Shanghai Business Review

February, 2007

 

Investing in Agricultural Technology

 

Research centres are springing up nationwide to assist China’s upgrading of its agricultural processes and transportation infrastructure.

 

By Bill Marcus

 

Germany-based BASF, the world’s largest chemical manufacturer, which annually invests EUR300m in R&D, wants to know how fungi become resistant to their fungicide products. So, it has made that quest part of a cooperation programme with Nanjing Agriculture University, expanding a scholarship scheme for 24 students announced in December.      

      

"There's a lot of bright talent in China and, of course, we don't want to miss the opportunity to tap into that vast potential," says Goetz Rittner, Division Manager, Agricultural Products, North Asia, BASF. "Their capabilities attract us to work with them. Also, by doing the research in China, we hope to get additional insight into specific Chinese market conditions for our marketing activities in China, as well as understanding our China customers better."

 

It’s not the only one. Agricultural businesses are increasingly investing in China's universities in the search for product innovations in chemicals and seeds. Bayer Innovation Management's relationships with several Chinese institutions includes Zhejiang University in Hangzhou, where students learn to design and build chemical plants, says Dr. Daniel Auriel, of Bayer Technology & Engineering (Shanghai). "We believe the scientific level has risen considerably over the last few years and, in some specific areas, Chinese and Asian research institutions are at the top worldwide."

 

Students and professors at East China University of Science and Technology in Shanghai, the Dalian Institute of Chemical Physics and the Changchun Institute of Applied Chemistry are developing project proposals in nanotechnology, biotechnology and process intensification, Auriel says. "They make project suggestions and we review them to see if they fit with our strategy before supporting them."

 

Education and Microfinance

 

While research and development is moving ahead, certain barriers exist further down the chain. Multinational companies report that a lack of knowledge and funds among farmers is slowing the marketing of agrochemicals. Auriel says Bayer wants to introduce a product to help farmers detect and measure the level of several residues (toxins, insecticides and fungicides) in their harvest. But navigating learning curves will add around five to ten years onto the time line before the farmers are ready. "They are not educated enough to use this type of technology yet. They would have to get familiarised with the modern agricultural techniques that we have in Europe and America," says Auriel.

 

Bayer's answer to this problem is to develop new methods of teaching and produce new teaching materials. "We have individual pictures for different pests," says Cynthia Wei, a spokeswoman for Bayer's CropScience. "It's a very practical answer to communicate with our farmers."

 

Bayer has also started a programme to microfinance farmers. Since 2003 the company has been working with the Support Service Cooperative of the Poor, a subsidiary of the China Foundation for Poverty Alleviation, and the Liuzhi Agricultural Bureau and Mercy Corps support organizations in the Liuzhi Special District of Guizhou.

 

The program provides micro loans, training and market information classes to poor farmers, especially women, without access to commercial and financial services. The goal in Guizhou, and villages in Fujian where the program is ongoing, is economic self-sufficiency coupled with training in plant protection technology.  "This is the big challenge," agrees BASF's Rittner, "to be able to know how to use [the new products) and be able to afford them." Bayer also donated its Regent and Admire products and other organic agrichemicals to help farmers combat corn and rice crops threatened by rice blast, rice plant hopper and other plant diseases and pests.

 

Protecting Bananas and Super Rice

 

Many of the latest innovative agrochemical products introduced in China over the last two years were developed overseas. Development lead time of as much as ten years is one reason. Fear that products may not be intellectually protected in China is another, companies say.

 

BASF introduced its F500 product in June 2005. Developed by German scientists, it removes fungus from banana crops. It is now in the launch phase in China. Bayer's rain-fast fungicide called Infinito, also developed abroad, was introduced in June of 2006. It protects new leaves, stems, tubes and fruits during the rainy season.

 

Switzerland-based Syngenta has developed an agrochemical that reportedly almost completely controls the effect of insects and diseases on hybrid super-rice – which, due to its biomass and larger size is more susceptible to pests. The solution, a pesticide spray, “outperformed the conventional spray program” and nearly completely eliminated sheath blight disease, dirty panicle disease, rice hopper, rice leaf roller and rice stem borer in tests in September in the Heshan fields of Hunan Province, Syngenta says.

 

Agricultural graduates go from village to village educating farmers on how to use Syngenta's products, Stephen Titze, Syngenta China General Manager, says in a company release. Syngenta is now in the second year of a three-year partnership with Wuhan-based Hubei Biopesticide Engineering Research Centre.

 

 

Inbound R&D

 

But R&D is starting to move into China. Out of the 143 new research and development centres sited last year by MNCs outside their home countries, 55 are starting up in China, according to a 2006 survey by Jerry Thursby, Professor of Economics at Emory University in Atlanta, Georgia.

 

The United Nations Conference on Trade and Development (UNCTAD) in Geneva, Switzerland, meanwhile, credits China's tertiary education boom for this R&D draw. MNCs spend USD2.1bn annually on research and development, UNCTAD says.

 

 

In 2006 Syngenta opened a technology center with four advanced laboratories for analysis and process development in Nantong, Jiangsu province, to provide technical support for additional local production and global sourcing.

 

Hong Kong-based liquid compound organic fertilizer manufacturer China Agritech, in 2006, announced that its new facility in Beijing will serve as the primary syrup concentrate production centre, converting factory and R&D institute, says Torbjörn Fredriksson, an economist with UNCTAD.  “I would guess that servicing the huge Chinese market and Chinese agro-industry is likely to be an important reason (for multinational R&D centres to be in China),” Fredriksson says.

 

Chinese firms are also scrambling to recruit Chinese research talent. Longping Hitech, one of the largest seed companies in Asia, confirmed that it collaborates with Zhejiang University faculty and staff, as well as three other universities, to research better ways to develop hybrid rice, a spokesman says. Hefei Fengle Seed, headquartered in Hefei, Anhui province, partners with China Agricultural University in Beijing and Anhui Agricultural University in Hefei. Hefei Fengle Seed is trying to develop a marketable hybrid corn, rice and watermelon seeds, a company spokesman says.

 

Cold Chain Investment

 

But in other areas, such as the cold chain refrigeration and preservation mechanisms that move food products from the farm to the fork, agricultural technology is lagging. “There’s a lot of ‘will’ to talk bout it, and a lot of money thrown around, but no sense of direction,” according to Steven Wolfe, Managing Director of Shanghai-based AllFresh Technologies Consulting.

 

China is on a par with the west when it comes to preserving grains, wheat and root crops, says Wolfe.  But when it comes to fruits and vegetables between a quarter to a third – a loss of RMB75bn – is being lost annually, according to the China Federation of Logistics and Procurement Agencies, a collection of more than dozen trades, building and transportation associations.  Comparable losses in the developed west are between one and two per cent, says Federation Director, Tian Xue, quoted on its website.

 

As with fighting crop pests the race is on at select Chinese universities to find technologies for this fight as well. But experts say finding the technology to help make humans and their logistics more efficient is eating into agricultural profits in China. Finding the solution may take longer than wiping out the scourge of parasites that are actually eating into the food itself.

 

 

Xu Ming contributed research to this report.

For a link to this story go to http://www.sbr.net.cn/issues.asp