How Can Agrochemical Companies Maintain Profitability in a Flagging Chemical Market?

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Falling crop prices has affected the agrochemical market. What can companies do to adapt?
Image source: Flickr CC user Matthias Ripp

Things have changed for the agrochemical market. What was once a sector filled with innovative, competing products geared toward protecting crops has been leveled due to upheaval in the agricultural industry. While the industry once focused on increasing the global food supply, it has moved toward improving the quality of food itself. As a result, the market now concentrates on the interests of the parties most interested in food quality—consumers, food chains and regulators—rather than farmers.

Unfortunately, the two groups often have opposing goals. One side is concerned with the effect of chemicals on the food we put in our bodies and the other is concerned with maintaining crop yield in the face of pests and disease. While there are certainly safe chemicals that can succeed at the latter, past cases of unsafe pesticides have made regulatory and consumer-interest groups more prone to scrutinizing such products.

To make matters worse, crop prices have seen a general downward trend, especially with regard to glutted varieties such as corn and soybean.1 Altogether, these factors have contributed toward less demand for crop protection chemicals. This is bad news for what is otherwise a $30 billion industry.2

In order to remain viable, agrochemical companies may have to merge or downsize. One company, Dow, merged with DuPont last year, with plans to consolidate their agricultural departments and spin it off as an independent company in 2018.3 Among the chief reasons behind the proposed decision are high research and development costs. This serves to emphasize the notion that companies choosing to remain in the business must streamline their workflows in order to remain profitable. In fact, having a streamlined R&D process is no longer an option but rather a necessity.

Strategies the Agrochemical Industry Can Adopt to Remain Viable in the Face of Weak Demand

Agrochemical research and development faces many challenges, most of which tie into the fact that developing innovative products requires substantial, long-term commitment and investment. From initial chemistry to toxicology to final registration with regulatory agencies to allow it to come to market, the entire process can take up to 10 years. The duration of the timeline is anything but compatible with the current market. Imagine funneling billions of dollars into developing a new herbicide, only to discover that there is no longer demand by the time it’s ready.

Despite the inherent difficulties, agrochemical companies have a few options to pursue. There will always be a need for protective crop chemicals, so they simply need to adapt those goals to the current climate.

  • Design molecules that have desired effects:
    Researchers often seek chemicals with specific properties. Instead of developing brand new products from scratch, agrochemical firms can keep these traits in mind and tailor molecules to fit these parameters.
  • Improve upon an existing chemical:
    Again, rather than redesigning the wheel, companies can focus on developing chemicals that can replace existing ones. For example, they can create a chemical that excels at both combating disease and making crops hardier. Such a product could effectively replace chemicals that only do one of the two tasks.
  • Screen more compounds:
    R&D efficiency is not just a matter of streamlining overall workflow. It also ensures that better decisions are made. For example, the ability to screen more candidates would allow companies to select the ones most likely to succeed, saving time and money in related testing. It also allows firms to diversify the molecules they evaluate and develop, protecting their profit margins in the long run when demand in one area falls.

The downturn in the agricultural industry has had undeniable consequences for the agrochemical market, leading many companies to consider closing their doors or merge with other firms to remain profitable. In a volatile market, companies have no choice but to focus on streamlining their workflows and business strategies in order to survive. Due to the high costs associated with research and development, companies especially need to remain conscious of ways to streamline this area.

The BIOVIA Chemicals Research & Development Solution is a suite of tools designed to streamline the R&D process by helping laboratories transition from outdated paper-based systems to an efficient, centralized digital one. By storing and sharing data in a secure, digital environment, laboratories can reduce the number of experiments necessary by allowing users access previous results. The suite comes equipped with modeling and simulation software to virtually screen candidate molecules in a 3D environment, allowing researchers to more accurately predict chemical properties. It’s ideal in cases where laboratories are designing compounds for specific traits or seeking to diversify their catalog offerings. And finally, it allows laboratories to streamline their chemical management procedures, saving money by preventing waste and noncompliance. Contact us today to learn more.

  1. “Monsanto cuts quarterly earnings guidance, shares drop,” November 11, 2015, http://www.todayonline.com/business/monsanto-cuts-first-quarter-earnings-guidance
  2. “Agrochemical researchers are maintaining their crop protection arsenals by using tools developed by the pharmaceutical industry,” September 9, 2005, https://pubs.acs.org/cen/coverstory/83/8338agrochemical.html
  3. “2015 TOP STORIES: Merger casts uncertainty over Dow Agro,” December 26, 2015, http://www.ibj.com/articles/56377-merger-casts-uncertainty-over-dow-agro

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