PESTICIDES IN AGRICULTURE AND THE ENVIRONMENT - CHAPTER 10 (end) pptx

The seed industry also became a focus of the crop protection industry as a component of the plant biotechnology revolution when it became apparentthat seed would be the carrier for the n

Evolution of the Crop Protection Industry

Robert E Holm and Jerry J Baron

in agricultural production that few would have believed possible when the centurybegan.Table 1indicates the dramatic yield increases for corn, soybeans, wheat,and cotton from 1920 to 1990, which ranged from 2.5-fold for soybeans to sixfoldfor wheat The increased productivity was even more striking when measured

by output per farmer, which increased 13-fold from an average of 9.8 peoplebeing fed per farmer in 1930 to 129 people per farmer in 1990

When the significant cultural practices are overlaid on the yield and tivity increases, it is clear that the most dramatic improvements were made inthe last half of the century and coincided with the maximized use of hybrid seed,better and more efficient mechanization of equipment, more available and cheaperfertilizer inputs (especially nitrogen), and the development of modern crop pro-tection tools such as the ethylenebisdithiocarbamate (EBDC) fungicides, herbi-cides like the phenoxies and triazines, and effective insecticides like the organo-

produc-T ABLE 1 Impact of Crop Protection Developments on Row Crop Yield and Productivity

Modern crop protection chemicals

→

Triazines Organophosphates

b N/A, not available.

Source: Farm Chemicals WOW 2000 America.

phosphates, carbamates, and pyrethroids In crops like cotton, where yields hadplateaued for 20 years, area-wide government programs such as boll weevil eradi-cation had an impact on a serious pest and reopened large areas of the Southeastand South to economical cotton production.

The last decade of the century brought about the advent of plant ogy, which was one of the most rapidly adapted new technologies ever utilized

biotechnol-by farmers It has been estimated that it took 7 years for 50% of U.S corn farmers

to accept hybrid corn but only 4 years for 50% of U.S soybean growers to acceptRoundup Ready soybeans [1] We delve into the current and projected status ofthe plant biotechnology revolution in a later section but begin by focusing onthe crop protection industry, recognizing again that it is just one important com-ponent in an overall production management system that includes fertilizers,mechanization, and improved seeds

2 THE CROP PROTECTION INDUSTRY—HAS IT COME

FULL CIRCLE?

The modern crop protection chemical industry evolved from European and U.S.chemical companies that were formed from the 1700s to the early part of the1900s (Fig 1) These companies dedicated resources to separate agriculturalchemical operations during the first half of the last century as stand-alone units

or as part of fertilizer operations Several of these companies—for example, EliLilly and Bayer—also had growing pharmaceutical businesses that were not inte-grated with agrichemicals but often shared compounds synthesized by their chem-ists between biological evaluation groups At one time, many of the major oilcompanies had agrichemical operations However, one by one (Esso in 1969,Gulf in 1975, Mobil in 1981, Shell in 1988 and 1994, and Chevron in 1991 and1993), the oil companies sold their agrichemical businesses and products to focus

on their core businesses with their shorter term investment returns Many rate oil company boards of directors found it difficult to reconcile the 8–10 yearperiod needed to develop and market a new agrichemical product at a cost of

corpo-$30–50 million or more with the short-term investment turnaround of drillingnew wells for oil or natural gas It was this attitude that drove companies todevelop life science business units comprising pharmaceuticals, agriculturalchemicals, and sometimes animal health products From an investment viewpoint,all of these high technology, heavily research-driven enterprises have similar longproduct development lead times with high investment commitments With indi-vidual agrichemical product profit margin potentials of 50% or more, the corpo-rate investment strategies and support to link these technology-driven businessunits together made good business logic In addition, many of the discovery toolsdiscussed later could be linked or shared, resulting in potential synergies and costsavings

F IGURE 1 Evolution of the crop protection industry Have we come full circle?

