Giant Views of the Industry: Trends and Insights
Our feet are firmly planted in the new decade, and changes in the seed industry are happening faster than ever. Technology is booming and the world is shrinking. Six experts from this year’s Giant Views of the Industry discuss the trends affecting your business today, providing advice on how to survive the next 25 years.
Plant breeding and biotechnology have changed the speed of the industry. The capacity to produce new varieties is greater than ever, but the life span of varieties isn’t the primary determinant of speed in the industry anymore. Many rapidly evolving factors will shape the business, such as new traits, biofuels, food quality issues, globalization and a shift in the end user (farmers aren’t the only customers anymore).
In order to keep up with the seed industry today, companies need to anticipate and welcome change. Be adaptable. And, in today’s world of advanced technology and globalization, companies must be willing to work together. The seed industry is becoming more globalized every day. As the world shrinks due to technology, working together is more important now than ever.
Canada, the United States, Mexico, Chile, Peru, Uruguay and Brazil have recently come together and formed the Seed Association of the Americas for this very reason, and it’s been very successful during the past year.
“You’ve got a block of countries from North America, Central America and South America that produce more than 85 percent of the biotech products in the world,” says Andy LaVigne, president and chief executive officer of the American Seed Trade Association. “We do a lot of counter seasonal production of seed, grow outs and multiplications, and research down in the region, and it is important that we have strong relationships with all of those countries.”
Lavigne says the SAA was established to make sure “movement of seed within the western hemisphere is expedited and that there are a limited number of delays in the process.”
And as these strategic alliances—whether between groups of countries or companies—grow and prosper, they become a cornerstone to a company’s marketing plan. “Strategic alliances and partnerships can be very good distributers in certain regions where we are not active ourselves, but the key is to educate the partners on how to sell grass seed,” says Stefan van der Heijden of Barenbrug. “Not only do we get them to sell our product, but we tell them how to manage our product, which is one of the most important aspects of how we are marketing our products.”
The Decade of Biotech
Advanced technology is the biggest driver in today’s evolving industry. There has been talk of the next generation of traits, such a drought tolerance and nitrogen use efficiency, for many years now but, for the most part, these traits haven’t come to market yet. In part, this is due to an overburdened regulatory system, and many feel this decade will finally see the commercialization of many exciting new traits.
“I’ve spent more than a decade working internationally with seed and biotechnology and there has been a huge increase in adoption of biotechnology over the last year driven by acceleration in South America—specifically Brazil and Argentina,” says Brett Begemann, executive vice president of global seeds and traits for Monsanto. “Mexico now is moving their process forward and allowing trials. China has moved forward with the approval of two biotech products—one for corn and one for rice. India is moving faster. So as you step back and look at the world, I think we’re seeing acceleration.”
The growth of biotechnology is benefitting the industry but this also means companies have to adapt and react quickly to change. “We started out with a few traits years ago, but they’ve grown fourfold since we’ve started,” says Dana Eaton, head of product development for GreenLeaf Genetics. “More traits and more product. Now, what we’ve been able to do is license more lines, incorporate traits into a lot more lines— that builds a revenue stream, but also means we have to add more processes.”
Eaton says the company has added a component of testing within the company, and while it had one provider before, “now we have three providers, therefore, we have to keep our sales force up to date on all these rapid changes so they in turn can keep our clients up to date on those rapid changes.” He adds that the growth in traits and, therefore, sales means a better revenue stream, “but we have to do a better job of getting to our clients faster, in a very efficient manner.”
All About Access
The onslaught of new technology and traits is making age-old challenges in the seed industry new again. Profit margins are narrowing as it gets tougher to make sure companies can pull a profit each year from all the product offerings now available. As technology evolves quickly, products are moving from production to obsolescence almost overnight, therefore having a tremendous impact on profit margins.
Also, gaining access to the new technologies that are available continues to be a challenge. Independent seed companies spend a lot of time trying to maintain access to the broadest portfolio of products and delivering those to their farmer customers in the format they need.
“The independent seed sector is very strong in the United States. There are many independent seed companies who want access to genetics. The seed companies may be acquired, they may expand, new ones might pop up, but that percentage of the market has remained about the same and there is a demand for quality genetics,” says Eaton.
But, the relationship between input suppliers—the licensees—and seed companies is also evolving. Broad licensing has been the basis for the last dozen years for the growth and access of independent seed companies to traits and genetics. That’s beginning to change and some of the suppliers are looking at seed companies a little bit differently—by beginning to work on alliances and ways of business that might remove some of the choices for independent seed companies.
“That dynamic has been changing in the last few years,” says David Hingst, president of Hoegemeyer Hybrids. “Genetics and traits seem to go together and at this point we must look at both, as well as a number of other facets such as seed treatments. So we really need to go back and ask what does our customer want? Because our customer is, in the end, the customer of a genetic or trait supplier or seed treatment supplier.”
Hingst says the key is to fulfill the needs of the customer, and when it comes to the relationship with suppliers, “it really starts with the customer and builds back up to what is available for us and how we chose to answer the question of what does our customer need?”
Eaton says, as a licenser of traits, GreenLeaf can’t afford to alienate the independent sector. “We see that there will always be a strong independent sector and we can support that—we need to support that,” says Eaton. “There will be consolidation, or they will be bought out, or shut down, and as long as we can provide them with the latest technologies in the best genetics, then that will keep these people in the game.”
And while the dynamic is changing, Begemann maintains that as the next generation of traits hits the market, Monsanto plans to continue with its broad licensing strategy. “We’ve always said licensing is a cornerstone of our strategy and how we intend to go to market. As we bring new technologies such as drought tolerance to market, we’ve already been talking to many of our licensing customers and telling them our expectation is that we’re going to license these technologies.”
