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Our industry

2013

Syngenta at a glance

We need to grow more with less


Our global challenge Agricultural production will need to increase substantially with limited natural resources

Global grain production

~70%

The UN estimates that by 2030 the world will need % more fresh water and 50 % more energy; by 2050 30 % more food we will need 70

2004

2050

Global grain demand Population growth and greater economic prosperity in emerging markets will drive future demand for food and feed production
Global demand of major grains* billion tons, CAGR (% per annum) 3 ~1.4% CAGR Fuel

Feed

1 Food 0 1980 1990 2000 2012 2027

* Corn, soybean, wheat and rice Sources: USDA; FAPRI; Syngenta analysis

Population is growing: by 2050, global population will grow to greater than ninebillion, more than two billion additional people compared to today Diets are changing: demand for meat and dairy is growing, especially in emerging markets

Limited natural resources Agriculture must meet rising demand for food, feed and fuel while protecting the planets natural resources

Expanding farmland increases environmental sustainability challenges Urbanization continues: by 2050, three billion more people are expected to be living in cities, with urban sprawl further reducing arable land and putting biodiversity resources under stress Water scarcity: agriculture uses 70 % of the worlds fresh water

Syngenta at a glance
Financial highlights 20121
Sales 12 14.20 11 13.27 10 11.64 12 11 10 3.15 2.90 2.50

US$14.2bn
EBITDA

+7% +8%

US$3.2bn
EBITDA margin

22.2%

12 22.2 11 21.9 10 21.5 12 22.30 11 19.36 10 16.44 12 11 10 12 11 10 0.92 1.56 1.19 9.50 8.00 7.00

Earnings per share 2

US$22.30 US$0.9bn CHF9.50

+15% -41%

Free cash ow before acquisitions

Dividend per share, 2012 proposed

Regional sales 20121


Europe, Africa and Middle East

US$4.0bn
North America

0% +20% +12% -3%

12 11 10 12 11 10 12 11 10 12 11 10

3.97 3.98 3.42 3.93 3.27 2.97 3.71 3.30 2.76 1.83 1.89 1.71

US$3.9bn
Latin America

US$3.7bn
Asia Pacic

US$1.8bn US$0.8bn
1 2

Lawn and Garden sales 20121


-8%
12 11 10 0.76 0.82 0.78

For further explanation of nancial information, see Section 6, Syngenta key nancial information and ratios Fully diluted excluding restructuring and impairment

Contents
01 Global challenges
Global agriculture: growing more from less 6 Demand 7 Environmental stress 12

05 Lawn and Garden


Market overview Flowers, home and garden solutions Professional market and products 69 69 69

02 Sustainable agricultural systems

Sustainable intensication of agriculture Improving productivity Reducing agricultures environmental footprint Building rural prosperity Investment and subsidy trends

21 22 26 27 29

06 Syngenta key nancial information and ratios


Syngenta 3-year nancial summary Regional 3-year nancial summary 3-year sales summary 2012 sales by crop Balance sheet Cash ow Signicant acquisitions Reference sources

03 Crops in focus
Introduction 35 Corn 38 Cereals 40 Soybean 42 Rice 44 Vegetables 45 Diverse eld crops 46 Sugar cane 48 Specialty crops 49

72 73 74 75 76 77 78 79

04 Technology in agriculture
Evolution of the industry 51 The role of crop protection 52 Crop protection: market overview 53 Crop protection products 54 Beyond traditional crop protection 55 Crop protection R&D process 57 Seeds: market overview 58 Plant breeding history 59 Benets of hybridization 60 Biotechnology 62 Research, development and regulatory environment for biotech crops 64 Innovation and intellectual property 66

01 Global challenges

01 Global challenges

Global agriculture: growing more from less


Our global challenge:
increase agricultural productivity by at least 70% in 40 years with limited natural resources

The ability of our planet to sustain life is fragile and under increasing stress. Despite signicant growth in food production over the past 50 years, 870 million people in the world still suffer from hunger and even more are malnourished. By 2050, the global food requirement will increase signicantly, driven by a population increase to more than nine billion and a demand for improved diets, particularly in emerging markets. Agriculture is receiving increasing attention worldwide as government and non-government authorities recognize a need to accelerate productivity in order to ensure food security and improved nutrition to a growing population. % more grain every year, representing Farmers will need to produce around 1.4 an increase of approximately 30% by 2030 and around 70% by 2050. At the same time, responding to changes in climate, using the limited natural resources in a sustainable way and respecting biodiversity pose additional challenges to achieving increased farm productivity at the required speed. Agriculture holds the key role to tackling these challenges and achieving food security today and in the future. The World Food Summit of 1996 explained that food security exists when all people, at all times have access to sufcient, safe, nutritious food to maintain a healthy and active life. But reaching this goal will not be easy.

Undernourished population in 2011

~870 million people

Asia&Pacific Sub-Saharan Africa Latin America &Caribbean Near East and North Africa Developed countries Source: FAO

millions of people 528 234 49 41 16

Global challenges 01

Demand

Since 1980, demand for eld crops has increased almost 90%, from 1.2 billion to almost 2.3 billion tons, with the increased demand for food and feed the key driver. In addition, biofuels have increasingly played a role to meet our energy needs in ways that mitigate the growing problem of green house emissions.
Global demand of major grains* billion tons, CAGR (% per annum) 3 ~1.4% CAGR 2011 Use of major grains*

Fuel
Feed Food Biofuels Source: USDA * Corn, soybean, wheat and rice 38% 56% 6%

Feed

Food

0 1980 1990 2000 2012 2027

* Corn, soybean, wheat and rice Sources: USDA; FAPRI; Syngenta analysis

Demand for grain has increased almost 90% since 1980 and will continue to increase at an average rate of around 1.4% per year

Grain demand is expected to increase ~30% by 2025 an additional 600 million tons. This demand will not only be driven by population growth but also by greater economic prosperity in emerging markets, as well as biofuels expansion. Around 30% of this additional demand will come from changes in consumer diets as opposed to population growth.
Demand drivers for the next 10 years (to 2025)*

Population growth 1964 to 1980 <1.7%

Economic growth >1.9%

Biofuels growth ~0.0%

Total

~3.6%

1980 to 1997

<1.4%

>0.5%

~0.0%

~1.9%

1997 to 2011

~1.1%

~0.7%

~0.4%

~2.2%

Feed Food Biofuels Source: Syngenta analysis * Corn, soybean, wheat and rice

~60% ~30% ~10%

Sources: USDA; Syngenta

01 Global challenges

Demand

The global population is expected to rise from around seven billion today to more than nine billion by 2050. Most of this population growth will occur in developing countries, where the populations are projected to reach around eight billion in 2050, an increase of almost 40%. In contrast, the population of the more deve loped regions is expected to increase at a much slower rate, to around 1.3 billion.
World population billions of people 8 7 6 5 4 3 2 1 0 1960 1970 1980 1990 2000 2010 2020E 0.0 53 57 0.5 73 76 75 82 89 86 79 77 78 78 74 1.0 2.0 Year-on-year growth % 1.0% CAGR 2.5

World population is

growing at a rate of around 80 million additional people per year a trend that is forecast to continue until 2020

1.5

Year-on-year absolute change (in millions) Source: FAO, CAGR 20122020

For the rst time in history, more people worldwide are living in cities than in the countryside. By 2050, around three billion more people are expected to be living in urban areas. In China almost 50% of the population now live in cities. Given that the spend per capita on food is 270% higher than that of their rural counterparts, the pressure on achieving food security becomes increasingly challenging.
Urban and rural population of the world in billions 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 World total population World urban population World rural population

Today 50% of the population in China live in cities, compared with ~17% in 1961

Source: United Nations Department of Economic and Social Affairs

Global challenges 01

Demand

In parallel, a greater number of people will experience increased wealth and higher purchasing power, and as a result will increase consumption of processed food, meat, dairy and sh. A recent Goldman Sachs study estimates that the worlds middle class people earning between US$6,000 and US$30,000 a year will expand by two billion people by 2030. In China alone, the McKinsey Global Institute has forecasted that the middle class will grow to be 76% of the population by 2025. That means not only more people to feed, but also feeding each person with a higher calorie and protein diet thereby impacting signicantly demand for feed. Since 2005, global meat demand is expected to increase by 40% by 2025. The type of meat consumed affects the amount of grain demand: one kilogram of beef requires seven kilograms of grain, whereas pork requires four kilograms and poultry twokilograms.
Global meat consumption Index: 1971 = 100 350 300 250 200 150 100 50 0 1976 Production Source: USDA 1986 Per capita consumption 1996 Population 2006 2012

By 2025 global meat demand to rise 40%; an increase of around 100 million tons
Source: FAO

10

01 Global challenges

Demand

Global energy demands are expected to increase by approximately 40% by 2030 and energy from biofuels produced from plants is increasingly playing a more important role as an alternative.
2011 biofuel production estimate: 29 billion gallons billions of gallons US 14.0 EU 27 0.97 1.1 2.7

Global energy demands

expected to increase by ~40% by 2030

Brazil 6.0 0.7

Rest of world ~1.8 ~1.7

Biofuels represent around 5% of global road transport fuels

Bioethanol Biodiesel Source: US Energy Information Administration (EIA) (1 gallon = 3,8 litres)

The US and Brazil have invested heavily in this area, producing 70% of the worlds biofuels today. As the US ethanol industry has expanded, the amount of corn used for ethanol production has increased. The Energy Policy Act of 2005 established the rst-ever Renewable Fuels Standard (RFS) in federal law, requiring increasing volumes of ethanol and biodiesel to be blended with the United States fuel supply between 2006 and 2012. The Energy Independence and Security Act of 2007 amended and increased the RFS, requiring 13.2 billion gallons of renewable fuel use in 2012, stepping up to 36 billion gallons by 2022. Under the modied RFS, corn-based ethanol is essentially capped at 15 billion gallons by 2015, while the balance must be derived from advanced biofuels such as cellulosic and non-corn-based ethanol.
The US Renewable Fuels Standard; bioethanol production billions of gallons 15

United States Federal Government ethanol mandate: 15 billion gallons by 2015

10

0 1999 2001 2003 2005 2007 2009 2010 2015E Source: Renewable Fuels Association (1 gallon = 3,8 litres)

Global challenges 01

11

Demand

Since December 2011 the tax credit on ethanol production (45 cents/gallon) as well as US import tariffs on foreign bioethanol (54 cents/gallon) have been discontinued, however the US ethanol production and demand have remained resilient in 2012. While the gures above are correct at time of publication, the current overall budget discussions in the United States may result in changes to the RFS commitments and requirements. In Brazil, ethanol from sugar cane produces ~30% of the worlds bioethanol and has replaced ~35% of the gasoline used in light vehicles in the country. Sugar cane ethanol represents a low carbon and cost efcient fuel option in comparison to many other biofuels.
Sugar cane: low carbon and cost-efcient fuel option CO2 balance %
100 180 80 150

Brazil mandatory biofuels


blend rate planned to return to 25% as sugar cane production shows signs of recovery

Crude oil equivalent US$ per barrel

CO2 output from sugar cane bioethanol is 90% lower than oil-based gasoline

US$ 100 per barrel oil price


40 45 10 10 10 85

128 110

Oil based gasoline Corn ethanol Oilseed rape

Palm Cellulose Sugar cane

Brazil sugar cane US corn Malaysia palm

EU wheat US soybean EU oilseed rape

Over 23 billion liters of sugar cane ethanol were produced in Brazil in 2011

Sources: Farrell et aI, Science January 2006; GTZ; Syngenta

The Brazilian government continues to strongly support the bioethanol industry and plans to return to the mandatory blend of 25% in May 2013 (after two consecutive years of poor sugar cane yields the mandate was temporarily reduced to 20%). Around 50% of the countrys automobile eet is composed by ex-fuel cars. The EU Renewable Energy Directive in 2009 established a renewed target of a minimum of 10% renewables in transport for 2020 and requested national action plans for each member state to outline a path for meeting the target. Most recently, an increasing public debate on competition between food and fuel, aggravated by high crop prices particularly in 2012, has triggered the European Commission to submit a draft in biofuels policy limiting food-crop based biofuels to 5% of EU transport fuel consumption. The draft still needs to be approved by the EU governments.

One ton of sugar cane produces 80 liters of ethanol compared to 38 liters from one ton of corn

12

01 Global challenges

Environmental stress
As demand for increased quantity and quality of crops grows, agriculture must evolve in order to meet these demands in a sustainable way. Changes in climate will further stress the availability of water, land, and biodiversity necessary for productive agriculture.

