Key takeaways

The European crop protection market consists of businesses active in the development, production and distribution of chemicals to protect agricultural output. These crop protection products are used to limit the negative impact of unwanted plants (herbicides), pests (pesticides) and pathogenic fungi (fungicides) to maximise the output of cultivated lands. These crop protection products come in two forms: chemical and biological-based products. The former are oil-based chemicals such as glyphosate and glufosinate, while the latter are derived from naturally-occurring plant, bacterial, viral and fungal sources (S2G Ventures, September 2023). Furthermore, biological products affect only the target organisms and closely related organisms in contrast to conventional products that also produce toxic residues and can pose risk to human health. Lastly, biological control products are particularly utilised in areas where chemical products are not suitable or impractical in environmentally sensitive areas or on low-unit-value crops where complete control may not be required. The market is being served by both chemical generalist players as well as crop protection specialists Herein, generalists develop and produce many products for various applications and often provide additional services. For example, Bayer Group’s product and service portfolio is highly diversified and mainly revolves around the production of pharmaceuticals and agricultural products, including seed breeding. On the contrary, specialists focus only on crop protection products and services, not engaging in other activities unrelated to crop control. These players’ offerings usually encompass both protection and stimulant chemicals, either biological or chemical variants. As such, we segmented the market based on the offering into (i) generalist and (ii) specialist.

The global chemical crop protection market is highly consolidated and mostly dominated by chemical conglomerates, with the top-4, comprising ChemChina (CN; through Syngenta Group), Bayer Group, BASF Group and Corteva Agrisciences (US), holding a ~55% market share in 2022 (AgNews, October 2023). Chemical crop protection products dominated the market as biological products represented only less than 5% of the total sales in 2022. Chemical herbicides captured ~47% of the market, followed by fungicides (~25%) and insecticides (~25%; S&P Global, January 2024). Biological crop protection products see steady adoption rates, driven by various factors such as an increase in price for traditional chemicals (+50% YoY in 2022 for glyphosate and glufosinate) and their adverse health and ecological effects (S2G Ventures, September 2023). Adoption is also accelerated by more stringent regulations promoting the use of these products as well as the increased demand from consumers for organic food products (AgriBusiness Global, March 2023). As of June 2023, ~18% of growers across the globe are either already using these products or are trialling them with the intention to use them at scale. However, among those who attempted to use biological crop protection products, ~30% did not apply them at scale. The proportion of growers who have never conducted a trial stood at ~29%, thereby offering future opportunities to this product type (LEK Consulting, June 2023).

Crop protection products face stringent regulations in the EU and even more so in the near future. For instance, the EU implemented the “Green Deal” regulation, which comprises the “farm-to-fork” and biodiversity strategies that are meant to take action to reduce the use of chemical pesticides by 50% by 2030 (European Parliament, October 2023). However, in November 2023, the parliament rejected the proposal and extended the use of pesticides for another 10 years (AP News, November 2023).

Investor-led interest has been significant, with ~48% of identified European assets being backed by financial sponsors as of January 2024. The specialist segment witnesses the highest interest from investors on the back of rising demand for biological products due to regulations and environmentally conscious consumers (~71% of identified assets being backed by financial sponsors). The main detractors include the rise of precision agriculture technology, thereby reducing the need for crop protection products as well as pest and insect tolerance against biological products.

ESG topics in the European crop protection market primarily relate to environmental and social issues. Herein, the most pressing environmental and social topic is the negative impact of crop protection products (“CPPs”) on biodiversity and human health. For example, CPPs are known to directly contribute to the decline of certain biological groups (e.g. birds, amphibians) as well as indirectly reduce food resources and habitat areas. At the same time, chemical pesticides are linked to chronic illnesses such as cancer and heart, respiratory and neurological diseases. To mitigate the detrimental effects of CPPs on the environment and society, identified European players invest in biologicals and digital agriculture practice. For example, BASF invests in a new fermentation plan for biological and biotechnology-based CPPs.

Company benchmarking

Market growth

According to Statista (December 2023), the European pesticides market will grow from ~$27.7bn in revenue in 2021 to ~$31.6bn in revenue by 2026 (+2.6% CAGR 2021-2026)

In 2018, the global biocontrol market generated ~$3.8bn in sales and is forecasted to reach >$15bn in sales by 2029 (+13.3% CAGR 2018-2029; DunhamTrimmer, January 2019; DunhamTrimmer, May 2023)

Technavio (October 2023) expects the global crop protection chemicals market to grow from ~$132.2bn in 2022 to ~$157.3bn by 2027 (+3.5% CAGR 2022-2027)

Positive drivers

Increasing demand for food on the back of a growing global population that will reach ~9.7bn by 2050 (+0.7% CAGR 2022-2050; AgriBusiness Global, January 2018; United Nations, January 2024) drives demand for crop protection products to improve crop yields

Opportunities for biological or bio-based pesticides due to the increasing negative attention on ecological side effects of using oil-derived traditional crop protection chemicals, as well as difficulties related to finding and registering new crop protection chemicals in the US (DunhamTrimmer, May 2023; S&P Global, December 2020)

Strong demand from developing markets such as Southeast Asia and MEA (AgriBusiness Global, August 2023). Herein, the increasing awareness about pesticides and continuous technological advancements will lead to strong growth rates for the sector

Negative drivers

Rising R&D costs leading to a decrease in cash conversion levels. The main factors relate to (i) increasing difficulty in finding novel product leads and (ii) rising number of product safety requirements (interviews by Gain.pro; AgriBusiness Global, July 2018)

Increasing stringency of European regulatory requirements for farmers may further challenge the usage of highly prevalent crop protection products such as herbicide Asulam sodium and the fungicides dimethomorph and mepanipyrim (PAN Europe, December 2023)

Technological advancements may lead to decreased sales volumes for the incumbents. Herein, AI, advanced imagery, and sensor technology will drive decisions on the farm that will result in optimised variable-rate applications of crop protection products. The largest pesticide sector could see an 80% decline in overall volumes when selective spraying becomes mainstream (AgriBusiness Global, March 2019)

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