In the 1990s some other complicating factors came into play that had animpact on the industry Many products patented in the 1950s–1980s came offpatent and were the source of market opportunities for generic producers who haddeveloped cost-effective manufacturing processes for many of the high-volumeproducts The seed industry also became a focus of the crop protection industry

as a component of the plant biotechnology revolution when it became apparentthat seed would be the carrier for the new technology and be a critical part in

certain management systems such as herbicide-tolerant crops, as discussed ingreater detail in Section 9.

What seemed to be a perfect strategy (i.e., life sciences) started to unravel

in the latter part of the 1990s owing to a number of factors, mostly economicallydriven After reaching record years of farm income in the early to mid-1990s,farm receipts dropped precipitously in the late 1990s and the early part of thetwenty-first century owing to general worldwide feed grain surpluses and tum-bling commodity prices This situation, coupled with lower overall gross profitmargins on off-patent products due to generic competition, led several companies

to reconsider their life science strategies Corporate boards were under increasingpressure from shareholders who saw lower profit margins (20% for generic agri-chemicals versus more than 50% for pharmaceuticals) and public concerns withrespect to plant biotechnology They started to distance their drug and animalhealth operations from the agrichemical and plant biotechnology business units

A new company called Syngenta was formed in 2000 from the crop protectionbusinesses of Novartis and Astra/Zeneca Several of the major pharmaceuticalcompanies (Merck in 1997, American Home Products in 2000, and Abbott in2000) divested their crop protection business units completely, while other com-panies, e.g., Pharmacia (which purchased Monsanto in 2000), set up their agricul-tural business as a separate operating company and sold public stock in it Manyanalysts saw this as a first step in total divestiture of the agricultural business unit

3 MERGERS AND ACQUISITIONS

The divesture of the agricultural chemical businesses by the oil companies wasonly a small part of the turnover in the overall industry, as noted inTable 2.Although there were a few changes in the 1960s and 1970s, the trend rapidlyaccelerated in the 1980s and 1990s as the dynamics of life science strategies,generic producers, seed businesses, and plant biotechnology drove companies toevaluate and re-evaluate the role of agrichemicals in their operations It is clearthat the trend will continue well into the twenty-first century Many analysts havepredicted that as few as five and as many as 10 companies will emerge as theultimate survivors, as the trend line inFigure 2 verifies The impact has beenfelt not only by the major companies directly involved in the industry but also

by companies manufacturing and formulating agrichemical products as supportindustries Several smaller companies, including FMC, Rohm & Haas (agrichem-ical business acquired by Dow AgroSciences in 2001), and Uniroyal Chemical(division of Crompton Corporation), continued to survive and compete by focus-ing on market niches such as minor crops and the home and garden market FMCactually made the top 10 global crop protection companies in 2000, not so muchfrom increased sales as from consolidation in companies above them in the rank-ings(Table 3).In 2000 alone, Novartis and Zeneca became Syngenta, and BASF

T ABLE 2 Mergers and Acquisitions in the Crop Protection Industry

Year 2000 survivor Merged or acquired companies (year)Aventis AgrEvo (1999), Rhoˆne-Poulenc (1999), Stefes (1997),

Plant Genetic Systems (1996), Hoechst/Schering/ Nor-Am (1994), Union Carbide (1987), Mobil (1981), Am-Chem (1970s), Nor-Am (1963), ICC/ American Hoechst (1961), Hoechst (1953), Roussel/ UCLAF (1946) Others include Boots, Hercules, Fi- sons, Boots Fisons Hercules (BFC), Morton Nor- wich, May and Baker, Rhodia, Chipman, American Paint, and Amchem-Rhor.

