What’s new in the world seed market?
Jan. 3, 2019
The first objective in seed business is to improve new varieties. To target farmers, seed companies have to provide the most desired cultivars and they must be best quality and perform maximum yield, resist to diseases-pests, heat-cold, drought etc. This can be achieved with plant breeding. Until recent years selection, hybridization, mutation, tissue culture, foreign gene transfer (GMO) and other molecular biologic developments have been used as plant breeding methods. Mutation, used to apply purposefully, to change genes of any living organism with X ray radiation or colchicine. In recent years, this process has begun to be carried out in laboratories at the molecular level, by intra-genome arrangements. These genome arrangements (gene editing), which are also defined as new breeding techniques (NBT), include a series of new gene engineering methods, like “Tilling, Protoplast Fusion, Cogenesis, Oligonucleotide Techniques, CRISPR-Cas9 etc.” These methods do not involve any external gene transfer as in GMOs. Conversely, new genotypes are created by silencing the targeted gene with the help of transient DNA-cutting enzymes, applied in the process step, increasing or decreasing the effect, i.e. micro-mutation.
What noteworthy is that, with these methods, development costs do not reach hundreds of millions of dollars, as it does not require a series of risk analyses like in the GMO technique! In other words, some kind of development with these methods can be realized by small and medium-sized or low-budget plant breeding startups, universities and public institutions. But in EU gen editing has been accepted as GMO and therefor cost of any gen edited new variety could be as high as GMO. Contrarily in the USA, registration formalities of NBT are different than the GMO registration systems and cost of any genome editing variety almost only 1/10 of a GMO.
In the last variety registration application in the USA, 23 candidates were on the list, all improved with NBT. Interestingly only three of them were belonging to the big – global multinational seed companies. The other 20 were owned by new 5-6 years old small – medium enterprises or universities. This means, such development coming with NBT, seems to shake the world seed market. This is an advantage for small companies, to develop new cultivars in short time with the minimum cost. The question here is how long they can keep such a position against global multinational companies.
As an example of the changes in the global seed market, let us have a look at the changes in the market share of the companies in upland cotton seeds application between the years 1976-2017 (Chart, OECD (2018) ). First we witness that only 10% of the farmers were sowing the seeds saved by themselves from their field by the 1990s. It means that 90% farmers were getting their seeds from seed companies. At the same time public institution’s seed share has been transferred to the private sector and public seed have almost lost the market share. Structural changes have started with mergers and acquisitions of the private sector and Delta & Pine have acquired Paymaster and Landkart. As we reached the 2000s biotechnology and GMO began to dominate the market. And now 90% of market share belongs to three cottonseed companies.
Although world seed market is quite small compared to other sectors, food security is very important in terms of agricultural economy, environment and nutrition. Contribution of seed (variety – genotype) to increase the yield is almost 88% . It proves the importance of seed and seed business seems to be a quite attractive one. We cannot oversee the fact that the Dutch vegetable breeders did have the highest profit margin (15%) in the agricultural sector. The CEO of United Phosphorus Limited, which acquired ADVANTA (a medium-sized, global seed firm) in 2006, is striking about the sector: “The future of seed business is bright and seed business is a great sector with lots of potential. ADVANTA has grown three times since we bought it. I see the company’s growth potential ten times more”.
This attractiveness, market values and many others are reasons for acquisitions and mergers in world seed companies, which cannot be observed very often in other sectors . Although mentioned merger complies with international laws, for many reasons, react not only consumers, but also civil society organizations. The main reason is that we have not yet found any answer to following important questions: a) Will seed prices increase? b) Will genetic studies be reduced? c) Is there a decrease in the number of varieties offered to the farmer?
According to 2017 data, the world commercial seed market is around $ 62 billion. 42% of this amount is transgenic i.e. GMO. By 2022, the market is expected to reach $ 78 billion, with a cagr of 7%. According to 2015 data, the organic seed market is estimated at $ 1.6 billion, with a cagr of 12.5%. The seed coating market reached 10 billion dollars according to 2017 data. In this sub-sector, which is expected to increase yearly by 11%, lion’s share (51%) is in insecticide chemicals.
How can be evaluated the developing countries seed business, in this context? Surely numbers of successful seed companies with export capability are exist almost in every country. NBT provide such a facility to small – medium seed firms for genetic improvement of new varieties, so they can compete almost with international firms. Arranging legal regulations like tax and providing credit, scientific consultant, expert, infrastructure and hardware support, will make them more competitive. But we should not miss the support of genitor. For this Universities should be oriented with planned projects, focused on the target.
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