Industry Corner: The Pesticide Market and Industry: A Global Perspective

By Young, Luci; Rao, S. Ram et al. | Business Economics, January 1996 | Go to article overview

Industry Corner: The Pesticide Market and Industry: A Global Perspective


Young, Luci, Rao, S. Ram, Cort, Stanton G., Business Economics


Pesticides or crop-protection chemicals are widely used in almost every nation around the world. Their application permits greater yield from farms and assures better storage and distribution for the output. Pesticide production in physical terms is likely to remain constant, but in dollar terms, the value of pesticides used should rise at 4.4 percent per year during the 1993-2003 period. The ten largest pesticide producers, headquartered in the United States and Western Europe, account for about one-half of world output. Entry into the industry is difficult but possible with new products and the existence of niche marketing-opportunities. Pesticides constitute health hazards to humans and animals, and contaminated water runoff is another major problem. Controversy continues regarding health risks, but pesticide makers have adjusted by offering more specialized compounds applied in lower dosages.

Pesticides are chemical compounds used to destroy harmful plants and animals; in simple terms, we are talking about weed-killers and bug sprays. But nothing is simple about herbicides, insecticides, and fungicides, which are known collectively as pesticides or crop-protection compounds. These complex organic chemical groups offer two major advantages and two major disadvantages. The pros and cons of usage then must be weighed and not just by strict economic cost-benefit analysis, but in terms of social patterns, regulatory forces, and technological developments. Farmers (the key users), pesticide producers, government agencies, and environmental groups are fully aware of the controversial nature of product offerings.

The key advantage of pesticides is that their use results in far greater agricultural output than would be the case without them. This is especially true for single-specie plantings or monocultures over vast tracts. The second positive aspect is that pesticides allow for improved storage and distribution of crops; fruits, produce, grains, etc. will stay fresher, last longer, look better.

The key problem with pesticides is that they can and at times do constitute health hazards to humans and animals. Another major disadvantage is that pesticides contaminate groundwater; this nonpoint runoff is considered a major source of water pollution.

Suggestions for countering the negative features include regulation or outright ban of high-risk categories, lower dosage of more sophisticated compounds, and training and education of growers, distributors, and consumers. Integrated pest management is coming into its own, using better methods of cultivation and more judicious applications. But eliminating use of pesticides altogether is most unlikely as the world needs higher crop yields.

DEMAND OR USAGE PATTERNS BY REGIONS

Demand for pesticides is a function of economic development, agricultural practices, climate characteristics, government regulations, and corporate marketing. The highest per capita users of pesticides in the world are the farms of Central America, where large landholders favor monocultures or single crops, e.g., bananas. In a similar fashion, pesticides are used heavily in the United States, France and Brazil by large cereal, fruit or produce growers and in countries with high population, small acreage, and intense cultivation, e.g., Japan.

On a worldwide basis, pesticide usage doubled every ten years since 1945 until the 1980s, when a definite slowdown occurred, due to both changes in applications and environmental concerns. Table 1 illustrates this slower growth, by major regions, especially for the period 1983-93, but even in 1993-2003. Note that actual tonnage is the same in both years and that pesticide use in kilogram per million dollars of world GDP will have been halved in this twenty-year span. At the same time, pesticide consumption in dollar terms will be rebounding to grow 4.4 percent per year during 1993-2003, compared to 3.0 percent during 1983-93. …

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Industry Corner: The Pesticide Market and Industry: A Global Perspective
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