BASF American Cyanamid (AG business of American

Home Products) (2000), Micro-Flo (1998), Sandoz (part of product line, 1996), American Home Products/American Cyanamid (1994), Shell Interna- tional (1994), Celamerk (1986), Cela plus Merck (Darmstadt) (1972) Others include BASF Wyan- dotte, Wyandotte, and BASF Colors and Chemicals Bayer Gustafson (50% with C K Witco in 1998), Bayer Cor-

poration (AG divisions consolidated in 1995), Bayer/Miles (1978), Chemagro (1967) Others in- clude Mobay, Baychem, and Geary Chemical Dow AgroSciences Rohm & Haas (agrichemical division in 2001), Myco-

gen (1996, 1998), Sentrachem (1997), Dow Elanco (Dow Chemical plus Eli Lilly) (1989) Others in- clude Murphy Chemical and Walker Chemie DuPont Pioneer Hybrid (1997, 1999), Griffin Corporation

(50% in 1997), Protein Technologies (1997), Shell Chemical (U.S business in 1988).

Monsanto An operating company of Pharmacia Corporation

(2000), Asgrow (1998), DeKalb (1998), Holden Foundation Seeds (1998), Plant Breeding Interna- tional Cambridge (1998), Cargill (joint venture, 1998), Calgene (1996/97), Agracetus (1996), Chev- ron (home products business in 1993).

Sumitomo Chemical Abbott (AG business in 2000), Chevron (ag business

in 1991) Others include California Chemical, fornia Spray, and some PPG Industries products Syngenta Novartis (2000), Zeneca/Astra (2000), ISK Biotech

Cali-(1997), Merck (AG business in 1997), Mogen national (1997), Ciba/Sandoz (1996), Northrup King (1996), ICI Americas (1993), Stauffer Chemical (1987), Garst Seed (1985), Ciba (1970), Geigy (1970) Others include Velsicol, Zoecon, Interna- tional Minerals and Chemicals (AG products), MAAG, Michigan Company, Atlas, Cannet Corp, Chipman of Canada, Fermenta ACS/Plant Protection/AB, SDS Biotech, Diamond Shamrock, Showa Denko, Ansul AG Products, Diamond Al- kali, Kolher Chemical.

Inter-Source: Farm Chemicals WOW 2000 Special Millennium Issue, herbicide company

ge-nealogy by AP Appleby and information by RE Holm and JJ Baron.

F IGURE 2 Consolidation trends in the agricultural chemical industry.(Adapted from Ref 11.)

purchased the American Cyanamid agricultural business unit from AmericanHome Products The shuffling in top 10 rankings over this 5 year period is a truereflection of the constant turmoil in the industry Also of interest inTable 3isthe flat to declining worldwide value of crop protection chemical sales over thelatter part of the 1990s after increases of 2–3% per year due partially to increaseduse of generic products (i.e., lower cost) and the impact of herbicide-tolerant andinsect-resistant crops in the United States

Of major future interest in the merger and acquisition area will be the egy of the Japanese agrichemical industry While their U.S and European coun-terparts have been very active in various strategies, of the major Japanese com-panies only Sumitomo Chemical Company has made a direct entry into theEuropean (through Philagro) and U.S (through Valent and Valent BioSciences)markets The impact Ishihara Sangyo Kaisha (ISK) had in the U.S market wasgreatly diminished by its product and business sale to Zeneca/Syngenta, although

strat-it has retained development rights to new products Other companies such as

T ABLE 3 Changes in Global Sales Leadership in Crop Protection (1996–2000)

Global

Kumiai Chemical, Nihon-Nohyaku, Sankyo, Hokko Chemical, Taketa Chemical,Nissan Chemical, and Nippon Soda appear to be content to license their newmolecule discoveries to European and U.S.-based companies for developmentand marketing in countries outside Japan and Asia where they lack a major pres-ence With the increasing market globalization pressures and the costs of dis-covering new molecules, it is doubtful whether this independence can continuefor long Whether the Japanese agrichemical industry will consolidate internallywithin Japan, with the major global companies, or both remains to be seen Aswill be noted in Section 8, many of the new chemistries being developed world-wide have their origin in Japanese laboratories.

