One of the most dynamic aspects of the big three pending crop protection and seed acquisitions (Dow and DuPont; Bayer and Monsanto; ChemChina and Syngenta) is the impact on global business. Garnering attention is Chinese company ChemChina acquiring Syngenta with a $43 billion offer. If the merger is approved, then Syngenta would be the largest foreign acquisition by a Chinese company.
“It’s important to note that ChemChina is a holding company, rather than an agribusiness” says Matthew Phillips, director of crop protection and seeds at Phillips McDougall. He has spent almost 30 years analyzing the agrochemical industry and consulting globally.
ChemChina has a portfolio across multiple industries. It includes Israel-based ADAMA, a crop protection company that focuses on generics.
“The key point of this transaction is that Syngenta will remain Syngenta–maintaining choice for customers,” says Paul Minehart, head of corporate communications in North America for Syngenta. “The company will have the same management, will remain headquartered in Switzerland, will have the same products and will maintain the same investment in R&D.”
China As A Consumer. Heading into 2017, Phillips shared his insights at the Ag Retailers Association annual conference, and his approach starts by looking at China’s role in the global grain markets.
“Actually, when we look at 2016, Asia is the brightest spot in the agrochemical market,” he says.
From 2008 to 2013, Chinese grain imports saw 14.5% growth per year to import 75 million tons of grain.
“At best, they’ve had a 1% per year increase due to yield growth, and their ability to increase this further is limited,” Phillips explains. “Production is not increasing at a fast enough rate to offset demand.”
In China, 33.6% of the population, or 270 million people, are employed in ag. In the U.S., it’s only 0.07% of the population, or 1.1 million. As Phillips explains, at the farm gate, the Chinese agrochemical market is bigger than the U.S. market.
China As A Producer. Of Chinese agrochemical companies, 80% are private-owned, and 20% are state-owned. Chinese agrochemical and GM trait patents are mostly held by institutions and universities, not companies. In 2015, 65% of active ingredient patents in Asia were publicly owned, and 35% were owned by companies. Compare that to 16.2% of active ingredient patents in NAFTA countries being public, and 83.6% are company-owned.