“Farmers do a damn good job,” he said. “They use technology and innovation to ensure that they can also have sustainable improvement in productivity.
“More and more people are moving from rural areas into urban environments. Per capita, arable land is declining. The challenge is not, can we produce enough per se, it is can we produce enough in a sustainable manner? We have to drive productivity increases without harming the environment or biodiversity. Agriculture is cyclical. Demand is constantly increasing slowly, but supply is erratic.
“We have this fragile balance and it doesn’t take much to tip it. It’s impossible to predict where we are in a cycle.”
Bayer has achieved strong relative growth, but is expecting a decline in the difficult commercial environment of 2016.
“We are expecting our sales to be on a prior-year level,” he said. “We are expecting from the second half of 2017 an upturn and a slow return to growth.
“You cannot motivate scientists with sales, EBITDA (earnings before interest, taxes, depreciation and amortization) and market share. We all want to make a difference. What everyone who works for us works for, every day, is the future of farming.”
There are new products planned in weed, disease and pest control in the coming years as well as new varieties of rice, soybeans and other oilseeds.
“This is about €5 billion peak sales for the products to be launched,” he said, highlighting soybeans in particular. “The demand for protein is constantly increasing. Soybeans are one of the biggest drivers.”
He also talked about the problems of weed control.
“Glyphosate resistance is spreading throughout the world,” he said. “There has been an overreliance on one active ingredient. We offer integrated solutions. We can offer a compelling package to farmers.”
Bayer has continued to make sizable investments over the years, Condon said. Even in difficult years, research and development is the last place the company wants to make cuts.
“We are also investing in collaborations with others and sometimes others invest in us,” he said.
He expected major breakthroughs from an interdisciplinary approach. Science means new techniques for plant breeding, like gene editing, gene silencing or gene stacking.
“A high-tech breeding strategy will allow us to do much more,” he said. “Computational life sciences are the glue that holds the whole thing together.”
With digital farming, Bayer is looking at applications specifically in the field, getting the right product and the right process to the right acre.
“We can sell a disease-free field or a weed free field,” he said. “This is real. It needs to be developed further.”
Developing wheat seed
“We have already passed our first very significant milestone, which is technical proof of concept,” he said. “The second element is that you are able to produce your hybrid seeds at a competitive cost.
“Still, we need quite some time to come to market. Our current launch date is 2023 for our first hybrid varieties.”
Percy said beyond the hybrid system, Bayer also is looking with new understanding at the wheat genome and identifying the key genes on wheat yield. Bayer is scheduled to invest about €1.3 billion over a decade. They aren’t working on GM.
“The hybrid system is clearly non-GM,” Percy said, adding that there are problems with regulation. “Science is advancing so quickly that regulators are struggling to keep up. On a European level, there is a lot of discussion on how to regulate or not regulate gene-editing techniques. In the U.S. and Argentina, for example, it is already clear that it is not GM.”
Percy described the U.K.’s vote to leave the E.U. as disappointing.
“The U.K. adds a lot to the discussions we have in the E.U.,” he said. “We will continue to work there, of course. The U.K. is a big focus for us. The U.K. will continue to be a focus. It is a shame that U.K. voices will no longer be so active in Europe.”
BASF handles challenges
“We are living in quite challenging times in the chemical industry, but especially in the agricultural industry,” said Herbert Schwager, member of its main board of executive directors.
Oil prices started to nosedive in the second half of 2014, and there’s a distinct correlation between oil prices and many soft commodity prices. Very good cropping seasons added to the bearish tone.
“It tightened money availability to everyone, especially to the farmer,” Schwager said. “In several important emerging countries we have seen their currencies nosediving as well.”
The crisis between Russia and Ukraine led to a host of sanctions and Russia’s tight fiscal policy made it difficult for farmers to access capital, he said. In addition, Brazil was hit by an economic crisis.
“Access to cash has become a big, big topic for farmers,” Schwager said. “We observed a wait-and-see mentality regarding investment, including in crop protection products. Mature markets like the E.U. have been rocked by events. Who would have believed a year ago that the British people would have voted for Brexit causing a lot of uncertainty?
“In BASF we are convinced that home-grown business has the innovative strength. Our strategy stands for providing customers with not merely chemicals, but with solutions. We address farmers’ needs in crop protection and beyond through innovation.”
For farmers, it’s important to ensure that they are buying genuine BASF products. In Europe, about 10% of the products are counterfeit. A number of BASF products will include a code on the label with all the information.
BASF sales have gone from €3.3 billion in 2005 to €5.8 billion in 2015, a rise of 75%.
“This increase is balanced across all regions,” Schwager said. “We continuously increase our presence in emerging markets. The basis for the success of our agricultural solutions business is, of course, our agricultural pipeline,” he said, explaining that around 40% of the company’s crop protection sales derive from innovations, while around 50% of its crop protection product portfolio is protected by intellectual property rights.
He lauded BASF’s success in making the best use of the knowledge and innovation of the wider company and its partners, something he called the ‘Verbund.’ For example, the company is developing a natural insecticide with a new formulation, in cooperation with a Japanese partner. Other parts have helped make it possible, by providing expertise in fermentation.
He stressed BASF’s commitment to crop protection.
“This business is very important to BASF and will remain so in the future,” he said. “Agricultural solutions have a strong fit to BASF’s ‘We Create Chemistry’ strategy.”
Markus Heldt, president of BASF Crop Protection, explained that the Clearfield system remains a leading technology, despite the availability of biotech crops. The concept helps rice growers deal with their weed problems, particularly red rice.
“The last couple of months have been busy and the environment is not changing short term,” he said. “In many markets, farmers have reduced their inputs. Nevertheless, farming doesn’t stand still. Farmers are looking for innovation. Farmers are the stewards of their land and recognizing the importance of their role is a key part of our strategy.
“We are very proud of our robust pipeline of innovative products. We are opening up partnerships in different spheres, for example digital farming. We have a long list of in-licensing products from Japan. We also closely analyze the consolidation in our industry.”
That means looking at the potential for others’ divestments, for example when required by regulators as a part of acquisitions. “We also believe that size on its own is not a recipe for success,” he said. “Farmers want a choice.”
Heldt put the value of BASF’s pipeline for 2015 to 2020 at €2 billion in terms of peak sales potential, with a further €1 billion coming in 2020 to 2025.
“It’s the best pipeline I’ve ever seen in BASF,” he said. “We’re building on 100 years of legacy expertise and development.”