The leaders of Bayer explain plans for expansion in the U.S. agribusiness market.
With total sales of $9.22 billion, Bayer CropScience is one of the global leaders in agribusiness. Its seed treatment, herbicide, insecticide and fungicide business accounts for 80% of the company’s sales. Now the company is expanding its role in the biotech arena. In a recent announcement at its world headquarters in Monheim, Germany, Bayer CropScience unveiled plans to double its annual investment in research and development at its BioScience unit by 2015 and to increase overall research and development budgets at Bayer CropScience to more than $1.14 billion by 2015.
Farm Industry News met with the key managers of Bayer CropScience to discuss how the company’s plans for growth will benefit U.S. producers. We spoke with Sandra Peterson, chief executive officer; Lykele van der Broek, chief operating officer; and Rüdiger Scheitza, executive committee member.
FIN: While Bayer CropScience has a significant market presence in Europe, its footprint in the United States is still small when compared to the competition. What is Bayer’s game plan for increasing market share in the U.S.?
Peterson: We have been working to build market presence in the United States for a number of years and made huge progress in 2011. Our sales increased 20% in the first half of 2011, to $981 million, due in part to the introductions of Stratego YLD and Poncho/Votivo.
We are working throughout the entire value chain, from the grower to the consumer. And we need to work with every segment along this chain. I used to work in the food industry, and there was a time in which we just bought commodities on the open market. Now, end users are turning to companies like us to ensure they don’t have an issue with oats for their oatmeal or rice for their Rice Krispies. They want to ensure that products are being grown with the right profiles. Ten years ago no one talked about that. The dynamics of the food chain have changed for all growers. We need to understand these changes and work to ensure our products and services meet these changing demands.
FIN: You indicated that Bayer CropScience is shifting its resources into growth areas, which includes plant biotechnology. For U.S. growers, your focus is on soybeans. Why?
Peterson: We see an immense amount of technology that can be brought to the soybean market on both the breeding side and the trait development side. That’s not surprising, because most of the industry’s focus has been on corn. You have to make strategic choices on where you are going to spend your money, and we have made the decision that we are going to spend it on soybeans.
We have a very strong trait pipeline with some unique and important traits, including traits for multiple herbicide tolerances, insect resistance and a promising technology for soybean cyst nematode control. With our acquisition of Hornbeck Seeds, we will marry these technologies with the appropriate germplasm to bring better-quality seeds to market. It’s not going to be easy, and we could have used that money to buy market share. But in reality, it is hard to sustain market share without strong technology.
We do have partnerships in which our technology is used in corn. We work with lots of companies in our traits and seed treatment businesses. It’s an interesting aspect of this business: you end up partnering with others to leverage your strengths.
FIN: What do you consider the biggest challenge for U.S. producers?
Peterson: The biggest challenge facing U.S. producers is no different than in other parts of the world: increasing productivity without a negative impact on the environment. Producers and input providers like us are responsible for that. The good thing is that we are bringing new technologies to meet this challenge. But the industry must understand that there is no silver bullet. For a few years we got complacent, thinking it would be easier to farm. But Mother Nature came back and said that’s not how it works. We need to ensure that we have sustainable agricultural practices in place.
FIN: Bayer CropScience has played an active role in the weed-resistance issue. How are you working to ensure your technologies don’t become overused? What’s in the future for Bayer CropScience?
Scheitza: Cereal crops and soybeans will be a key area of growth. With the world’s population at 7 billion and moving higher, we will need investment in new technologies to meet this growing demand. For soybeans, the seed value has increased to more than $4 billion, from a little more than $500 million before the introduction of the first herbicide-tolerant trait. There are tremendous opportunities for new traits in soybeans and wheat to increase productivity at a time when prices are also increasing.
FIN: Europe accounts for about 35% of Bayer CropScience’s worldwide sales, and in North America it is approximately 22% (2010). How do you see this changing?
van der Broek: When we look at our historical sales patterns, we have had strong market share in Europe because it is our home base. We have a strong presence in crop protection products, with well-known brand names.
In North America, we see the demand for novel products driving our growth. Recent product introductions have allowed us to gain market share, and we expect this trend to continue as new products are introduced from our successful product pipeline.
FIN: You recently toured the southeast United States and saw firsthand the weed-resistance issues producers are facing. What solutions can we expect from Bayer?
van der Broek: When I toured farm fields in the Midwest and Mid-South, I saw everything from fields with just a few problems with resistant weeds, to entire fields. It is almost difficult to comprehend the issues the producers face. One thing we continue to stress is rotating products to delay the onset of weed-resistance issues, which includes different modes of action, crop rotation, pre and post herbicides, and other selectives. As soon as weeds are detected, deal with the issue. We have had many interactions with growers, extension and suppliers.
Our LibertyLink soybeans offer producers an option, and we have other herbicide-tolerant traits in the pipeline. But we also stress that these tools must also be used in a responsible manner.