Little Seed, Big Business

Seed industry is the start point of agriculture, being a fundamental and strategic industry which involves agricultural production capacity, increase farmer’s income, and assurance of food security, national economy and people’s livelihood. Since the founding of the first seed company, the world seed industry has developed for 270 years. Globally speaking, seed industry has grown from the past labor-intensive, management-extensive and capital-decentralized form into a modern industry integrating extensive technology, intensive capital, market-monopolizing and competition-globalizing. 
 

Overview of global seed market 
 

According to ISF and industry consultant report, the global seed market value increased from the $12 billion in 1975 to the $53.8 billion in 2014, which is 3.5 times growth over the last 40 years. In the 5 years ahead, the global seed market is foreseen to maintain fast growth, being expected to arrive at 9.4% CAGR from 2015 – 2020 to reach $92 billion in 2020. 
 

With the continued development of biological technology, global GM crop planting continues to grow. Thanks to GM crop’s high yield, extensive adaptability, less reliance on chemical pesticide and higher nutrition value, commercial GM seed market has grown continuously since 1996. The GM seed market value went up from the $7.8 billion in 2007 up to the $14.8 billion in 2012 with growth rate having reached 90%. The GM seed market share also increased rapidly, from 25% up to 33 % (Figure 1). It is expected that by 2020 global GM seed market value will reach $31.3 billion. 
 

Territory statistics (Figure 2) suggests that seed market of North America ranked No.1 with market value of $17.6 billion and market share of 32%; Asia Pacific ranked No.2 with market value of $16.5 billion and market share of 31% which is very close to North America, followed by Europe ($9.7 billion and 18%) and Latin America ($4.7 billion and 9%). 
 

 

Country Statistics suggests that the top 10 ranked countries are US, China, France, Brazil, Canada, India, Japan, Germany, Argentina and Italy. The total market value of the top 10 amounts to $41.9 billion accounting for 78% of the world total, which shows a high degree of centralization of planting area. The traditional North American market and the emerging Asia Pacific market are developing in parallel. 
 

Crop statistics (Figure 3) suggests that cereal seed played a major role in 2014 with a market value of $25.3 billion and market share of 47%, followed by oil plant ($15 billion and 28%), fruit and vegetable ($7.6 billion and 14%). If calculated in crop category, corn market value turns out to be the largest having reached $12.2 billion with market share of 23%; wheat, rice and soybean are between $6 billion to 7 billion with market share of 11% - 13%; rapeseed, cotton and sunflower are important oil plants, on top of soybean, being between $1 billion to 2 billion with market share of no more than 5%. 
 

Multinational’s development strategy 
 

Since the founding of the first seed company Vilmorin in 1743 (now affiliated to Limagrain), world famous seed companies have been founded one after another over the last 100 years. In the 1990’s of last century, the issue of intellectual property rights continued to extend to crossbreeding sector. Large-scale groups have participated in mergers of seed industry players, leading to lots of merger and acquisition activities, resulting in formation of a number of highly-developed multinational seed enterprises, who are mostly located in developed countries where seed industry began earlier with higher economic level like the US, Netherland, Germany, France, Japan, UK, Denmark, Switzerland and Sweden. Later Monsanto, DuPont, Syngenta and Dow AgroSciences, based upon traditional crossbreeding, have further utilized biological technology to breed GM single trait and multiple trait varieties to consolidate their monopoly position in the industry, having gradually pulled ahead from other seed companies. 
 

The 2014 top 10 global seed companies (Table 1) shows that companies who have invested in GM trait field captures larger market share and takes an advance opportunity of seed development in the future, which are represented by Monsanto, DuPont, Syngenta, Dow AgroSciences and Bayer CropScience. The seed sales of the 5 companies of 2014 accounted for nearly half of the world seed market, having reached 46% of the world market value. Other companies focused on different aspects of seed business, where KWS specialized in normal seed varieties covering cereal and sugar beet seed; Limagrain and Land O’Lakes covered seed, biological research, food processing and healthcare; Japanese Sakata and DLF worked on horticultural seed and grass seed. 
 

To further enhance the competitive edge with respect to research, registration, production, sales and service of seed industry, the prime seed companies have launched series of investment, collaboration, mergers and expansion of business to promote a new round market deployment. The summary of the major business activities of each company in 2013-2015 (Table 2) reveals their respective product strategy – besides continued key cereal seed research and commercialization process, stress is laid on new varieties and new trait; besides increase of capacity to grow market share, expedition of emerging market and sales channel is enhanced. 
 

In the future, the world will experience global warming, decrease of cultivated land, increase of population, shortage of food, increase of biofuel capacity, reduction of farmer’s retained seed, higher volume of commercialized seed and the diversified demand for crop quality and variety. These situations will result in a higher demand for seed world-wide. OECD predicts that the world food demand will be 1.2 billion tons in 2023, which will be 130 million tons higher than 2011-13. While the cultivated land for coarse food grain will not increase, the increase of food crop will rely on other crops such as wheat, rapeseed and sugarcane to fulfill the needs of food, feed, fuel and industrial raw material. 
 

Compared with cereal crop, fruit and vegetable are indispensable due to their unique nutrition. The difference between tropic zone and temperate zone allows farmers to grow extensively different crops, fruit and vegetable. Staple oil crops like soybean, cottonseed, rapeseed, sesame and sunflower seed will be used to fulfill the oil needs of humankind and animal as well as the needs of industrial fuel. 
 

By reviewing the development of seed industry, it reminds that the breakthrough in hybridization technology and GM technology has greatly promoted the development of seed industry. Multinationals like Monsanto, Bayer CropScience and Syngenta have all developed crop varieties that are adaptive, high yielding, resistant to insect pest, resistant to adversity and herbicide, as supported by their strong research capacity and superior genetic resources. In the future, besides the public research institution who will continue investment in researches, private-run institutions and enterprises will also play an important part in the research program, resulting in more diversified research bodies. 
 

Although more investment is made, industrialization of technical achievement cannot be done just at once. According to statistics, it takes 13 years from the discovery of trait until being commercialized for a seed product with new trait. The discovery, development and authorization of rapeseed trait will take 11.7 years; 12 years for corn; 12.7 years for cotton; 16.3 years for soybean. It will take an extra 10 years for special crop varieties, which is a challenge to development of new trait seed. 
 

Laws and regulations to be made complete 
 

With the development of seed industry, relevant legal system has been established which regulates and promotes the commercialization of seed development.
 

The challenge to EU seed market is caused by its market access-related policies. So far EU’s only approved GM crop is MON 810 corn, which is banned by 9 member countries. EU law and regulation concern about the impact caused by GM crops to the biological diversity, diffused impact from GM trait to wild species and the impact from single trait to pest and weed resistance. In a foreseeable future, the laws and regulations of EU and some other countries that concern about human health, environment and agronomic trait will still affect the development of GM crops in many countries. 
 

The demographic dividend and market potential of emerging market are important driving force for the development of future seed industry. Different from the developed economy, emerging market is confronted with problems such as the weak research capacity, disconnected industry chain, incomplete law and regulation, insufficient product protection, quality resources under control of foreign investors, and etc. Therefore it is an urgent need to establish complete legal system for seed industry. In 2015 China will amend the Seed Law of PR China, which will position seed industry to be a national strategic and fundamental core industry. The new law will cover all sectors of seed industry including research, production, distribution, import/export, genetic resource conservation and intellectual property protection. The release of the new seed law will have a significant influence on China’s seed development pattern.