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Summary: 10 keywords of Chinese seed industry 2017qrcode

Dec. 21, 2017

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Summary: 10 keywords of Chinese seed industry 2017

Author: Dingfu Liu, Moran Lin, NOVOSEED

China’s seed industry of 2017 has been labeled with keywords such as Variety Burst, Revision of Standard, Merger and Acquisition, Global Top 10, Adjustment of Planting Structure, and Capital Shrinking, among others. These labels can be summarized thus: “Everything will be redefined.” The changing tone of our times constitutes a great challenge to the seed industry practitioners.

Keyword No. 1: Variety Burst

In the background of multiple increases in seed varieties covered by the national variety regional test, the growing number of cultivation, propagation and promotion-integrated seed enterprises, and more varieties being covered by the green channel test and introduced to all regions of China, a variety spring tide has begun. Variety testing has accelerated, more regions have joined variety testing, the first round of joint testing has come to an end, and provinces have established mutual recognition mechanisms.

Keyword No. 2: Revision of Standards

The Rules of Registration for Main Crop Variety, as issued by the Chinese National Crop Variety Approval Committee in September 2014, have been revised after being put into effect only two years ago. The new revision is seed nature-centric and market-oriented, which changes the past yield-driven evaluation criteria. Seed variety is divided into three types – high yield stability, green quality and special purpose, which indicate the direction of development of variety registration towards classification and diversification.

Keywords No. 3: Modification of Laws and Regulations

This year, China has revised a series of agricultural laws, including the Regulations on Administration of Agricultural GMOs Safety, Measures on Administration of Agricultural GMO Safety Evaluation, Measures on Administration of Agricultural GMO Import Safety, Measures on Administration of Agricultural GMO Labelling, Measures on Administration of Crop Seed Business Licensing, and Measures on Administration of Crop Seed Quality Inspection Body.

In the meantime, following seed-related regulations have been abolished: Permission of Employment Access to Two Occupations in Agricultural Crop Seed Propagation Industry, Procedure of Renewal of Agricultural GMOs Safety Certificate, Evaluation Report on the Safety of Southern Propagation of Agricultural GMOs, Reply to Questions on the Territory of Seed Sales, Reply to Questions on Numbering of Main Crop Variety Registration, and Reply to Tobacco Variety Registration.

Keyword No. 4: Merger and Acquisition

On June 8, 2017, ChemChina announced the closing of the acquisition of Syngenta, the world’s largest pesticide company and the third largest seed company. On November 30, Longping High-Tech, together with CITIC Agri Fund, announced the completion of the acquisition of Dow AgroSciences Sementes & Biotecnologia Brasil. Longping High-Tech acquired majority stakes in Hunan Golden Rice, Hubei Huimin Agricultural Technology, Sanrui Agricultural Technology and Hebei Universe Agricultural. COFCO International sold its Nidera seed business to Syngenta.

Credit: Keith Gillard, Pangaea Ventures Ltd.

Keyword No. 5: Global Top 10

From the 1990s to the early 21st century, there were three merger waves — the first one from 1997–2000, which lasted for three years; the second one from 2004–2008, and the third one from 2016–2017.

Monsanto cast the first stone in the series of mergers. The merger waves in global agrochemical industry witnessed the birth of global seed giants such as Monsanto, Syngenta and DuPont Pioneer, as well as the rise of the Chinese seed industry. The third merger wave was precipitated by the two Chinese companies, ChemChina and Longping High-Tech (under CITIC Agri Fund). This round of mergers resulted in great changes to the industrial structure of the global seed industry.

Credit: Vilmorin Cie

Keyword No. 6: Lowered Price of Rice

While for two years there has been no escalation in the minimum purchase price of mid-late indica and japonica, China’s National Development and Reform Commission lowered the price of rice for the first time this year, and also disclosed that the price would be further lowered in 2018, and it might even cancel the mandated minimum purchase price of the early-season rice.

