Glyphosate: Not Too Big to Fail

Glyphosate has become a ‘systemic herbicide’. It fundamentally altered farming practices. Now, as societal opposition about its use intensifies, and its effectiveness dwindles, the quest to develop alternative glyphosate-free and ‘petrochemical-light’ farming systems gathers steam. Advances in biology, ICT, AI, and robotics will diminish farmers’ reliance on synthesised chemicals in weed management over time. Forcing farmers and agrochemical companies to look beyond their horizons. The broad pallet of technologies available today, and the uncertainty about how these technologies integrate into novel farming practices, increase the risks of today’s capital allocations. Today’s winners might be tomorrow’s losers.

Once again glyphosate will determine agriculture’s future. This time however, it is glyphosate’s withdrawal from the farm fields that will disrupt global agriculture and the agrochemical industry. The focus on glyphosate’s claimed negative impact on human health and the environment increased the societal pressure to limit, or even ban, the use of it. Also, its intense application has rendered it less effective as weed tolerance for glyphosate has increased substantially since the turn of the century. The current negative sentiments surrounding glyphosate in the broader stakeholder universe are in stark contrast with the widely acknowledged and praised unique characteristics upon its introduction in the 1970s. Characteristics that enabled the rapid development of two novel farming practices: no- or low till agriculture in the 1980s and GMO crop cultures in the 2000s. The former is unanimously seen as an extremely beneficial practice, whereas the latter receives increasing levels of opposition.

Glyphosate is a systemic product

As such, glyphosate is much more than just an agrochemical. It is a systemic product underneath a farming system that has come to dominate broad acre crop farming in the Americas and Australia. Making it the best-selling herbicide for decades, with about 20% global market share. Therefore today’s quest is foremost to develop alternative farming systems and weed management strategies that allow for the continuation of no- or low till without the use of glyphosate.

Control over the soil’s weed seed bank density is an important success factor in a farmer’s weed management strategy. Prior to the introduction of glyphosate, tillage of the soil was a dominant tactic in controlling the number of weed seeds per square meter of farm land. Clearing the land by spraying glyphosate as opposed to ploughing has economic and ecological benefits. Substantial labor and fuel cost savings were achieved. And yield potential increased as soil health improved because organic matter and moisture levels in the soil’s top layer are maintained at higher levels. Keeping these benefits in a glyphosate-free farming system requires farmers to substantially alter their farming practices. French and Australian research hinted at a customized combination of good old-fashioned physical and mechanical methods, cultural tools and the use of alternative herbicides (both chemicals and biologicals).

Changing value propositions

The anticipated changes in farming practices and the subsequent shifts in farmer spending away from agrochemicals towards biologicals, farm equipment and extension services poses questions about the long-term positioning of agrochemical companies. And hints at another restructuring of the industry in due time. There is still time to act though, as the shift is likely to be gradual and slow. Plenty of research is still required and the society can’t afford potential shocks in food supply as a result of a rushed and less thought-through farm practice disruption. But today’s capital allocations create tomorrow’s technology platforms and value propositions.

Facing the gloomy long-term outlook of glyphosate in particular, and agrochemicals in general, the R&D-driven agrochemical companies have already shifted gears. The allocation of R&D dollars away from the discovery of new active ingredients and towards biotechnology substantially reduced the introduction of new active ingredients in the last decade. Resulting in decreasing market shares of these companies in the agrochemical market, while increasing their market shares in the seed market. A good intermediate step. The introduction of GMO crops that are tolerant to three other traditional commodity herbicides, offers farmers weed management solutions to combat weeds that have become tolerant to glyphosate. And, as such, creating earning potential for these R&D-driven agrochemical companies in seeds and herbicides.

Ensuring long-term resilience

But this is by no means a definitive route towards long-term resilience. And to complicate matters, Glyphosate’s second novel farming practice – GMO crop culture – might well be a victim in the disruptive process towards a glyphosate-free agriculture. A broader pallet of technologies and service platforms to facilitate the novel ‘petrochemical light’ farming practices opens up more value-creating opportunities. But at the same time, this diversity in technologies, products, and farm practices to combat weeds increases the risks of today’s R&D and M&A capital allocations. For as long as these new farming practices are only roughly outlined, allocation risks are substantial. So, today’s winners might be tomorrow’s losers.

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