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3. Description of the Agrichemical Sector

Chemicals that are used on farms are known as agricultural chemicals, or agrichemicals. These products comprise:

  • pesticides;
  • herbicides;
  • insecticides;
  • others eg plant growth regulators, defoliants.

The definition of agrichemicals does not include other chemical-based products used in the farm environment, such as sanitisers and detergents.

Herbicides and insecticides fall under the definition of pesticides. The Food and Agriculture Organisation of the United Nations defines pesticides as:

Any substance or mixture of substances intended for preventing, destroying or controlling any pest, including vectors of human or animal disease, unwanted species of plants or animals causing harm during or otherwise interfering with the production, processing, storage, transport or marketing of food, agricultural commodities, wood and wood products or animal feedstuffs, or substances which may be administered to animals for the control of insects, arachnids or other pests in or on their bodies. The term includes substances intended for use as a plant growth regulator, defoliant, desiccant or agent for thinning fruit or preventing the premature fall of fruit, and substances applied to crops either before or after harvest to protect the commodity from deterioration during storage and transport.

3.1. Key stakeholders

The agricultural chemical sector in New Zealand is complex. The sector is characterised by a large number of brand owners - a core of research-based multi-nationals and a range of "generic" suppliers - with differing approaches to sales and distribution to farmers and growers.

Some brand owners market and deliver direct to farmers and growers. Others utilise retail chains to distribute their products.

There has been significant change in recent years in sales and distribution, especially since a number of core products came "off patent". This has led to a proliferation of players and approaches to sales and distribution.

Brand owners

The core, large-scale internationally recognised chemical companies are all represented in New Zealand, either directly or via secured relationships (such as New Zealand-based parties holding their formulations). They are:

These companies have a wide product and service range far beyond agriculture or agrichemicals. In most cases, they have agriculture-specific sales teams that interact directly with farmers, growers and who have relationships with the retail sector (primarily specialist farm retail/service suppliers). There is only one significant pesticide "formulator" in New Zealand (Nufarm) who also imports product and formulate for other brand owners.

"Generic" suppliers source (via imports) and formulate products for sale in New Zealand. Generic agrichemicals are products that were developed and patented by research-based companies but have since come off patent and are being produced by so-called generic suppliers. This type of product can either be sold direct or through retail chains.

The generic sector appears to be growing significantly through price competition and direct relationships with end-users. Generic suppliers have advised that they may represent up to 30% of the total agrichemical market. Agrecovery will only know when it signs up brand owners to the programme what the actual volume to market. This is due to there being no measurement of current volume to market.

The main generic companies in this section of the market appear to be:

  • Orion Crop Protection Ltd;
  • Ravensdown;
  • AGPRO;
  • Agronica.

These generic suppliers all have a "physical" company presence in New Zealand, and operate nationwide. There have been no instances of parallel importing in agrichemicals that we are aware of.

A significant number of agrichemical brand owners are represented by an industry association, Agcarm. Agcarm has existed since 1948 as the non-profit trade association of companies that manufacture, distribute and sell products that keep animals healthy and crops thriving. Agcarm is also a member of Crop Life International (a global federation representing the plant science industry) and the International Federation for Animal Health.

There is another industry association, Animal Remedies and Plant Protection Association (ARPPA), to which non-Agcarm member (mostly generic) suppliers belong.

Retailers

The rural service sector has gone through significant change in recent years with a number of amalgamations, concentration of service and rationalisation of outlets. This is ongoing. There are now between 15 and 20 different distributors of product. Key players are considered to be:

  • PGG Wrightson (incorporates Fruitfed, W&K);
  • RD1 (Fonterra-owned);
  • Farmlands;
  • Other regional brands (eg Combined Rural Traders, Skelton Ivory, Allied Farmers).

Retailers have moved in recent times to stock their own generic brands in direct competition with research-based patent brands.

Some generic brand owners sell directly to farmers through call centres and/or websites.