The prices of early Indica rice, mid-late Indica and Japonica have been lowered respectively by Yuan0.03, Yuan0.02 and Yuan0.05 per 1/2 kg this year. The prices were lowered to convey the message that the supply of rice is now exceeding demand. The reform in pricing mechanism, and the purchasing and storage of key farming products such as grain will follow the idea of“variety-differentiated planning and gradual progression,” where basic policy framework stays unchanged while the flexibility of policies is increased, which means that pricing needs to reflect the market demand accurately. If pricing is distorted, then what happened to corn will happen to rice also (reduction of planting area).

Keyword No. 7: Adjustment of Planting Structure

To meet the requirement of stability in grain crop, quality of economic crop, and expansion of feed crop, efforts are being made to speed up the formation of “grain-crop, economic-crop and feed-crop ternary planting structure.” For grain crop planting, stress is laid on stability and security with special focus on quality rice and high (low)-gluten wheat. The decrease in non-advantageous grain corn shall continue. Planting of quality food soybean, potato and various beans shall continue. For economic crop planting, quality of varieties and regional distribution for plantation will be optimized. Cotton, oil plants and sugar production shall continue; effect and value of horticultural plants shall increase. For feed crop planting, planting area will be expanded so as to grow silo corn and high quality forage such as alfalfa, and a modern feed industry system will be established. The restructuring of agriculture and pasturage-interlaced zone of northern China shall be accelerated to shape a plantation structure, which is breeding-oriented, rather than plantation only, as well as livestock-agroforestry and grass-fruit-vegetable integrated. The grain-change-to-feed and grain-change-to-soybean subsidy pilot program shall continue.

In November, the State Grain Administration and Ministry of Finance initiated a Quality Grain Program which would drive grain production to move from “focusing on output of grain” towards “focusing on quality of grain.” The initiative is expected to enable increased supply of green, high-quality grain and oil products, as well as to facilitate the grain industry to achieve high quality.

Keyword No. 8: High Temperature and Rains

There has been a nation-wide high temperature summer in China this year. In May the first round of high temperature hit Northeast China, North China and the Huang-Huai Region. This summer high temperatures impacted the crops, where seed-set ratio of corn and rice dropped in large areas, resulting in reduced output.

The autumn rain of West China came early this year and lasted long with heavy rains and high precipitation. The accumulated rainfall was 70% higher than normal, a maximum since 1984. Paddy rice was beaten down in large areas affecting 480,000 hectares of planting area and causing economic loss of Yuan12.1 billion.

Keyword No. 9: Business Shrinking

Corn planting area of 2017 decreased by 50 million mu, whereas seed consumption decreased by 100 million kg, and market value decreased by Yuan2.5 billion, resulting in a threat to the survival of corn seed enterprises. The National Agro-Tech Extension and Service Center (NATESC) analyzed the business performance of 90 representational corn seed enterprises, revealing a corn sales profit of Yuan841 million for 2016, which was Yuan1.571 billion in 2015, 46.5 percent down year on year. The first half of 2017 saw more difficulties with 21 listed seed enterprises having 66% decreased sales while profit of 30 representational corn seed enterprises decreased 65%.

2016, 2017 financial year net income data Credit: NOVOSEED

Keyword 10: Technical Breakthrough

The National Key Technical Promotion, which is the Corn-Soybean Strip Mixed Cropping System and its mechanization process, has been demonstrated successfully in Zhangye of Gansu Province. The intercropped corn in the pilot zone in Ganzhou District and Gaotai County, shows an average yield of 919kg and 878kg per mu, whereas the yield of sole-cropping corn has decreased about 4%, and the intercropped soybean shows an average yield of 101kg per mu, resulting in a unit yield increment of Yuan355 per mu. Corn and soybean are both mechanically planted and cropped.

In light of the difficulty in weed control during direct sowing in paddy fields, a Chinese scientific research team, via a chemical mutation screening process, has developed non-GMO herbicide resistance materials for application to paddy rice, wheat, corn and rapeseed. The team has also worked out a special “clean cultivation” mode which applies well to the higher multiple crop index of the cultivated land of China. This approach can avoid damage to paddy rice caused by weed. This is a big technical breakthrough into the technological monopoly of multinationals.

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