A three-year downturn for crop protection sales is expected to continue
in 2002.
“Anybody who has been following the weather forecasts knows we have
been hit with some really historic drought-related conditions,” said
Lorne Hepworth, president of CropLife Canada, which represents crop
protection companies.
“Our industry on the chemistry side is married to the business of
farming. So goes the farm economy and so goes our industry.”
In an interview during the CropLife Canada meeting Sept. 16, Hepworth
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said sales will be down again this year, but the amount will vary from
region to region.
Canadian industry sales of crop protection products totaled $1.27
billion in 2001, down 2.8 percent.
Herbicide sales accounted for 80 percent of the total, fungicides nine
percent, insecticides five percent and specialty products six percent.
Sales in Western Canada were up slightly, but down 16 percent in
Ontario. Ontario represented 18 percent of total Canadian sales.
More genetically modified crops were planted, but they were damaged by
drought in western Saskatchewan and most of Alberta, so producers
bought fewer treatments.
Eric Ward, chief executive officer of a small chemical development
company in North Carolina, said major industry changes also contributed
to a weaker bottom line for the $30 billion a year global business.
Major companies are producing fewer new products because rates of
return are too low.
In 1960, a company could expect to spend $1 on research and earn $6 in
sales by 1970. Today, only $1.25 is earned for every dollar spent in
development.
“You’d probably be better off putting money in the bank than try and do
R and D at this point,” Ward said.
As a result, big companies are only interested in developing a product
that is almost guaranteed to provide a high rate of return.
Slower sales can also be attributed to an aging baby boomer population
questioning the value of agro-chemicals.
“It’s like the hippies have grown up and they have spending power now.
They want to buy organic foods and they want to tell us why chemicals
are bad.”
Widespread mergers and acquisitions have also had an impact.
There were 13 major companies in the sector 10 years ago, but only six
today.
This activity creates turbulence for research scientists who are
sometimes left adrift when new policies are introduced or staff
removed. The ability to continue long-term research and development is
put on hold as some companies choose to service the markets they have
rather than develop new products and new customers.
