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Oligarch Structure of Chinese Rice Seed Industryqrcode

Jul. 11, 2018

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Jul. 11, 2018
刘海英 Haiying Liu

Haiying LiuFollow

Statistics reveal that there are some 3,293 seed enterprises in China, which include 691 rice seed enterprises. According to an expert estimation, the market value of the rice seed industry is roughly 18.4 billion yuan, including the hybrid rice value of 11 billion yuan, with the total business sales reaching 6 billion yuan.
In 2016, the rice seed sales of Long Ping High-Tech were 1.372 billion yuan, while that of Da Bei Nong Group and Win-All Hi-Tech Seed were 530 million yuan and 420 million yuan, respectively. The total of the top three reached 2.322 billion yuan, accounting for 38.7% of the total hybrid rice seed sales. This is the first time such a high concentration ratio has been seen, indicating the Chinese rice seed industry has assumed an oligarch structure, where tycoons dominate the industry.
1.    Chinese Rice Industry Overview
1)    Planting area of some 450 million Mu with the total output being roughly 200 million tons
China’s rice planting area is some 450 million Mu, ranking second in the world, while the unit and total yield rank first in the world. In 2016, China’s hybrid rice planting area was some 226 million Mu and the conventional rice planting area was 223 million Mu, both being somewhat same.
According to the 2017 Grain Production Public Notification issued by the National Bureau of Statistics of China, China’s paddy planting area in 2017 reached 453 million Mu, which was some 204,000 Mu more than that of 2016, while the paddy output reached 208.56 million tons, which was some 315,000 tons more than the record high of 2015, thus setting a new record. The paddy output has stayed above 200 million tons for seven consecutive years.
2)    Indica varieties of southern region are the main planted rice varieties

The distribution of rice plantations in China shows that the southern planting region is the main rice production region of China, including the double rice cropping rice area of central China and south China, as well as the single/double cropping rice area of the plateau of southwest China. The southern region of China accounts for some 93% of China’s total rice planting area, producing mostly indica rice varieties, except for the small amount of japonica rice planted on Yunnan-Guizhou Plateau.

In recent years, japonica rice has been developing rapidly in China, which is mainly distributed in four prime regions: northeast paddy rice region, downstream Yangzi and Huai River Basin japonica rice region, Yunnan-centered southwest japonica rice region and northwest paddy rice region. Among the above, the planting area of Heilongjiang Province and Jiangsu Province has reached 54.62 million Mu and 29 million Mu, respectively, which is still growing, accounting for some 60% of China’s total japonica rice planting area.
3)    China’s hybrid rice variety being upgraded to 4th generation
Chinese rice breeding has experienced three generations of development: dwarf breeding, three-line hybrid rice breeding and two-line hybrid rice breeding, of which the two-line hybrid rice breeding and the super hybrid rice breeding have developed simultaneously. Accordingly, the rice variety promotion has experienced three upgrades. The landmark varieties are: Shanyou 63, Liangyoupeijiu, Feng Liang You No.1 and Y Liangyou No. 1.

From provenance perspective, the breeding revolution of three generations were led by Aizizhan, “Wild Abortive” male sterile line, IR8 Rice and Nongken 58. The dwarf rice revolution started from Aizizhan rice and Aijiaonante rice, while the three-line hybrid rice breeding was driven and promoted by the discovery of the “Wild Abortive” male sterile line and the strong restorer line IR24 (IR8 derivatives). The two-line hybrid rice breeding revolution originated from Nongken 58.

The fourth generation of Chinese hybrid rice breed is regarded as having started from 2015 when the “Huazhan” series variety was promoted and applied, which is referred to as the Huazhan Era. Its representational varieties include Tianyou Huazhan, C Liangyou Huazhan, Long Liangyou Huazhan and Jing Liangyou Huazhan.
4)    Rice purchasing price in China gradually marketized
Since China’s marketization of corn purchasing, rice purchasing was also marketized in 2017 after the implementation of the protective price policy for 14 years. In 2017, the lowered purchasing price of early indica rice, mid-late rice and japonica rice was deemed as the beginning of marketization of rice purchasing. In 2018, the rice purchasing price went down further and dropped significantly.

5)    Green and fine-quality rice varieties becoming tendency of future development
The supply-chain reform of Chinese agriculture has provided the paddy rice industry with great opportunity for development, which facilitates paddy rice to move towards diversified, green, quality-oriented and featured development for the benefit of cultivation of fine-quality rice. The restructuring of rice varieties, promotion of green and fine-quality rice varieties are bringing about unprecedented opportunities.

Over recent years, a breakthrough in indica rice hybrid breeding has been achieved, which ends the notion that “hybrid rice is not tasty.” In the coming years, simpler and mechanized cultivation of rice of better quality will become an irreversible process in rice production.