4 IMPACT OF GENERIC PRODUCERS

From the perspective of the crop protection industry, the generic products try has changed dramatically over the past 30 years Generic producers used to

indus-be viewed as business opportunists by the basic manufacturers, who had investedlarge amounts of research dollars and business capital to discover, develop, andmarket new products only to see the generic producers quickly gain market entryonce the products went off patent Early off-patent product market launches bygeneric companies met with acrimonious lawsuits on data compensation allowedunder the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) Afterseveral precedent-setting lawsuits were settled, the two camps settled into anuneasy truce Gross profit margins of 20–30% for off-patent products versus50–60% for patented products dictated different marketing strategies Genericproducts continued to gain a foothold in markets where low-cost production wasimportant and where farmers could not afford high production input costs such

as in third world countries It has been estimated that the market share for genericproducts exceeds 70% in China, 60% in India, 50% in Korea, and 40% in Taiwan

In the 1990s, the attitude of the agricultural chemical companies towardtheir generic competitors started to change In 1996, it was estimated that off-patent products accounted for over $18 billion in sales, or 58% of the globalmarket [2] This impact and growth could not be ignored The Israeli companyMakhteshim-Agan was formed from Makhteshim Chemical Works, Ltd andAgan Chemical Manufacturers, Ltd in 1996 and cracked the top 10 global saleslist in 1999 with over $800 million in sales(Table 3).Makhteshim-Agan is clearlythe global generic leader and remains an independent operating company(Table4).Fernz/NuFarm (over $450 million sales in 1998) and Cheminova (over $300million in 1998 sales) also remain independent However, Griffin ($300 million

in 1998 sales) became a 50% joint venture with DuPont and increased its 1998sales to over $450 million with the addition of DuPont’s off-patent products.DuPont gave as reasons for the joint venture (1) Griffin’s knowledge of the ge-neric business infrastructure and their proven record of managing off-patent prod-

T ABLE 4 Generic Producers in the Crop Protection

Industry

Companies acquired by or entering into joint

ven-tures with basic manufacturers

Griffin: 50% joint venture with DuPont

prod-1998 Dow indicated that the acquisition was part of their strategy to gain ship in an industry being driven by biotechnology, consolidation, and genericcompetition Along these same lines, Aventis (AgrEvo) purchased the Germangenerics company Stefes, and BASF purchased the United States–based genericproducer Micro-Flo In a variation on the theme, Aventis (Rhoˆne-Poulenc) cre-ated a separate operating division named Sedagri to market the company’s ge-neric product line

leader-Companies like Monsanto/Pharmacia who have not gone the generic route

in partnerships and acquisitions have developed their own strategies for genericproducts Monsanto’s glyphosate became the crop protection industry’s first pro-prietary product to exceed $1 billion in annual sales in the 1990s Althoughglyphosate became a generic herbicide in much of the global market in the late1980s and early 1990s, it did not go off-patent in the United States until 2000.Prior to that, Monsanto developed the strategy of becoming the lowest cost pro-ducer and expanding into new markets by lowering the price According to Beer[3], the average global end user price for glyphosate technical dropped from $34/

kg in 1991 to $20/kg in 1997—an 8%/yr reduction However, agricultural uses

of glyphosate increased from 42,000 tons in 1994 to just over 74,000 tons in

1997 (a 20%/yr increase) and were expected to exceed 112,000 tons in 1998.Monsanto increased production capabilities at a similar rate and was forecast to

exceed 100,000 tons of glyphosate per year in 2000 Monsanto coupled an gressive licensing program, lowered prices, and increased production with lowerproduction costs In the last few years, Monsanto licensed Syngenta (Novartis),Cheminova, Fernz/NuFarm, Dow AgroSciences, and BASF (Micro-Flo andCyanamid) to sell glyphosate in stand-alone and premixed products In addition,Monsanto used formulation technology to differentiate its Roundup glyphosatebrand from the glyphosate of generic producers It developed a formulation sys-tem termed UltraMAX that contained 25% more glyphosate than the olderRoundup Ultra formulation along with formulation technology called Transorbthat enhanced glyphosate uptake, translocation, and rain-fastness They also intro-duced in 2000 a new formulation of glyphosate plus atrazine called ReadyMasterATZ for the Roundup Ready corn market With these innovations and Mon-santo’s dominant position in the herbicide-tolerant soybean market with itsRoundup Ready program, they are in a position to maintain their glyphosateleadership position for years to come.

