Global Seed Industry: 2006 edition

For the crop protection and crop production industries this is the Age of Biology. An age in which the seed industry indisputably plays a critical role Any doubts about the potential return on investment in the seed industry must have been well and truly dispelled. While crop protection chemicals will continue to produce important revenue for most of the major international companies, genetics and biotechnology will provide the engine for growth The international seed industry is highly sophisticated. Global breeding programmes integrate different sources of elite germplasm and biotech traits to produce new hybrids and varieties which can be adapted to local conditions. Elite germplasm remains the foundation of plant breeding, but the new tool-box of biotechnology provides the means to characterise and use it more effectively. Breeding cycles can be reduced, allowing new products to be developed more quickly and with greater confidence The past decade has seen the growth of GM crops, from their introduction in 1996 to 90 million hectares managed by 8.5 million farmers in 21 countries in 2005.

The technology has been embraced by farmers in the US, Argentina and Brazil wanting to improve and facilitate weed control in soybeans, and it has helped cotton growers in Australia, China and India to reduce insecticide applications and control key cotton pests, for example There is still consumer opposition to GM crops, and their usage in food products, and reluctance in most countries to approve planting of food crops, such as rice and wheat. The scorecard is definitely mixed. However, GM crops will continue to expand in existing markets and there are signs that pressures are building to use the powerful technology of genetic engineering to increase the rate of progress in agricultural productivity in other countries Agriculture The world's population continues to increase and land to accommodate this expansion is no longer available in most countries, except in South America In many cases, the best land for agriculture in all countries is being lost to urbanisation, industry and transportation. Increased production will only be possible through increased productivity per unit area. Genetics has played a critical role in achieving increases so far and will be even more important in the future In developed countries, government subsidy and support programmes have played a major role in sustaining agricultural production levels. Commodity prices have remained exceptionally low, so that farmers have had to maximise yields while minimising crop inputs to remain profitable. WTO pressure to establish a more even global playing field is likely to result in the reduction of existing support programmes. Therefore, improved genetics and value-adding traits will be the key to increasing yields and returns The challenge to increase crop production is even greater in developing countries, in order to feed their expanding populations and to enable rural populations to generate more income so that living standards can be improved. In particular, more fruits, vegetables and livestock products will be required Governments are increasingly aware that a progressive seed industry is critical in supplying the enhanced genetics and quality seeds to make these increases possible Intellectual property rights Most harvested crops are seeds, so their very nature enables them to be reproduced. Plant variety protection (PVP) rights have been established through the International Union for the Protection of New Varieties of Plants (UPOV).

59 countries are members of one or other of the UPOV conventions relating to plant variety protection. Even though some form of PVP legislation may be enacted, the level of enforcement in a particular country may be poor. Provision is still made for farmers' rights, allowing seed to be saved for farmers' own use, although EU countries enable seed companies to levy royalties on farm-saved seed of protected, certified varieties. In many countries, farm-saved seed accounts for as much as 90% of seed use Farm-saved seed in Europe varies from 20% to 80% of the total, depending on the climate and local conditions for cereal crops The challenge for the seed industry is to establish an infrastructure that can produce and deliver quality seeds of higher yielding varieties at a price that farmers are willing to pay profitably Hybrids form the bulk of the product portfolio of most seed companies, except for highly specialised crops like forage legumes and grasses and some vegetables which require special conditions for optimum quality and harvesting Seed associations are active in trying to gain better intellectual property rights (IPR) for the seed industry in their region or country. However, the topic is considered controversial and complex. Consequently, companies have to learn how to operate profitably in each country and adapt their product mix and operations accordingly Technology Germplasm remains the foundation of plant breeding. Seed companies' plant breeders continue to play a vital role in planning and executing breeding programmes and making decisions on commercialisation.

However, many more tools are now available to the modern seed company to facilitate and accelerate the process The use of molecular markers has become widespread and genomics is providing an increasing amount of information on the nucleotide sequences, including structural genes and regulatory sequences, of key plant genomes The use of computers has allowed bioinformatics to develop as a powerful tool to deal with huge amounts of biological information. These, and other new technologies, require highly qualified staff and expensive equipment, thereby increasing the cost of research Many, if not most, industries are characterised by increasing use of technology, favouring larger companies whose size makes such investment affordable. The seed industry is now dominated by companies that have been willing to invest significant resources in plant science technology. In addition to their in-house expertise, most of these companies have either acquired or are funding projects at specialised biotechnology research companies Many developed countries report decreased public investment in plant breeding. This has caused concern about the continuing availability of trained plant breeders, as universities reduce their programmes and offer fewer courses and possibilities for graduate work Technology developments have clearly been a major if not the major driver in transforming the seed industry. Chapter 5 is devoted to them Regulation The Organisation for Economic Co-operation and Development (OECD) seed schemes remain the best opportunity to facilitate the movement of seed from one country to another.