Limited land for agriculture


Within the 13 billion hectares of total land, only 1.6 billion is under farmland production; 36% of that land is in Europe, the Middle East and Africa, 39% in Asia Pacic, 17% in North America and the remaining 8% in Latin America.
Global land use and agricultural land billion hectares 13.0 4.0 3.0 4.1 0.3 4.9 4.9 3.3 Potential area for agricultural expansion Total planted area ~1.6 billion ha 0.14 1.2 0.3
Land Forest Other Agricultural Agri- Permanent Permanent Major cultural meadows crops crops Undefined

2011 crop area: approximately 1.6 billion hectares globally; 12% of land surface

Sources: FAO; World Bank; WWF; Syngenta analysis

2011 crop areas Eastern Europe Africa Western Europe, Middle East China India Rest of Asia Pacific United States of America Rest of North America Brazil Rest of LATAM Sources: FAO; Syngenta estimates 13% 17% 6% 8% 11% 20% 11% 6% 4% 4%

~1.6 billion hectares

Global challenges 01

13

Environmental stress

In the last 50 years, there has been only a gradual expansion in agricultural areas because yield has increased at a much faster pace as farmers have adopted more technology, keeping pace with the rising demand for grain.
Yield and acreage trend (corn, soybean, wheat, rice) Index: 1961 = 100 300 280 260 240 220 200 180 160 140 120 100 1960 Area Source: USDA 1970 Yield 1980 1990 2000 2010

Productivity levels

from land and water are steadily increasing, average grain yields per hectare almost doubling in the past 40 years In the 1980s one hectare of arable land produced 2.3 tons of grain* annually; today it produces 3.4 tons
* Corn, soybean, wheat and rice

Until now demand has been met primarily through yield improvement. However, the improvement rate of yields in the major grains has been slowing down and will not be sufcient to fulll increasing demand.
Rolling 10 year average growth in crop yield (corn, soybean, rice, wheat) % 4.0

Yield improvement slowing down in major crops

3.0

2.0

1.0

0.0 1970 Source: USDA 1980 1990 2000 2010

14

01 Global challenges

Environmental stress

To meet future global grain demand, the FAO estimates suggest that ~80% of crop production growth by 2050 is expected to come from higher yields, but land available for farming will also have to expand by approximately 120million hectares in developing countries, mainly Sub-Saharan Africa and Latin America. These 120 million hectares should come primarily from a change in land use, for example pastures to arable land which will require signicant investment, knowledge transfer and education. However, the area suitable for agriculture is only available in limited geographies. Brazil represents about 60% of this opportunity, with approximately 7085 million hectares that could be brought into production in the future without impacting natural ecosystems such as the rainforest.
Brazil uses of land

To produce the same

amount of food today with yield levels from 50 years ago would require additional land equivalent in size to the US Agriculture must meet rising demand for food, feed and fuel without stressing natural habitats

millions of hectares 100% Total land area 7% Farmed land 25% Cattle raising 49% Amazon & Atlantic forest, rivers 9% Cities, roads, infrastructure ~10% Potential additional area for cultivation Sources: FAO; WWF; Syngenta 850 ~ 60 ~210 420 75 70 85

The challenge going forward is to meet demand without stressing natural resources.
Number of people fed per hectare of planted land

5.6 4.5

3.3 2.3
1960 1980 2000 2020

In 2020 one hectare will be required to feed more than ve people compared to 1960 when it only had to feed two people

3.0 billion Source: FAOSTAT

4.4 billion

6.0 billion

7.5 billion

Global challenges 01

15

Environmental stress

Climate variability and agricultural risk


Every year, some part of the world suffers from drought which can hamper the growth of crops and signicantly reduce the level of grain harvested. Today, some 80 countries are already suffering from water shortages, and the problem is not conned to the arid regions of the world. Nations like Brazil, Canada, Colombia, Indonesia, and Russia are all teeming with fresh water but even they sometimes experience severe drought.

Water stress is already


limiting productivity: around US$40 billion in crop losses in 2012 due to drought

Global crop losses due to drought 2012: water stressed year EU, mainly central Europe US Key crops affected: corn, soybean, cotton ~US$ 23 billion Key crops affected: corn, sunflower, grapes ~US$ 3.5 billion

CIS Key crops affected: wheat, barley, corn ~US$ 6.8 billion

Argentina (planted 2011) Key crops affected: corn, soybean ~US$ 4.7 billion

Australia Key crops affected: wheat ~US$ 1.2 billion

Total: ~US$ 40 billion Source: Syngenta

16

01 Global challenges

Environmental stress

In 2012 the US drought caused crop losses of almost US$23 billion. It had direct impacts on the commodity market, with signicant price spikes of grain commodities.
Commodity price evolution since May 2012 Index @ May 2012 = 100 170 160 150 140 130 120 110 100 90 80 70 May-12 Wheat Jun-12 Corn Jul-12 Soybean Aug-12 Rice Sep-12 Oct-12 Nov-12 Drought in US, Central and Eastern Europe

Over the last three years


unexpected weather events triggered losses of ~130 million tons and record crop prices

Source: CBOT/Bloomberg

In addition to the impact of cyclical weather variability, which varies in intensity and character year by year, some fundamental changes in the climatic patterns have been observed over the last decades. The most visible ones were: 1) global widespread temperature increase, 2) change in precipitation patterns (increased in some regions and decreased in others) and 3) the change of frequency and intensity of some extreme weather events. Fundamental changes in the patterns of temperature and precipitation could possibly shift production seasons, pest and disease patterns, and modify the types of crops grown in certain areas. A potential decrease in productivity due to hotter and more variable weather may lead to more erratic production patterns overall. Although there will be gains in some crops in some regions of the world, the overall impact on agriculture may be negative. Simulations using greenhouse gas emissions models suggest by 2100 an increase of global average temperature of up to 2.5C, with more and stronger extreme events. These changes are expected to drive a further increase of water stress, the acidication of oceans and potentially the risk of extinction of 2030% of assessed plant and animal species.

Drought conditions frequently observed in regions with no water scarcity

Global challenges 01

17

Environmental stress

Water scarcity
Global water scarcity has a critical impact on food security and health. Only about 3% of the Earths water is fresh, and less than a third of that is economically accessible for human use in an environmentally responsible way making water one of the biggest limiting factors in the worlds ability to feed a growing population. Even though global fresh water resources are sufcient, they are unevenly distributed with water scarcity in some locations already reaching alarming levels. China and India, with one-third of the worlds people, have between them less than 10% of the worlds fresh water.
Areas of physical and economic water scarcity

China and India together

have <10 % of the worlds fresh water

Little or no water scarcity Not estimated

Physical water scarcity Approaching physical water scarcity

Economic water scarcity

Source: International Water Management Institute

18

01 Global challenges

Environmental stress

Practically everything we do requires water. With the world population growing, becoming wealthier and more economically productive, the demand for water will surge. Along with the economic development over the last 50 years, we have seen water use triple. With the competing demands on this nite resource drinking, sanitation, agriculture, energy, and industry it is not surprising that 80 countries suffer from water shortages that threaten health and economies, while 40% of the world more than two billion people does not have access to clean water or sanitation.
Population living in areas of absolute water scarcity Population in water scarce areas in millions 600 60 500 400 40 300 200 100 0 SubSaharan Africa South Asia East Asia& Pacific Middle East& North Africa Europe& Central Asia OECD Latin America& countries Caribbean 0

Over two billion people

live in areas that have no access to clean water and sanitation

% of total population

20

Source: International Water Management Institute

Agriculture is still the largest consumer of fresh water. It is estimated that almost 70% of the global fresh water withdrawal is used for agricultural production, not always in the most efcient way. In Africa many countries use over 50% of their available water resources in agriculture whereas, in other regions such as Latin America the proportion is signicantly lower. Water availability, water quality, climatic conditions and soil quality as well as local policies, legislation and regulation all play an important part in ensuring that holistic solutions are developed to meet grower needs and constraints.

In China around 50% of all farmland is irrigated

Global challenges 01

19

Environmental stress

Many countries already face temporary or permanent water shortages and, in the future, changes in climatic patterns will likely make these shortages worse. In many developing countries agriculture employs a signicant portion of the labor force and represents a large percentage of total GDP. Therefore, these people, who are already vulnerable and food insecure, are likely to be the most seriously affected. The United Nations Environment Programme estimates that two out of three people will live in drought or water-stressed conditions by 2025. In addition to changes in climate, it is also anticipated that the amount of irrigation water used in agriculture in developing countries might grow by around 14% while at the same time it is expected to decline by around 2% in developed countries. This means that on average we will need to use around 11% more water globally to support agriculture, much of which might come from the continued unsustainable use of groundwater, increasing the competition for industrial water and sanitation. There is an urgent need to increase water use efciency in agriculture by developing new technologies that will help to secure and enhance yields with less water. Global water consumption will continue to increase steadily and will, without corrective actions, hit global supply thresholds. Looking forward, solutions need to be found that will not only increase yields but do so in a way which reduces the amount of water required. The combination of changes in grower practices, increased availability of drought tolerant plants, crop protection and crop enhancement technologies as well as improved grower education will help deliver tailored solutions that will increase not only output but also improve overall land stewardship.

On average it takes one

liter of water to produce one calorie of food

Today, one kilogram of rice requires 3,400 liters of water

Use of water to support agriculture is expected to grow around 11% globally

02 Sustainable agricultural systems

Sustainable agricultural systems 02

21

Sustainable intensication of agriculture

The dilemma facing the world today is how to feed a growing population while safeguarding the only planet we have. Although this poses signicant challenges, they are by no means unachievable. A system-wide approach to sustainable agriculture which focuses on the links between technology, people and land can contribute to solving these challenges.

Improve farm productivity

Enhance agricultures environmental footprint

s Re

Technology

olu tio ns

rce ou ies nc cie effi

Be tte
People

rs

Land

Rural economies Build rural prosperity

Agricultural technologies enable a sustainable production system that protects the long-term economic and environmental viability of farming. Farmers can earn better incomes, live better lives and become stewards of the land. Strong rural economies are the keystone of sustainable agricultural systems and fundamental in achieving food security. Technology combined with supporting infrastructure, access to markets and nancial resources enable better solutions for farmers so they can increase productivity and improve the farm economy. At the same time, agricultural solutions can have a benecial impact on water, land and biodiversity by allowing more efcient and responsible use of these basic natural resources. Creative nancial solutions are necessary for sustainable increases in productivity. Bad weather and sub-optimal harvests, for instance, can result in a cycle of poor productivity and low incomes, which can be hard to break. The International Fund for Agriculture Development (IFAD) has shown that GDP growth generated by agriculture is up to four times more effective in beneting the poor compared to growth generated by other sectors. The importance of focusing on agriculture is highlighted by China and India where, in 2011, the sector accounted for more than 30% of their GDP.

GDP growth generated by agriculture is up to four times more effective in benetting the poor

22

02 Sustainable agricultural systems

Improving productivity

The Green Revolution that began in 1945 transformed agriculture through the introduction and expansion of technology in certain parts of the world. Farm productivity benetted greatly as the Green Revolution focused on developing improved crop varieties, together with crop protection products, irrigation projects, and synthetic nitrogen fertilizer to successfully alleviate hunger in many areas. Yields grew dramatically in many regions while limiting the expansion of cultivated land. Global production of the major crops corn, soybean, wheat and rice have more than tripled since 1960. During that time, yields for rice have more than doubled and those of wheat have increased by around 160%.
Cereal* yields tons per hectare (t/ha) 7 6 5 4 3 2 1 0 1985 1990 1995 2000 2005 2010

Over the past 20 years a

ton of corn can be grown using 37% less land

Global production of corn, soybean, wheat and rice more than tripled since 1960

Developed countries East Asia&Pacific Latin America &Caribbean South Asia Sub-Saharan Africa * Barley, buckwheat, canary seed, fonio, corn, millet, mixed grain, oats, quinoa, rice, rye, sorghum, triticale, wheat and other cereals Source: FAO

Sustainable agricultural systems 02

23

Improving productivity

However, the revolution was never fully realized with many places in the world by-passed, especially Africa. This is reected, for example, in the loss of international competitiveness of many traditional African export crops during the past 30 years. At the same time, many domestic crops have become less competitive and import dependence has increased. For the foreseeable future, reducing poverty in Africa will largely depend on stimulating agricultural growth.
Sub-Saharan Africa Cereal yields (t/ha) 3.5 50 40 30 1.5 20 10 0.5 1987 1990 Poverty Yields Note: Cereals includes corn, wheat, rice, barley, rye and sorghum Sources: Ravallion and Chen 2004; World Bank 2006 1993 1996 1999 2002 0 0.5 1987 1990 1993 1996 1999 2002 1.5 Poverty incidence % 60 3.5 50 40 30 20 10 0 South Asia Cereal yields (t/ha) Poverty incidence % 60

Agricultural productivity

is a key driver to reduce poverty

2.5

2.5

Clearly, the worlds farmers need to increase yields per hectare sharply and sustainably. This means without using more water or other natural resources, while using chemical inputs like fertilizers and pesticides as efciently as possible.

24

02 Sustainable agricultural systems

Improving productivity

However, there is also a need to reduce inefciencies that occur in the current production system. Around 40% of all food produced is never used. Much of it is wasted during the post-harvest process which is effectively a waste of the resources invested in the crop: the land, water, and nutrients needed to grow the crop. Another signicant portion is thrown away by consumers and retailers.

In developing countries
40% of grain losses occur post-harvest

An estimated 30 50% of food is lost or wasted in the chain (around 1.3 billion tons annually) Estimated range of avoidable losses and waste by stage globally 110140% 1040%* 210 %

100%

530%** 15% 15 % ~3050% 1030 % 5070%

Potential production

Yield gap

Harvest loss

Production

Post-harvest loss

Processing loss

Distribution waste

Consumer waste

Consumed

* Up to 100% possible if all technologies are implemented together, based on selected crop and country combinations ** Represents average range; certain crop and location combinations may see up to 50% post-harvest loss Sources: FAO; Syngenta

Crop losses in elds can be addressed by applying better products and using more effective practices, so that the yield gap is closed and valuable production is not lost during the harvest process. In Africa, insects and weeds destroy an estimated 25% of the crop. Post-harvest losses can be addressed with in-farm and out-farm solutions. By focusing on post-harvest crop protection products and increasing the efcacy of the supply chain, we can help combat some of the issues related to storage, transportation and processing losses. In the area of smallholder farming, this is particularly important given the number of smallholders who live on the edge of food security. If we are able to successfully address some of these challenges, we can have a signicant impact on the livelihoods of many people.

