Chinese pesticide firms aim to grow US market share
In the world of the “Big Six” agriculture-chemical companies, marketing a product is like trying to find shelf space in the cereal aisle dominated by a handful of brand names, but that’s what Chinese pesticide producers are looking to do. Dow Chemical Co, Syngenta AG, Monsanto Co, Bayer AG, BASF SE and E.I. Du Pont De Nemours and Co are producing the majority of their agriculture-chemical products in China, according to Telisport Putsavage, a pesticide industry expert and environmental counsel at Sullivan & Worcester law firm in Washington.
At the same time, the Chinese government expects to see an increased effort by domestic agriculture-chemical companies to sell their own brands in the United States, which would increase China’s market share in the global industry.
“One of the difficulties for any company, particularly offshore companies looking to enter the US, is figuring out a way to break into distribution,” Putsavage said.
“These products do not go to the farmers and they don’t even go directly into farm retail stores. They all go through distributors.”
In 2011, China’s largest generic agricultural-chemical company, China National Chemical Corp ( ChemChina), with nearly $ 32 billion in annual sales, put up $ 2.4 billion to acquire the world’s largest generic agriculturalchemical producer, Israelbased Makhteshim Agan Industries Ltd.
The deal not only helped ChemChina expand its production capabilities. It also better positioned the company to break into the US pesticide market, Putsavage said.
Pesticide companies have played a key role in driving the growth of China’s chemical production output, which overtook that of the US for the first time in 2010.
In 2012, China’s chemical pesticide output increased 34 percent year- on- year to 3.6 million tons, according to the China Pesticide Industry Report, 2012-2015.
In 2012, the operating revenue of Chinese pesticide manufacturers increased 21 percent to $38.5 billion, while total profit reached about $2.9 billion.
Noting recent success in the industry, the Chinese government has launched a five-year plan to reduce the number of pesticide plants — there are more than 2,000 pesticide makers in China — to create a field of about 20 Chinese agriculture-chemical companies with a strong international presence.
“The big companies in the US aren’t encouraging the Chinese to come in,” Putsavage said. “But we believe it’s inevitable. The Chinese produce the largest part of the product.”
The increased presence of Chinese agriculture-chemical producers in the US market would help lower prices for farmers as a result of greater competition.
In turn, China’s involvement in the US market will force the Chinese government to pay more attention to environmental concerns, since each chemical factory that makes a product for sale and distribution in the US must register with the US Environmental Protection Agency.
“The interesting aspect is these materials are now made in China,” Putsavage said. “It’s not like all of a sudden we’re going to have materials that are made in China that were being made in Germany or in the US or somewhere else. They’re made in China now.”
During a business trip to Shanghai in 2010, Putsavage and fellow counsel at Sullivan & Worcester, Leonard Miller, made a presentation to members of the Chinese crop protection industry and gave advice on entering the US market: find a joint venture or some other arrangement with a US company.
“We strongly discouraged Chinese companies from thinking they could come to the US and enter the US market and market directly without assistance from people who knew the US market and have been active in the US market,” Miller said.
“We believe the winners will be those people who effectively integrate themselves into the US distribution system.”