Begemann says the challenge is as the products become more complicated, it becomes harder to ensure farmer success, seed company success and supplier success.
“As we add those together and the complexity comes in, we have to continue to be good about conversing with each other and planning for that,” he says. “We said we’re not going to force farmers to buy seed from Monsanto in its brands just because we have a trait; we’re going to let farmers pick what brand they want to buy by broadly licensing these technologies and we’re going to earn the genetic business by putting good seeds in the bag and there are some great companies out there that have been fabulous partners with us in bringing technology to farmers. I continue to believe that farmers are better served by all of us working together in that licensing relationship.”
The line between supplier and competitor is also being blurred. There are many companies today that not only provide input products but also then compete with seed companies in the marketplace, and this has brought a new dynamic to the entire business.
“It’s really clear where we’re customers and suppliers and it’s really clear where we’re competitors,” says Begemann. “We all compete ferociously on the turn row with the farmer trying to sell him our seed, and we’re all very good at that.”
Regulatory Issues Remain
As mentioned, the recent explosion of new products on the market is also bringing with it a burden to the current regulatory system. “We need to make sure [the regulatory system] is functioning properly so that products can be reviewed and deregulated in an appropriate timeframe, in order to deliver new technology to farmers. The system does not need to become more burdensome and more costly,” says LaVigne.
LaVigne says ASTA is making sure it is interacting with the regulators and the legislators who oversee seed issues, “to make sure they understand the intricacies of the seed industry today. As technology is developed and further integrated into our industry, it is imperative that we make sure regulators understand the science behind these new products, so as technology progresses, it’s not stopped unnecessarily,” he says, adding that ASTA has stepped up its efforts with the U.S. Environmental Protection Agency, the Food and Drug Administration, the White House and Congress to make sure elected offi cials and regulatory bodies understand the seed industry is key to the success of American agriculture.
And while it’s important to work on regulatory challenges within the United States, perhaps the biggest regulatory issues right now are those affecting the global seed trade. Issues surrounding low level presence have been front and center this
past year and everyone is hoping to see progress in this area soon. “I think the great variability in regulations is the biggest barrier to trade,” says Stefan van der Heijden of Barenbrug. “There are so many differences between countries and we need
to work on leveling the playing field.”
Specialized Trait Developers
Traits are also beginning to fl ow from other companies—not only the big six. Many big companies are partnering with small biotech (or non-biotech) trait development companies to commercialize traits such as drought tolerance and nitrogen utilization. Big companies are frequently partnering with these specialized companies to advance their breeding programs.
“We are a trait development company that allows companies to put a particular trait into a plant, without the regulatory burden,” says David Voss, vice president of commercial development with Cibus. “Some products that are soon to be entering the market were developed by our technology and will be carried forward with some major companies. Some of the media like to put us against some of the major players in agriculture which really is unfair because, in reality, we’re really actually partners with many of these major companies.”
Some of Cibus’ partnerships include major companies like BASF and Mahkteshim, as well as smaller organizations such as the Flax Council of Canada. The company’s main target is Europe, due to the fact that its technology is not transgenic. “We’ve actually had several scientist groups in Europe look at our technology and they’ve also come to the same conclusion— that we are a mutagenesis technology,” says Voss. “And that is very key for Europe because Europe actually goes out of its way to exclude mutagenesis in its directive of GMOs annex”
Recruitment Still Key
At the end of the day, no matter how bright the future looks, we need a solid foundation, which is why recruitment remains a top priority. “When we look at the evolution of this industry, it is happening very, very quickly. For us to continue to innovate and evolve, we need to have a solid base of students coming out of college with master’s degrees, PhDs in all the sciences, not just breeders, plant physiologists, agronomist breeders, and geneticists,” says LaVigne. “And we realize that that’s a challenge for us today. Land grant universities have budget issues that are impacting them on a regular basis so it is important that companies play a more active role in the education and training process.”
ASTA has developed a couple of programs, with help from its affiliated organizations like the National Council of Commercial Plant Breeders and the American Seed Research Foundation, within its new First the Seed Foundation.
“We’re pairing up students with seed industry mentors in our various meetings so they can shadow industry professionals,” explains LaVigne, “to talk to them about what’s out there and the opportunities. We really think there are a host of areas that students can come back to in agriculture and we want them to see the opportunities available to them—not only to meet the demands here in the United States, but to meet the demands globally to feed the world.”
The key is getting the message out there, and the seed industry needs to continue and expand its communication and education tactics, not only for recruitment but for overall survival.
“We’ve got to talk to people about the seed industry—this is a technology-based industry and innovation is central to agriculture’s success. Innovation and technology are driving those opportunities to maximize what we’ve got—to preserve the environmental resources of the United States and to feed the world,” says LaVigne. “So, we’re excited about telling that story, we see it as a big challenge, but it’s something that we’re really looking forward to.”
Begemann agrees, saying in order to harvest the seed industry’s bright future, we need to work together to spread the right message. “We have to stand together and stand with our farmer customers to help people that are not directly involved in agriculture understand that what we do is actually good for our environment—not bad,” says Begemann. “I think there are a lot of things that as an agricultural community we could do better standing together on than we do today in dividing ourselves, and that would be my advice and encouragement to us as an industry—is stay together on the issues around agriculture, recognizing that we’ll have different opinions but that’s okay, stay together when it comes down to challenges that we face as an industry.” Julie McNabb