Insects and weeds destroy ~25% of crops in Africa

Sustainable agricultural systems 02

25

Improving productivity

Many regions of the world hold the potential to increase productivity signicantly in the coming years by adopting modern technologies. For example, in Russia and the Ukraine, once considered the breadbasket of Europe, only 10% of the land surface is farmed efciently. Asia has the potential to boost productivity by approximately 20% in 10 years by adopting current technology. BRIC countries (Brazil, Russia, India and China) are expected to undergo the greatest growth between 2010 and 2021, with the OECD foreseeing around 30% of global production growth and continuing professionalization of those markets, with the ongoing adoption of technology. A recent study from Stanford University found that without the intensication of agriculture, 50100% more land would need to be cultivated compared to 1960. At the same time, there are those who call for extensication, such as increased organic production. Organic production methods can t into integrated farming systems when the products and methods used are safe, effective and economical. Currently organic farming occupies less than 1% of total land used for food production, with average yields approximately 35% lower than those from conventional agriculture. This level of output is not sustainable or sufcient to feed a growing global population.
Global agricultural production* billions of tons 10

Without the intensication


of agriculture, 50100% more land would need to be cultivated compared to 1960

8.2 6.7

6
~85% of global production growth

2011 Brazil, Russia, India, China Rest of world Developed countries = NAFTA, EU, Japan

2021

* Wheat, coarse grains, rice oilseeds, protein meals, vegetable oils, meat, dairy and sugar Sources: OECD; FAO

26

02 Sustainable agricultural systems

Reducing agricultures environmental footprint

Improved farming practices and solutions will not only address the need for increased productivity but also help farmers manage and protect the environment. Many stakeholders from a wide range of disciplines, including academia, governmental and non-governmental settings, are acknowledging that agricultural intensication is necessary to produce enough food without further compromising nature. Greenhouse gas emissions directly associated with crop farming and livestock (excluding deforestation) represent around 14% of all man-made emissions and have been continuously decreasing per ton of crop produced due to the intensication and modernization of practices and products. In addition, agricultural productivity has been contributing to more optimized land use and consequently the conservation of natural habitats. The most concerning land use change in modern times has been deforestation, which is also the second major contributor for man-made greenhouse gas emissions. In Brazil, for instance, Amazon deforestation plunged to a historic low in 2010, more than 75% below its 2004 peak, while productivity increased faster than most countries across the globe. Fertile soil is the foundation of sustainable agricultural systems; biodiversity is the basis for agricultural resilience. But poor farming practices leave soils depleted and exposed to soil erosion. Already, some 40% of the worlds farmland is seriously degraded. Cultivating more wilderness for human consumption threatens biodiversity, so it is crucial that farmers become more productive and manage their land to protect and improve biodiversity on farm and around the eld. Millions of hectares of farm land become infertile globally each year as a result of soil erosion. Much of this soil is lost as a result of traditional tillage used for weed control. By breaking up and turning the soil, tillage leaves it more vulnerable to erosion and soil is more easily washed off the elds by heavy rain. Globally around 15% of the population has become affected by land degradation since 1981. Farmers need help to increase soil fertility and improve the productivity on their land in sustainable ways. That means crop rotations, restoring degraded land, planting vegetation around elds to prevent erosion and techniques to avoid unnecessary tilling. It takes nature 500 years to replace 25 mm of lost soil making soil a top priority for every farmer. Farming also depends on biodiversity. Diversity of genetic material is the key to adapting crops to changing conditions and changes in climate are accelerating the need for adaptation. Farmers need the pollination provided by bees and other insects a number of the worlds agricultural crops depend on pollination. See how Syngentas operation pollinator helps with biodiversity on: www.syngenta.com

Soil loss in corn

cultivation has dropped 69% per ton in the past 20 years

Agriculture accounts for 14% of all manmade greenhouse gas emissions and 70% of the worlds fresh water use Nature takes 500 years to replace 25mm of lost soil

Sustainable agricultural systems 02

27

Building rural prosperity

The worlds 450 million smallholder farmers, farming less than two hectares of land, are globally the largest farmer group and of key importance to local, national and global food security, especially in developing countries. In Asia and Sub-Saharan Africa, more than 80% of farmers are smallholders. They farm less than 50% of the agricultural land and produce 35% of global grain (corn, soybean, wheat and rice) output. However, the regions where smallholder farmers make up the majority of the farming communities are also the regions that are most food insecure, where the largest agricultural yield gaps exist and where overall country development is blocked by undeveloped rural systems. In fact, smallholders constitute half the hungry people in the world today. By 2050, smallholder farms will need to more than double their current production. It is clear that we will need to focus on smallholder farmers to ensure rural prosperity.

Smallholder farmers in

China, India and SubSaharan Africa account for around 35% of global grain* production
* Corn, soybean, wheat and rice

Smallholder production number of farms (m) 500

400

300

200

100

0 <2 2 to 10 Farm size (ha) Source: FAO agricultural world census 10 to 100 >100

Smallholder farmers often lack access to appropriate technology, education and agronomy training, information on weather, pests, diseases, markets and nancial resources and this hinders productivity increases. It also curtails the ability of farmers to be protable and to support the development of their families and communities. Around 35% of the farmers in low- and middle-income countries have access to adequate resources and markets. Appropriate technology, coupled with agronomic knowledge and best practice, can help these farms increase productivity in an environmentally sustainable manner. For example, labor costs for weeding have been found to absorb up to 50% of a smallholders production costs and this will increase as labor availability for agriculture decreases in many countries. Access to the right technology, such as herbicides, can signicantly reduce labor costs as well as bring environmental and yield benets.

An estimated 2.5 billion people in the developing world depend on agriculture for their livelihoods

28

02 Sustainable agricultural systems

Building rural prosperity

When smallholder farmers are given access to improved agricultural technology, new crop varieties and better irrigation methods, they can be efcient producers per hectare and achieve high levels of yield. Vietnam, for instance, transitioned from being a food decit country to being the second largest rice exporter in the world largely through developing its smallholder farming sector. It is estimated by the FAO that around US$30 billion per year needs to be invested in re-invigorating smallholder agriculture on a global scale, in order to reverse the decades of under investment. But simply increasing productivity is not enough. Farming needs to be protable. For this farmers need access to markets and fair prices for their produce. Developing farmer cooperatives, partnering with food chain companies and accessing market and price information via mobile phones are some ways in which farmers can access markets and secure better prices for their produce. The risk of farming can also be reduced through provision of affordable credit and insurance. The role of women farmers is another aspect that demands focus, as well. In the smallholder regions of Asia and Africa women make up 6075% of the agricultural workforce. Yet they often have no claim to their land and nd it harder than the men to access markets, nancial services and technology. To increase the productivity of smallholder farms and the food security of rural communities, women farmers need to be especially targeted when developing agricultural solutions.

Smallholder farmers face many barriers that need to be addressed in order to increase their productivity and protability

Productivity Seeds, fertilizers, pesticides, nutrients Agronomy information Product stewardship Water, environmental management Protability Harvesting, storage, transport Purchase agreements Selling production Fair prices Source: Syngenta Input / knowledge / resources Finance and insurance

Investment Investment in farm Credit for inputs Weather/production insurance Risk mitigation tools

Market access / infrastructure

Market / weather/ pest info

Information Market information Price information Weather information Pest and disease information

There is a growing recognition of the importance of smallholder farmers. And many stakeholders including governments, donor agencies, the private sector and non-prot organizations are working independently and in public-private partnerships to develop innovative solutions including investments in infrastructure and training, nancial solutions, mobile phone-based solutions and contract farming.

Sustainable agricultural systems 02

29

Investment and subsidy trends

Given increasing pressure and global focus on achieving food security, there have been signicant positive trends in recent years related to investment in agriculture. The necessary productivity increase can only be achieved if it is underpinned by adequate levels of both public and private investments. Higher levels of agricultural investments translate directly to an increase in productivity. These investments can take a number of forms, including: Government agricultural subsidies and support Public-private partnerships Private investments The FAO estimates that to meet the food requirements in 2050, US$120 billion needs to be invested in the agriculture sector annually in Asia Pacic. The present level of investment, both from public and private sector, is estimated at US$80 billion.

Government subsidies: US Farm Bill


The US governments commitment to strong federal farm policies ranges from domestic support to taxes, trade, conservation, research and energy. The majority of these policies are contained within the 2008 US Farm Bill and until recently have experienced strong backing, particularly from the US Senate. High crop prices and hence increased farmer incomes as well as requirements to cut national decits are putting increasing pressure on the current levels of funding, and it is likely that signicant changes will be seen following expiry of the Farm Bill at the end of 2012. Currently around 27% of the mandatory dollars committed under the 2008 Farm Bill provide domestic support for farmers and ranchers, including the provisions for crop insurance and conservation payments. The remaining 73% of the Farm Bill expenditures cover nutrition programs, such as the National School Lunch Program and the Supplemental Nutrition Assistance Program (food stamps), further ensuring the governments commitment to a stable domestic food supply. Currently US farmers receive support through a variety of federal programs: Commodity programs providing price and income support, intended to help farmers stabilize their incomes Farmer loans and crop insurance at favorable rates Conservation payments, disaster assistance and incentives to produce renewable energy

Nutritional program funding accounted for 73% of the spending under the US Farm Bill in 2008

30

02 Sustainable agricultural systems

Investment and subsidy trends

Initial indications suggest that the total 2012 Farm Bill may be reduced by US$23 billion with around 80% of the cuts coming from agricultural support and the remaining 20% from nutritional programs. In addition, it is expected there will be a shift from subsidized production payments towards revenue protection and enhanced crop insurance tools. The rationale for reducing direct payments is based on federal decit reduction efforts and a diminished need for a farm safety net due to sustained high crop prices.
Expected breakdown of 2012 Farm Bill proposal

Nutrition Crop insurance Conservation Commodity Source: Syngenta estimates

84 % 7% 5% 4%

United States agricultural producers received US$12.2 billion through commodity programs in 2009

The new Farm Bill and its more revenue-based policy frameworks should be implemented in Q3 or Q4 of 2013, well before the 2014 growing season.

Government subsidies: EU Common Agricultural Policy (CAP)


For over 50 years, the Common Agricultural Policy has been a cornerstone of European Union policies. Europe is a large global importer/exporter of the major food and feed crops. Over time, the CAP has evolved, ensuring: A stable supply of affordable and safe food exists for the European population Agricultural production remains environmentally friendly The security of the economic and social foundation of rural communities in all parts of Europe while minimizing distortion of international trade

2011 EU budget for agriculture: 54.7 billion

Sustainable agricultural systems 02

31

Investment and subsidy trends

In the 27 EU countries, approximately 16 million farmers managing 178 million hectares are potentially beneting from the CAP. In 2010, the total CAP expenditure was just under 55 billion, equivalent to roughly 0.4% of EU GDP, allocated as follows:
The path of CAP expenditure 1980 2020 billion (current prices) 70 60 50 40 30 20 10 0 1980 1985 1990 1995 2000 Direct payments Market expenditure 2005 EU-10 EU-12 EU-15 EU-25

% GDP EU-27 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 2010 2015 2020

Export funds Other market measures

Coupled support Decoupled support

Rural development

% of EU GDP

Source: European Commission, DG Agriculture and Rural Development

All of these programs seek to provide a market-oriented safety net, allowing for the wide diversity of farmers in Europe to develop over time and manage through difcult years. In October 2011, the European Commission unveiled planned reforms to the CAP which will take effect during the period 20142020. The proposed revision aims to ensure viable food production, sustainable management of natural resources and balanced territorial development across the region while at the same time promoting resource efciency that will ensure smart, sustainable and inclusive growth for EU agriculture.

32

02 Sustainable agricultural systems

Investment and subsidy trends

It is expected that the CAP will continue to follow a two-pillar approach based upon: Annual direct payments and market measures Multi-year rural development measures There will be a third area of additional spending allocated to research and innovation in agriculture and bio-economy. In the proposals the rst pillar payments consist of three elements: basic payments, greening measures and specic additional support schemes. Basic payments will only be made when minimum standards of cross compliance and good agricultural and environmental conditions are met, including water and sustainability measures. To qualify for greening measure payments, farmers must demonstrate crop diversication, maintenance of permanent grasslands and the establishment of ecological focus areas such as eld margins. The nal element, specic support schemes, encourages young farmer development as well as development of farming in areas with natural constraints.
CAP pillar 1 allocation

Basic direct payments Greening measures Support schemes Source: Syngenta

55% 30% 15%

The second pillar related to rural development measures aims to complement the rst pillar by encouraging farmers to pursue voluntary practices that go beyond the mandatory standards and requirements. The proposed measures focus on food chain organization, disease/pest risk management, knowledge transfer, competitiveness and agri-environmental schemes that preserve and promote resource efciency. The European Commission proposals anticipate that the future level of expenditure of the CAP will remain frozen at current levels throughout the period 20142020 and the total budget for the CAP should be around 382.9 billion. However, this is now subject to the joint approval of the Council of Member States and the European Parliament, with a decision expected in spring 2013. It is quite likely that the nal outcome will see further changes to the way payments are distributed between and within the two pillars, and that the overall EU budget for agriculture will be reduced by at least 2%.

20142020 CAP approval due spring 2013

Sustainable agricultural systems 02

33

Investment and subsidy trends

Public-private partnerships
Working in partnership is key to enable and accelerate the development of functioning markets. The combination of public and private expertise allows traditional public sector skills of rural development, long-term research and policy to be combined with the more practical elements of companies and business such as technical and market development as well as marketing and distribution expertise. Public-private partnerships are most successful when clearly dened agreements exist regarding contribution to the collaboration and share of the output. Common goals, objectives and deliverables must be underpinned by a commitment from all parties, open communication, trust and an agreed balance of power sharing. The benets to be gained include wider access to technology, improved connectivity between growers and markets, ability to build on individual expertise, ability to share costs and optimize investment decisions as well as overall increased chance of success in R&D related projects. Critical agricultural challenges such as water efciency, infrastructure and post-harvest loss management can be better addressed when joining up the right partners, including those who provide nancing, technology, machinery, irrigation, farming expertise and infrastructure. Through long-term investment and commitments, the benets can be substantial in enabling many countries not only to produce enough food to replace current imports, but also to become resource efcient and competitive in global markets. A good example is Africa where agriculture is likely to continue growing but at different paces depending on the country. Governments are directing more investments to agriculture, especially in the productivity of smallholder farming, a sector that suffers from the difculty of accessing markets and technology. The large opportunity for public-private or private-private partnerships is to develop innovative new business models that will remove existing constraints and attract investors. Joint efforts in knowledge sharing through agronomy training, including the best use of crop protection and seed programs, and in better farm management practices pay out in better productivity and protability of agriculture.

Private investment

accounts for 50% of R&D spend in developed countries; in emerging markets it is only 6%

Investments focusing on economic, social and environmental returns will create the most sustainable long-term value

03 Crops in focus

Crops in focus 03

35

Introduction

There are eight major crops/crop groupings grown globally: corn, cereals, soybean, vegetables, rice, diverse eld crops, sugar cane and a number of smaller more diverse crops referred to as specialty crops. These crops represent the majority of global food production and planted area worldwide. Currently we consume 2.3 billion tons of grain per year for food, feed and fuel with four crops corn and soybean (primarily for feed), and wheat and rice (primarily for food). Most grain is locally produced and consumed. Only a few countries, such as the United States, Brazil and Argentina, have sufcient industrial-scale grain production to contribute signicantly to global trade.
Regional agriculture patterns

Wheat, corn, soybean

and rice account for approximately 90% of global grain consumption

Major grain and meat exporters

EU 27: net importers CIS: increasing export share, largest oilseeds producers

China: large-scale production model, major soybean importers Asia: largest vegetable and rice producer

Production gap, unmet demand Major soybean and meat exporters, largest sugar cane producer

Source: Syngenta

36

03 Crops in focus

Introduction

Around 22% of wheat and 38% of soybean are traded globally. Only 12% of corn, 8% of rice, 5% of sunower and less than 3% of vegetables are traded globally, with the rest being consumed locally. In sugar cane the level of export of raw cane is minimal but the exports of processed sugar account for 33% of total production.

