More than one in five people alive today live in China. The country’s hundreds of millions of farms, large and small, are chronically strained to produce enough food for the population.

Therein lies the extraordinary opportunity before Syngenta, the large, Switzerland-based agribusiness that state-run chemical company ChemChina acquired in 2017 for $43 billion.

The deal lifted daunting barriers to Syngenta’s ability to expand its business in China. The company, which produces seeds and crop-protection chemicals, is a big player in the agriculture field that aims to leverage innovation and technology to vastly — and very profitably — boost the yields of Chinese farmers.

Syngenta, which had been listed on the SIX Swiss Exchange, has gained much well-needed operational flexibility as a privately held subsidiary in the world’s second-largest economy. Mark Patrick, a 25-year company veteran, took the CFO reins in September 2016, after the ChemChina acquisition was announced but before it closed.

Patrick recently sat down with CFO editors to discuss a wide range of topics, from doing business in China and Syngenta’s relationship with its new parent to the country’s trade tensions with the United States and the controversial role of chemical companies in producing the world’s food supply.

An edited version of the conversation follows.

How has going private affected what you’re doing?

Not a huge amount, except that now we have one shareholder rather than 94 million shareholders. And we have bond investors rather than equity investors, but they want the same financial transparency.

We don’t have quite the same level of reporting requirements we used to, but day to day there is not a big difference.

What about in terms of numbers you have to send to ChemChina?

There are a few additional requests driven purely by SASAC, the body that runs all the state-owned enterprises in China. But we have SEC filings in the United States and had other requirements for being listed in Switzerland, so we already had pretty comprehensive financial reporting that meets 98% of what China needs.

What does the acquisition require you to do in China from an operational standpoint?

A tea plantation in China

We had invested a lot there already. We have two crop-protection manufacturing sites, and we have a joint venture for our corn seeds business. We need to start scaling up now to ensure that we can service a different market than we were servicing two years ago. That takes a bit of time.

But we have a global business, and what we’re seeing in China now is not that different from what we saw in Eastern Europe and Latin America a decade or two ago, in terms of establishing more Western-type [farming] practices.

In many cases, farmers are now looking for financial and risk management solutions that they weren’t looking for before. It’s a source of competitive advantage for us.

ChemChina is already talking about the possibility of an initial public offering for Syngenta. What do you think of that?

It’s quite common in China. The transaction agreement that was signed in 2016 said that within five years of the deal’s closure they would be looking to IPO a minority stake.

But a couple of things are needed. First, the markets obviously have to be conducive to an IPO. Right now, for example, wouldn’t be a particularly good time. Second, we have to demonstrate that the new Syngenta story is an upgrade from the old Syngenta story and that we’re creating incremental value.

What advantages has the acquisition brought to Syngenta’s business?

First is China itself. It’s a $12 billion market today. We’re the leading multinational in the crop-protection space, and we have only a 5% to 6% market share. In seeds, we have less than a 1% market share.

Mark Patrick

One of President [Xi] Jinping’s stated priorities in his 2013 five-year plan was the modernization of agriculture and rural reform. But he needs something or someone to create the momentum to do that. Syngenta is now best placed to establish itself as the leading player in the market. Hopefully, we can go some ways toward helping that modernization along.

China has a basic problem: it has 22% of the world’s population and 7% of the world’s land. It also has a hugely fragmented market and very unsophisticated farmers. There are 200 million “small holders” who don’t have the technology for best-practice protocols, and hence their yields are half what you see in Western countries.

What does that mean for selling into that market of small farmers?

One of the big opportunities in China is Alibaba and [its third-party online payment platform] Alipay, which have e-commerce solutions to reach the small holders in a way that traditional sales reps trudging around the fields couldn’t do — there’s just too many [potential customers].

There are also huge, state-run farms in China. Now we have an opportunity to partner with them and with Alibaba, where before we couldn’t even get through those organizations’ front gates. Our CEO, Erik Frywald, met recently with Alibaba’s chairman to talk about opportunities for collaboration and partnership.

What are the ramifications of having one shareholder instead of 94 million?

I’m not running from one quarterly call to the next trying to demonstrate the company’s performance. China is comfortable taking a longer perspective. For our industry, given the innovation and the length of time it takes to bring new technologies to market, that’s really important for us.

Do they let you plow more of the profits back into the business?

They’ve been very supportive of our management, whether [we’re investing in] M&A or in organic growth through research and development. We did five deals last year. I don’t have any complaints about their interaction with us. We weren’t quite expecting that.

How closely do you follow the geopolitical machinations between the United States and China?

Very closely. Soybeans have been at the heart of some of the trade disputes. We know the impact that it’s had on U.S. farmers, given that commodity prices have suffered substantially. Farm delinquencies here are up quite a bit.