ag-5 THE ROLE OF THE SEED COMPANIES

Until recent years, the association of the crop protection industry with the seedbusiness was as remote as their relationship with the generic producers Thatbusiness approach did not change until the 1990s, when the heavy investment inplant biotechnology led to the realization that seed was the delivery system fornewly discovered input traits like herbicide tolerance and insect resistance Thedecade of the 1990s saw a wild scramble for seed businesses by the crop protec-tion industry (Table 5) DuPont paid nearly $10 billion for Pioneer Hybrid in

T ABLE 5 Seed Companies in the Crop Protection Industry

Estimated sales Industry ownershipaSeed company ($ million) (year purchased)

two steps (20% in 1996 and the remaining 80% in 1999) to gain control of theleading hybrid seed corn producer, which had over 40% of the U.S market.Monsanto followed with acquisitions of DeKalb, the number two U.S hybridseed corn producer, with over 12% market share, and Asgrow, a leading soybeanproducer, to become the third largest seed producer Syngenta, thanks to the seedbusiness acquisitions of its parent companies (Zeneca with Advanta/Garst, Cibawith Ciba Seeds, and Sandoz with Northrup King), became the world’s secondlargest seed company behind Pioneer/DuPont Monsanto’s stake in the globalseed market could have been larger if it had held on to the cottonseed operations

it purchased (Stoneville Pedigreed Seeds, acquired as part of the Calgene chase) or had agreed to buy (Delta and Pine Land) Delta and Pine Land hadover 70% of the U.S cottonseed market, whereas Stoneville Pedigreed Seed heldabout 15% of the domestic cottonseed market Because of antitrust concerns overcontrol of such a large share of the cottonseed market, Monsanto sold Stoneville

pur-to Emergent Genetics in 1999 They later decided not pur-to follow through on theDelta and Pine Land purchase and ended up paying an $81 million terminationfee Dow AgroSciences is another major player in the seed business with its

T ABLE 6 Seed as a Multicomponent Delivery System

Germplasm Proprietary germplasm Higher yields

Hybridization systems Stress tolerance (drought,Marker-assisted breeding salt, cold, etc.)

resis-tanceQualitative traitsNutritional valueTransgenes Gene discovery, expres- Insect, virus, and disease

sion, and delivery resistance

Herbicide toleranceQuality traitsSeed protectants Seed treatment chemicals Soil and plant systemic in-

and technology sect and disease Safener technology tion

protec-Increased crop tolerance

to selected herbicidesProduct variations Processing, coating Easier planting

Pelleting, priming Improved germination

Uniformity of emergenceSoil temperature activa-tion

purchase of Mycogen Only Cargill; Delta and Pine Land; Limagrain, a based seed company that is 15% owned by Aventis (Rhoˆne-Poulenc); and Savia,which is the largest vegetable seed producer with around 25% of the global mar-ket and 40% market share in the United States and Europe, remain independentfrom the crop protection industry.

French-The agrichemical industry views seed as a multicomponent delivery systemnot only for input and output traits but also for chemicals to be placed on theseed for protection against plant disease and insects(Table 6).Many of the newinsecticides and fungicides being developed are highly active at low rates, aretaken up by germinating seedlings, and are translocated to emerging and newfoliage for 6–8 weeks or longer to protect systemically against insects and plantpathogens Bayer, Syngenta, Aventis, Uniroyal Chemical, and others have devel-oped strategic business plans to focus on the seed treatment market Bayer pur-chased 50% share of Crompton Corporation’s Gustafson seed treatment business,which is the leader in the United States We expect the seed treatment chemicalbusiness focus to continue because of its environmental and worker exposurebenefits versus foliar applications after plant emergence to control plant pests