More than 80% of grain

today is locally produced and consumed

2011 global consumption and trade by crop Feed crops Corn millions of tons (Mt) 873 Relative feed use has fallen from 70% to ~60% over last decade mainly due to biofuels ~90% of the US crop is genetically modified Major producers: US, China, EU, Brazil Major exporters: US, Argentina (Brazil in 2011) 12%** 108 Major importers: Japan, Mexico, South Korea, Egypt 38%** 90 254 ~ 80% is used as meal for animal feed ~75% of the global crop is genetically modified Major producers: US, Brazil, Argentina Major exporters: US, Brazil, Argentina Major importers: China, EU Soybean millions of tons (Mt)

Food crops Wheat millions of tons (Mt) 695 70% used for human consumption Major producers: EU, China, India, Russia, US Major exporters: CIS*, US, EU, Canada Major importers: North Africa, Middle East, Southeast Asia 90% of rice is grown and consumed in Asia 458 >50% of the crop area is irrigated Major producers: China, India, Indonesia, Bangladesh Major exporters: Thailand, Vietnam, India Major importers: Middle East, Philippines, Nigeria, Central America and Caribbean Rice millions of tons (Mt)

22%**

157

8%**

38

Consumption

Trade (export)

* Commonwealth of Independent States (former Soviet Republic) ** Trade as % of production Sources: USDA; ISAAA

Crops in focus 03

37

Introduction

Crop seasons for global agriculture: major grains Jun Cereals EU US Australia South America Corn EU US Brazil Argentina Soybean US Brazil Argentina China Rice Japan Thailand India Vietnam Crop 1 Crop 2 Winter crop Winter crop Spring crop Winter crop Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

May Jun Jul Aug Sep Oct Nov Dec

Spring crop

1st Harvest 2nd Harvest

1st Harvest 2nd Harvest

Summer crop Crop 1 Crop 2 Crop 3 US Sources: Phillips McDougall; Syngenta Corn Soybean Cereals Rice

Crop seasons for global agriculture: oilseeds and sugar cane Jan Canola Canada Sunower EU CIS Winter oilseed rape EU CIS Sugar cane Brazil Center South Brazil Northeast Source: Syngenta Planting Harvesting Planting Harvesting Harvesting Planting Planting Harvesting Planting Harvesting Planting Planting Planting Harvesting Harvesting Planting Harvesting Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

38

03 Crops in focus

Corn
Corn (also known as maize) is widely cultivated throughout the world, resulting in more tons produced each year than any other grain. Feed use has fallen from 70% to ~60% over the last decade, mostly due to growth in biofuels. Given that ~60% of corn is still used for animal feed, a key driver of future growth will be meat consumption and demand. The underlying feed demand for corn will continue to grow as protein consumption grows in emerging markets. As far as non-food and feed uses are concerned, the main factor will continue to be US demand for ethanol. Currently around 40% of US corn production is used for ethanol. Another important outlet for corn products after feed and fuel is industrial use, in particular starch and sweeteners.
Stocks-to-use ratio* % 30 Crop price index Jan 2002 = 100 400

Corn production is

largely driven by animal feed requirements, which account for 60% of demand

One planted seed delivers over 500 kernels of corn

25

300

20

200

15

100

It takes ~950 liters of water to grow one kilogram of corn

10 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13E *Current prices, stocks estimated by end of marketing season Prices: last update January 2013 Sources: WASDE; Bloomberg; Syngenta analysis

Crops in focus 03

39

Corn

Corn is the most widely grown crop in the Americas, specically the United States which produces around 36% of the worlds harvest. Other top producing countries include China, Brazil and the European Union. The key exporters are the US and Argentina. In 2011, Brazil was a major exporter due to production shortages in US and Argentina.
2011 corn production and consumption millions of tons (Mt) 350 314 300 250 200 150 100 65 50 0 US Production China EU Brazil Argentina Mexico India 67 193 188 279 Production Total: 878 Mt Top 7: 80 % Consumption Total: 873 Mt Top 7: 74 % Trade Total: 108 Mt 12% of production

The United States

produces ~36% of the worlds corn and is the largest exporter

2011 corn yields by country tons per hectare (t/ha) World United States China France Brazil Argentina Russia South Africa Nigeria 0 2 4 6 8 10

73

54 21 8 18 29.5 22 17

Consumption

Sources: USDA; COCERAL

Historic yield growth for corn has been driven by a succession of technological innovations and intensication. The continuing advances in genetic modication (GM) and marker-assisted breeding are expected to accelerate this growth to meet future increases in demand. 88% of the corn grown in the United States in 2011 was genetically modied. In 2011, GM corn was also grown in Argentina, Brazil, South Africa, Canada, Philippines and six EU countries. Asian countries are increasingly positioning themselves towards GM and this may indicate a potential acceleration of the technology in the region.
US corn yields bushels per acre 200 Revolution #2 Biotech-led step change 150 Revolution #1 Introduction of corn hybridization improved agricultural productivity Traits

88% of the corn grown in the United States today is genetically modied

100

Seed treatments Marker-assisted breeding

50

Double cross hybrid

Single cross hybrid

0 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Sources: USDA NASS; Syngenta

40

03 Crops in focus

Cereals
Wheat is the principal cereal cultivated worldwide accounting for about 68% of global cereals production. In 2011, world production of wheat was 696 million tons, making it the second most produced grain after corn. With around 80% of the crop being used for food, wheat consumption is driven primarily by population growth. Feed use at ~20% is the next largest outlet, and this has been growing recently as wheat has been competitive with alternative crops such as corn and sorghum. A new and additional use is biofuels which, while growing, still represents only a minor portion of consumption.
Wheat Stocks-to-use ratio* % 40 Wheat Crop price index Jan 2002 = 100 400

80% of wheat production


is used for food

35 300 30

Wheat is grown in over 120 countries worldwide on ~230 million hectares, producing around ~700 million tons of grain

25

200

20 100 15

10 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13E *Current prices, stocks estimated by end of marketing season Prices: last update January 2013 Sources: WASDE; Bloomberg; Syngenta analysis

Wheat is grown on more hectares worldwide than any other crop and likewise is distributed over a wider range of countries, China being the major individual producer. The major exporters are the CIS, United States, Canada and the European Union. Currently, there is no genetic modication in wheat due to strong public opposition. Recently, however, Canadian, US and Australian wheat industry groups have voiced their support of GM technology.

There is no GM trait in wheat today

Crops in focus 03

41

Cereals

Wheat is the most susceptible of all major crops to the effects of changing climatic conditions, pests and diseases. With tight supply and demand balance, high usage of low yielding saved seeds and no GM currently available, signicant technology investment is required to match yield growth with demand growth.
2011 wheat production and consumption millions of tons (Mt) 160 140 120 100 80 60 40 20 0 EU China Production India US Consumption Russia Pakistan Canada Argentina Australia Kazakhstan Ukraine 137 127 118 121 Production Total: 696 Mt Top 11: 85 % Consumption Total: 695 Mt Top 11: 67 % Trade Total: 157 Mt 22 % of production

2011 wheat yields by country tons per hectare (t/ha) 0 2 4 6 8 10

87

81 54 32 56 38 24 23 25 10 23 8 16 6 22 15 30 7

World France Germany China India United States Russia Canada Argentina

Sources: USDA; COCERAL

Planted on ~50 million hectares in 2011, barley is the second largest cereal crop worldwide. The top ve producing regions are EU, Russia, Ukraine, Australia and Canada and combined these account for approximately 70% of global production. The primary use of barley is animal feed as a good source of protein. Similar to wheat, there are no GM traits in barley today and a relatively high use of saved seeds leading to signicant discrepancies in yield performance globally.
2011 barley production and consumption millions of tons (Mt) 60 50 40 30 20 10 0 EU Production Russia Consumption Ukraine Australia Canada 17 51 52 Production Total: 134 Mt Top 5: 70 % Consumption Total: 136 Mt Top 5: 60 % Trade Total: 20 Mt 15% of production

Around 10% of barley produced worldwide is used for beer production

2011 barley yields by country tons per hectare (t/ha) World Canada Australia Ukraine Russia EU 0 2 4 6

14 9 6 8 3 8 7

Sources: USDA; COCERAL

42

03 Crops in focus

Soybean
Soybean is an important global crop, providing protein and oil; ~80% of the soybean crop is used as meal for animal feed, with the remainder used either directly for food or in a wide range of industrial products. Population growth and increasing meat consumption per capita will continue to drive demand for soybean production in the future. China is expected to continue to increase its imports in the medium term, and Latin America is expected to be the main supplier of this growth. The US is expected to remain a strong exporter.
Stocks-to-use ratio* % 30 Crop price index Jan 2002 = 100 400 250 25 300 200 +700% 20 200 150 Global production

~80% of the soybean

crop is used for animal feed

100 15 100 50 +300%

10 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13E * Current prices, stocks estimated by end of marketing season Prices: last update January 2013 Sources: WASDE; Bloomberg; Syngenta analysis

0 1960 1970 1980 1990 2000 2010

Production (Mt) Harvested area (Mha) Source: USDA

Soybeans can produce twice as much protein per hectare as any other crop

Crops in focus 03

43

Soybean

The United States, Brazil and Argentina together account for more than 80% of global soybean production, while China and the European Union are the major import markets for soybeans.
2011 soybean production and consumption millions of tons (Mt) 100 90 80 70 60 50 40 30 20 10 0 US Production Source: USDA Brazil Consumption Argentina China 14 49 40 41 37 67 84 Production Total: 238 Mt Top 4: 86 % Consumption Total: 254 Mt Top 4: 77 % Trade Total: 90 Mt 38 % of production 71

More than 80% of

soybeans are produced in the Americas

2011 soybean yields by country tons per hectare (t/ha) World United States Brazil Argentina China Canada India 0 2 4 6

Soybeans are one of the food and feed crops that have been genetically modied, and GM soybeans are being used in an increasing number of products. In 1997, 8% of all soybeans cultivated for the commercial market in the United States were genetically modied, and by 2011 that number had grown to ~94%. Globally, 75% of the soybeans planted today are genetically modied.

~75% of soybeans grown globally today are genetically modied

44

03 Crops in focus

Rice
Rice is the most important staple food for a large part of the worlds human population. The growth in demand for rice is correlated to population growth and is expected to be around 1% per annum.
Stocks-to-use ratio* % 35 Crop price index Jan 2002 = 100 800

More than one billion

people depend on rice cultivation for their livelihood

30 600 25 400 20 200

15

Annual per capita rice consumption in Asia is 85 kg, seven times that of the United States

10 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13E * Current prices, stocks estimated by end of marketing season Prices: last update January 2013 Sources: WASDE; Bloomberg; Syngenta analysis

There are three main challenges surrounding the largest global food crop. The rst is to accelerate the yield productivity growth trend, highlighted by the biggest producing regions, South and South East Asia, delivering inconsistent yields at 60% below their estimated potential. Secondly, the current growing methods have a substantial reliance on labor that must be reduced. More than 90% of rice is planted by hand and with labor availability increasingly scarce, labor costs continue to escalate. Finally, excessive loses during and after harvest can reach up to 40%. To solve these challenges a more comprehensive approach to rice planting is required, with substantial up-scaling of agricultural input quality and intensication, complemented by agronomic education and infrastructure improvement.
2011 rice production and consumption millions of tons (Mt) 140 120 104 100 80 60 40 20 0 China India Indonesia Bangladesh Consumption Vietnam Thailand Myanmar Philippines US 37 40 34 35 93 141140 Production Total: 465 Mt APAC: 90% Consumption Total: 458 Mt APAC: 86 % Trade Total: 38 Mt 8% of production

Almost 90% of rice is grown and consumed in Asia

2011 rice yields by country tons per hectare (t/ha) World China India Indonesia Bangladesh Vietnam Thailand Philippines United States 0 2 4 6

27

20

20 10 11 10

11 13

6 3

Production Source: USDA

Crops in focus 03

45

Vegetables

Around 75% of the 1 billion tons of global vegetable production takes place in Asia and over 60% of global production is consumed by 3 countries: China, India and the United States.
Production value Global production volume

The vegetables market is divided into 6 main crop groupings and 18 major crops:
Solanaceae Cucurbit Root&bulb Tomato, pepper, eggplant Melon, watermelon, cucumber, squash Onion, carrot Cabbage, cauliower, broccoli Lettuce, spinach Beans, peas, sweet corn

US$ ~600 billion

~1 billion tons

Brassica Leafy Large seed vegetables

Fresh Processed

70% 30%

China India Rest of Asia Europe Africa United States Central & South America

52% 10% 15% 9% 7% 3% 4%

Source: FAO

Input value ~US$16 billion, production value ~US$600 billion

The input value (crop protection, seeds, fertilizer) to the crop represents around 3% of the ~US$600 billion production value, of which around US$4 billion relates to seeds.
Global vegetables seeds market by crop group

US$ 4 billion

Solanaceae Cucurbit Root & bulb Brassica Leafy Large seed vegetables

38% 21% 15% 11% 6% 10%

Source: Syngenta analysis

Key demand drivers for vegetables are population growth, GDP evolution, evolving customer preference for fresh produce and a willingness in developed markets to pay a premium for different appearance, taste or color. Given these drivers, the largest future growth market is expected to be Asia. There is a signicant difference both in tastes and production methods in the emerging and developed markets. Emerging markets tend to be dominated by small growers focusing on individual products and supplying small, local market places. On the opposite side are the developed markets where vegetables production is well established and reliable suppliers and growers are essential, as are efcient supply chains. Consumer and retailer needs play an important part in shaping the product offerings in the developed markets. Understanding customer needs is critical, and the value chain and customer requirements are complex. Customers from a growers perspective include traders, retailers and end consumers, each having their own requirements all of which ultimately must be delivered by the grower.

