Truth about Trade and Technology, IA
03-27-07
The Seed Race
by: Sarah Bzdega
As a farmer of more than 500 acres, Ted Crosbie sees competition among
agricultural biotechnology companies as good, because it increases his seed
options and drives down prices. As vice president of global plant breeding for
Monsanto Co., he is in the race with other biotech company executives to get
more farmers to purchase his company's products.
Ethanol and other new uses for crops are driving prices to record levels, making
Iowa's agricultural economy more promising. As a result, biotech seed
companies are investing millions of dollars into research and development of new
seeds that will increase yields and protect crops, in addition to increasing their
share in the market. The result: Iowa is seeing more jobs and money being
poured into the state each year.
The more competition there is, the better the products I can plant will be, and
more competition means more choices. - Ted Crosbie Vice president of global
plant breeding, Monsanto Co. This investment, said Crosbie, who also is Iowa's
chief technology officer, will help stimulate economic development in the state for
years to come. "It's easier to grow up when you're growing," he said. "So this is
all good news for economic development."
Biosciences is one of three areas the state is focusing on for future economic
development based on a strategy outlined for Iowa by the Battelle Memorial
Institute, the other two being advanced manufacturing and information
technology. Though the three areas need to develop side-by-side, said Shawn
Rolland, public information officer for the Iowa Department of Economic
Development, having "two leading ag science corporations (Pioneer Hi-Bred
International Inc. and Monsanto) in the state is a great thing for Iowa workers.
Both provide high-paying jobs, grow the economy and demonstrate Iowa's
commitment to renewable energy."
The number of people employed in the bioscience industry in Iowa in 2005 was
72,682, a 5.5 percent increase from 2000. These jobs provided total wages of
$3.2 billion.
"I think Iowa is positioned to take advantage of all the things happening in
biotechnology," said Pam Johnson, a Floyd County farmer who also chairs the
National Corn Growers Association's research and business development action
team. She pointed out that in addition to these companies, the state has the
natural resources and university research programs to be a major player in the
industry.
Zooming ahead
The job figures are expected to look even better a year from now, as many
agricultural biotech companies continue to expand their facilities and invest more
dollars in research and development.
E.I. du Pont de Nemours & Co. announced earlier this year that it is investing
$100 million in its seed business, primarily through its Johnston-based Pioneer
subsidiary. The increased funding will add 400 new positions and expand 67 of
Pioneer's 92 research centers worldwide over the next year. It is the largest yearto-year increase in research investment and staffing at Pioneer since it was
founded 81 years ago.
The plan includes adding 62 research positions to Pioneer's headquarters in
Johnston and expanding its genetic discovery and trait technology programs. The
company's Dallas Center facility also will expand and add about 11 staff
positions; all of Pioneer's discovery breeding field staff, which will focus on
finding new products and technologies, will relocate to the center.
"We think about how biotechnology and different tools in the industry are
improving productivity, profitability and sustainability," said Frank Ross, vice
president and business director of Pioneer's North American operations. "What it
means to Pioneer is accelerated growth in investments in [research and
development] and sales and marketing in order to position our products and
provide better products and services that increase the productivity and
profitability for our customers."
Monsanto also is expanding its centers throughout Iowa. It is moving into the
second floor of its Ankeny research center, which will increase its operations by
30 percent. A 125,000-square-foot research center in Huxley is near completion,
and the company plans to double production capacity at its Grinnell facility.
The company consistently invests 10 percent of its revenues into research and
development, which last year was about $725 million.
Dow Agrosciences LLC also is evaluating where to increase investments, which
could affect its facilities in Huxley, Belmond, Davenport and Marshalltown.
"We're very committed to the breeding program and are continuing to make
larger investments," said Ben Kaehler, trait and germplasm licensing leader for
North America. As a subsidiary of Dow Chemical Co., Kaehler added, Dow
Agrosciences has a "large, very supportive parent company that sees a value in
the ag market and is willing to support that business."
These private companies are also making investments in public-sector programs.
Pioneer, for example, just announced that it is contributing $50,000 for a
proposed bio-based products industry center at Iowa State University,
which will focus on the economic, business and policy aspects of the emerging
bio-economy.
Face off
Monsanto officials believe Pioneer's huge investment in research and
development is an affirmation that Monsanto's business model is working.
Monsanto was one of the first companies to invest heavily in biotechnology, while
other companies continued to look for new chemical products to apply to crops.
In 1996, it commercialized the first biotech product, Roundup Ready Soybeans,
designed to withstand certain herbicides, including the company's Roundup,
making weed control easier for farmers. It introduced the trait in corn and other
crops soon after.
The company began offering this new technology through licensing agreements
with seed companies like Pioneer, which provided the seed while Monsanto
provided the technology. But soon after, Monsanto began acquiring its own seed
companies. It purchased Asgrow Seed Co. and DeKalb Genetics Co., two
national seed companies, in the late 1990s, and in 2004 formed American Seeds
Inc., which is designed to market seeds through regional sellers.
Monsanto's strategy to widely distribute its traits seems to have worked.
According to a Jan. 22 story in The Wall Street Journal, 60 percent of corn acres
planted in the United States today have seeds with the company's traits and 96
percent of soybeans planted have a Monsanto trait. Monsanto has sold out of its
triple-hybrid seeds this year, Crosbie said.
