The year 2000 was a watershed event for agricultural chemical companies. That year, Monsanto's patent to its popular Roundup expired, and suppliers jumped into the generic glyphosate market with both feet.
Although generic ag chemicals were already on the market (2,4-D and atrazine, for example), the sheer size of the glyphosate market brought generic agricultural chemicals to the forefront. Producers, lured by lower prices and increased supplier options, welcomed their newfound marketing choices with open arms.
Approximately 85% of agricultural chemicals are off patent, which means these chemicals now can be produced by companies that did not own the original patent. Given that approximately 60% of all pesticides used in U.S. agriculture are herbicides, the market is huge.
“Several years ago, generics were a nonfactor in the agricultural herbicide market,” says John Rabby, president and CEO of Makhteshim Agan of North America. “Generic glyphosate increased the number of products, gave producers more choices and introduced producers to the concept of quality generic crop protection products.”
The generic-product industry, as a whole, has made tremendous strides in its marketing efforts. Take generic grocery store products, for example. No longer does generic laundry detergent come in a large, black-and-white box labeled “detergent.” A generic product often has its own brand identity, whether it is a takeoff of a name-brand supplier or a store's own proprietary brand name. These generic products are taking more and more shelf space away from the traditional brand names.
The same holds true for generic agricultural chemicals. Atrazine, for example, remains a popular active ingredient that's found in many generic herbicide formulations. The Iowa State University 2006 herbicide guide for corn and soybean producers lists 44 corn herbicides, and at least 27 of those herbicides have at least some amount of atrazine listed as an active ingredient.
Within the glyphosate industry, generic herbicides are finding an expanding market for supplementary weed and grass control. Applications of residual herbicides are being recommended to prevent early weed competition, and this includes weeds showing indications of glyphosate tolerance.
“Makhteshim Agan offers generic versions of the former Dual II and Bicep II metolachlor and metolachlor plus atrazine in our herbicides Parallel and Parallel Plus,” Rabby says. The company also offers generic clethodim, under its brand name Arrow, which controls volunteer corn in Roundup Ready soybeans.
“Today, producers are much more in tune with the active ingredients in the chemicals they use,” says Dallas Peterson, extension weed science specialist at Kansas State University. “They understand the chemistry, and there's little concern that the generic product is inferior.”
While the market continues to be dominated by the original brand names, the generics have developed their niche. Most estimates have the total generic market somewhere around 25%. “Is it growing? Yes. Is there going to be a cap on the total market share for generics? Probably,” Rabby says. “The ag chemical market is dominated by the original brands, but the acceptance of generic products continues to grow.”
New kids on the block
Founded in 2003, Etigra started as a marketing agent with a handful of generic products in its portfolio. It has only been since April 2006 that the company has offered a product for crop protection. Etigra took the active ingredient metsulfuron methyl and created its own branded product, MSM E-AG 60 EG Herbicide. The company also registered imidachloprid and introduced the products, branded Imida E AG, to the market in the fall.
According to JJ Grow, president and CEO of Etigra, his company is evaluating additional crop protection products — both products that are coming off patent and products that are now off patent.
“We look at the chemistry, evaluate the product and the market, and determine if we can do a better job of manufacturing and distribution,” Grow explains. Formulation and manufacturing processes have greatly improved through the years, and this improvement can give a fresh face to older, off-patent chemistry.
What sets Etigra apart, Grow explains, is a business model that's built on communicating with customers, good distribution, and knowing what the customers' needs are.
“You can't just walk in and say ‘Here's our new generic product, buy some’ and expect to make a sale,” Grow says. “We need to understand what our customers want. And we need to meet their needs.”
Makhteshim Agan has been in the marketplace since 1961, mostly selling technical products. The company emerged in 2001 as a major generics supplier, and it continues to grow.
“Our market approach has been to increase our market portfolio,” Rabby says. The company has grown from having four to five active ingredients in its stable five years ago, to offering more than 40 today.
