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Last week we talked about Farm Aid and the focus of this organization on the plight of American farmers (mostly the small family farmer, as opposed to the large corporate farmer). I promised we would take a look at the AG biotech market in this weeks article.
This is no easy task, so I will try to analyze the crop segment of Ag bio. The information in this article is mostly drawn from Burrill & Companys Biotech 2005 - Life Sciences: A Move Towards Predictability. This 600+ page tome is an encyclopedia on the biotech industry and I highly recommend it to anyone who wants to get a good grip on the major issues and facts of the biotech industry in one source. The problem is that it does not come cheaply.
One way to look at the AG biotech market is by crop value (in terms of economic terms).
While the above doesnt really represent 100% of the worldwide AG biotech crop market it is probably close to about 98% of the total. Western Europe is conspicuously absent due to their wariness towards biotech crops. Nevertheless, the Europeans have approved canola, corn, soybeans,chicorysoybeans, chicory, and tobacco. A number of field trials have been underway in countries such as Spain, France, Italy, U.K., Germany, and Belgium.
According to Burrill, South Africa is the leading adopter of ag biotech in Africa and produces biotech corn, soybean, and cotton to the tune of about $147 million annually. Other African countries look to be also adopting biotech crops such as Morocco, Kenya, Egypt, and Tunisia.
Although numbers are not available, Latin America and the Caribbean seems to also be aggressively adopting biotech crops particularly in countries such as Chile, Colombia, Mexico, Cuba and the two leaders mentioned above, Argentina and Brazil. Although Argentina is number two in the world and the main crop listed is maize, soybean is also giving the U.S. a run for its money.
All told there are more than 34 countries with biotech crops, and this number is growing at a furious rate. Additionally, there a total of 63 countries doing research on ag biotech.
Why such a fast growth rate? Well, the bottom line is, in essence, the bottom line!
Biotech crops produce greater income for farmers in terms of cost savings, increased productivity and a reduction on the need for herbicides and pesticides.
According to Burrill, as compared with conventional crops, biotech varieties increased farmer income by $1.9 billion last year, and increased crop yields by 5.3 billion pounds, while cutting pesticide use by 46.4 million pounds!
Biotech soybeans income increased $1.2 billion, while reducing pesticides by 20.1 million pounds
Biotech corn generated additional income of $258 million for farmers while generating yield gains of 4.9 billion
Biotech cotton added $413 million in income while reducing pesticide use by 12.9 million pounds
China may soon become the number one ag biotech company in the near future, as it will become the first nation approve biotech rice (resistant to insects and disease). China invested about $500 million in Ag biotech in 2004 (from a level of $100 million in 2000). Initial reports are that rice yields are improving by 15%. This trend is important when you have to feed 1.3 billion people. Agriculture currently represents about 15% of Chinas GDP, but 50% of its labor force. Crop land only represents currently 1.3% of the total country. Having said this, China planted 5.1 million acres of biotech cotton.
Looking at Ag biotech crops from a global perspective, Burrill estimates that there are about 8.25 million farmers which planted ag biotech crops in 2004 with more than 200 million acres planted (20% above the prior year level). Ninety percent of the farmers were in developing countries. This level is expected to grow to 15 million farmers at the end of this decade with biotech crops covering 370 million acres.
In the U.S., 117.6 million acres of biotech crops were planted in 2004, up 11% from the prior year. India is probably the next big forefront in terms of biotech crops, and cotton appears to be the lead crop.
So which companies are at the forefront of this ag biotech activity?
Although Monsanto is listed last in terms of revenue, it is the company that has most invested in ag biotech over the last 10 years. According to Monsanto, seeds with its traits accounted for more than 90% of worldwide acreage of herbicide resistant or insect-resistant crops.
The big issues for further growth of biotech crops revolve around the following concepts:
All of the above has to do with the tendency that organisms have to spread, wander, mate and pop-up in unexpected places. This issue has been a major hindrance towards the use of plants as factories for making pharmaceuticals.
So how does the average American view biotech crops? According to Burrills research, the views are divided:
30% of consumers said biotech foods are basically safe (vs. 29% in 2001), while 27% said they were basically unsafe
85% of consumers said regulators should ensure biotech foods are safe before they come to market (81% believe the FDA should approve the safety).
57% of consumers oppose research on biotech animals ( vs. 32% who favor such research)
54% said using plants to produce cheaper pharmaceuticals was a good reason to use this technology, while 52% said using biotech to produce cheaper food to reduce hunger was a good reason.
If we looked at the typical European consumer, we would see a high percentage skewed against the use of biotech crops, yet even Europe is slowly changing as the first biotech crops have been approved for use there.
The numbers from above indicate that Ag biotech is big business and having a significant impact around the world. It is also interesting to see that the countries in leadership positions with this technology, other than the U.S., are very different from those using human biotechnology. It is also apparent that China and other countries may soon overtake the U.S. in ag biotech revenue and production, but it is American companies such as Monsanto, DuPont and Dow, that are leading this innovation in crop science. All three companies either have headquarters or significant operations here in the Midwest (or both).
See you next week!
Michael S. Rosen is president of Rosen Bioscience Management, a company that provides CEO services including financing, business and corporate development to start-up and early stage life science companies such as Renovar and Immune Cell Therapy. Rosen is also a founder and board member of the Illinois Biotechnology Industry Organization
. He can be reached at firstname.lastname@example.org
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