Although Pioneer has been slow to enter the biotech market, the company has
been a leader in the seed business for the majority of its existence. Ross doesn't
see that changing.
"When it comes to North America corn market share, we are the leader," he said.
"We have the highest market share of acres in the U.S. for both corn and
soybeans; we have for years."
Though Monsanto dominates in the triple-stack hybrids, which combines its
herbicide-tolerant technology and insect protection and rootworm protection
technologies in one seed, Ross added, "we are aggressively ramping up our
triple-stack hybrids. In 2008, we expect to be fully competitive in the rest of the
industry."
In 2003, Pioneer, in collaboration with Dow, commercialized a biotech trait called
Herculex, a biotech corn seed that protects against a variety of crop-damaging
pests. By 2009, Pioneer expects to introduce Optimum GAT, its first independent
proprietary biotech seed, which is designed to withstand certain herbicides.
All of these biotech products are a result of 15 to 20 years of research, and Ross
said part of the excitement surrounding the agricultural biotech industry stems
from the fact that many biotech products are just starting to come on the market.
Andy LaVigne, president of the American Seed Trade Association, believes
some of the industry's hype is because people are recognizing the importance of
agriculture and the role biotechnology will play in agriculture in the future.
"I think there's more competition in the industry than we've seen in the past,
mainly because of new developments we've seen in technology and seed, and I
think people see that as the growing area of opportunity in technology for
agriculture," he said. "Everyone wants to be where the new demand and the new
technology will be."
More opt for biotech
Monsanto claims that its share of the U.S. corn market grew slightly more than 3
percentage points last year, the greatest gain it has had since it acquired Asgrow
and DeKalb, which makes it the No. 2 branded corn seed provider in the country.
Though Monsanto is gaining a larger portion of the market, Crosbie said, many
ag biotech companies are increasing their seed sales because more farmers are
purchasing biotech seeds than ever before.
According to the U.S. Department of Agriculture's June 2006 acreage report, 64
percent of Iowa's 12.6 million corn acres were planted with biotech corn hybrid
last year and 91 percent of Iowa's 10.15 million soybean acres were planted with
a biotech variety.
As the value for crops has increased with the discovery of new uses, like more
healthful oils from low-linolenic soybeans and ethanol, many farmers want the
higher yields and better security of crop production that biotech products
promise.
In February, Iowa's corn prices hovered above $4 per bushel. Brian Jones,
research and business development manager for the Iowa Corn Growers
Association, said when prices reached this level in the past, it was usually driven
by weather. "What we're seeing now" he said, "is $4 being driven by demand,
which is unique."
To capitalize on the potential for huge profits in agriculture, the biotech industry
has undergone a period of consolidation over the past few years. Jones believes
it is a natural evolution as companies come up with new strategies and develop
more efficient processes.
At the same time, some experts believe there are opportunities for smaller
companies to create a niche in the marketplace, especially as corn, soybean and
other seed products become tailored to specific uses, such as more healthful
oils, better feed for animals and even clothing.
"There's so much work to be done in research," Johnson said. "No matter how
big one company is in the marketplace, they cannot afford to do it all."
Jones said the project funded by the National Science Foundation, U.S.
Department of Agriculture and the Department of Energy to sequence the corn
genome, or map its genetic code, could level the playing field for smaller
companies, because they could access the public information. It also will lead to
development of more advanced biotech seeds.
"I think we've reached a point where we've identified the easy targets," he said,
citing to herbicide-tolerant corn as an example. "Those are sort of low-hanging
fruit, and now we're looking at more complex trait opportunities."
A better understanding of the genetic makeup of the corn plant is expected to
allow companies to find traits that do things such as increase yields to maximize
the crop's potential. With this ability, Ross believes more biotech products will
start to reach the marketplace faster.
Pioneer has developed FAST corn, a miniature corn plant that can reach maturity
in 50 to 60 days and is part of a process that speeds up testing of new traits in
corn plants. Monsanto is focused on marker-assisted breeding, which quickly
identifies a desirable plant characteristic that can then be developed to maximize
that seed rather than going through the process of cross-breeding plants and
then testing their genetic makeup. Pioneer also is ramping up its research in this
area.
Though the competition is steeper, leaders in the field believe that the
collaboration that's common among companies could still exist. "Competition is
very fierce, but there are times when the company looks and sees that products
combine well with others," Kaehler said.
Johnson would like to see the public sector invest more money into research and
development in addition to private investment. "We think that biotechnology is our
future and we think that especially now, when we're starting to turn from a society
that's petroleum-based to one based on biorenewables, that there needs to be a
lot of investment," she said.
The private sector at least is planning to continue its heavy investments and is
expected to continue to create jobs in research and development and marketing,
especially in Iowa and the rest of the Corn Belt.
"I just think we have significant opportunities to increase profitability and
productivity and the science that we're working on today will really drive
productivity, not only short term but in the medium and long term," Ross said.
So, who will come out the winner?
"As a farmer I think it's wonderful because it means more investment," Crosbie
said. "The more competition there is, the better the products I can plant will be,
and more competition means more choices."