Life In The Fast Lane
The seed category remains on the fast track among input revenue with biotech varieties primarily driving the car.
September 12, 2008
There's no other way to say it — the seed category is having one heck of a 21st century. Among all crop inputs, seed has been moving ahead at breakneck speed year after year in terms of revenue gains with no stop sign in sight.
For evidence of this trend, consider the figures from this decade's CropLife® 100 retailers survey. In the 2000 CropLife 100 (then known as the FARM CHEMICALS Top 100 Dealerships), the seed category only recorded $855 million in revenue — far behind then input giants crop protection and fertilizer. This year, however, the seed category saw sales of more than $1.5 billion — almost doubling in the past six years — and had an 11% share of the total crop input revenue market.
What makes this performance more impressive is retailers say that their profit margins on seeds are much lower compared with other inputs. "The biggest challenge for us is the low margins on seed," says Ronald Stutsman, president of Eldon C. Stutsman, Inc., Hills, IA.
Not surprisingly, the majority of the sales growth taking place in the seed category comes from the biotech segment. While traditional seed sales were down in 2006, with only 23% of CropLife 100 retailers seeing an increase, biotech seed sales went up to 84%, a 1% increase from 2005's total.
Among crop types, soybeans continued to lead the biotech seeds pack in terms of total market share. In 2005, CropLife 100 retailers indicated that 88% of their grower-customers who planted soybeans were using biotech varieties. Incredibly, this percentage went up in 2006, growing 2% to reach 90%.
Cotton ranks second among biotech crops. In 2006, CropLife 100 retailers said that 82% of their grower-customers planted biotech cotton, an increase of 7% over the 2005 percentage.
As impressive as these percentages for biotech soybeans and cotton are, however, the biggest story in biotech seeds in 2006 was corn. As recently as 2003, the percentage of biotech corn being planted by CropLife 100 grower-customers stood at less than 40%. Since that time, the market has expanded significantly. In the 2006 survey, retailers reported that the number of grower-customers growing biotech corn varieties had increased to 56%. This represented a 9% gain from the 2005 total of 47% and the first time biotech corn has outpaced traditional corn in the field.
When it comes to individual biotech seed types, the undisputed market leader is Roundup Ready. According to the data from the 2006 CropLife 100 survey, 98% of the retailers that sell biotech seed to their grower-customers say it is Roundup Ready seed. A distant second is Bollgard cotton seed, which is the choice among 82% of the grower-customers who buy biotech cotton seed.
Among some of the newer varieties of biotech seed, YieldGard is the most popular. This variety is chosen by 79%
of grower-customers of CropLife 100 retailers. Corn rootworm seed comes in at fourth place at 70%.
Perhaps the most noteworthy biotech seed in terms of growth is stacked traits for corn. In 2005, this variety didn't even break into the double-digit range among CropLife 100 retailers. In 2006, however, 79% of the retailers polled were selling this variety to their grower-customers. According to observers, growers were impressed with stacked trait seeds' ability to increase crop yields anywhere from 20 to 30 bushels per acre. With more growers expected to look to sell at least part of their harvests in 2007 to an ever-expanding ethanol industry, this increased yield potential will probably boost sales for the variety even further.
Overall, going into 2007, retailers can expect the percentage of biotech corn being planted to continue to increase, particularly if the trend toward ethanol expands as expected. Based upon early estimates, this could add anywhere from 4 million to 9 million corn acres to the 2007 crop mix.
Still, at least one retailer cautions that biotech seed suppliers need to be careful when it comes to distributing their offerings. "While genetically modified organism seed has increased our potential income, it has also increased our liability," says Jim Shelton, agronomy division manager for Landmark Services Cooperative, Cottage Grove, WI. "There are so many places that mistakes can be made — from the order to the warehouse to storage to delivery to farm tracking and placement to proper applications — so it can be very challenging."