Competition for your seed business is fierce
Gone are the days when farmers only bought seed from their sales rep. Today, seed companies offer a wide-ranging portfolio—everything from herbicides to software to data analysis.
While bundling is advantageous, seed performance is still at the heart of a company’s success. "Corn and soybean market share is driven by the industry’s consolidation during the past decade, plus swings in hybrid and seed performance," says Dean Cavey, managing partner of Verdant Partners, a consulting firm in Champaign, Ill.
As competition for farmers’ business remains fierce, the seed industry continues to grow, both inside and outside of the U.S. The global seed market’s value is approaching $50 billion, Cavey says. Of that, the U.S. seed market is worth about $12 billion.
DuPont and Monsanto Company are the clear heavyweights, possessing 70% of the corn seed business and slightly more than 60% of the soybean seed business. While they are basically within a share point of each other in corn sales, DuPont has pulled ahead in soybeans by almost eight points.
The other two national brands on the seed circuit—Dow AgroSciences and Syngenta—currently hold 5.3% and 6.1%, respectively in the corn market. Syngenta at 10.1% also has an edge on Dow AgroSciences’ 5% on the soybean side.
AgReliant Genetics enters the mix at 6.7% market share in corn and 3% of the soybean business.
Although market share has been slipping each year for both local and regional companies, together they still own 11% of the corn market and almost 18% on the soybean side. Farm supply brands, public and saved seed, round out the remainder of the soybean market share at 2.5%.
The big four have remained relatively consistent in market share for the past several years. Syngenta is the only one of the national brands that has lost market share, which has allowed for other companies to gain. "The fastest riser in recent history is AgReliant," Cavey says. "This is due to a combination of performance and a high level of customer service."
Consolidation trend. Because farmers have rapidly adopted transgenic traits, the major companies have aggressively bought up seed genetics and seed distribution companies for the past decade. "In the pre-transgenic trait age (before 1995), there were some 300 companies in the U.S. marketing seed corn," Cavey says. "There are less than 50 now."
Consolidation has been a prominent trend in the seed industry—and one that will likely continue, says Phil Howard, associate professor at Michigan State University. "But there aren’t as many companies left to acquire now," he says.
Acquisitions are still happening, but most are outside of the U.S. "The seed industry continues to become more global and more consolidated," he adds.
Companies continue to cross-sell technology and bundle services. "The relationship between the big six seed and chemical companies continues to get closer," Howard says.
The diverse and deep spectrum of products and services companies offer are helping farmers reduce risk and be more cost-effective, Cavey says. "As more traits, seed treatments, biologicals, crop protection products, etc., are developed, we’ll see more of the bundling approach," he adds. "Farmers like being able to get one-stop service from one or just a few sources."
Even with all this consolidation, Cavey says, the industry’s overall structure of national, regional and local companies will likely remain the same for the near future.
"The big companies create good technology to help farmers become more efficient and profitable," he says. These companies can license their genetics and traits to other companies.
The medium- to smaller-sized seed companies are more service-driven, Cavey explains.
"There will always be farmers who like a high level of customer service and want to work with smaller local or regional companies," he adds.
A new revolution. Cavey says agriculture and farming have traveled through several key transformations in the past century and are on the verge of another.
First came the Industrial Revolution and mechanized farming. The next big change was the invention of hybrid seed corn, which was followed by the introduction of transgenic traits in the mid-’90s.
The budding revolution now is the introduction and broad-scale adoption of information technology. "Farmers quickly embraced transgenic technology, and I think the same will be true with information technology," Cavey says. "It’s a bit intimidating. But as it is packaged in ways that allow farmers to utilize it in a quick and easy way, I think we’ll see the same thing happen in information technology."
With this explosion of information, Cavey says, seed companies and other parties, such as large-scale private-equity funds, will likely start developing information platforms for farmers. "Over the next five years, I think we’ll see a substantial amount of information that will be packaged for farmers to use," he says.
In recent years, consolidation and seed performance have driven swings in market share. While corn market share has remained relatively stable, one point is estimated to equal $113 million or 376,000 standard bags, assuming 95.4 million acres and 31,500 plants per acre in 2013. For soybeans, one share point is estimated at $46 million or 765,000 standard bags based on 76.5 million soybean acres and 140,000 plants per acre in 2013.