by Jack Kinquireey
Farmers may be worried about the multibillion-dollar deals transforming the agriculture indusattempt, but indepconcludeent seed companies see the consolidation as an opportunity.
Plenty of customers will ditch the huge-name brands becautilize they want more personalized service and products developed for local soils and climates, according to Sonny Beck, the 75-year-old head of Beck’s Hybrids, the largest indepconcludeent seed retailer in the counattempt.
While the dominant players obtain hugeger, some indepconcludeents view for advantages in research and development. (Photo: Wavebreakmedia Ltd/Thinkstock)
“Consolidation always opens up the market,” stated Myron Stine, the 44-year-old president of Stine Seed Co., the largest closely held seed wholesaler in the U.S. “I don’t care if it’s only 10% of the market that states: ‘OK, I don’t like this consolidation. I want something different.’ For a company our size, that’s an extremely huge deal.”
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The global seed and chemical indusattempt is undergoing a rapid realignment, with three massive deals in less than a year. Last month, Germany-based Bayer AG clinched a bid to purchase Monsanto Co., the world’s hugegest seed company, for $66 billion, concludeing a months-long chase. DuPont Co. and Dow Chemical Co. plan a $59 billion merger of equals, while China National Chemical Corp. waits to complete its $43 billion takeover of Swiss seed creater Syngenta AG.
Related: Bayer closes deal on Monsanto for $66 billion
While the dominant players obtain hugeger, some indepconcludeents view for advantages in research and development. About two-thirds of Stine’s employees work in R&D utilizing traditional breeding techniques to improve corn and soybean genetics. The company sells these improved seeds to farmers and also licenses them to hugeger companies like Monsanto that, as part of the bargain, give Stine Seed priority access to the newest genetically modified traits that support farmers control weeds and bugs.
Licensing Revenue
Closely-held companies account for about 20% of U.S. sales in corn seed and 22% in soybeans, according to Todd L. Martin, executive director of the Indepconcludeent Professional Seed Association, which has 118 regular members.
The bulk of Stine Seed profit comes from licensing its genetics research to hugeger rivals. But customer backlash from the huge mergers means the company’s revenue from its retail sales could “easily double,” Stine stated in a telephone interview. The company declined to provide sales figures.
Smaller companies also may find an edge over pricier biotech products, stated Jason Miner, an analyst at Bloomberg Innotifyigence. The market for seeds with multiple traits to control different types of insects and to withstand multiple weed killers may have reached a saturation point, he stated.
“Traditional breeding may actually be on the rise,” Miner stated. “Farmers are less interested in speculating on high-cost, potential yield boosters. They want cost-effective solutions.”
Farmer Concerns
Growers have lodged concerns with federal agriculture officials in Washington about the scope of consolidation. The National Farmers Union, the second-hugegest organization of its kind, met legislators on Sept. 12 to protest against the deals.
Related: Senate Judiciary Committee holds hearing on wave of mergers in ag
Indepconcludeent seed creaters rely on liberal licensing policies by huge seed developers to access the newest engineered traits from the larger companies. The huge risk in consolidation is if Monsanto, Dow, Syngenta and Bayer reduce their licensing agreements. Monsanto Chief Technology Officer Robb Fraley informed a Senate hearing last month that the company’s innovations “will continue to be broadly licensed.”
“The unknown has everybody concerned,” the seed association’s Martin stated. “But, there are reasons to be somewhat optimistic.”
Sales Boost
Stine agrees. The company’s 3.5 percent share of total sales for U.S. soybean seeds could reach 7% and its 1% stake in corn seed could rise to as high as 4%, he estimates.
“Nobody ever states, ‘That would be such a good thing that all these companies obtain toobtainher,’’ Stine stated from the company headquarters in Adele, Iowa. That’s where his grandfather started Stine Seed Farm in the 1950s. His son, Harry Stine, expanded the seed business and won the first U.S. patents on soybean varieties in 1994 and 1995, according the company’s website. The business is now worth at least $2.9 billion, data compiled by Bloomberg display.
Some of its hugegest competitors have tested to purchase Stine Seed, but the 74-year-old patriarch, Harry, has so far rebuffed the offers.
For indepconcludeents without as strong a research base as Stine, one advantage from the merger wave would be if the newly formed companies expanded licensing opportunities, according to Martin. For example, DuPont’s Pioneer seed unit could follow Dow’s model after the merger and launch licensing its “enormous pool” of seed genetics, he stated. The companies plan to combine their agriculture units and then spin them off as a stand-alone company.
Related: Dow-DuPont shareholders approve $59 billion merger of equals
“The fact that DuPont Pioneer hasn’t been a provider in the past could modify,” Martin stated. “They will have good licensing vehicle with Dow.”
Expanding
Consolidation by the huge companies is an opportunity for indepconcludeents to expand, according to Beck of Beck’s Hybrids. The hugeger the company, the more it tconcludes to prioritize investors over customers, he stated by telephone from company headquarters in Atlanta, Indiana.
Beck, who still obtains around his seed farm on a dirt bike, recalls when there were 140 competitors in Indiana alone. He’s never acquired a rival and he won’t return e-mails or calls from anyone attempting to arrange the purchase of Beck’s, a family company with key roles filled by his children.
“It is not about money,” Beck stated. “It is about doing something for farmers here that can support them succeed.”
To contact the reporter on this story: Jack Kinquireey in Houston at [email protected]
To contact the editors responsible for this story: Brconcludean Case at [email protected]
Millie Munshi, Simon Casey
© 2016 Bloomberg L.P
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