Yet, in many ways, the regulatory process is scrambling to catch up with developments in technology and current commercial practice. The process of approving GM products has been a major stumbling block, with approvals gained on a country-by-country basis Codex Alimentarius, the food standards division of the FAO/WHO, has been struggling to harmonise international standards that promote fair trade and enable trade disputes to be resolved The EU's moratorium on GMO approvals was recently judged to be illegal by the WTO, but it is uncertain whether this will be sufficient to encourage member countries to move forward Consumer acceptance of GM food tends to be low in most countries, even though no human health concerns have been shown to exist and the scientific community's attitude is favourable. But, lack of consumer support for GM is likely to dissuade governments from approving GM food and crops Seed treatment is another area of uncertainty, with no international regulatory framework or guidelines for seed treated with crop protection chemicals There is also no global agreement on levels of adventitious presence (AP) of GM seed. Environmental activist and organic food producer organisations have been pushing for low levels lower than 1% which are considered unrealistic, particularly for cross-pollinated species, such as canola International agreement is unlikely to be reached soon Companies There has been significant consolidation during the past five years Monsanto expanded its portfolio by acquiring the large vegetable seed company Seminis and has increased its regional involvement in corn and soybeans in the US.

Syngenta has also increased its critical mass in corn and soybeans. DuPont, through its Pioneer Hi-Bred subsidiary, has been concentrating on organic growth and has not made any company acquisitions. Bayer is focusing on canola, cotton, rice and vegetables, and has divested its corn and soybean interests in the US and South America BASF has made it clear that it has high hopes for its plant science division Dow AgroSciences is clearly committed to growth in its seeds and traits businesses Input traits have been a major market driver during the last ten years, but end-user traits for consumer, processor and livestock owners are seen as providing a very much larger market opportunity in the future. The synergy between seeds and crop protection chemicals was not clear until input traits became established. The major companies with involvement in both seeds and chemicals can offer packages of products, appropriate to the trait(s) of the hybrid or variety sold. Value is also seen in integrating the delivery of seed with crop protection chemicals at the retailer level GM Input traits have been rapidly adopted by farmers, primarily in the US, Argentina, Brazil and Canada, but also in 17 other countries. Secondgeneration products are being introduced which offer enhanced performance with resistance to a greater range of insect pests and greater safety and flexibility in timing of spray applications. Emphasis continues to be on developing traits and product offerings of greater value to the producer Farmers are demanding more stacked products and, as a result, three and even four traits are now combined in one hybrid The pipeline of new offerings seems to be strong, with additional players involved so that there will be greater competition. More traits will be made available by Monsanto, DuPont/Syngenta, Bayer and Dow AgroSciences, and their licensing arms. Smaller seed companies will benefit from access to new traits for their private-label products for their area or region Insect-resistant traits offering control of key sucking insects in cotton; fungus-resistant traits; and herbicide combinations, such as glyphosate + dicamba or glyphosate + sulfonylurea, are under development. If they are as effective as first generation traits, they will take market share and claim a portion of the cost of chemical control through the higher cost of seed There can be little doubt that such traits will drive market share and increase the revenues of trait providers and seed companies There are signs that the highly desired end-user or output traits are being actively developed and some are already commercialised, including healthier oils and modified starch The seed industry once lacked focus in the downstream use of its products, but this has changed dramatically. It may take some time for the market to move from commodity markets to seed being optimised for different enduse segments. The next decade will certainly see progress in this direction Surveys indicate that consumers are largely opposed to GM foods, but arguments centring on health benefits and lower costs might change their minds. The seed industry and trait providers will have to invest more time and effort in establishing close working relationships with food processors, to persuade them of the benefits and of product safety. In this way, enduser traits are more likely to gain acceptance Success in achieving more widespread use of end-user traits will allow GM technology to be used more widely in food crops, vegetables and fruit Probably the matter should be addressed on an individual project basis, rather than through general promotion of GM technology Seed production Seed companies operate in highly competitive markets and the commercial lifespan of hybrids and varieties is getting shorter.

In countries where a range of biotech traits are available, the number of stock-keeping units (SKUs) has being growing significantly. Inventory management has become a very important aspect of managing the business, from forecasting to production of inbreds, hybrids and varieties in the field, to storage and packaging. Careful segregation is required to maintain the integrity of each product. Many companies have gained ISO 9000 certification in their efforts to ensure appropriate procedures and documentation to achieve this successfully Farmers expect to be able to buy quality seed of high purity and this can only be achieved by careful attention to detail on the part of the seed company, from the harvest field to final delivery of the seed package or bulk container Market growth This report uses International Seed Federation domestic seed market values primarily. The federation adds just under US$5 billion to the US$25.2 billion total from their documented countries to reach a global market value estimate of US$30 billion, compared with a global total of US$27.2 billion estimated in this report Forecasts are not available for individual countries but this report estimates global growth of 2.5% annually, resulting in the market reaching just over $30 billion in five years Corn seed is estimated to be growing at 5% per year globally, but most other crops will not be increasing at this rate Good opportunities for growth exist in North America for input traits. India and Latin America are also growth markets. Real potential also exists in Eastern Europe and the republics of the former Soviet Union. Finally, significant growth is forecast by China for seed demand