Producing markets the global agrochemical industry

The term "agrochemical industry" specifically refers to those few, large, diversified chemical companies that globally manufacture and sell the active ingredients in pesticides and fertilizers. These firms and their respective markets have also undergone dramatic recent changes.

The establishment and expansion of large-scale pesticide and fertilizer development and manufacturing is a product of military technology and processing power developed during World War II. The fight against typhus and malaria on the front, coupled with the search by chemists for chemical warfare agents, led to the discovery and the development of DDT (in 1939), the discovery of the herbicidal properties of 2,4-D and MCPA (in 1944), and the first organic weed killers based on the regulation of plant hormones (Whitten 1966; Aldus 1976; Anderson et al. 2003). Under the direction of research and development by the Chemical Warfare Service of the US military, pesticide production blossomed and proved to be effective and economically efficient. As historian Edmund Russell notes (2001:149): "the finances of making DDT could not be beat", especially since government tax amortization was dispensed to chemical producers as the war neared its end.

The profitability of the industry expanded during the post-war period, as demographic shifts increased food demands, agricultural land prices rose, farm labour became increasingly scarce, and growing affluence meant increased demands for unblemished food products with no signs of damage or disease (Stephens 1982). Inexpensive, easy-to-use farm chemicals continued to grow (Green et al. 1987), especially as the petrochemical industry entered pesticide manufacture as a way to market production byproducts, and academic researchers and extension agents continued to sing their praises (Young et al. 1985).

However, contraction of farm chemical markets began following the energy crisis of the 1970s, the US farm crisis of the mid-1980s, and the concurrent economic recession. By the 1980s, there were fewer acres in crops, pesticides had reached saturation in most markets, and demand for farm chemicals began to drop, remaining low throughout the 1990s (United States Department of Commerce 1985; Eveleth 1990; British Medical Association 1992). Continued depression in commodity prices meant a continued reduction in the market for and drop in the price of agricultural chemicals (Reich 2000).

At the same time, the costs of raw materials, solvents, and other chemicals needed for the reactions and purification processes in chemical manufacture have risen (British Medical Association 1992). So too, research and development costs have skyrocketed, becoming higher in the pesticide industry than in manufacturing as a whole (Reich 2000). About 15,000 new compounds must be tested to yield one marketable pesticide and it takes 8-10 years to bring a pesticide from the stage of initial synthesis to the commercial market; the extent and cost of registration trials, required by the EPA under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and the FDA under the Federal Food, Drug, and Cosmetic Act (FFDCA), have risen in recent years as regulation of pesticides has increased (Staggers 1976; Anderson 1996). With the passage of the Food Quality Protection Act (FQPA) in 1996, all pesticides previously declared safe were subject to review by EPA (Hanson 1998; Thayer 1999; Hess 2000). The cost to develop a single new pesticide, as a result, ranges from $20 million to $50 million (Zimdahl 1999; Rao 2000).

Because the research and application process takes so long, a new pesticide will not show profit until about 10 years after application, leaving only 10 years before patent expiration. Producers must constantly research new pesticides as older patents expire. This, coupled with increasing pest resistance to existing formulae, has led to consolidation. In the mid-1980s, the patents on several major herbicides expired, fueling a series of mergers and acquisitions by chemical companies. Pesticide manufacturing is currently dominated by only a few large firms with familiar names like DowElanco, du Pont, and Ciba-Geigy (United States Department of Commerce 1985; British Medical Association 1992).

In sum, saturated agricultural markets, rising costs of materials, expense and lengthy time requirements for research and development, extensive and retro-active regulatory requirements, patent expiration, growing problems of pest resistance, together set the competitive conditions of early twenty-first-century agrochemical production. As a result, agrochemical manufacturers are increasingly turning away from conventional agriculture and seeking new markets (Zimdahl 1999). So far, attempts to sell pesticides to the developing world have been less profitable than predicted (US Department of Commerce 1985). Despite the potential promise of biotechnological innovation, genetic innovation has only resulted in further consolidation; because biotechnology research is expensive, smaller firms are usually taken over by larger, better-capitalized firms, hastening the concentration of the industry, increasing the ferocity with which non-biotechnological manufacturers must compete (Thayer 1999).

Raw, non-agricultural pesticides, on the other hand, represent a worldwide market currently worth around $7 billion, which is growing at 4 percent per annum, far more rapidly than the agricultural sector. 40 percent of these sales represent US household consumption. The turf care market for raw chemicals is itself about a billion dollars, and is also increasing annually (Agrow Reports 2000). By way of illustration, over 500,000 pounds of lawn care chemicals are applied annually in New Jersey, as compared to 63,000 pounds for mosquito control and 200,000 pounds for golf courses (New Jersey Dept. of Environmental Protection 2002).

Agrochemical companies are therefore finding yard chemical formulators to be their most reliable customers and formulator companies have developed several agreements with chemical manufacturers to secure exclusive access to pesticide and fertilizer ingredients (United States Securities and Exchange Commission 2001). Contracting margins in the agrochemical industry mean that chemical manufacturers will continue to seek out relationships like these, which in turn strengthen the ability of formulators to develop new marketing plans and increase the ranks of chemical-using lawn managers. Thus, changes in the broader economy of agricultural chemical manufacturing have paved the way for increases in the sales of lawn chemicals. An increasingly constricted industry is the central engine for the expansion of chemical commodity markets and the invention of new arenas for the consumption of toxins. It is ultimately the supply of pesticides, herbicides, and fertilizers that directs the imperatives for chemical demand.

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