Crop fortunes favor chemical companies

Tag : Chemicals Supply

"We're having a very good year," Rabby said.

Farmers are penny pinchers. Exposed to the vagaries of the weatherand the volatility of the market, the best control they have overtheir income is to minimize costs for planting, protecting andharvesting crops.

But adverse weather around the globe -- prolonged droughts inAustralia and Russia, recurrent floods in Europe and last year'slate spring freeze in this country -- has cut into supplies.Meanwhile, increased biofuel production is diverting nearly 30percent of the U.S. corn crop to make fuel ethanol and dietarychanges in developing countries are boosting U.S. exports. As aresult of the demand-supply mismatch, U.S. commodity prices havejumped about 70 percent since January 2006.

Rising crop prices, in turn, are spurring farmers to plant moreacres. Despite the flooding in the Midwestern corn belt, U.S.farmers are expected to produce the second largest corn harvest onrecord and generate a record national farm income of $92 billionthis year.

Chemicals to protect valuable crops will be in high demand, said EdEstes, assistant head of N.C. State University's Department forAgricultural and Resource Economics.

"If [farmers] have a weed problem, they want the weedsgone," Estes said. "Weeds will hurt yield."

Vic Swinson, a Duplin County farmer for more than 30 years,regularly uses a Makhteshim Agan fungicide on his peanut plants."You have to spray the peanuts or your crop will die,"Swinson said. "It's all about pounds and bushels. You've gotto make the most of the crop that you can just to survive."

Crude oil prices that are nearing $150 a barrel are squeezingfarmers, too, Swinson said. In the past two years, the cost to growcorn has increased from about $200 an acre to about $450 an acrebecause of higher prices for diesel fuel and fertilizers, which aremade from oil.

"One bad year can put me out of business," Swinson said.

Rainfall and temperature remain a farmer's main challenges. ButMakhteshim Agan is working on broadening its product line to offersomething for every weather.

With agrochemical product sales increasing 20 percent to $1.9billion last year, Makhteshim Agan was ranked seventh behind othercrop protection giants like Bayer, BASF and DuPont. But it was alsothe second-fastest growing company in the industry.

As the head of Makhteshim Agan's North American business, Rabbyoversees five business units that employ about 160, including about50 in Raleigh.

The company makes most of the active ingredients for its about 250products at plants in Israel, Brazil and Colombia. Twelve contractlabs come up with the final recipes for products aimed at a varietyof plants, including corn, soybeans, cotton, turf, fruit trees andornamental shrubs and flowers.

The Raleigh headquarters handles marketing and planning. But tofurther increase the variety of products, Rabby plans to do moredevelopment in-house, and he is looking for lab space in the area.North Carolina and the Triangle are on top of his list of locationsfor the same reason that Makhteshim Agan moved its North Americanheadquarters from New York's Fifth Avenue to Raleigh's Falls ofNeuse Road three years ago: the area's labor pool.

Five of the top eight agrochemical companies worldwide have U.S.headquarters or research and development facilities in theTriangle, an area better known for drug development. That's nocoincidence. The agrochemical industry depends on some of the samescientific skills as pharmaceutical and biotech companies.

Makhteshim Agan's new lab will be in charge of formulating productsthat farmers can use and combine whether it is wet and cool or hotand dry.

"We're not trying to predict Mother Nature," Rabby said.

Instead, the company wants to have products ready for everyweather, he said. "If it's too hot, too cold, too dry, toowet, we can change [products] with the weather."

That'll help with another company goal: Boost annual sales by aboutone-third.

sabine.vollmer@newsobserver.com or (919) 829-8992

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