We’re hopeful that the disputes will get resolved very soon. Certainly, the rhetoric coming out of both sides has improved recently.

U.S. farmers can move between corn and beans quite readily, but having clarity that the tariffs on soybeans won’t be there when they want to sell them late this year is going to be a key component of their decision-making.

Sometimes lately things in the geopolitical arena seem to be resolved, and then almost in the next moment they’re not resolved.

I’m English, and Brexit is a similar mess, even more extreme in some respects. The political situation at the moment is very difficult to navigate. As a CFO, when you haven’t got that level of certainty it’s very hard to make investment decisions of a material nature. I think we’re all struggling with that, irrespective of the sector [we’re] in.

How is your U.S. business doing? Farm economics are pretty tough right now.

It was a good year in 2018 for both crop protection and seeds. We gained share in both businesses. But the planning and planting decisions for 2018 were made before much of the current trade uncertainty unfolded. So the 2019 season is a very different kettle of fish, as we’re waiting to see how that’s going to play out.

Decisions on what to plant and what technology to invest in are predicated on what the commodity price is going to be when farmers harvest and sell. Some of them have taken protection by hedging forward.

Are you able to project where the U.S. market will go over the long term?

U.S. farmers are the most sophisticated on the planet and [they] yearn for innovation. They continue to drive yield and quality like nowhere else in the world. We don’t see that changing materially. It’s ingrained in the U.S. farming culture.

Now, Mother Nature seems to be always a step ahead, whether you’re talking about weed resistance, insects, disease, or the vagaries of weather. So companies like ours have to continue to innovate so that farmers can deal with whatever Mother Nature throws at it.

For example, we now have products in our portfolio that are drought-resistant and can tolerate heat stress. Now, our lead times for new technology aren’t 6 to 12 months. They’re more like 8, 10, or 12 years. So we’ve been working at this for some time.

The worst-case scenarios for the climate say it could be significantly different just 15 or 20 years from now. Are you factoring that into R&D already?

Yes. We’re starting to model, using computational science, how things may play out. But we don’t have a crystal ball.

One thing we can be sure of is that the world’s population is growing, and [the amount of arable land isn’t]. Agriculture already uses 70% of fresh water and produces 30% of global greenhouse gases, and even today there are 870 million people that go to bed hungry every night.

None of that is going to get any easier. We need innovation and companies like Syngenta and others to bring technologies into play that hopefully will enable farmers to continue producing effectively while reducing the planetary issues we see today. It’s a tough thing.

What kind of sustainability initiatives do you have?

In 2013 we launched a plan that consists of five commitments to the planet. They’re around things bringing land back into production and training for small holders on the safe use of pesticides.

We currently are in the process of refreshing that. About 18 months ago we hired a chief sustainability officer (CSO) because we recognized the importance of changing our rhetoric. We can’t just sit there talking about the science, because most of the public doesn’t understand the science. All they read is that [genetically modified organisms] and synthetic chemistry are bad for you.

The CSO and her team are working with the executive team as to what the industry is doing well and what we need to do differently. Within two or three months, I hope, we’ll be in a position to articulate externally what the next evolution of our sustainability program will be and what metrics we will now assess ourselves on.

Part of this is, who are we going to work with? If Syngenta alone says, “We’re great and here are our metrics,” many people will still say, “You’re just a bad pesticide company.” We need other organizations that believe what’s being told is the truth to work with us to ensure there’s a balance to this dialogue.

But we’re already taking sustainability into account in day-to-day operations. From an R&D perspective we’re trying to predict what the regulators in Europe are going to want in 10 years’ time, so that what we bring to market then is a significantly improved sustainability footprint.

Why hasn’t Syngenta come under nearly the pressure that Monsanto has?

The Monsanto class-action lawsuits are about glyphosate, which may be the most tested product on the planet. There are no studies to suggest that it’s carcinogenic. One judge and jury in California did find against Monsanto, based on one report that said it might be carcinogenic.

We strongly support the position Monsanto is taking, which is to defend its technology. The company has followed all of the regulatory approvals and required testing to get government support around the world for the use of glysophate. If we can’t rely on governmental regulatory approvals, where does that leave innovation?

Some companies and people out there are saying everything should be organic, but some of the compounds used in organic farming are worse than synthetic chemistry. Copper, for example, is approved for organic farming, but it’s not something I’d particularly want on my food.

Also, yields in organic farming are 30% to 40% lower. It wasn’t even a decade ago that newspapers around the world were talking about government protection and limiting exports because countries didn’t have enough food for their own population. Well, if everyone goes organic, the drop in yields will be cataclysmic.