Farmers and growers

Farmers and growers rely heavily on agrichemicals in their day to day operations. Farmers will typically hold just one year's stock of agrichemicals on-farm. A Taranaki Regional Council survey of farmers found 82% of farms stated they only held one year's supply, 9% held approximately two years' supply and 9% held approximately three years' supply [Taranaki Regional Council (2005)Investigation into Taranaki's Rural Waste Stream] .

Specialist conventionally grown crops require targeted chemical applications. Pressure to reduce chemical application and the advent and proliferation of integrated pest management type programmes has increased farmer and grower reliance on a limited range of specialist chemicals.

At the same time the coming off patent of glyphosates in particular has led to a proliferation of brand options and reduction in price of broad-spectrum applications.

Brand owners have increasingly had to compete on price for farmer/grower business.

We have not been able to identify information, collected and verified centrally, on which sectors in agriculture use agrichemicals and in what proportion.

3.2. Size of market

There is no authoritative data on the total quantities of agrichemicals placed on the New Zealand market. It is estimated that agrichemical sales in New Zealand exceed $200 million (not able to be verified).

A 2005 survey of companies [ScottEconomics Ltd (2005) Report of the Container Survey 2005] in the animal health and plant protection industries in New Zealand revealed the following volumes for agrichemicals:

Annual sales of plastic containers

1.2 million

Estimated annual volume

13.3 million litres*

Total annual empty weight

749 tonnes

* Note: the volume sold in containers <30 litres is 10 million litres

The industry association, Agcarm, estimates that the survey participants represented approximately 90% of the market volume. However, discussions with a number of generic players and non-participants in the survey suggest an underestimation of the size of the overall market.

The growth of generic-brand market penetration in New Zealand seems to be significant with some large-volume players emerging. (eg Ravensdown, Agpro, Agronica, Orion). Some industry sources estimate that generic suppliers represent up to 30% of the market.

ScottEconomics (the survey report writers) consider the estimated total agrichemical container weight of 749 tonnes as a conservative estimate of the potentially available plastic. This is due to the incomplete data provided and the inability to contact all companies with a presence in New Zealand. This is speculative as there has been no consistent data gathering of the whole sector to enable accurate assessment to take place.

Whilst research-based market participant volumes may have remained static or shrunk, other brands (generics in the main) seem to have grown significantly as prices for these applications have fallen (ie farmers have been using more of the lower-priced product).

3.3. Market share breakdown

The industry is cautious about revealing market-share information. Whilst we have been made aware of suggested shares this is not for public dissemination. Within Agcarm, the "big 6" dominate volumes.

The "generic" players are estimated to hold up to 30% of the agrichemical market in New Zealand.

3.4. Product imported vs New Zealand-made

There is only one large-scale producer (formulator) in New Zealand (Nufarm). The balance of product is imported.

3.5. Trends in the market

The agricultural chemical industry in New Zealand is a mature market and sales are therefore relatively stable. No overall sales figures are available but there is a consensus that increasing market share is being taken by generic brands (See 2.1 for definition) over research-based brands.

There are some key trends in the market that are relevant to the development of product stewardship in the sector:

  • There is a move towards more concentrated products and therefore smaller container sizes and reduced-litre sales volumes.
  • There is a very wide range of agrichemical products and prices. A 20-litre agrichemical product can sell for between $6 and $50 a litre, depending on the product. The trend seems to be towards cheaper products in some applications and higher-priced products in others.
  • There is also a move towards granulated products and these can be sold in bags. This type of product and packaging is in its infancy and does not represent a significant proportion of the market so far. The industry itself is unsure how much this product type will grow in the future.
  • Light-weighting of existing packaging has probably achieved its maximum potential.
  • There is an international trend away from 20-litre to 15-litre containers to satisfy health and safety concerns around lifting.
  • Climate and good growing seasons have a clear correlation with sales of agrichemicals. The last two seasons have been particularly good and may have resulted in strong sales.
  • New Zealand is at the end of an international research chain so products are largely dictated by off-shore developments.
  • Refillable containers - these are in larger sizes 100 litres and above but have relatively poor return rates.