The cost of seeds for some high value tomato varieties can be more than double the cost of the equivalent weight in gold

46

03 Crops in focus

Diverse eld crops



Diverse eld crops group includes sunower, oilseed rape (canola) and sugar beet. Sunower and oilseed rape both produce high value vegetable oils, characterized by their healthy composition with a larger proportion of unsaturated fats which are critical to todays diets. As such they are the most valuable vegetable oils and particularly targeted for food uses. With demand for vegetable oils increasing at around 5% per annum, they play an extremely important role in meeting future demand.
Global vegetable oil production millions of tons 20002025 (Mt) 250 200 150 100 50 0 Demand 2011

Demand for vegetable

oils has increased at 5% per annum since 2000

2000 Corn oil Coconut oil Groundnut oil Source: LMC

2005

2010

2015E Sunflower oil Rapeseed oil Soybean oil

2020E

2025E

Cottonseed oil Palm kernale oil Palm oil

Sunower is widely grown in the emerging markets of Russia, Ukraine and Argentina where it is an important crop due to its stable growing patterns even under adverse climatic conditions. In addition low input costs and high commodity prices make it particularly attractive in these markets. With a drive towards higher yielding varieties and native trait adoption, the market has seen a substantial shift from local genetics to high value hybrids. This market evolution is expected to continue, and will be an important driver in meeting the 5% per annum demand increase.
2011 sunower production and consumption millions of tons (Mt) 11 10 9 8 7 6 5 4 3 2 1 0 Russia Production Ukraine EU Argentina China Turkey US 3 3 2 2 1 2 1 1 Production Total: 39 Mt Top 4: 79 % 8 8 Consumption Total: 39 Mt Top 4: 76 % Trade Total: 2 Mt 5 % of production

Russia and Ukraine account for almost 33% of global sunower production; Ukraine is the biggest sunower oil exporter

10 9

9.5

10

2011 sunower yields by country tons per hectare (t/ha) World EU Ukraine Russia Argentina China United States Turkey 0 0.5 1.0 1.5 2.0 2.5

Consumption

Sources: USDA; COCERAL

Crops in focus 03

47

Diverse eld crops

Oilseed rape dominates the productive farm lands of the northern countries such as Canada, Germany, France and UK where it is grown by sophisticated farmers. China is also an important oilseed rape growing country with production representing over 20% of the worlds harvest, all of which is consumed locally.
2011 winter oilseed rape production and consumption millions of tons (Mt) 25 20 15 10 5 0 EU Production China Canada India Australia 19 22.5 7 16.5 13 14.5 Production Total: 61 Mt Top 4: 88 % Consumption Total: 63 Mt Top 4: 84 % Trade Total: 13 Mt 21% of production

Around 60% of Canadas


rapeseed is exported

2011 winter oilseed rape yields by country tons per hectare (t/ha) 7 6.5 7 3 1 1.5 1 1 US World EU China Canada India Australia Ukraine United States 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

0.2

Ukraine

Consumption

Sources: USDA; COCERAL

Oilseed rape and sunower are frequently grown in crop rotation with other eld crops such as wheat or corn and farmed in an environmentally sustainable way. Both crops are highly adapted to their respective environments, provide good returns to growers and positively contribute to environmentally sustainable farming. Sugar beet is responsible for around 20% of the global sugar production worldwide. Sugar beet is a root crop which grows in temperate zones with a very intense and demanding cultivation. It is therefore mainly concentrated in the Northern Hemisphere, where it is an important rotational crop, specically in Europe. France is the biggest worldwide producer of sugar beet followed by US, Germany, Russia and Turkey. France is also the biggest European producer of sugar. Sugar beet growers have quickly adopted GM technology. The glyphosate tolerant trait, launched in 2007, covers today 95% of the area planted in the US, having already reached 60% adoption in the second year of launch.

United States sugar beet had already reached 95% GM adoption in 2009; its third year of commercialization

48

03 Crops in focus

Sugar cane
Sugar cane is a highly productive perennial grass which is grown largely in tropical and subtropical regions with no water scarcity. Sugar cane requires around 250,000 m3 of water per hectare. Ideal growing conditions are hot during the initial growth phase and then dry during the maturation stage this will optimize the level of sucrose production. Sugar cane is only replanted every ve to six years. During that period the crop is harvested and regrown several times and, as a consequence, crop yield progressively diminishes; with as much as 50% loss in sugar content. Sugar cane production is largely concentrated in six countries. Brazil is the worlds largest sugar cane producer, producing over 40% of the worlds sugar cane. Over the past 10 years production has increased by over 100% and upward trends are continuing at a comparable pace. Bioethanol derived from Brazil sugar cane is very cost competitive relative to other sources even with no governmental subsidies. Sugar cane derived biofuels (ethanol, bioelectricity) rank highly with regard to sustainability with up to a 90% reduction in greenhouse gas emissions compared to gasoline.
2011 sugar cane production millions of tons (Mt) 800 600 400 200 0 Brazil Source: FAPRI India China Thailand Mexico US Brazil India China Thailand Mexico United States World 2011 sugar cane yields by country tons per hectare (t/ha) 60 65 70 75 80 85

Brazil produces

over 40% of the worlds sugar cane

Around 50% of Brazil sugar cane output is used for biofuel production

Sugar cane demand is growing exponentially driven by both human sugar demand and biofuels. This outpacing of demand has pushed prices up almost 250% over the last 20 years. With sugar cane producing over 80% of the worlds sugar, this creates a signicant requirement to improve yields and efciency. Due to lack of technication, growing areas have expanded to keep pace with demand but this is not a sustainable model. Technology development will be essential to increase yield over the life of the crop and to address land sustainability issues. Currently there is no GM available in sugar cane due to lack of investment and the genetic complexity of the crop. Signicant strides have been made in this area in recent years which should allow development of GM sugar cane crops in the foreseeable future.
Human sugar consumption millions of tons (Mt) 160 140 +46% 8 6 4 120 2 0 +106% Growing areas for biofuels from sugar cane in Brazil millions of hectares (Mha)

Sugar cane produces ~80% of the worlds sugar

100

1990 Source: USDA

2000

2010

2006

2010

2020

Note: Assumes that 50% of sugar cane area is dedicated to biofuels Source: OECD-FAO

Crops in focus 03

49

Specialty crops
Specialty crops represent a collection of more than 40 diverse crops spanning the major fruit crops, potatoes and cotton, as well as the plantation crops such as coffee and cocoa. Specialty crops are grown throughout the year in all regions and have a total farmgate value in excess of US$500 billion. There are signicant yield differences in many of these crops, depending on where and how they are grown, agronomic practices and degree of technication.
Specialty crops farmgate value

Five major crops

represent ~ 45% of the total farmgate value

US$ ~500 billion

Citrus and pome Potato Grape Plantation Cotton Other crops

US$70 billion US$55 billion US$40 billion US$40 billion US$30 billion US$270 billion

Source: Syngenta analysis

China is the largest producer of cotton, most of it used domestically. The United States is the largest exporter

All regions have a diverse range of specialty crops specic to the agronomic conditions within that region: North America Europe Latin America Asia Pacic Potato, cotton, citrus, pome Grape, potato, citrus, pome Cotton, citrus, banana, coffee Potato, cotton, pome

Potatoes are the third largest food crop after rice and wheat

Specialty crops encompass a multitude of end uses, from high value niche segment consumables such as chocolate and wine, through to broader segment end uses including textiles, tires and cooking oil. The key food crops within specialty crops have many similar characteristics to vegetables in terms of demand drivers and grower challenges. Like vegetables, a signicant proportion of the market exists in Asia Pacic and as such many crops will experience above-average demand growth linked to GDP advancement and the subsequent increased desire for more variety of fresh produce. In developed markets the need for shelf life, quality and convenience means consumers are willing to pay signicant premia for high-quality produce. One of the largest challenges facing specialty crops is the availability of labor. With high levels of production taking place in emerging markets, increasing levels of urbanization make it hard to attract labor into this sector thereby accelerating the need for technology advancement in crop management programs.

Potatoes produce two times more calories per liter of water than rice

04 Technology in agriculture

Technology in agriculture 04

51

Evolution of the industry

Traditionally the agricultural industry has operated under a single product paradigm. That is to say the global agribusiness enterprises were mainly focused on launching the best individual products within a single technology stream be it crop protection, seed care, seeds or traits. Consequently growers had to rely mainly on their own judgment and knowledge in combining such products in order to address specic challenges which they faced. Farmers, however, operate in an increasingly challenging and complex environment where single product solutions are no longer sufcient to address weed, pest and disease pressures so that they continue to increase output to meet high levels of demand while supporting the environment. In addition, more stringent controls from governments, consumers and regulators bring further challenges which must be managed. Farming businesses have always depended on their ability to combine products suited to their specic conditions and needs. The best yields that can be obtained involve an integrated approach using better seeds, water efcient technologies, nutrients, pest and weed management and soil conservation. Furthermore, knowledge sharing can increase agronomy skills and build on local practices. Syngentas response to the evolving needs of farmers across the globe has been to launch a new integrated strategy with those needs at its very heart. The strategy recognizes that solutions to complex farmer challenges are no longer met by single products, but instead require innovation to weave together several technologies (both existing and new) in order, ultimately, to bring plant potential to life.

Integrated solutions Agronomic know-how

Crop protection Integrated solutions

Seeds and traits

Adjacent technologies

52

04 Technology in agriculture

The role of crop protection

Crop protection products protect crops from damage by controlling weeds, disease and insect pressure. The widespread use of newer and more effective products since the middle of the twentieth century has increased food security and improved standards of living around the world. Crop protection products also help to safeguard public health by controlling pests that spread disease to people and livestock or cause damage to homes and property. Weeds, insects and disease have attacked food supplies throughout human history. Only very recently, however, has modern science discovered effective ways of controlling these threats to crop yield. After 30 years of rapid growth in agricultural production, the world can currently produce enough food to provide every person with more than 2,700 kilocalories per day; this level would ensure adequate food for all if distribution distortions did not exist.
Theoretical maximum yield on key crops % 100 80 60 40 20 0 Rice Wheat Corn Soybean Cotton Potato

Without crop protection,

~40% of the worlds food would not exist

Remaining potential Extra yield from crop protection today Yield with no crop protection

Since 1975, when the population was four billion people, crop protection products have been essential in order to produce enough to feed the global population. Crop productivity improvements since 1961 have forestalled habitat conversion to farmland of some 980 million hectares globally; an area roughly the size of the total land area of the United States. Crop protection products are absolutely essential for raising yields and keeping pace with rising demand without encroaching on the environment.

Technology in agriculture 04

53

Crop protection: market overview

In a little over 60 years since its inception, the crop protection industry has grown from nothing to a market of more than ~US$46 billion in 2011. From the 1970s through to the 1990s, growth was fuelled by the introduction of new chemistry which addressed many unmet agronomic challenges faced by growers, resulting in signicantly improved yields. France was an early adopter of crop protection products and today produces average corn yields around 10 tons per hectare. This contrasts sharply with agricultural markets still in the process of adopting crop protection products, such as Russia where corn production averages four tons per hectare. More recently, the long-term factors driving the crop protection market have been: variable commodity prices impacting farm incomes in the major developed markets; the impact of farm subsidy reforms; economic development in emerging markets such as Latin America and Eastern Europe; and the uptake of biotechnology, predominantly in the Americas.
Relationships of current France and Russia yield 10 t/ha 6.6 t/ha

The crop protection

industry was valued at ~US$46 billion in 2011

Current yield in France Current yield in Russia

4.3 t/ha

2.3 t/ha Wheat

Corn

The global market for agrochemical products, including non-crop uses such as professional pest management, was valued at ~US$52 billion in 2011, a growth of ~13% compared to 2010, an increase of around 30% compared to 2007 and more than doubling since 2000.
Global crop protection and non-crop chemicals market US$ billions 55 50 45 40 35 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

The global agrochemical market has grown around 30% since 2007 as growers focused on increasing productivity

Non-crop chemicals Source: Syngenta estimates

Crop protection

54

04 Technology in agriculture

Crop protection products


Herbicides
Herbicides control weeds that compete with crops for light and nutrients. Without weed control, crop yield can be signicantly reduced. Weeds can also cause further problems by harboring pests and diseases, interfering with harvest operations, and increasing costs of cleaning and drying the crop produce. Herbicides reduce the need for cultivation and can also prevent soil erosion and water loss. Herbicides can be divided in two categories: Selective herbicides: can be directly applied on specic crops to control particular weeds without damaging the crop. Non-selective herbicides (NSH): eliminate all plants (if absorbed by green tissue). Some NSHs can now be used in the same way as selective herbi cides on crops that are genetically modied in order to make them tolerant to specic herbicides. Growers also use non-selective herbicides when preparing elds for new plantings, thus avoiding the need to plough the land. No-till agriculture of this sort maintains soil structure and thus prevents erosion, as well as reduces emissions from ploughing tractors.

2011 global crop protection market by product

~US$ 46 billion

Selective herbicides Fungicides Insecticides Non-selective herbicides Seed treatment Source: Syngenta

30% 28% 23% 13% 6%

Fungicides
Fungicides prevent and cure fungal diseases which can have severe adverse effects on crop yield and quality. The main markets today are fruits and vegetables, cereals and rice. Plant diseases are caused by a great variety of pathogens. Accordingly, this requires many products used in combination or series to control the full range of problems in ways that minimize the chance of resistance building up.

Without fungicides, yields of most fruits and vegetables would fall by 5090%, making fresh produce unaffordable to many

Insecticides
Insects such as caterpillars and aphids can signicantly reduce crop yield and quality through their feeding. Insecticides help minimize this damage by controlling insect pests. The largest insecticide markets are in fruits and vegetables, cotton, rice and corn. In addition to their use in agriculture, insec ticides play an important role in public health programs to control insecttransmitted diseases like malaria.

Seed treatment
Seed treatments are chemical or biological substances or physical processes applied to seeds or seedlings. They help to protect the seeds and assure optimum emergence of the crop. Application of a chemical to seeds is a very well-targeted method of reducing pest and disease attacks on the growing plant.