In addition, Makhteshim Agan focuses on being efficient, hiring excellent personnel to serve customers and ensuring cost-effectiveness. “We strive to have a good product at a good price,” Rabby says. “The bottom line is that a producer wants a chemical partner to supply products that work.”
To be sure, there's more to each generic product than simply an active ingredient or two placed in a jug with a label added. Although the generic suppliers don't develop the actual molecule, they develop specific formulations that, they say, make their product more effective. In addition, new manufacturing techniques, new encapsulation technologies and new adjuvants are all part of the mix — all designed to differentiate one generic product from another.
The 2006 University of Illinois crop bulletin warns producers about relying on trade names. For example, a few years ago, the herbicide Option contained the active ingredient fenoxaprop and was used for postemergence control of grass species in soybeans. The Option herbicide on the market today contains foramsulfuron and is used for postemergence control of grass species in corn.
At Etigra, managers named the company's products after strolling down the medicine aisle. “A lot of those generic products had the active ingredient incorporated into their names,” Grow says. “It seems like a commonsense approach — and one we've found to be effective.”
United Agri Products (UAP) has been reviewing off-patent products. Under the Loveland Products nameplate, it also has been building its own private label names. “We have been working with our suppliers to formulate quality products at a good price,” says Mike Steffeck, director of commercial operations for Loveland Products.
Late last year, the company announced that its new glyphosate product, called Makaze, will be available for use in the 2007 crop season.
The company is using proprietary technology to develop its glyphosate. “Studies have indicated a faster, more complete uptake of the active ingredient compared to leading glyphosate formulations,” Steffeck says. “This is a formulation that will offer a better value to the grower.”
Another advantage for UAP in developing its own brand is inventory management. As the largest agricultural chemical distributor in the United States, UAP wanted to better manage its product pipeline. “If you have five or six suppliers each with two to four SKUs [stock keeping units] per product, that is a lot of inventory to track,” Steffeck says. “By having our own brand, we can better support the original manufacturer's brand, build our own brand and manage our inventories all at the same time.”
The generics market comes down to one main trend: The agricultural chemical market has become a commodity business.
“The commoditization of ag chemicals mimics several other markets — airlines, pharmaceuticals and gasoline,” explains Fulton Breen, president of XS Inc. “As consumers better understand the marketing channels, they will look for cheaper alternatives.”
In the grocery store, consumers looking for pain relief will take a hard look at the generic ibuprofen compared with the name brand. “It's the same product, and you can save money,” Breen says. “The same goes with airline tickets. Some people may want that extra service of a travel agent. But the vast majority of consumers have discovered how they can shop and purchase their own tickets and save money in the process.”
The same holds true for agricultural producers. “As farms get bigger, their buying power becomes more like a commodity purchaser. They want the basic chemical and the best price,” Breen says.
However, the full-service business still has its place, Breen says. “The part-time farmer may want, or need, additional services that were once common,” he says.
Generics have made a lasting impact on the ag chemical market, but competition will remain fierce. “It's a problem for any company wanting to get into the generics business,” Steffeck says. “There are costs involved to bring a chemical to market and to get it distributed. Everyone can't expect to gain a 20% market share.”
The number of corn and soybean acres, for the most part, is relatively stable in the United States. That means that whether there are three or 13 ag chemical suppliers, the only way to gain market share is to take it away from someone else.
“The market is shrinking,” Rabby says. “There is a proliferation of generics, and there are a lot of good products out there.” With approximately 90% of soybean acres being planted with the Roundup Ready trait, the number of Roundup Ready corn acres on the increase, and other Roundup crops entering the pipeline (alfalfa, for one), the pressure on the market will increase.
“One acre of Roundup Ready corn decreases corn herbicide needs about $10 to $15/acre,” Rabby explains. “If 10 million acres of corn go to Roundup Ready, that's $100 million to $150 million that's not being spent in the ag chemical market.”
