The quest for seed market share among manufacturers is every bit as bruising as the classic battles that Coca-Cola and Pepsi have waged over the years. And the 2011 season is set up to be a real tooth-and-nail war for market share. Sano Shimoda, president of BioScience Securities, an ag biotechnology corporate advisory firm, says the past five seasons have set up what retailers and growers will be experiencing in seed this winter and spring.
As the driver of biotechnology adoption through the early 2000s, Monsanto really came into its own by 2006, right at the cusp of the corn price uptick that reached its peak in July 2008. With competition still working to catch up to Monsanto’s lineup of genetic breakthroughs, the company set aggressive pricing in response to not only its strategic view of trait value sharing with farm customers, but also on belief in the sustainability of high corn prices.
In 2008, based on its decision to accelerate the timing of pricing decisions, Monsanto had set 2009 pricing for its seed as the price of corn was peaking, says Shimoda. “They aggressively raised prices based on the new and uncharted territory we were in — corn in the $7 range — and did not see we were in the midst of a pricing bubble,” he says. “It really created a monster.”
By August 2008, the price of corn had fallen, but Monsanto decided to stick with the higher seed price points. Meanwhile, Pioneer Hi-Bred, buoyed by the release of its own triple stack hybrids, could provide a more comparable genetics package at a lower price point.
More challenges occurred on the soybean side, where Monsanto introduced its Roundup Ready2Yield. “The company said that the technology would deliver a clear and substantial yield gain,” says Shimoda. “And for that added value, the soy list was about $20 to $25 higher than Roundup Ready 1.”
The 2009 season would not cooperate with the initial launch of Roundup Ready2Yield, as cool and wet weather accentuated disease susceptibility in many key locations, which diminished the yield return of the new release. It would also mark the bottoming out of Pioneer market share, says Shimoda, and a flat year for Monsanto.
Pioneer was able to take advantage in 2010 and pick up market share on seed with comparable performance and lower cost. Meanwhile, Monsanto unleashed SmartStax technology into another challenging weather season, which diminished the expected yield gains.
Going into the 2011 season, Monsanto has revamped its seed pricing, and Pioneer is reenergized for the battle.
“The price premiums for both SmartStax and RoundUp Ready2Yield were very modest vs. existing triple stacks, so this year there is going to be a tremendous market share battle,” says Shimoda. “We have high corn prices, so the farmer’s willingness to spend on seed makes it a great environment.
“From a competitive standpoint, Pioneer has some wind at its back and is not giving up, and Monsanto is fully engaged. Syngenta, based on its triple stacks, is also competitive. Mycogen’s strategic agreement with Monsanto for SmartStax, as well as sharing germplasm, means its ability to enhance its market share has improved,” he concludes. “Bottom line, it is going to be a very competitive marketplace in 2011.”