Technology in agriculture 04

55

Beyond traditional crop protection

With the need for food security and sustainability becoming ever greater, the science of crop protection is opening up new and exciting possibilities that will enhance the tools available to growers. They share a feature: they all offer the potential to help us reduce the environmental footprint of agriculture as complementary tools to traditional agricultural chemicals. They can be classed into ve broad groups.

Biologicals
Biologicals include naturally occurring organisms (e.g. insects, bacteria, fungi or viruses) that can be harnessed into effective crop protection or stimulant products. They offer growers new modes of action which are instrumental in helping to combat insect or disease resistance. Some biologicals are also able to address problems not fully resolved by chemical products available today (e.g. soybean cyst nematodes), and thus offer an important complementary tool for fruit and vegetables.

Crop enhancement
Simply put, crop enhancement seeks to address environmental stress through development of new technologies to enable plants to realize their full potential. Abiotic stresses such as drought, heat, cold and other local stresses, reduce agricultural potential for growers by US$100 billion per year. Over the years, growers and scientists observed and discovered the benets of chemical products as well as biostimulants, to help plants withstand difcult growing conditions and to deliver better yield, improved quality or greater stress tolerance. For example, the chemical active ingredient azoxystrobin (traditionally used as a fungicide to control diseases) when used in many crops leads to enhanced root and/or leaf growth, giving an additional yield improvement over the disease control benet.

Abiotic stress reduces agricultural potential by at least US$100 billion per year

Nutrient efciency
Nutrient availability in soils can be variable, resulting in plants not fullling their full potential. Innovative products designed to boost nutrient solubility in soils and nutrient availability in crops are becoming more available. Such products can help optimize the amount of fertilizers that need to be added to soils, increase yields and improve sustainability of crop production.

United States 2012: 43% of farms experienced severe drought; average corn yields 16% lower than last year

56

04 Technology in agriculture

Beyond traditional crop protection

Crop farming practice


Today, modern farming benets from a wealth of analysis and data e.g. eld topography, soil analytics, microclimate weather analytics and production history. Compiling and converting this data into meaningful information specic to a particular grower environment is now becoming possible. Such information can then be further developed into integrated and actionable grower advice such as product recommendation and application instructions. Complementing availability of advanced information and advice are new advances in delivery technologies. For example, a particular crop protection application protocol may be recommended based on information available at a given time and in the United States product delivery is automated through irrigation pivots rather than having tractors burning fuel driving up and down elds. This allows for timely application in a convenient manner for the grower, ultimately resulting in improved yields.

Technology in agriculture 04

57

Crop protection R&D process

Crop protection products are vital to the production of a safe, affordable and abundant supply of cereals, oilseeds, fresh fruits and vegetables. The crop protection industry is one of the most highly regulated industries in the world. The registration of a product requires demonstration of safety for workers, for all aspects of the environment, for the crops that are being protected and for the food that is eaten. Sophisticated risk assessments are made based on data from hundreds of safety studies and an understanding of Good Agricultural Practice. All aspects of production, manufacturing and distribution are regulated. National and EU agencies monitor food safety on a continual basis. Most food con tains no detectable pesticide residues. When residues do occur they must be below a Maximum Residue Level (MRL), which is a legal standard that shows that approved agricultural practices have been followed. MRLs are set following risk assessments that ensure that the exposure levels to consumers will be well below the levels at which any harm could occur. The acceptable daily intake (ADI) and acute reference dose (ARfD) are set based on safety testing to determine the no observable adverse effect levels (NOAEL), with additional safety factors of 100 or 1,000 built in. Whole diet studies show that any possible health risks from pesticide residues are so small as to be insignicant (notional zero risk). A signicant amount of time and money must be invested into the registration of a crop protection product. The chance of a discovery compound passing all the many safety and efcacy tests on the way to market is about 1 or 2 in 100,000 and, on average, it can take 810 years and around US$260 million before commercial launch in the rst countries.
Discovery and development of a crop protection product Research optimization Year Chemistry synthesis formulation of product Biology research trials field development Toxicology 0 1 2 3 Early development 4 5 6 7 Late development 8 9 Estimated cost US$ millions*

Crop protection products

are vital to the production of a safe, affordable and abundant supply of crops

Approximately 30% of the cost of a new active ingredient is spent on product safety

~US$ 80

~US$ 85

~US$70
Environment Registration Compounds
140,000 5,000

~US$ 25
30 13 1 1 1 1 1 1

~US$ 260

*Estimate excludes cost of failures Sources: CropLife International; Syngenta

58

04 Technology in agriculture

Seeds: market overview

The seeds industry has changed dramatically over the past century, with farmers increasing the amount of purchased seed instead of using seed saved from the previous harvest. Advances in seed technology have accelerated through marker- assisted breeding. Since 1996 the industry has been further shaped by the intro duction of genetically modied (GM) crops. Since 2000, the global seeds market has almost tripled, reaching approximately US$41 billion in 2011. Growth has occurred in both conventional and genetically modied seeds over that period, with cumulative growth rates of ~100% and ~600%, respectively.
Global seeds market* US$ billions 40 35 30 25 20 15 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Since 2000, the global

seeds market has grown almost 90% reaching approximately US$41 billion in 2011

Genetically modified seeds

Conventional seeds

* Includes all crops, commercial and public seeds, excludes flowers Source: Syngenta estimates

In the future, growth will come from a range of crops. The market is expected to continue to grow to over US$60 billion by 2020, primarily due to the continuing improvement of seed quality and hybridization as well as further penetration of GM globally. The seeds industry is concentrated in more industrialized and developed economies, with North America and Europe accounting for ~60% of the total seeds industry in 2011.
2011 global seeds market by region US$ billions

North America and Europe: ~60% of the global seeds market

EAME 22% US$ 9 billion

NAFTA 34% US$14 billion

APAC 29% US$12 billion

LATAM 15% US$ 6 billion


Source: Syngenta

Technology in agriculture 04

59

Plant breeding history

Since the practice of agriculture began 10,000 years ago, farmers have been conducting plant breeding. Initially farmers simply selected food plants with particular desirable characteristics, and used these as a seed source for subsequent generations, resulting in an accumulation of characteristics over time. However, over time experiments began with deliberate hybridization.The science of plant breeding made huge progress based on the work of Gregor Mendel toward the end of the 19th century. By the 1920s, the rst hybridized crops were introduced, bringing tremendous yield improvements to some crops. In 1953 Watson and Crick discovered the structure of DNA. This would soon lead to the advent of marker assisted breeding and to a revolution in the science of crop improvement. Until the 1980s, breeding science consisted of crossing plants within the same or related species. But in 1983 the rst genetically modied plant was produced, opening the possibility to improve crops with completely novel characteristics: biotechnology became an additional technology in the breeders toolbox. Today breeding has become an information science utilizing teams of computational biologists empowered by the processing power of supercomputer and advanced modeling techniques. You can nd more information about some of the modern breeding technologies mentioned in the following section.

60

04 Technology in agriculture

Benets of hybridization

The introduction of hybrid seeds led to one of the biggest science-based jumps in crop productivity. Hybridization is a traditional breeding process in which two inbred lines from diverse backgrounds are crossed to create seed varieties with greater yield potential and enhanced biological characteristics than exhibited by either parent a phenomenon called hybrid vigor or heterosis. From the farmers perspective, hybrid seed has many advantages, including higher yield potential, uniformity, improved plant vigor, improved resistance to stress and disease, and a better return on investment. Crops in which reeders have achieved high levels of hybrid vigor (typically 15% or more) are dominated by hybrid varieties, which are continuously improved and adapted to current needs by the seed producer. Hybrid seeds were rst introduced in the US commercial corn market in the 1920s and have contributed signicantly to the increase in crop yield since then. In 2009, more than 70% of the corn grown globally (and virtually all grown in the US, Western Europe, China and other developed countries) consisted of hybrid varieties. In the other key global crops due to current challenges with hybrid seed production and limited levels of heterosis the percentage is much lower, with ~14% of rice being hybridized and virtually no hybridized seed in either wheat or soybean. However, in several vegetable crops where heterosis levels remain low, hybrids have become commonplace due to their potential to rapidly deploy improved fruit quality and agronomic traits such as disease and insect tolerance.

Yield generally correlates


with the quality of the seeds grown

Yield generally correlating with quality of seeds 2011 Corn tons per hectare (t/ha) 8.1 5.1 5.3 2.4 2.9 1.7 Soybean tons per hectare (t/ha)

Global

Low tech*

High tech**

Global

Low tech*

High tech**

Wheat tons per hectare (t/ha) 4.3 2.9 2.2

Rice tons per hectare (t/ha) 4.7 2.9 2.4

Global

Low tech*

High tech**

Global

Low tech*

High tech**

* Corn: BR, China, CIS, RoW; Soybean: RoW; Wheat: CIS, India; Rice: SEA, India ** Corn: US, AR, EU; Soybean: US, AR, BR; Wheat: US, EU, China; Rice: China, Japan, US Source: Syngenta, based on planted area

Technology in agriculture 04

61

Benets of hybridization

Marker-assisted breeding
Marker-assisted (or molecular-assisted) breeding can provide a dramatic improvement in the efciency with which breeders can select plants with desirable combinations of genes. It is used in advancing research both in native (non-GM) traits and biotech (GM) traits. A molecular marker is a genetic tag that identies a particular location within a plants DNA sequences. Plant breeders use genetic markers to identify the versions of specic genes associated with a desirable trait; this allows them to predict and guide performance at early stages of development. Genetic markers, when tied to enhanced genetics knowledge, create a roadmap of the genes and genetic effects in the plant. Markers allow the breeder to predict the presence of specic characteristics even before the plant is fully grown. Therefore, the efciency and leverage of costly and time-consuming breeding trials in the eld or in greenhouses can be leveraged. Marker-assisted breeding enables the outcome of the breeding process to be optimized at the gene level, allowing for the development of plants with new properties that are benecial to the consumer, such as improved taste, without incorporating undesirable foreign genes.
Marker-assisted breeding process Desired gene 23 fewer backcrosses

Marker-assisted breeding
accelerates the breeding process while reducing costs

Donor plant Undesirable gene Source: Syngenta

Commercial cultivar

Breeding intermediate

Improved commercial cultivar = Molecular markers that distinguish the DNA of a donor parent from the DNA of the commercial cultivar

Towards predictive breeding


Most of the molecular markers used by breeders today are like road signs along the highway. They are associated with a specic location on the genome, but they do not reveal much about the location (the variant gene causing the trait) itself. Advances in biology and genome sequencing are rapidly changing this. Genome sequencing cost has come down exponentially over recent years, and now allows the determination of the specic version of the gene that causes the trait variant, rather than a number of markers loosely associated with the trait. This in turn provides insights in the mode of action of the gene variant that causes the trait of interest. This type of know-how is being developed and deployed at a fast pace. It is made possible by super-computer and computational scientists that can analyze and interpret the staggering amount of data produced in breeding programs by the combinations of traits. Breeding is quickly becoming an information science, where the performance of a hybrid variety in a farmers eld may soon be predicted to a large extent just by looking at its DNA sequence. This new science, referred to as predictive breeding, increases the selective power of breeding programs, and accelerates seed improvement.

62

04 Technology in agriculture

Biotechnology

Biotechnology is dened as the use of living organisms to develop useful products and includes the technique of genetic modication, also known as gene technology or genetic engineering. This refers to the process of adding a specic gene or genes to an organism or of knocking out a gene to produce a desirable (and often novel) characteristic. The ability to create genetically modied (GM) organisms has been used to develop new drugs and vaccines in medicine. In agriculture, it allows the production of food and feed crops with improved characteristics such as higher yield, improved nutritional qualities, resistance against insects and diseases and enhanced food-processing qualities. In order to successfully develop a product through biotechnology, two key elements are needed: trait development and commercial plant biotechnology. Trait development is widespread, but the number of organizations involved in commercial plant biotechnology is relatively small due to the associated high costs of R&D, intellectual property protection of the technology and the level of regulatory testing. In many countries, GM crops have been adopted rapidly, and the market for genetically modied seeds containing herbicide tolerant and/or insect resistant crop traits has been one of the fastest growing sectors in the agricultural industry over the last decade. This trend continued strongly in 2011 with a further signicant increase in the utilization of GM crops globally. The market value increased to US$16.5 billion. Crop yield increased dramatically in the United States with the introduction of biotechnology contributing to these increases. Since 1995, the last year before GM varieties were planted in the United States, corn yield has increased ~30% reaching almost 147 bushels per acre in 2011 (~9.3 t/ha). Of the 86% planted corn acres in the United States today, contain a GM variety. Similarly, ~94% of all soybeans in the United States are GM varieties, with yields increasing ~20% since 1995.
GM adoption by crop 2011 millions of hectares (Mha) 80 75%

Biotechnology is the

most rapidly accepted technology by farmers ever; plantings are increasing each year

GM exists primarily in four crops today: corn, bean, cotton and canola
32%

60

40 68% 82% 26% 0 Soybean Corn Cotton Canola

20

GM adoption in percent of global crop area Source: ISAAA

Technology in agriculture 04

63

Biotechnology

In 2011, over 16.7 million farmers in 29 countries around the world grew biotech crops on 160 million hectares of land. Another 30 countries have approved the import of biotech products for food and feed use, for a total of 59 approving countries globally. In 2010 three new countries grew biotech crops: Pakistan, Myanmar and Sweden. Germany also resumed planting of GM crops.
Adoption of GM crops by country millions of hectares (Mha) 80 Canada: 10.4 Other LATAM: ~5.2 60

GM adoption:

Americas dominate, followed by Asia

40

US: 69.0

Brazil: 30.3 Other APAC: 1.6 Pakistan: 2.6 Europe: <1.0 Argentina: 23.7 China: 3.9 India: 10.6 Africa: ~2.6

20

0 NAFTA Source: ISAAA LATAM APAC EAME

In the EU, the use of biotechnology in crops for cultivation has still not been accepted widely despite several biotech products receiving a positive risk assessment from the European Food Safety Authority. In a world where food security affects everyone, it is critical that farmers across the globe have access to the technology that will help them produce more food in a sustainable manner.
GM adoption millions of hectares (Mha) Economic benet of GM crops since 1996

150

2011 highlights +8% to 160 Mha

US$ 78.4 billion


~9% of global crop area

100

Yield gains Decrease in production costs Source: ISAAA

60% 40%

50

0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Rest of world China India Canada Brazil Argentina US

Sources: ISAAA; Syngenta

64

04 Technology in agriculture

Research, development and regulatory environment for biotech crops

The process involved in the development of a new biotechnology trait is extremely complex and time consuming. The overall time required is more than that for the discovery and development of a crop protection chemical and is increasing the complexity of new trait discovery and development. The complete process takes around 13 years from the point of discovery of a new genetic sequence, which demonstrates changes in the plant metabolism or biological activity, through to the complex registration process that must satisfy both the regulatory bodies in the cultivating country as well as those in the major import markets. Following the discovery of a new genetic sequence, this must then be combined with other sequences in order to develop the most suitable genetic construct. From here several events will be selected for introgression into elite germplasm. This will result in high quality hybrids or varieties that can then be further tested and evaluated under eld trial conditions. Alongside the ongoing commercial evaluation of the trait, all biotech crops are thoroughly assessed for their safety to humans, animals and the environment before receiving nal regulatory approval. Rigorous laboratory and eld studies are conducted to identify and assess potential toxic, allergenic or other unintended effects that may raise safety concerns. Agricultural biotech products are among the most stringently tested food products available on the market, and regulatory agencies have concluded that approved biotech products are as safe as their conventional counterparts. Over the years, thanks to progress made in genetic screening and evaluation, biotech companies have been able to signicantly increase efciency in the process. There are signicantly more genes evaluated within the discovery phase and those which progress through to the commercial event produc tion and selection phase are far more focused. Due to the stringent regulatory processes this is the most time-consuming area of the development stage. An average nine years of regulatory work is required, much of it running in parallel to the early development stages. The time taken in 2011 was almost 20% more than that of new traits introduced prior to 2002.

