Thursday, August 5, 2021
All countries COVID-19 Cases
Total confirmed cases
Updated on August 5, 2021 4:38 AM

Syngenta expects China’s farmers to grow ahead of mega-IPO

Must Read
- Advertisement -

Article content

WEI COUNTY – Agrochemical giant Syngenta Group is rapidly expanding its agricultural services deployment in China ahead of a large stock market listing as it seeks to meet growing demand from farmers, crucial to Beijing’s growing focus on food safety.

The World’s Largest Phytosanitary Product Manufacturer and No. 3 Seed Supplier Says It Is Boosting Grain Production And Increasing Farmers’ Income Just As The Pandemic Fuels Government Concerns Over Food Supply And Increases Cost of key agricultural materials.


Article content

That means an opportunity for Switzerland-based, China-backed Syngenta to gain market share in a fragmented market for agricultural chemicals, positioning the company for growth as Chinese farmers expand their operations. properties.

The group aims to raise $ 10 billion by listing in Shanghai in what is likely to be the biggest market launch of the year.

But Syngenta acknowledges that it “faces tremendous competition in the markets in which it operates.” Its rivals include Bayer AG and Corteva Inc, as well as Chinese companies that sell agronomy services to farmers in the country.

“Before we sold pesticides, seeds and fertilizers. Now we are an agricultural services company, we sell services and technology, ”said Mao Feng, brand director of Syngenta Group China Modern Agriculture Platform (MAP) and digital agriculture. MAP will receive about 12% of the IPO’s proceeds for the expansion, according to a prospectus released Friday.


Article content

“By selling individual products, we had peaked, there was no more space,” Mao told reporters last month.

In China, crop yields lag far behind western countries, even as growers use three times as much fertilizer, while farms in the vast country are small by global standards, averaging half a hectare, in compared to 180 hectares (440 acres) in the United States. .


So Syngenta is trying to help herself by helping farmers like Liu Ligang.

Liu, who farms 20 hectares (50 acres) in Wei County in northern Hebei Province, has doubled his contracted land in the past four years, one of a growing number of Chinese farmers seeking to become professional growers. To date, 37 million hectares have been outsourced, about 30% of China’s arable land.


Article content

Such expansion brings more risks to farmers, requiring more knowledge and sophisticated services.

Liu just harvested about 7,500 kg of wheat per hectare (6,600 pounds per acre), 25% more than last year and 10% more than his neighbors, he says, thanks to Syngenta’s MAP service, which helped him control the pests.

“Before, only when the disease came did the pesticide start,” he said. “That is too late and you can move forward now.”

In addition to supplying seeds and chemicals, MAP runs training centers in China and around 900 demonstration farms that show growers what produces the best yields in a given location. Farmers get free management of their land and, in return, buy the company’s products or others recommended by its agronomists.


Article content

MAP tripled its revenues to more than $ 280 million in the first quarter from a year earlier, adding 40 centers to reach 365 nationwide. It contributed 4% of the group’s income, compared to 1% in the same period of the previous year.

The company also makes money selling fresh crops and produce to clients such as Alibaba Group’s Hema supermarkets and Dole Food Co. They pay above-market prices for the quality of MAP’s farmers and the traceability of their digital platform.

Revenues are expected to exceed $ 1 billion this year and reach about $ 4.5 billion by 2025, according to an industry estimate.


But other companies are also trying to capitalize on the increasing scale and sophistication of Chinese agriculture. Bayer, for example, is announcing a head of “digital farming” in China.


Article content

Beijing-based ICAN has created digital crop models to guide farmers through the selection, planning and harvesting of plots. He claims that his modeling can increase yields and reduce fertilizer use.

Sales of fertilizers and crop chemicals in China were $ 24 billion in 2018, Rabobank estimates, more than $ 20 billion in the United States, while seeds in each country were worth about $ 12 billion.

Input markets are more fragmented in China, offering plenty of room for equity growth. Syngenta generated less than 5% of its sales in China before it was acquired by state-owned ChemChina in 2017. It had less than 1% of the seed market, although a more significant 7% share in crop chemicals.

MAP receives help to reach farmers through group affiliate Sinofert Holdings, China’s largest producer and distributor of fertilizers. Its 30,000 retail stores reach the farmers who work 95% of the country’s farmland, Reckons Fitch.


Article content

But the size of China’s small farms raises logistics costs and progress in land consolidation has been slower than expected, said Thomas Luedi, senior partner at Bain & Co in Shanghai.

“We found that to break even we needed to have 5,000 hectares of farmland in a city using our service,” said an industry executive who previously ran an agricultural services company.

Syngenta said dispersed agriculture and incomplete infrastructure and supply chains hold back all service companies. But he is working with agricultural cooperatives and trying to standardize production across entire towns to reduce the impact of fragmented holdings.

($ 1 = 6.4764 Chinese yuan renminbi)

(Reporting by Dominique Patton. Additional reporting by Beijing Newsroom and John Revill in Zurich; Edited by William Mallard)


In-depth reports on the economics of innovation from The Logic, presented in association with the Financial Post.


    Postmedia is committed to maintaining a lively but civilized discussion forum and encourages all readers to share their views on our articles. Comments can take up to an hour to moderate before appearing on the site. We ask that you keep your comments relevant and respectful. We have enabled email notifications – you will now receive an email if you receive a response to your comment, there is an update from a comment thread you follow, or if a user you follow comments. Visit our Community Principles for more information and details on how to adjust your E-mail settings.

    - Advertisement -


    Please enter your comment!
    Please enter your name here

    - Advertisement -
    Latest News

    WATCH: Bill O’Reilly Interviews Mark Levin On Why American Businesses Have Woken Up

    Bill O'Reilly interviewed Mark Levin tonight and they discussed why American businesses have been woken up so much lately...
    - Advertisement -

    More Articles Like This

    - Advertisement -