Going Mainstream

Biopesticides have been the darlings of organic growers and gardeners for some time now. And, promoted by biopesticide makers such as AgraQuest, they are increasingly finding their way into mainstream farming.

Last year, global sales of synthetic pesticides were about $30 billion, estimates Gautam Sirur, principal consultant at Cropnosis, a Scottish market research firm.

In contrast, the market for pesticides produced through a combination of fermentation and chemistry techniques was about $800 million. The category includes products such as Dow Chemical’s Spinosad, which controls foliage-feeding insects, and avermectin, an antibiotic that is also used for insect control.

Valued at nearly $1 billion were fermentation-based bactericides and fungicides, such as those from AgraQuest. And a smaller group of biopesticides, valued at about $200 million, consists of natural extracts, including toxins from the bacterium Bacillus thuringiensis for caterpillar control and rotenone and pyrethrum for insect control.

These days, when sustainability counts, even traditional farmers are seeking to lower chemical residues on their crops. Thus major crop protection companies such as Syngenta, Bayer, Sumitomo Chemical, and Arysta LifeScience are all showing “greater interest” in combining biopesticides with synthetic chemical controls, says Kin Cheung, also a consultant with Cropnosis.

That interest is good news for Davis, Calif.-based AgraQuest, which has been promoting a “low-chem” approach that encourages farmers to reduce the synthetic chemical load on crops by synergistically combining traditional pesticides with its biopesticides. About 95% of the firm’s business now comes from its low-chem approach, helped in part by an agreement with BASF under which the German firm is distributing AgraQuest’s Serenade in Europe, Africa, the Middle East, Asia, and Latin America. Serenade is a fungicide based on the bacterium Bacillus subtilis.

More recently, AgraQuest reached a three-year agreement with Monsanto, which is working with the smaller firm to evaluate its pipeline of biopesticides. Monsanto hopes the two will develop seed treatments to control insects, nematodes, and diseases.

Marcus Meadows-Smith, AgraQuest’s chief executive officer, notes that regulators continue to ban older, more toxic synthetic pesticides even as the world’s population is expected to grow to 9 billion people by 2050. And the way to double food production from current levels to meet global needs in the next 40 years is through the complementary use of biopesticides, he contends.

AgraQuest, which by Cropnosis’ estimate has $30 million in annual sales, is even considering the development of pesticides, like Dow’s Spinosad, produced through a combination of fermentation and synthetic techniques. AgraQuest wouldn’t sell such products, Meadows-Smith says, but would license them to chemical pesticide makers. “We could function as an external R&D organization for them,” he says, pointing to Monsanto as the first such relationship.

Meadows-Smith joined AgraQuest in 2008 from specialty chemical firm Chemtura, where he headed a portfolio of businesses that included crop protection. Investors apparently like his strategy. In March, AgraQuest raised $18 million in new financing. Overall, it has raised $100 million from venture capitalists since its founding in 1995, notes Meadows-Smith, who says the next step could be a public offering in 2012.

Alternatively, the Cropnosis consultants suggest, one of the major pesticide players could buy AgraQuest to incorporate low-chem more easily into its product line. Meadows-Smith declines to comment on that scenario. The plan, he says, is to push along research, grow revenues, and infiltrate mainstream markets with the low-chem approach. “We’re in the sweet spot of what the farming industry is looking for,” he says.