It takes on average

13 years to develop a new GM trait

Agricultural biotech products are the most stringently tested food products on the market

Technology in agriculture 04

65

Research, development and regulatory environment for biotech crops

Discovery and development of a biotech crop product Research Development

Regulatory authorization Registration and regulatory affairs 17 US$136 m* Total Commercial Introgression event production breeding&wide and selection area testing 14 28 Regulatory science 18

Early discovery Cost (US$ m) Units evaluated Pre-2002 20082012 Duration (months) Pre-2002 2011 18

Late Discovery 13

Construct optimization 28

1,638 6,204

302 4,005

135 511

2,853 1,302

4 2

2 1

1 1

38 26

17 21

18 33

24 34

40 42

51 47

44 66

13 years

* Estimate excludes cost of failures Note: time taken is not consecutive, many activities can overlap Source: Phillips McDougall for CropLife International

As export trade for major crops increases one of the major challenges facing the industry is the harmonization in regulation approval timelines between major importing countries. Asynchronous GM approvals occur due to discrepancies in approval timelines between importing countries of GM modied food and feed. The issue is most common in Europe and China who increasingly rely largely on imports from the Americas where GM accounts for the majority of production. By harmonizing approval timelines, benets would be seen in trade relations, processing and importation costs, as well as ensuring continuity and choice of supply. Several governments have recently signed a declaration of intent to work collaboratively on the issue of the Low Level Presence of GM-products approved in the country of origin but not in the countries of import to facilitate international trade of agriculture commodities.

One of the major challenges facing the industry is asynchronous GM approval timelines

66

04 Technology in agriculture

Innovation and intellectual property

Intellectual property (IP) rights such as patents and plant breeders rights are established legal instruments that provide incentives for innovation in agriculture: innovations such as improved crop protection chemistries and new plant varieties that help farmers grow more while using fewer natural resources. Agricultural companies invest in research and development (R&D) to bring forward new agricultural innovations that drive long-term agricultural productivity, rural development, and environmental sustainability. They do this with the belief that such innovation needs to be encouraged, supported, and protected. As is the case for any industry, the maintenance of IP rights is an essential basis for innovation and progress. However, when it comes to an issue as fundamental as food security, IP systems must be progressive and balanced in order to stimulate continued innovation, and to encourage the broad dissemination and use of benecial technologies. Patents and other forms of IP protection provide incentives to invest in R&D processes, which are increasingly more resource intensive, lengthy and risky, and which require continuous technological innovation. R&D investment typically is around 10% of company sales, which make agriculture one of the most R&D heavy industries. The breeding industry continues to undergo a rapid technication to develop new plant varieties faster and more efciently. Modern technologies and innovative processes are now used at every step of the breeding cycle: gene banks to access genetic diversity; marker-assisted genotyping to help in combining the best characteristics; information technology to help understand critical correlations between genes; metabolomics to support the characterization of interesting traits, and so on. The outcome of the R&D process can easily be copied by competitors and growers, which is why IP protection is important. Without some form of enforceable commercial protection, there would be little incentive to make such large and risky investments. Two different and complementary IP systems Plant Variety Protection (PVP) and patents are used to protect plant innovations. PVP protects a new plant variety on the basis of its phenotypical characteristics, and is suitable for varieties developed by empirical (traditional) breeding efforts. The term of a PVP differs between countries and depends on plant species, but is generally between 15 and 25 years. While the PVP rights prevent unauthorized commercial copying of the variety, the laws contain a statutory breeders exemption that allows a variety to be used for further breeding. This recognizes that new plant varieties are always created from existing plants. For new traits derived from highly technical processes such as genetic modication or complex marker assisted breeding, patents are a better form of IP protection because they provide more robust means to recoup huge research investments. Patents are also used to protect crop protection innovations. The prerequisites for grant of a patent are: novelty inventive step or non-obviousness industrial applicability

Two IP systems

protect plant research and innovation PVP and patents

Technology in agriculture 04

67

Innovation and intellectual property

A patent term is 20 years from date of ling. Most patent systems contain a research exemption, which allows further improvement of the invention. In addition, through their disclosure requirement, patents enable other breeders to work with and further improve upon prior inventions. Through patents, many important innovation disclosures have been made, which have bolstered innovation cycles. To be clear: the concept of life cannot be patented, and patents neither confer ownership of a living organism nor any active right to use a patented material or technology. At Syngenta, we believe that tackling the growing challenges facing agriculture can only happen if the industry creatively leverages innovations, not primarily by blocking others, but by making them broadly accessible. IP tools like patents can be used in a positive way that maximizes their benecial effects to foster innovation, while also enhancing opportunities for licensing and technology dissemination. Learn more about Syngentas new e-licensing platform, TraitAbility, on www.traitability.com

Patent life is 20 years


from the date of ling

PVP
Protects: One specic variety described by the sum of all its (phenotypical) characteristics. Only plants with all characteristics are protected Suitable for: Traditional, experienced-based breeding Specics: Breeders exemption; farm-saved-seed provision

Patents
Protects: Invention (new gene or trait; breeding process etc). All plants with the protected feature are protected Suitable for: Biotechnology, marker-assisted bree ding, complex traits, new breeding processes Specics: Research on the invention is allowed, license needed for deve lopment and/or commercial use

05 Lawn and Garden

Lawn and Garden 05

69

Market overview

The lawn and garden industry consists of three main agronomic sectors: genetics, controls and growing media. The market is divided between two major customer groups: professionals and consumers.
Lawn and Garden market 2010

US$ billion

US$ 43 billion

US$ 9.3 billion

Consumer Consumer Professional US$ 43 billion US$ 9.3 billion Genetics* Controls Fertilizer Growing media 63% 16% 12% 9%

Professional Controls Genetics* Fertilizer Growing media 30% 27% 27% 16%

* Genetics includes cut owers, garden owers and shrubs

Flowers, home and garden solutions

The consumer lawn and garden market consists of end-user consumable products for growing gardens and protecting homes and gardens from pests. The market size of US$43 billion is larger than some common retail industries such as laundry or hair care. Gardening products are used to decorate, maintain or protect lawns, gardens, patios, pathways and other outside areas. Among the offerings are plants and seeds, plant protection and nutrition products as well as growing media. About 80% of gardening products are sold through garden centers and hardware/home-improvement stores. Home pest products are used to protect homes from insects and rodents. Over 60% of home pest products are sold through grocery retailers.

It is estimated that

the average United States consumer spends between US$350450 per year on lawn and garden supplies

Professional market and products

The professional market can be characterized by three main segments ornamental growers, turf and landscape and professional pest management businesses. Consumer spending is the overall driver of market size. Substantial consolidation and professionalization of professional ornamental growers is affecting the market structure and is mainly being driven by the big box ower retailers. Similar structural changes have also been seen in the golf course industry where multi-course organizations now manage multiple golf courses worldwide. Professional pest management is a growing market segment driven by consumer desire to control pests in urban and rural spaces.

70

05 Lawn and Garden

Professional market and products

Professional ornamental growers


The professional ornamental segment consists of vegetative and seed genetics, controls, fertilizers and growing media. The largest use segment in controls is cut owers where longer shelf and vase life are key targets of solutions that go beyond controlling pests and diseases. In genetics, products such as seeds, cuttings and young plants are distributed through a value chain including distributors, growers, and retailers that must be nely tuned in order to manage the complexities that the short shelf life of live goods demands. In addition, continued industry consolidation across all segments of the professional value chain contributes to the markets ability to provide high quality, just-in-time products to the end consumer. Genetics are researched and developed not only to meet the desired aesthetics and tastes of consumers, but also to perform optimally under multiple growing conditions. This can mean developing traits to protect plants from drought, heat stress and/or disease as well as expressing traits such as ower color or size. In addition, controls are also researched and developed to be compatible with integrated pest management in order to provide solutions that have favorable environmental proles as well as improved characteristics such as ease of use and application.

Approximately 50% of

the 33,000 golf courses worldwide are in the United States

145 million poinsettias are delivered on time for Christmas, and 128 million pelargonium are delivered on time for Easter

Turf and landscape business


The turf and landscape segment encompasses three main components: golf, landscape management and professional pest management. The golf segment, which is currently the largest and most mature of this business, is primarily concentrated in the US, Europe and Japan. Landscape management, including tree injection to control pests and disease, as well as pest management are also dominating in developed markets, such as North America, but are becoming increasingly important in emerging markets. In the golf and turf market, key priorities are high quality playability, aesthetics and environmental sustainability. Due to the challenging economic environment and the increased pressure from regulators as well as their customers to utilize leisure spaces more sustainably and productively, golf course managers are increasingly looking for holistic, integrated solutions to satisfy the changing needs of the golf course business. In the landscape management and pest management markets, operators aim for technologies which will not only control different pests, diseases and weeds, but also conform to high regulatory and environmental standards and ultimately contribute to their business productivity. The demand for professional pest management products is being driven by factors such as economic growth, urbanization and emergence of new pests and diseases. Customers are increasingly looking for targeted and effective solutions with minimal environmental impact.

Subterranean termites

cause over US$2 billion in damage each year in the United States and up to 1 billion across Europe

06  Syngenta key financial information and ratios

72

06 Syngenta key nancial information and ratios

Syngenta 3-year nancial summary


US$ millions except EPS, DPS 2010 2011 2012 CAGR

Financial highlights 2012


Sales

Sales 11,641 13,268 14,202 10% YoY sales growth 6% 14% 7% YoY growth at constant 4% 12% 10% exchange rates Gross prot margin 1 49.5% 49.0% 49.2% EBITDA 2 2,505 2,905 3,150 12% YoY EBITDA growth 3% 16% 8%

US$14.2bn
12 11 10

+7%
14.20 13.27 11.64

Earnings per share 1 EBITDA margin 2 21.5% 21.9% 22.2% Net income 6 1,397 1,599 1,872 16% YoY net income growth -1% 14% 17% R&D 1,081 1,191 1,253 R&D as % of sales 9.3% 9.0% 8.8% 8%

US$22.30
12 11 10

+15%
22.30 19.36 16.44

Basic EPS 1 16.54 19.47 22.41 16% YoY EPS growth 2% 18% 15% Fully diluted EPS 1 16.44 19.36 22.30 16% YoY EPS growth 2% 18% 15% Tax rate on results1 17% 17% 15% Free cash ow before acquisitions 3 1,187 1,556 924 YoY growth 66% 31% -41% Trade working capital to sales 4 33% 30% 32% Debt/Equity gearing 20% 15% 20% Net debt 5 1,473 1,135 1,706 Dividends per share (CHF) YoY dividend growth
1 2

Free cash ow before acquisitions3

US$0.9bn

-41%

12 0.92 11 1.56 10 1.19

Dividend per share, 2012 proposed

CHF9.50
12 9.50 11 8.00 10 7.00

Acquisition spend 7.00 17% 8.00 9.50 14% 19%

US$654m
12 11 10 654 19 58

Before restructuring and impairment Earnings before interest, tax, minority interests, depreciation and amortization excluding restructuring and impairment 3 Cash ow from operating and investing activities, except acquisitions and investments in and proceeds from marketable securities 4 Period end trade working capital as a percentage of twelve-month sales 5 Total debt net of related hedging derivatives, cash and cash equivalents and marketable securities 6 Earnings after restructuring and impairment, attributable to Syngenta AG shareholders

More information at: http://www.syngenta.com/ir

Syngenta key financial information and ratios 06

73

Regional 3-year nancial summary*


Excluding restructuring and impairment US$ millions Europe, Africa and Middle East Sales 3,423 3,982 3,974 YoY sales growth 16% 0% YoY growth at CER 12% 6% Gross Prot 1,855 2,184 2,115 YoY GP growth 18% -3% Operating Income 1,079 1,333 1,305 YoY operating income growth 24% -2% Operating Income margin 31.5 33.5 32.8 8% 20101 2011 2012 CAGR
Sales: Crop Protection and Seeds US$ millions 5 4 3

7%

2 1 0 2010 Crop Protection 2011 Seeds 2012

US$ millions North America

2010 2011 2012 CAGR

Sales: Crop Protection and Seeds US$ millions 5 4 3 2 1 0 2010 Crop Protection 2011 Seeds 2012

Sales 2,969 3,273 3,931 15% YoY sales growth 10% 20% YoY growth at CER 9% 21% Gross Prot 1,401 1,631 2,126 23% YoY GP growth 16% 30% Operating Income 732 963 1,371 YoY operating income growth 31% 42% Operating Income margin 24.7 29.4 34.9

