Japanese ag chem firms look abroad as local market shrinks

Worldwide, the value of agrochemical shipments doubled from 2000 to 2022. But in Japan, the value of shipments increased only slightly, while volumes actually declined.

Agriculture in Japan faces difficult circumstances. The number of farmers has plummeted—from a peak of 11 million in 1960 to 1.3 million in 2020, according to government statistics. Meanwhile, planted acreage fell slightly in the 10 years up to 2021, to a bit less than 4 million hectares.

That smaller group of farmers must maximize productivity, and agrochemicals play a role in addressing this need. But as the Japanese market shrinks and gets more competitive, the country’s agrochemical producers have been forced to globalize and quicken their product launches.

Sumitomo Chemical was one of the first to look abroad. The big Japanese company formed an agrochemical joint venture with Valent U.S.A. in 1988 and later acquired Valent outright. In 2010, it set up Sumitomo Chemical India. And its purchase of the South American operations of Australia’s Nufarm in 2020 gave Sumitomo a sales system for fungicides and herbicides in countries including Brazil, the world’s largest agrochemical market.

Mitsui Chemicals, another major Japanese player in agrochemicals, is likewise working to strengthen its global presence by introducing innovative molecules and pursuing acquisitions and equity participation in international businesses.

“Japanese agriculture, with its hot and humid climate and diverse crops, struggles with pests and weeds,” says Takashi Hirooka, director general of the Japan Crop Protection Association. “The need for new agrochemicals, discovered like new drugs, is high. In the past 10 years, Japan has accounted for 47% of the world’s new chemical entities in the crop protection business.”

In addition, stringent government regulations are spurring the development of better crop protection chemicals, according to Hirooka. “Japanese agrochemicals must have high performance with low dosage and pass strict safety standards related to health and the environment,” he says, adding that authorities are not the only ones monitoring safety. Major supermarkets and other distributors conduct voluntary inspections for residual chemicals and discard products if they exceed limits.

The chemicals that have supported Japanese agriculture are well accepted overseas, according to Hirooka. Exports tripled in size between 2000 and 2021, he says. “This shows the competitiveness of Japanese agrochemicals.”

Japan’s major ag-chem manufacturers are expanding their presence in the global market by leveraging discovery capabilities they developed at home. Sumitomo Chemical is a prime example. Its overseas sales are currently four to five times its domestic sales, which consist primarily of products for rice, tree fruits, and vegetables.

“The market for herbicides for field crops is large,” says Shinsuke Shojima, Sumitomo’s managing executive officer. Herbicides used on field crops have basic properties that are different from those of herbicides used on rice, so to build its business for the former, Sumitomo has expanded its footprint in regions where those crops dominate, he says.

One result of this strategy is Indiflin (inpyrfluxam), a fungicide effective against rust, the most serious disease of soybeans. The company estimates that it has a potential market size of $2 billion per year. Last year, Sumitomo launched Excalia Max—a soybean fungicide whose main ingredient is Indiflin—in Brazil, the world’s largest soybean producer.

Rapidicil (epyrifenacil) is another new herbicide for which Sumitomo is seeking registration in the US, Brazil, and Argentina. The firm expects Rapidicil to complement glyphosate as a tool in no-till cultivation, which decreases soil erosion. While removing weeds with glyphosate takes about 2 weeks, it takes only 1–2 days with Rapidicil, Sumitomo says.

Japanese firms are positioning naturally derived, or biorational, crop protection products as a complement to synthetic chemicals. Sumitomo acquired a biological crop protection business from Abbott Laboratories in 2000 and later set up a new US subsidiary, Valent BioSciences. “The trend is to reduce the use of chemical pesticides, especially in developed countries,” Shojima says.

Sumitomo is spending $25 million to expand R&D capacity by 25% at Valent’s Biorational Research Center in Libertyville, Illinois. The Japanese firm currently sells 18 biorational products, including Accede, a plant regulator that received pesticide registration in the US in 2021. Sumitomo says it also has more than 40 biorational products in its development pipeline.

Sumitomo’s agrochemical business is the mainstay of its health and agriculture–related segment, which is the firm’s top earner. It posted operating profit of $395 million on sales of over $4.1 billion in the 2023 fiscal year, and the company predicts that it will reach $544 million in operating profit on $4.9 billion in sales in fiscal 2024.

Mitsui Chemicals is going through an evolution that is similar to Sumitomo’s. After acquiring Sankyo Agro’s ag-chem business in 2007, Mitsui accelerated its strategy of expanding into overseas markets. It now has overseas bases in eight countries, including Thailand, Brazil, and India.

Because it requires a large amount of capital and time to develop new active ingredients for agrochemicals, it is important to maximize the value of existing ingredients. Takashi Kakimoto, chief technology officer of Mitsui’s Crop & Life Solutions subsidiary says the firm maximizes the ingredients’ value by using formulation technology to expand into new applications and regions. Kakimoto points to uses in fields peripheral to agriculture, such as pest extermination and mosquito control.

Like Sumitomo, Mitsui intends to make biobased products the second pillar of its crop protection business. The purchases of Sankyo Agro and, in 2021, of Meiji Seika Pharma’s ag-chem business were made with this goal in mind, Kakimoto says.

Mitsui has a similar focus with its research investments. In April, the firm established the Biological Solutions Research Center across two sites in Japan; in October, it established a laboratory with Tohoku University to research new biological products.

Hirooka of the Japan Crop Protection Association sees the focus on biological products and international growth as the best way forward for companies with a shrinking local market. But he doesn’t discount that market. “Agrochemicals are key for maintaining agriculture that can be cultivated by a small number of people,” he says.

Katsumori Matsuoka is a freelance writer based in Japan.