The additional competition from generics may have altered the marketing landscape, but the basic manufacturers (the product's original patent owners) remain major market players. One main reason is the strength of the brand — a brand that's had years to cultivate loyalty in the marketplace.
“We continue to have a very large base of satisfied customers,” says Brian Uken, U.S. Chemistry lead for Monsanto. “We have seen unprecedented demand. And in the past two years, we have seen tremendous growth in Roundup products.”
Uken credits Monsanto's investment in market research with growers and retailers to identify key attributes that they want in formulations, delivery systems and usage rates. “We also are heavily invested in researching new formulations,” Uken says. “We have not remained stagnant and have upgraded the technologies we have in the market.”
Monty Bayer, U.S. marketing leader for Dow AgroSciences, says basic manufacturers are committed to the continuous improvement of their products. “We must ensure that our products continue to remain effective and aligned with growers' needs,” he says. “That means investing in new technologies, as well as formulation developments.”
Monsanto adds value to its products through its highly successful Roundup Rewards program. “It's been around since 1997, well before the product went off patent,” Uken says. “Farmers are well versed in the program, and it gives them confidence when using our products.”
For Monsanto, the growth in glyphosate demand is being driven by the increase in Roundup Ready technology products: corn, cotton, canola, alfalfa and soybeans. Glyphosate also is being increasingly used on turf, roadways, trees and nuts.
“We always have had competition, whether it is different active ingredients from basic manufacturers or the same active ingredients from generic manufacturers,” Bayer says. “Generics are simply another market segment for us to compete against.”
Dow AgroSciences competes, Bayer says, by differentiating the company's technologies and ensuring its products continue to improve a grower's productivity.
There's no question that shrinking profit margins have had an impact on research and development. “What we've done is further refined our research targets to better align with growers' needs,” Bayer says. “Research has migrated from a broad approach to a more focused approach in identifying specific active ingredients which we believe growers will require in the future.”
Uken agrees. “Granted, there are fewer dollars available for research,” he admits. “But we are committed to bringing new products to market. Our plan is to target new Roundup formulations over the next couple of years in the United States.”
Bayer says that Dow AgroSciences and other basic manufacturers will continue to invest in their products. “Our goal is to invest and differentiate to add value and extend the life cycle of our products,” Bayer says. “We have a huge investment in our brands, and we want to continue to maintain our brand strength in the market.”
Shrinking profit margins and effectiveness of current products may be slowing development of new chemistry
THE GENERIC market has given producers more corn and soybean herbicide choices, but experts worry that shrinking margins and increased costs for research and development may be drying up the new-chemical pipeline.
“There's a real lack of any new active ingredients,” says Aaron Hager, extension weed science specialist at the University of Illinois. “The pace of novel chemistry development has slowed tremendously.”
The cost of bringing a new product to market can run into the hundreds of millions of dollars. After a scientist isolates a specific molecule, the development to commercial product can take 8 to 10 years. And there are no guarantees that the product will work or be competitive with products already on the market.
It's difficult to compete in a devalued market like the ag chemical industry. “Generics have taken a lot of the profit out of the market,” says Dallas Peterson, extension weed science specialist at Kansas State University. “And while lower costs are great for producers, that also means companies have less money to spend on research.”
Another factor is the effectiveness of today's chemistry. There isn't a bug, disease or weed that can't be controlled with current active ingredients in the market.
However, that also worries weed scientists. “Weed shifts and selection of herbicide-resistant weed biotypes are significant concerns,” Hager says. “Glyphosate is a very effective product, but we are seeing instances in which it's not working as well.”
For instance, Hager and his colleagues have identified a waterhemp population that's resistant to three different chemical families. That leaves only one option for postemergence control in soybeans — glyphosate. Hager says, “If glyphosate loses its effectiveness, then we're severely limited for season-long weed control options.”
