Time for Chinese seed players to ramp up for R&D
Seizing opportunities from Government's initiatives and strengthening edges against competitionDOWNLOAD
Publish date: 13 July 2012
Chinese commercial seed players should ramp up their research and development (R&D) for biotech seeds in order to benefit from the government's support for the agricultural industry and to deal with the unique industry challenges – a relatively long cycle for launching biotech products and the increased penetration of foreign products, according to the latest Deloitte’s Chemical Quarterly (the "Paper").
The Paper cited a number of factors that support the steady growth of China's commercial seed industry, including favorable government policies and subsidies, less use of farm-saved seeds, continuous increase in the price of seeds and the increasing use of proprietary seeds. As a result, the sector was growing at a compound annual growth rate of 12 percent between 2005 to 2010, reaching a market value of RMB38 billion.
At the moment, 90 percent of the seed market is controlled by Chinese players. So far, commercial seeds have been largely used for corn and rice, which accounted for over half of the market value in 2010. Some leading players have expanded from food crops into other seed categories, such as oilseed, vegetables and fruits.
"Compared with the global commercial seed market, China's biotech seed market has a very low penetration rate. In 2010, biotech crops only accounted for 2.2% of the total planted crop area in China. Despite the visible expansion barrier for biotech seeds, the Chinese Government aims at driving agricultural innovation which should help accelerate the development of both the conventional and biotech seed sectors, and drive domestic consolidation within the sectors." said Mr. Yann Cohen, National Leader for Chemical Industry of Deloitte China.
Mr. Cohen continued, "Looking ahead, the Chinese government's measures and subsidies for conventional and biotech seeds (particularly for biotech corn, cotton, rice, and wheat) will likely support R&D investments, encourage the use of commercial seeds, promote sector integration, improve seed trading, and speed up biotech breeding activities."
The Paper also highlighted the strategies of global seed players, which have been trying to raise their market share in China from merely 10 percent at the moment. Global seed players are now selling a greater variety of seeds, including grain, vegetables, fruit and selected genetically modified (GM) seeds. They also set up joint ventures with Chinese companies in order to comply with regulatory requirements. Some leading global players even have established R&D centers in China and formed partnerships with Chinese research institutes to promote seeds through local R&D initiatives.
"Compared with their Chinese counterparts, Global seed players are adopting a more integrated approach and would consider and streamline the different aspects within the value chain from R&D to distribution (or further into farming and food processing). They would also better capitalize on cross-licensing (leveraging multiple IPs on GM seeds to breed stacked traits). The path from research to end product is a multi-year process, involving the en route to market challenges. In this regard, Chinese players would need to invest more in R&D of biotech seeds," concluded Mr. Cohen.