Agrow Biotech News

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CHAPTER 1 - INTRODUCTION

It can be argued that plant breeding has played and will continue to play as important a role in the progress of civilisation as any technology. It was the selection of plants with the best seed yields that enabled the early farmers to develop and so provide food for towns and non-farming inhabitants. Our global population is expected to increase to eight billion by 2025 with little possibility of access to further suitable land for farming except in South America. Current prime land is being lost to housing and industry. Our food supply will have to be produced from an ever-smaller area so that productivity per unit area will have to increase significantly. It is fortunate that technology has made huge strides in recent years so that there seems to be little doubt that both the quantity and quality of food and animal feed can be increased to meet the challenge.

All the large seed companies and organisations involved in plant breeding have been embracing the tools of modern technology that are facilitating the advances being made in plant breeding. Truly, the Age of Chemistry is giving way to the Age of Biology, where plants are seen as not only being able to provide food and feed but also the raw material for energy generation – ethanol and biodiesel – raw materials for plastics, improved fibres and vaccines. Chapter 5 will touch on some of the technologies, such as genomics, molecular markers, bioinformatics and genetic engineering, that are facilitating and speeding up the breeding process.

Large multinational plant science companies have collaborated with leading-edge biotech boutique companies and organisations, in moves that have allowed seed companies to take advantage of technology in genomics, gene modification and other areas being developed in the field of human health. While traditional plant breeding could undoubtedly have continued to provide yield increases, further significant increases require the application of more fundamental science.

Clearly, the higher cost and sophistication of modern technology for plant breeding makes it more difficult for smaller companies to survive and favours the larger multinational companies.

Environmentalists are critical of genetic modification and the planting of hybrids and introduced varieties. Yet, all our major world crops spread around the world over many thousands of years, thereby becoming adapted to a much wider range of climatic and soil environments than those of their place of origin. The precision of modern genetic modification and understanding of genomics will speed up this process and provide plants that serve us and the environment in the most sustainable way.

The seed industry needs appropriate safeguards for its intellectual property rights, since the very nature of seed allows reproduction. The World Trade Organization’s (WTO) 1994 agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) requires that countries either adopt the plant variety protection (PVP) system of Geneva-based intergovernmental organisation the International Union for the Protection of New Varieties of Plants (UPOV), or initiate plant patenting, or both. More and more countries are joining UPOV (59 to date) and other countries have some local form of PVP, but an appropriate infrastructure and will to carry out enforcement is essential. This topic will be addressed in more detail in the final chapter.

A much wider range of seed treatments has been introduced, offering greater protection from both soil and early foliar insects and diseases. Chapter 6 can only offer a brief overview of this subject, but a new Agrow report under preparation will provide a complete review and details.

1.2 Seed Industry – company acquisitions

Anyone following the progress of the global seed industry will be aware of the significant changes that have occurred since the last Agrow report covering this sector (Global Seed Markets, DS208, October 2000). The major plant science companies have been consolidating their position through further acquisitions and technology investments. The International Seed Federation (ISF) Secretary General estimated at the Santiago Chile 2005 World Seed Congress that consolidation in the seed industry, as measured by the top five companies, has increased from 8% to 25% over the past 20 years (A Dansby, 2005).

The acceptance of GM traits in North America for use in soybeans, corn, cotton and canola has focused attention on these crops. Vegetable consumption has increased throughout the world as developed countries have recognised the importance of good nutrition and developing countries have improved their standards of living. By contrast, the early attention paid to wheat by Monsanto and DuPont/Pioneer, in particular, has waned. Hybrid rice and cotton in Asia (pioneered in India) may provide the incentive for acquisitions and consolidation in these still largely undeveloped markets.

Crop protection chemicals continue to ring the cash register, but competition has become fierce. Monsanto is already getting more revenue from seeds and traits than from its agrichemical business. Syngenta forecasts that seeds will contribute 40% of its total sales in the future, increasing from around 20% at present. In 2004 Pioneer contributed 42% of the revenue of DuPont’s agricultural businesses versus 36% for crop protection chemicals. Bayer has been divesting its corn seed businesses (Pau Seeds in the US and its seed subsidiary in Argentina), but focusing on vegetables (Nunhems), cotton (Fibermax), rice and canola. Dow AgroSciences is focusing on corn, sunflowers, other field crops and cotton (Phytogen in the US). All these major international companies have invested heavily in new technology.

There have also been some examples of companies building up significant seed industry assets and then disintegrating, such as AgriBiotech in the US, while Advanta was the result of a merger of seed interests.

Recent acquisitions have often been intended to build critical mass in major markets, such as the US corn market. Many of the large companies have also been investing in Asia, particularly India and China, or have had Asian subsidiaries for several years.

There are indications that the generic agrichemical companies are interested in investing in seed companies. United Phosphorus entered the global seed business with its purchase from Fox Paine of the remaining Advanta global seed businesses. Nufarm has also acquired some regional seed companies in its home base, Australia. Acquisition of a fast-growing hybrid seed company in China may presage more privatisation and consolidation. Clearly, seeds are seen to be a growth opportunity, with the potential to provide more integrated production inputs for farmers and growers.

1.2.1 Monsanto

Monsanto became the market leader in 2005 with the acquisition of Seminis, which lifted the group’s share of the global vegetable seeds market to an estimated 20%. In its field crops businesses the group has been pursuing a strategy of acquiring market share in US corn and soybeans by purchasing regional seed companies through its holding company, American Seeds Inc (ASI). This complements the organic growth it expects to get via improvements in its hybrids achieved within the 12 corn breeding programmes it has acquired. Channel Bio has become the parent company under ASI for the regional seed companies such as Midwest Genetics, Inc and Wilson Seeds.

Some of the main acquisitions are shown in Table 1.1.

Table 1.1: Major acquisitions by the Monsanto group