Most of the new herbicides for 2007 are the tried-and-true active ingredients in a new formulation
By Mark Moore
UNIVERSITY BULLETINS might list a plethora of herbicides for use in corn and soybeans, but it's unlikely that the names on the list have changed much. Most of the new products are the standby active ingredients in a new mix and a new package.
Late last year, FMC Corporation and Dow AgroSciences entered into a long-term supply agreement, whereby FMC will have access to cloransulam-methyl and Dow AgroSciences will have access to sulfentrazone.
For producers, this means two new premixes for soybeans in 2007. Dow AgroSciences' product will be sold under the name Sonic, and FMC will market its product under the brand name Authority First DF.
As either a preplant or preemergence application, the products will offer broad-spectrum control of weeds with two effective active ingredients. As a foundation soil treatment in Roundup Ready soybean systems, Sonic will provide early-season weed control, says Dave Ruen, product technology specialist for Dow AgroSciences.
“These products have a nice fit for conventional and Roundup Ready soybean growers,” says Dallas Peterson, extension weed specialist at Kansas State University. “A big advantage is that they have a nice fit with glyphosate products, providing good control of key problem weeds such as waterhemp, Palmer amaranth, morningglory, prickly sida, copperleaf and velvetleaf, and allowing for more flexibility with postemergence application timing.”
The big question, Peterson says, is the price. “They will need to be price competitive with other products on the market,” he says.
Impact from Amvac Chemical Corporation is not new to the market, but the company has amended its label to allow lower use rates in certain tankmixes for 2007. According to Amvac, tankmix partners qualifying for the lower 0.5 oz./acre rate include Accent, glyphosate (including Roundup and Touchdown), Liberty, Lightning, Option, Steadfast and Stout. Tankmixes with Cinch, Prowl H2O and Stout herbicides also are new on the label.
In addition, Impact now may be used in postemergence sequential applications after soil-applied applications of isoxaflutole (Balance Pro) herbicide or premixes containing the active ingredient. The maximum isoxaflutole rate for this use is 0.0625 lbs. active ingredient/acre (equivalent to Balance Pro at 2.0 fl. oz./acre or less).
“In areas where Roundup Ready corn and soybeans have been grown continuously for several years, some broadleaf weeds are becoming harder to control because of selection pressure from continuous use of glyphosate,” says Bill O'Neal, technical product manager for Amvac. “Adding Impact to the mix improves broadleaf weed control and reduces selection pressure for tolerant and resistant biotypes, while also maintaining excellent safety to corn.”
An alternative to glyphosate for burndown, Gramoxone Inteon is a new formulation of paraquat from Syngenta. By offering a different mode of action, Gramoxone helps preserve glyphosate technology for future use, the company says. Gramoxone provides broad-spectrum control of broadleaf weeds, sedges and grasses.
Syngenta has co-packed S-metolachlor and fomesafen for preemergence weed control in both conventional and Roundup Ready soybeans, helping to prevent early-season weed competition.
DuPont is marketing this preemergence herbicide for corn. It is an acetochlor-based product, with a formulation that also contains atrazine. It provides broad-spectrum control of grasses and broadleaf weeds, including foxtails, barnyardgrass, crabgrass, waterhemp, lambsquarters, pigweeds and nightshade.
Also approved for postemergence grass and broadleaf weed control is Stout. Its active ingredients are nicosulfuron for grass control, combined with thifensulfuron methyl for broadleaf weed control. Use rates are 0.5 to 0.75 oz./acre for field corn. Stout may be applied to corn up to 16 in. tall or up to, and including, five-leaf collars, whichever is most restrictive.
Stout can be tank mixed with other herbicides registered for use on corn, including atrazine, dicamba, Distinct, Callisto or Cinch, DuPont says.
Autumn, from Bayer CropScience, has the active ingredient iodosulfuron. It is available for use as a fall-applied herbicide prior to corn use. It also can be applied up to 30 days prior to corn planting. However, it is not labeled for use on areas that will be planted to soybeans.