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Seed tech titans

The once quiet seed industry rocked with news of major company acquisitions this summer. Syngenta announced in May the purchase of Garst Seed. It followed up in June by buying a 90% interest in Golden Harvest Seed. While all three companies await government approval of the acquisitions, the rest of the seed industry is abuzz with the news. This latest move by Syngenta promises to dramatically change an industry that's had its share of changes in the last decade.

Market share

If the acquisitions are approved, Syngenta with its NK Brand and Garst and Golden Harvest brands will arguably become the second largest branded seed corn company in the U.S. Syngenta reports its corn market share is 15%. Holding first place is Pioneer Hi-Bred International; it says it has about 40% of the corn hybrid seed market. Monsanto reports it has 14% of the U.S. corn market through its Dekalb and Asgrow brands.

Syngenta's new seed company purchases aren't just about market position, though. They also are about competing in the trait business, which Monsanto has dominated since Roundup Ready (RR) soybeans entered the market in 1996. Monsanto has received more product approvals than the rest of the industry combined. Its recent approvals include YieldGard Rootworm, which provides in-seed protection against corn rootworms, and YieldGard Plus, which provides in-seed protection against both corn rootworms and corn borers. YieldGard Plus with RR may be available as early as next year.

Syngenta hopes to take a stab at Monsanto's dominance with its own traits. It recently acquired the rights to a glyphosate-tolerant technology for corn called GA21 from Bayer CropScience and plans to introduce it to the marketplace next year. Syngenta also expects to sell its own corn rootworm hybrids by 2007 and currently has its own Bt trait for corn borer. As these traits become available, Syngenta will start stacking them just like Monsanto does.

More competition

Monsanto faces other competition, including that from the market leader. Pioneer just purchased the gene research company Verdia and now has its own glyphosate-resistant trait to use in both corn and soybeans. This trait may not be available for five to six years. In the meantime, Pioneer plans to offer its own corn rootworm trait, developed with Dow AgroSciences, in the next couple of years. It already offers corn borer and other insect control that is tolerant to over-the-top applications of Liberty herbicide through Herculex I, another trait developed with Dow.

“What you have are three big companies with three sets of traits. That's a completely different marketplace than we've seen the last several years,” reports Tray Thomas, president of The Context Network, a management consulting firm specializing in agribusiness. “We've had one trait supplier who supplies genetics to almost everyone. Now as we move forward, these big companies will all have their own traits and genetics and they are all competing heavily with each other.”

As a result, farmers will find more options for buying traits. Plus, Thomas speculates competition may hold down prices. “Seed and trait companies may be driven to lower their prices to get to the farmer. Essentially, we'll go back to more of a normal marketplace,” he says.

It's clear that the normal marketplace still promises to be interesting. All of the companies have plans to be competitive in the tight market.

Improve corn platform

Syngenta's acquisitions of Garst and Golden Harvest are designed to build the company's corn platform. Jack Bernens, Syngenta's marketing vice president, explains: “We've taken the strength of germplasm from Garst and our purchase of CHS germplasm in the later maturities, Golden Harvest in the west and northern maturities and NK Brand in the more northern Corn Belt and have really rounded out our overall ability to bring very competitive products to the market across all maturity groups.” The company plans to keep all three brands distinct.

“What we bring to the market that growers are looking for is an alternative choice,” he says. “We wouldn't have made some of these moves if we didn't believe that we will be successful and can alter the landscape of the marketplace from what it looks like today.”

Syngenta's crop protection portfolio will be used to help drive penetration of its seed trait business. Bernens says the company's portfolio of germplasm traits and crop protection products will help growers solve production problems and be more profitable.

The company expects to receive approval for the two acquisitions by early fall.

Garst Seed President David Witherspoon says he looks forward to a change in ownership because the present owners had gotten out of agricultural investments except for the existing Garst business. “Garst has needed an owner who has a long-term commitment to agriculture,” he says. “Then you have more investments for breeding, biotech, production.”

The present shareholders are a joint venture between AstraZeneca and Royal Cosun of the Netherlands. AstraZeneca previously owned Zeneca Agrochemicals, which combined with Novartis to form Syngenta.

Sticky relations

Garst and Golden Harvest are two large licensees of traits from Monsanto. The question now is if the licensing will continue.

Glenn Stith, Monsanto's U.S. branded business lead, responds: “We have licensing agreements in place with Garst and Golden Harvest. For them to legally sell Roundup Ready soybeans, they need to do so under the terms of the existing agreements that they hold. Because the announced acquisitions for Garst and Golden Harvest are not finalized, we cannot speculate on how that will affect our business relationships.”

Syngenta's purchase of the two seed companies did not surprise Monsanto. “We've expected these things to happen and frankly thought they'd happen sooner,” Stith says. “It makes us feel good when our competitors want to emulate what we're doing. We've always handled competition and welcomed it.”

Monsanto believes it has the knowledge and technology to maintain its top spot in trait development and sales. Stith says, “We think we're very well positioned on the leading edge of biotechnology. We have some unique strengths that are going to be difficult for any competitor to emulate.” Some of the strengths include a global base of germplasm, a molecular breeding program, and a company position in crop protection.

