean rust and grower-customers using such products to improve their plant health possibilities. In fact, according to the survey, 75% of CropLife 100 retailers said their grower-customers were using fungicides as a way to improve overall plant health.
The herbicide segment performed next best. The number of retailers seeing sales improvement in 2006 stood at 42%. Unfortunately, an almost equal percentage — 41% — saw sales declines in herbicides. As in the past few years, retailers tended to blame declining margins due to the influx of post-patent products (particularly glyphosate) for much of this sales drop.
By far the worst hit among crop protection product segments in 2006 were insecticides. In this segment, the majority of CropLife 100 retailers — 52% — recorded a sales drop. Only 37% had sales increases and 11% had sales identical to their 2005 totals.
The Post-Patent Equation
In many instances, CropLife 100 retailers see post-patent products as one of the primary reasons the crop protection products category is losing revenue. "The percentage of generic product entries is causing price erosion," says Steve Dugo, manager for Mid Valley Agricultural Services, Linden, CA.
However, despite this view, the majority of CropLife 100 retailers do business with post-patent suppliers. In fact, according to the data, 86% of respondents purchased crop protection products from these companies, up from 79% in 2005. When asked what percentage of crop protection sales in their markets were post-patent entries, respondent totals ranged from 2% to 80%. On average, almost one in five crop protection products (24%) is represented by a post-patent entry.
As for why retailers conduct business with post-patent producers, 97% of respondents said this was based strictly on price. Twenty-six percent marked product quality as their No. 1 deciding factor when picking which post-patent products to carry. Sixty percent marked both price and quality as their deciding factors.
In terms of which post-patent companies CropLife 100 retailers dealt with in 2006, not much has changed in the past year. As in 2005, Makhteshim Agan of North America was the top post-patent supplier in 2006, with 53% of respondents listing the company as their major product supplier. In second place was Cheminova at 41%, up 10% from its 2005 percentage. Other major post-patent suppliers included United Phosphorus Inc. at 32%, Sipcam at 26%, Albaugh and NuFarm at 17% each, and Agriliance at 12%.
Given this overall performance in 2006, most CropLife 100 retailers are pessimistic the crop protection products category will recover much of its lost ground going into 2007. "The No. 1 challenge facing our company preparing for the 2007 season is the devaluation of crop protection products," says Pat Avery, senior vice president and general manager, retail businesses for Simplot Grower Solutions/J.R. Simplot Co., Boise, ID.