It is noteworthy that japonica rice in northeast China is superior to southern indica and will be more competitive. It would be wise to pay due attention to any possible changes in the southern indica rice market. Experts have given a bold forecast that the rice production structure in China in the future will be a one-third situation, where japonica rice, indica rice and hybrid rice will each take one third of the share.
Remark: Some 165 out of the 178 nationally registered rice varieties in 2017 were hybrids, of which 98 were grade 3 or above, accounting for over 55%.
2.    Formation of oligarch structure of rice seed industry

1)    Rice seed industry has the highest concentration ratio in the seed industry
The number of Chinese seed enterprises has dropped from more than 8,700 to some 3,200, with continued mergers and acquisitions. However, the concentration ratio of top 10 Chinese seed enterprises is below 20%, which appears decentralized and less competitive, as compared to the international seed industry.
Nevertheless, in 2016, the concentration ratio of the Chinese rice industry’s top 3 — Long Ping High-Tech, Da Bei Nong Group and Win-All Hi-Tech Seed — reached 38.7%, thus gradually forming an oligarch structure of the rice seed industry in China.
Top 20 Hybrid Rice Enterprises of 2016
Publicized by the National Agro-Tech Extension and Service Center (NATESC)
Long Ping High-Tech
Sichuan Huafeng Seed
Beijing Jinse Nonghua Seed
Hunan Hoping Seeds
Win-All Hi-Tech Seed
Zhejiang Wuwangnong Seeds
China National Seed Group
Hunan Tao Hua Yuan Agricultural Technologies
Hubei Jingchu Seed
Jiangsu Grand Agriseeds
Hainan Shennong Dafeng Seed
Guangxi Zhaohe Seed
Zhongnongfa Seed
Sichuan Golden Harvest Seed
Jiangxi Modern Seed
Sichuan Guohao Seed
Ningbo Seed
Hunan Huoli Seed Technical
Hefei Fengle Seed
Hunan Keyulong Seed

2)    Variety registration highly concentrated
Concerning variety registration, it is noted that the stronger is stronger, as shown by the variety registration structure. Among the varieties registered in 2017, the registrations of the three seed industry leaders — Long Ping High-Tech, Win-All Hi-Tech Seed and Jinse Nonghua Seed of Da Bei Nong Group — accounted for 58.1% of the total registrations, which also increased significantly over the 33.9% in 2016.

As regards to the regional distribution, in 2017, the number of variety registrations of Long Ping High-Tech for all main rice production regions increased significantly, particularly in the upstream Yangtze region and south China of great potential, where its registered varieties accounted for 91.7% of the total in south China. These varieties not only have apparent trait advantages of yield, quality and rice blast resistance but also have proved to be remarkably developed in respect of bacterial blight resistance and heat resistance.

By virtue of its “Huazhan” variety series, the Jinse Nonghua Seed of Da Bei Nong Group has shown its strong competitiveness in the Yangtze valley rice production region, supported by its continued independent breeding achievement. The company has made a breakthrough in achieving five nationally registered varieties, accounting for 12.8% of the total nationally registered varieties.

Win-All Hi-Tech Seed, which is deeply rooted in the semi-late and late rice market of the mid/downstream Yangtze valley region, is now developing upstream Yangtze market and has made a breakthrough from zero in the national variety registration for the upstream Yangtze region. The company owns two nationally registered varieties, accounting for 5.1% of the total nationally registered varieties.

3) Continued merger and acquisition activities

Among the three industry leaders — Long Ping High-Tech, Da Bei Nong Group and Win-All Hi-Tech See — Long Ping High-Tech has conducted a large number of acquisitions. In the last two years, Long Ping High-Tech has successively acquired 51% stake in Guangxi Hengmao Agricultural Technology Ltd, 32.49% stake in Hubei Huimin Agricultural Technology Ltd and 80% stake in Hunan Golden Rice Seeds Ltd, with its market share growing continuously. In 2015, Long Ping Seed International was founded, followed by the establishment of an international R&D center in Hainan Province in 2017. So far, research bases have been set up in the Philippines, Pakistan, Bangladesh, India, Viet Nam, Indonesia and Angola. The Southeast Asian market volume of Long Ping High-Tech has reached 15 billion yuan, while its overseas deployment is expected to have a bright future prospect.

As for Da Bei Nong Group and Win-All Hi-Tech Seed, Da Bei Nong Group has entered into a strategic partnership with Heilongjiang Academy of Agricultural Sciences to hold a controlling share in Heilongjiang Long Ke Seed, aiming to shape the largest seed enterprise in Heilongjiang Province. In the meantime, Da Bei Nong Group made an equity investment in Win-All Hi-Tech Seed, thus becoming the second largest shareholder of Win-All Hi-Tech Seed. Experts said that Da Bei Nong Group intends to take over Win-All Hi-Tech Seed to make up for its inadequate overseas rice deployment and further grow the rice business of the company.
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