Growth plans and government work

Washington – Attendees of BASF’s media summit, held last month in the nation’s capital, gained insight into the company’s growth plans, as well as pesticide regulation and registration.

Mike Heinz, president, agricultural products, started the summit by giving a general overview of the company. BASF generated $54.4 billion in sales during 2005 – 12 percent of which was from agricultural products. The following is a breakdown of the company’s overall sales:

• Chemicals                                     19 percent
• Oil and gas                                   18 percent
• Performance products                   19 percent
• Plastics                                         27 percent
• Agricultural products and nutrition 12 percent
• Other                                            5 percent

The ag segment generated 3.3 billion of sales during 2005 – 40 percent was from fungicides, 37 percent was from herbicides, and 23 percent was from insecticides.

Geographically, the company’s sales break down like this:

• Asia Pacific        8 percent
• North America   29 percent
• Europe               43 percent
• South America   20 percent

Latin America has the biggest growth potential for BASF because the ag market can grow the most there. Farmland is cheap in South America, and China will focus on fruits and vegetables, which is labor intensive, according to Markus Heldt, group vice president, North America.

On the horizon
Looking ahead, Heinz says the company is focusing on 60 active ingredients for the ag market.

“Innovation is key to customer success, and customers need new solutions because some of the products they use will be banned from the market,” he says. “Ten percent of all sales will be spent on research and development. We’re offering solutions beyond disease, weed and insect control.”

Lately, Heinz says the company has been shifting away from herbicides to focus more on the research and development of fungicides. It spends 21 percent of R&D on herbicides, 33 percent on fungicides and 39 percent on insecticides.

The “in launch” stage of bringing products to market includes four fungicides for the cereals, soybeans and specialty crops markets; three herbicides for the cereals and corn markets; and one insecticide for the noncrop market. The new pesticides have $1.5 million in peak sales potential, according to Heinz.

Yet Heldt says the growth of glyphosate, i.e., Roundup, has revived herbicide innovation.

“BASF will be introducing a new herbicide in 2010,” he says. “The broadleaf solution will fill the glyphosate gaps.”

In the early stage of development, the company has two fungicides for the cereals, rice and specialty crops markets; two herbicides for the corn and noncrop markets; and two insecticides for the specialty crops and noncrop markets – all with a peak sales potential of $894 million. A new fungicide will be launched in 2009 or 2010, and a new broad-spectrum insecticide will be launched in 2011 or 2012.

Heinz says 50 percent of the company’s sales comes from proprietary products, which can blend with older products to provide some defense against generics.

Additionally, BASF has had a biotech platform since 1998. It will spend $320 million in green biotech within the next three years and has invested $89 to $102 million for this biotech platform.

“We are fully committed to ag in the long run and want to help customers shape the future of the ag market,” Heinz says.

Specialty markets
Shifting away from the ag market, Steve Briggs, director, specialty products, says the specialty products business impacts quality of life for people. The $2-billion industry is broken down into the turf and ornamental market ($880 million), pest control market ($550 million) and vegetation management market ($500 million). The pest control market consists of the termite and general insect segments; the T&O market consists of the golf, lawn care, sports turf, commercial turf and ornamentals segments; and the vegetative management market consists of the forestry, utility, aquatic, bareground, roadside and invasive weed segments. Briggs estimates invasive weeds cost the United States $138 billion in lost productivity.

The lawn care market is growing 4 percent to 5 percent annually, and the golf market is flat, but the fungicide segment of golf is growing because fungicides are being replaced, according to Briggs. He also says BASF wants to bring a nematicide to market by partnering with another company and isn’t developing a proprietary nematicide.

In the pest control market, consumers are more aware of pests that can damage their No. 1 asset – the home. They want protection against termites and ants, which have replaced termites as the No. 1 household pest.

“Pest control operators are looking to companies like BASF for new, innovative products,” Briggs says. “For example, they want a compound to take care of bed bugs, which are on the rise in hotels, partly because of international travel and the fact that fewer pesticides are being used indoors.”

PermitterPlus is an example of innovation meeting customer needs, according to Briggs. It’s a new application with Termidor. PCOs used to have to drill holes in the ground every 12 to 18 inches to apply Termidor. Now, PCOs can trench the soil back and apply PermiterPlus around the house, then push the soil back and finish.

“It’s less labor intensive and allows PCOs to treat more homes,” Briggs says of the product that has a 10-year guarantee.

In the vegetation management sector, the company wants to increase the level of professionalism.

Inside the beltway
Aside from discussion about the ag and specialty markets, a legislative panel of Washington insiders discussed the relationship between pesticides and the federal government. Greg Thies, director of BASF government relations says the ag market is the second most regulated segment in the United States behind the pharmaceutical industry. He says the mid-term election in November will effect the ag industry because there’s a lot on the table, such as the Farm Bill and the Endangered Species Act update.

Todd Willens, senior policy director and member of the House Resources Committee, says seven months have passed since the reauthorization of the Endangered Species Act passed in the House. There are 1,300 species on the list and 10 have been recovered.

“We have a priority of recovering species to the point they don’t need to be regulated by the federal government,” he says. “If we don’t do something now, Congress will miss an opportunity. It’s an extremely slow process. The Senate might take this up. The House was active, now we’re waiting on the Senate. However, environmental groups don’t want to pass a bill for the Endangered Species Act.”

Jim Jones, director, office of pesticide programs for the Environmental Protection Agency, says the EPA has improved the process of registering and reregistering products via the Pesticide Registration Improvements Act.

“We’re making decisions within two years about a compound,” he says. “PRIA gives the agency time frames and a check from the manufacturer that covers 25 percent to 30 percent of the EPA’s cost. We’re meeting 99.9 percent of the requests. During the past 10 years, we’ve passed about 100 new synthetic chemicals and didn’t register five because the requirements are clear and the industry understands those.”

Jones says he expects to see the globalization of pesticide licensing by governments working together to master license products because it will be cheaper for them and quicker for the manufacturer to bring products to market.

Additionally, Allen James, president of RISE, says phosphorus in fertilizer is being targeted by activists. James says various industries such as pest control, lawn, ag and golf aren’t organized on a local level and need to stick together to defend themselves against activists. RISE is implementing a grassroots initiative to defend against activists. James says communication is key, yet RISE can’t communicate with the general public effectively because it’s too expensive to do so. Instead, it’s targeting groups of individuals such as school superintendents.