COUNTY OF WEI, CHINA: Syngenta Group, the world’s largest agrichemicals company, is swiftly extending its farm services rollout in China ahead of a major stock market debut, as it tries to fulfill rising demand from farmers who are critical to Beijing’s growing focus on food security. Just as the epidemic increases government concerns about food shortages and drives up the cost of critical farm materials, the world’s largest crop-protection producer and third-largest seed supplier says it is boosting grain yields and raising farmers’ incomes.
That means Syngenta, located in Switzerland and backed by Chinese investors, has a potential to gain market share in a fragmented farm chemicals market, preparing the company for growth as Chinese farmers extend their holdings.
The company plans to raise $10 billion by offering in Shanghai, which is expected to be the year’s largest stock market floatation.
Syngenta, on the other hand, admits that it “faces enormous competition in the markets where it operates.” Bayer AG and Corteva Inc are competitors, as are Chinese companies that provide agronomy services to the country’s farmers. “Previously, we offered pesticides, seeds, and fertilizer for sale. We’ve evolved into a farm services company that sells both services and technology “Mao Feng, the chief brand manager for Syngenta Group China’s Modern Agriculture Platform (MAP) and digital agriculture, said this. According to a prospectus filed on Friday, MAP will get about 12% of the IPO proceeds for expansion.
“We had struck the ceiling selling individual products; there was no more room,” Mao told reporters last month.
Crop yields in China lag considerably below those in Western countries, despite the fact that producers use three times as much fertiliser, and farms in the huge country are small by global standards, averaging half a hectare compared to 180 hectares (440 acres) in the US.
BETTER, BIGGER
So Syngenta is attempting to help farmers like Liu Ligang in order to help itself.
Liu, who farms 20 hectares (50 acres) in Wei county in Hebei’s northern province, has more than doubled his contracted land in the last four years. He is one of an increasing number of Chinese farmers who want to become professional growers. To date, 37 million hectares, or 30% of China’s arable land, have been contracted out. Farmers face higher risk as a result of this expansion, which necessitates more expertise and advanced services. Liu claims that because to Syngenta’s MAP service, which helped him manage pests, he was able to harvest 7,500 kg of wheat per hectare (6,600 pounds per acre), up 25% from last year and 10% more than his neighbors. “Previously, pesticides were only used when disease struck,” he explained. “It’s too late; it can now be advanced.” MAP maintains training centers and roughly 900 demonstration farms across China, in addition to offering seeds and fertilizers, to show growers what provides the best yields in a given location. Farmers receive free land management in exchange for purchasing the firm’s products or those recommended by its agronomists. In the first quarter of this year, MAP tripled its sales to more than US$280 million, adding 40 new locations to bring the total number of locations to 365 across the country. It provided 4% of the group’s sales, up from 1% the year before. Customers include Alibaba Group’s Hema stores and Dole Food Co., and the company also makes money selling crops and fresh food. They pay premiums for the quality of MAP farmers and the traceability of its digital platform. According to one industry forecast, revenues will surpass $1 billion this year and reach $4.5 billion by 2025. COMPETITION Other corporations, on the other hand, are attempting to profit from China’s growing scale and skill in agriculture. Bayer, for example, is looking for a “digital agriculture” head in China. ICAN, based in Beijing, has developed digital crop models to assist farmers with plot selection, planning, and harvesting. It says that by using its modeling, it can boost yields while lowering fertilizer use. Fertilizer and crop chemicals sales in China were US$24 billion in 2018, according to Rabobank, more than the US$20 billion, while seed sales in both countries were around US$12 billion. In China, input marketplaces are more fragmented, allowing for significant share expansion. Before being bought by state-run ChemChina in 2017, Syngenta generated fewer than 5% of its sales in China. It possessed less than 1% of the seed business, but a significant 7 percent of the agricultural chemical market. Through group subsidiary Sinofert Holdings, China’s largest fertiliser producer and distributor, MAP is able to reach farmers. According to Fitch, its 30,000 retail shops contact farmers who work 95 percent of the country’s fields. But, according to Thomas Luedi, senior partner at Bain & Co in Shanghai, China’s tiny farm sizes drive up logistics costs, and progress in combining land has been slower than projected. “We discovered that in order to break even, we needed 5,000 hectares of farmland in one town to use our service,” stated a former agricultural services executive. All service firms are held back, according to Syngenta, by fragmented farming and insufficient infrastructure and supply chains. To mitigate the impact of fragmented landholdings, it is collaborating with farm cooperatives and attempting to standardize production across entire communities. (One US dollar equals 6.4764 Chinese yuan renminbi) (Dominique Patton contributed to this report.) Beijing Newsroom and John Revill in Zurich contributed additional reporting; William Mallard edited the piece.)/n
