The Changing Economics of Industrial Vegetation Management
For many years, IVM customers benefitted from effective and economical herbicide programs. Many customers even experienced a reduction in costs of their programs from the introduction of generic chemistry when the patents from proprietary chemistries expired. But now, changes in weed spectrums and the rapid increase in the number of herbicide resistant weeds is putting upward pressure on the price of new industrial herbicide chemicals as the generic formulations lose their effectiveness against weeds.
Graph courtesy of Dr. Ian Heap
To understand the dynamics of increasing industrial herbicide prices, a person needs to understand where the industry has been, what has changed over the years, and where the industry is going in the future.
History of the herbicides market
In the 1970s and early 1980s, herbicide chemistry development flourished. Newly discovered compounds were patented and placed on the market. These new herbicides made IVM much easier but carried a very hefty price for chemical’s manufacturer.
Prior to 1974 and the implementation of FIFRA (the Federal Insecticide, Fungicide and Rodenticide Act), regulations on pesticides were relatively weak. FIFRA was established by the EPA to ensure environmental safety. FIFRA changed the way pesticides and herbicides were regulated and how new pesticide products had to be registered, which added substantial costs to product approval for the chemical manufacturer.
Once a new compound has been developed, it must be patented and also registered with the EPA. This process can take up to a year or more and cost several million dollars. Add to that cost the extensive product research and efficacy studies which include: residue studies in plants and irrigated crops, residues in potable water, residues in livestock, poultry, milk and eggs, avian toxicity studies, toxicity on aquatic organisms, toxicity on non-target organisms, mutagenicity and teratology studies, and oncogenicity studies. All of these tests and data must be submitted to the EPA before it will give its approval to market the herbicide.
Studies required by the EPA can take an additional eight years and cost an estimated $150 – 200 million. The chemical manufacturer will spend another five to ten million dollars in marketing and advertising costs for its new formulation to introduce it to the market.
Therefore, costs for developing a new herbicide compound can exceed $250 million and take an estimated 12 years from start to finish. If an agro-chemical company has a twenty year patent on the new herbicide, it only leaves it eight years to recover the entire research and development cost.
Another factor that keeps herbicide prices high in the industrial sector of vegetation management is its relatively limited use. Compared to the agricultural sector, markets for industry are relatively small. Chemical manufacturers have to spread their costs over a smaller number of acres to recover their costs for a patented product and have a limited window in which to recover their investment.
The introduction of generic chemistries
The late 1980s and 1990s saw the introduction of generic chemistry into the IVM. As patents expired, new companies entered the market with generic versions of the chemistry the industrial sector had grown accustom to using. These new companies added competition into the market which drove the price of herbicides down. The benefit to the customer was a reduction in cost of their herbicide program.
The drawback to the widespread use of generic chemistry was the discovery of new chemistries was virtually eliminated. Chemical manufacturers were not generating enough profit from the sales of their chemicals against the generics to maintain high levels of research and development for new chemistry. So, the market languished with the same chemistry for several years. Lower generic herbicide costs encouraged more frequent applications and repetitive use patterns. These factors set the stage for increased weed resistance.
Graph courtesy of Dr. Ian Heap
Weed resistance to generics brings the return of higher herbicide prices
Plant scientists today recognize that weed resistance occurs when weeds have adapted or mutated to develop weed resistance to herbicides or herbicide groups. This herbicide resistance occurs in most weeds and invasive plants that have been repetitively sprayed year after year with the same herbicide or combination of herbicides that target certain areas of plant function or mode of action.
Weeds were easily controlled for many years at an economical price per acre, now there are weeds and plants that are only partially controlled or not being controlled at all using the same chemicals. After enjoying low cost per acre weed control for so long, weed managers now have to rely on using additional herbicides in their applications, which increases the cost per acre to maintain adequate control.
As weed resistance increases, more and more species of weeds are becoming resistant to many more herbicides, even herbicides with different modes of action. Chemical application to these resistant weeds has now come full circle and per acre costs have sharply increased. Additional treatments may be required, which add to the cost per acre, often with less than adequate weed control benefits.
Control that was easily achieved at $25 to $30 per acre could now be over $100 per acre to achieve the same weed control objectives as were achieved in previous years. This is a reality that weed managers, purchasing agents and others who contract weed control services must realize.
The relationships over time between patented herbicides, generic herbicides, weed resistance and price can be seen in the following chart:
Where we are today
The options available to weed control specialists have narrowed significantly, herbicide costs have increased due to new herbicide chemistry, and weed resistance to known herbicide groups is rising dramatically. In order to control weeds that might have developed weed resistance, new chemistry has to be employed.
If new available chemistry is used, it will cost more because there is no generic competitor and development costs must be recouped by the manufacturer while the patent exists. To prevent weed resistance to the new chemistry, new methods of rotating herbicides and multiple product mixes that include more modes of action will be employed again resulting in increasing herbicide costs. All of these steps are necessary to maintain the quality and level of the weed control into the future.