F 3 How crop protection tools reached the farmer in the past

6 SUPPLYING CROP PROTECTION TOOLS

TO THE FARMER

For many decades, from the 1920s until the early 1990s, farmers received theirchemical, seed, and fertilizer inputs through the traditional chain diagramed inFigure 3.They then sold their produce to processors or food retailers for consumerpurchase The only exception was hybrid seed corn, which was sold to dealerswho were usually local farmers and in turn sold to their neighbors Now onlyfertilizer is sold through the traditional route Crop protection chemicals may besold directly to some large farms and farmer cooperatives With the agrichemicalcompany’s big investment in the seed industry (see previous section), theirinvolvement in seed sales has increased dramatically (see Fig 4) Because inputtraits such as herbicide tolerance and insect resistance require a much greater

F 4 How crop protection tools reach the farmer—current and future

level of management and technical skills to grow the treated seed, dealers anddistributors are becoming much more involved in seed sales The coupling ofchemical treatments for traits such as herbicide tolerance with seed sales has been

a way of maintaining grower contacts for distributors and dealers who supplyboth products (i.e., seed and chemicals) and the technical service to use them.Some companies have gone a step further by becoming involved in food pro-cessing Novartis, Syngenta’s parent, owns Gerber, the babyfood producer Du-Pont purchased Protein Technologies, which is a global leader in the use of soy-bean proteins for the food industry This has led to the term “dirt to dinner table”for the integration of DuPont’s agricultural businesses ranging from supplyingfarmers with seed and chemicals through processing the crop for consumer use

It is likely that this trend will continue as companies look at ways to extract valuefrom their technologies throughout the food chain

7 THE DISCOVERY PROCESS

As with many other aspects of the industry discussed previously, such as theseed technology business integration, little changed in the processes used to syn-thesize and biologically evaluate new crop protection chemical candidates for 50years from the 1940s until the early 1990s An organic chemist could synthesize50–100 unique new structures or 100–200 analogs of an active series annually.Biological evaluations were conducted on entire plants under greenhouse orgrowth chamber conditions The limiting factor became the number of chemists

a company could afford along with the biologists to conduct the empirical ing approach By the 1970s, 100 new molecules per week or 5000 per year wasthe goal of many companies, and this was raised to 10,000 molecules per year

screen-in the 1980s and early 1990s That goal changed dramatically by the mid-1990swhen the dual technologies of combinatorial chemistry and high-throughputscreening (HTS) pioneered by the pharmaceutical industry were adapted, espe-cially in the life science companies that had drug and agrichemical business andresearch units [4] Those discoveries led to new targets of 100,000 compoundsper year by the late 1990s However, by 1999 Aventis announced it was screening600,000 compounds per year and would increase that number to 1 million annu-ally Bayer also announced at the end of the decade their intent to screen 1 millionsubstances a year in their new $26.5 million research facility at their Monheim(Germany) Agricultural Research Center

One of the consequences of combinational chemistry approaches for pound synthesis is the lack of pure products—i.e., the target substance is accom-panied by other materials from the reaction plus starting materials Because puri-fication was not economically feasible before evaluation because of the highnumbers involved (up to 5000 per day in some cases), the major concern switched

com-T ABLE 7 New Approaches to Discovery

screening software for compound optimization3-Dimensional Pharmaceuti- Compound libraries and technologies to optimize active com-

Molecular Simulations, Inc Molecular modeling software for lead discovery, optimization,

and combinatorial chemistry approachesBio Discovery Screening and inspection of library extracts for crop produc-

tion potential

and nematicidesParadigm Genetics Use of gene function, bioinformatics, and new assays to de-

velop novel screening targets for new herbicidesArQule Use of combinatorial chemistry for screening to obtain several

hundred thousand compoundsDow AgroSciences Biotica Technology New Spinosad analogs obtained by targeting changes in bio-

synthetic pathwayIntegrated Genomics DNA sequence of Saccharopolyspora spinosa used to improve

Spinosad production through fermentation