US$ millions Latin America

2010 2011 2012 CAGR

Sales: Crop Protection and Seeds US$ millions 5 4 3 2 1 0 2010 Crop Protection 2011 Seeds 2012

Sales 2,763 3,305 3,713 16% YoY sales growth 20% 12% YoY growth at CER 20% 13% Gross Prot 1,189 1,492 1,656 18% YoY GP growth 25% 11% Operating Income 739 873 1,007 YoY operating income growth 18% 15% Operating Income margin 26.7 26.4 27.1

US$ millions Asia Pacic

2010 2011 2012 CAGR

Sales: Crop Protection and Seeds US$ millions 5

4 3

Sales 1,707 1,887 1,827 YoY sales growth 11% -3% YoY growth at CER 6% 0% Gross Prot 798 903 854 YoY GP growth 13% -5% Operating Income 492 565 505 YoY operating income growth 15% -11% Operating Income margin 28.8 29.9 27.6
* Excluding non-regional segment 1 2009 not restated so growth in 2010 is not available

3%

3%

2 1 0 2010 Crop Protection 2011 Seeds 2012

74

06 Syngenta key nancial information and ratios

3-year sales summary


Product line
US$ millions 2010 2011 2012 CAGR Selective herbicides 2,308 2,617 2,939 13% Non-selective herbicides 987 1,117 1,246 12% Fungicides 2,662 2,998 3,044 7% Insecticides 1,475 1,790 1,841 12% Seed care 838 1,018 1,107 15% Other crop protection 177 137 141 -11% Total Crop Protection 8,447 9,677 10,318 11% Corn & soybean 1,292 1,471 1,836 19% Diverse eld crops 524 676 719 17% Vegetables 663 703 682 1% Total Seeds 2,479 2,850 3,237 14% Elimination of Crop Protection (64) (80) (110) sales to Seeds Lawn and garden 779 821 757 -1% Group sales 11,641 13,268 14,202 10%
2012 product line sales

Selective herbicides Non-selective herbicides Fungicides Insecticides Seed care Other crop protection Corn & soybean Diverse field crops Vegetables

US$ 2,939 m 1,246 m 3,044 m 1,841 m 1,107 m 141 m 1,836 m 719 m 682 m

22% 9% 22% 14% 8% 1% 14% 5% 5% 100%

Crop Protection by region


US$ millions 2010 2011 2012 CAGR Europe, Africa & Middle East 2,569 2,958 2,910 6% North America 1,940 2,158 2,577 15% Latin America 2,466 2,907 3,261 15% Asia Pacic 1,472 1,654 1,570 3% 8,447 9,677 10,318 11% Total 1
1

2012 Crop Protection sales by region

Includes inter-segment sales to Seeds. Mexico sales reported in Latin America (previously NAFTA).

Europe, Africa & Middle East North America Latin America Asia Pacific

US$ 2,910 m 2,577 m 3,261 m 1,570 m

28% 25% 32% 15% 100%

Seeds by region
US$ millions 2010 2011 2012 CAGR Europe, Africa&Middle East 877 1,063 1,101 12% North America 1,060 1,142 1,398 15% Latin America 304 409 479 26% Asia Pacic 238 236 259 4% Total1 2,479 2,850 3,237 14%
1

2012 Seeds sales by region

Mexico sales reported in Latin America (previously NAFTA)

Europe, Africa & Middle East North America Latin America Asia Pacific

US$ 1,101 m 1,398 m 479 m 259 m

34% 43% 15% 8% 100%

Syngenta key financial information and ratios 06

75

+ 1%

- 5%

+ 14%

2012 sales1 by crop


+ 12%

US$ billion
+ 26%

+ 6%

2012 sales: US$13.4bn (+11%) + 10%


- 5%

Sales by Crop Specialty crops Rice Diverse field crops Cereals Corn Sugar cane Soybean Vegetables

+ 28% + 1%

+ 12% + 14%

US$ 2,051 m 590 m 1,299 m 1,599 m 3,612 m 259 m 2,341 m 1,670 m

15% 4% 10% 12% 27% 2% 18% 12% 100%

US$ billion
+ 26%

+ 6%

Sales by Crop + 10% Specialty crops Rice Diverse field crops Cereals Corn Sugar cane Soybean Vegetables US$ 2,051 m 590 m 1,299 m 1,599 m 3,612 m 259 m 2,341 m 1,670 m 15% 4% 10% 12% 27% 2% 18% 12% 100%

+ 28%

2020 sales target: US$25bn


US$ 25 billion
Specialty crops

8% CAGR

Rice Diverse field crops Cereals

US$ 13.4 billion

Corn

Sugar cane

Soybean

Vegetables 2012 2020

Excluding Lawn and Garden. Growth at constant exchange rates

Source: Syngenta estimates

76

06 Syngenta key nancial information and ratios

Balance sheet
As at December 31 US$ millions Assets Current assets Cash&cash equivalents Trade receivables, net Inventories Other current assets Total current assets Non-current assets Property, plant&equipment Intangible assets Other non-current assets Total non-current assets Total assets 2010 2011 2012

40

Period end trade working capital %

ROIC % 40

1,967 2,554 3,844 1,351 9,716

1,666 1,599 2,736 3,191 4,190 4,734 1,158 1,440 9,750 10,964

30 30 20

2,964 3,025 3,193 3,087 2,869 3,501 1,518 1,597 1,743 7,569 7,491 8,437 17,285 17,241 19,401

20 2010 2011 2012

10

Liabilities&equity Current liabilities Trade accounts payable (2,590) (2,881) (3,409) Current nancial debts (992) (743) (980) Income taxes payable (406) (547) (574) Other current liabilities (1,365) (1,472) (1,464) Total current liabilities (5,353) (5,643) (6,427) Non-current liabilities Non-current nancial &other debts (2,786) (2,374) (2,514) Deferred tax liabilities (813) (753) (863) Provisions (884) (968) (841) Total non-current liabilities (4,483) (4,095) (4,218) Total liabilities (9,836) (9,738) (10,645) Shareholders equity (7,439) (7,494) (8,745) Non-controlling interests (10) (9) (11) Total equity (7,449) (7,503) (8,756) Total liabilities&equity (17,285) (17,241) (19,401)

Syngenta key financial information and ratios 06

77

Cash ow
US$ millions
Cash ow before working capital change Changes in working capital Cash ow from operating activities Additions to property, plant&equipment Acquisitions&divestments Other investing activities Cash ow used for investing activities Changes in interest bearing debt Purchase of treasury shares Dividends paid to shareholders Dividends paid to minority interests Acquisitions of non-controlling interest Cash ow (used for), from nancing activities Cash ow from discontinued operations Currency translation impact Net change Opening cash and cash equivalents Closing cash and cash equivalents 2010 2011 2012 1,582 125 1,707 (396) (10) (44) (450) (26) (246) (523) (1) (48) 1,921 (50) 1,871 2,218 (859) 1,359

2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

Uses of cash versus net gearing US$ millions Net gearing %

(479) (508) 50 (582) (43) (128) (472) (1,218) (601) (377) (705) (1) 535 24 (791) 0 (232) 24 (67) 1,666 1,599

40

20

(844) (1,684) 2 (16) 415 (301) 1,552 1,967 1,967 1,666

0 2010 2011 2012

Capital expenditures Dividends Acquisitions & intangibles Share repurchases

78

06 Syngenta key nancial information and ratios

Signicant acquisitions
Purchase price consisting of: 1st date of consolidation Cash1 (US$ millions) Other (US$ millions)

Acquiree Devgen

Description
The acquiree is a biotechnology company in Belgium. Devgen uses advanced biotechnology and molecular breeding technology to develop hybrid rice seeds and crop protection solutions with a superior environmental prole A US-based provider of sunower seeds production and processing services.The acquisition represents an important step in the implementation of Syngentas sunower strategy by strengthening supply chain capabilities to enable future growth The acquiree is a US-based biotechnology company. Since 2011 Syngenta and Pasteuria have had an exclusive global technology partnership to develop and commercialize biological products to control plant-parasitic nematodes, using the naturally occurring soil bacteria Pasteuria spp The acquired business is a leading supplier of innovative products for the professional turf, ornamentals and home pest control markets Purchased 100% of Agrosan S.A, an agricultural distributor in Paraguay, together with the trademarks related to its business Acquired the remaining 50% stake in Greenleaf Genetics from DuPont. The transaction dissolved a joint venture between Syngenta and Pioneer Acquired the sugar beets business of Maribo International

Dec. 2012

493

(94% acquired)

Suneld Seeds, Inc.

Dec. 2012

not disclosed

Pasteuria Bioscience, Inc.

Nov. 2012

52

(remaining 63% acquired)

Dupont Professional Products insecticide business Agrosan S.A Greenleaf Genetics Maribo Seeds International ApS Synergene Seed& Technology, Inc.

Oct. 2012 March 2011 Nov. 2010 Oct. 2010 Dec. 2009

125 32

not disclosed 61

not disclosed not disclosed 160

Acquired US lettuce seed company based in Salinas, California, a company known for its diverse and proprietary lettuce gene pool Acquired US lettuce seed company based in Santa Maria, California, well-known for its quality seed production and processing as well as its germplasm Acquired the assets of Monsantos sunower business including all germplasm and the development and breeding activities of hybrid sunower seeds Acquired US-based Circle One Global Inc. to add an antitoxin crop protection technology to portfolio. Toxins can develop in crops such as corn and peanuts, particularly during heat and drought stress Acquired the global pot and garden chrysanthemum and aster business of US owers producer Yoder Brothers Inc. SPS primarily specializes in development, production and marketing of soybean, corn and sunower Goldsmith produces and sells a broad range of pot and bedding products, including major crops such as cyclamen, impatiens and petunia Zeraim Gedera specializes in the breeding and marketing of vegetable crops, including tomato, pepper and melon Fischer specializes in the breeding and marketing of ower crops Fafard is a leading producer of packaged growing media for professional ornamental growers and the consumer retail market EGV specializes in the breeding and marketing of spinach, cucumber, cabbage and cauliower Acquisition of 90% of the North American corn, soybean and wheat business of Advanta BV (known as Garst) Acquisition of 90% stake in Golden Harvest, a company focused on corn germplasm, breeding materials and inbreds

Pybas Vegetable Seed Co., Inc. Dec. 2009 Monsanto hybrid sunower seed activities Circle One Global Inc. Yoder Brothers Inc. SPS Argentina SA Goldsmith Seeds, Inc. Zeraim Gedera Ltd. Fischer Conrad Fafard, Inc. Emergent Genetics Vegetable A/S Garst Golden Harvest
1

Sept. 2009 June 2009 Dec. 2008 Nov. 2008 Nov. 2008 Sept. 2007 July 2007 Aug. 2006 June 2006 Sept. 2004 Aug. 2004

not disclosed not disclosed not disclosed 74 77 33 116

not disclosed 387 185

Amounts include closing adjustments

* 16 per share plus warrants at market value depending on take-up, approx. US$500 million

79

Reference sources

Adoption of Genetically Engineered Crops in the US in 2008, USDA Economic Research Service Report Agribusiness and hunger, Deutsche Bank Research Agricultural Productivity in changing rural worlds. Center for Strategic and International Studies. February 2010 American Coalition for Ethanol A Bafing Global Economy, The Washington Post, July 16, 2008 Buying farmland abroad: The scramble for land in Africa and Asia, The Economist, May 21, 2009 Chicago Mercantile Exchange Council for Biotechnology Information CropLife International Crop Losses to Pests, E-C Oerke, Journal of Agricultural Science (2006) Directorate-General for Agriculture EurObservER The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality, Goldman Sachs, July 7, 2008 Food and Agricultural Policy Research Institute (FAPRI) Food and Agriculture Organization (FAO) of the United Nations Genetic Resources Action International (GRAIN) Greenhouse gas mitigation by agricultural intensication IIED: Land grab or development opportunity? Improvements in Life Cycle Energy Efciency and Greenhouse Gas Emissions of Corn-Ethanol, Journal of Industrial Ecology, 2009 The International Food Policy Research Institute (IFPRI) The International Fund for Agricultural Development The International Institute for Applied Systems Analysis International Labour Organization The International Service for the Acquisition of Agri-biotech Applications (ISAAA) International Water Management Institute KPMG research study on lawn and garden business National Biodiesel Board The New Global Middle Class, Knowledge@Wharton, July 9, 2008 NZFSA 2009 Organisation for Economic Co-operation and Development (OECD) PG Economics Ltd. Ravallion and Chen 2004 Renewable Fuels Association Stanford University study: Greenhouse gas mitigation by agricultural intensication, Burneya, J.A., Davis, S.J., Lobella, D.B. (2009) Tollefson, J. (2010) The global farm. Nature, 466, 554-556 United States Congressional Budget Ofce United Nations Department of Economic and Social Affairs United States Department of Energy United States Department of Agriculture (USDA) USDA National Agricultural Statistics Service (USDA NASS) The Vital Ingredient, Royal Society of Chemistry. (2008) The Washington Post The World Agricultural Supply and Demand Estimates (WASDE) The World Bank World Business Council for Sustainable Development World Health Organization Fact Sheet Health in water resources development The World Wildlife Fund (WWF)

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Cautionary statement
Cautionary statement regarding forward-looking statements
This document contains forward-looking statements, which can be identied by terminology such as expect, would, will, potential, plans, prospects, estimated, aiming, on track and similar expressions. Such statements may be subject to risks and uncertainties that could cause the actual results to differ materially from these statements. We refer you to Syngentas publicly available lings with the U.S. Securities and Exchange Commission for information about these and other risks and uncertainties. Syngenta assumes no obligation to update forward-looking statements to reect actual results, hanged assumptions or other factors. This document does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer, to purchase or subscribe for any ordinary shares in Syngenta AG, or Syngenta ADSs, nor shall it form the basis of, or be relied on in connection with, any contract therefor.

Syngenta Crop Protection AG Corporate Affairs P.O. Box CH-4002 Basel Switzerland www.syngenta.com

2013 Syngenta Crop Protection AG, Corporate Affairs, Basel, Switzerland. All rights reserved. The SYNGENTA Wordmark, BRINGING PLANT POTENTIAL TO LIFE and the PURPOSE ICON graphic are registered trademarks of a Syngenta Group Company. Trademarks indicated by TM or are the property of a Syngenta Group Company.

Article number 016865.040