In addition, Stith says, the company is well positioned to take risks on new products and “place them in the market well in advance of when other competitors might be willing to take that risk. So naturally, it puts them in a following position.”

Regional strongholds

A competitive edge for Monsanto is the licensing agreements it has with 250 seed companies for traits. Some of the regional seed companies have very close ties with the company and almost exclusively market Monsanto's traits in their own genetics.

Regional companies such as NC+ see the close connection with the industry giant as a win-win situation. Small companies that can't afford to do their own high-tech research receive access to some of the newest technology available. And Monsanto has a partner to sell the technology to growers, particularly in fringe areas of the Corn Belt where Dekalb and Asgrow brands are not prevalent.

Consultant Thomas says some ties are so financially tight that there is little room for the regional companies to shift to another company's traits. This will create a tough scenario for competitors like Syngenta.

“There's no question that Monsanto has a tight grip on these regional companies, almost a monopolistic type grip,” Syngenta's Bernens says. “That's not going to be easy to compete against. However, we believe there are a lot of seed companies that welcome the opportunity to work with us if they can find a way out of that grip.”

Pioneer also does not discount the competition from regional seed companies. “They are absolutely our toughest competitors by far,” reports Kyle Whitaker, Pioneer's technology launch manager.

Time-tested philosophy

Pioneer's marketing plans, however, don't change as competitors change. It uses the same marketing philosophy it has had for years and that has made it a seed corn leader.

“Our focus is still on genetic enhancement and always has been, regardless of what's going on in the industry,” Whitaker reports. “Growers are ultimately buying seed for yield. I don't see us going off that mark at all. And the people who work with farmers have to be better trained and equipped and better able to answer questions and make recommendations, which is what we've been working on.”

The traits that Pioneer helped develop will stay within the company. Under Pioneer's agreement with Dow, only Dow has the legal ability to license traits developed through their joint research effort for Herculex I. Pioneer does not license the Herculex I trait.

“Ideally, we'd like to have a full library of traits that we own and are proprietary to us,” Whitaker says. “In today's world, that's not completely feasible. But it just makes business sense to diversify your offerings.”

That's why Pioneer decided to move ahead with the new glyphosate-resistant trait, even though it licenses the RR trait from Monsanto. “If we bring the [new Verdia] trait out in our own genetics, it's a different purchase than if we're licensing a trait,” Whitaker says. “It is also a different source of glyphosate resistance.”

Four trait developers

Pioneer's partner in the development of Herculex I and the corn rootworm trait due out soon is Dow AgroSciences. It is among the handful of seed companies left developing traits.

“Back in 1996 when we started trait development, we saw the corn [trait developing companies] consolidating down to three or four,” reports Tom Wiltrout, Dow AgroSciences global business leader. “Our goal is to be one of those top three companies. Really, Monsanto, Pioneer, Dow/Mycogen and Syngenta are the four global corn players at this point.

“I think all four are positioned to play,” Wiltrout says. “We'll probably carve out success in different areas. It's a big enough market that all four can be successful. But if you're not in it today, there's no easy way to get in.”

According to Dow, its Mycogen seed brand ranks fourth in the U.S. corn market with 5% market share. Wiltrout says it holds this position because of the success of Herculex I and its ability to handle additional pests such as western bean cutworm, black cutworm and fall armyworm. The company hopes the corn rootworm trait scheduled for launch for 2006 planting (pending regulatory approval) with Pioneer will be equally successful and help it build market share.

Competitive markets

As the major seed companies make their moves to improve competitive positions, growers ultimately should benefit. “I think farmers will have more options for traits, more competitive pricing, and probably fewer seed suppliers,” consultant Thomas concludes.

Checkup on seed treatments

Nothing flew off ag dealers' shelves faster this spring than seed treatments. Seed companies reported exceptionally strong sales of the Gustafson Poncho products and Syngenta's Cruiser treatments.

“Seed treatments have been just unbelievable. They surprised everyone with their rapid adoption,” reports Kyle Whitaker, Pioneer Hi-Bred International's technology launch manager.

Why? Because they are convenient, they are safe and they work, he says. Growers appreciate that they don't need to handle insecticides. Plus, the products are working well. “The plants look good and healthy,” Whitaker says. “Farmers are seeing nice, green corn in the fields with even stands, even though the plants are sitting with wet feet from so much rain.”

He anticipates fewer service calls into Pioneer because the products are taking care of secondary pests.

Before the treated seeds got into the field, Pioneer was concerned about plantability, especially with the higher rates. The company took a proactive approach and offered an optional polymer coating for the high rate. As a result, Pioneer customers got through planting season with minimal problems, Whitaker says. “We had no situation where seed just could not be planted.”

Pioneer plans to offer treatments next year and expects the volume to double. “I think we're going to continue to see demand go up,” Whitaker says.

Pioneer offered three seed treatments this year: a low-rate Cruiser product, a mid-rate Poncho 250 and the high-rate Poncho 1250. Costs ranged from $11/unit on the low rate, $15/unit on the mid rate, and $46 on the high rate.

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