Smaller Seed Companies See Big Opportunities in Upcoming Mergers, Acquisitions


Bloomberg reports: 

Farmers may be worried about the multibillion-dollar deals transforming the agriculture industry, but independent seed companies see the consolidation as an opportunity. 

Plenty of customers will ditch the big-name brands because 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 independent seed retailer in the country. 

“Consolidation always opens up the market,” said 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 percent of the market that says: 'OK, I don't like this consolidation. I want something different.' For a company our size, that's an extremely big deal.” 

The global seed and chemical industry is undergoing a rapid realignment, with three massive deals in less than a year. Last month, Germany-based Bayer AG clinched a bid to buy Monsanto Co., the world's biggest seed company, for $66 billion, ending 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 maker Syngenta AG. 

While the dominant players get bigger, some independents look for advantages in research and development. About two-thirds of Stine's employees work in R&D using traditional breeding techniques to improve corn and soybean genetics. The company sells these improved seeds to farmers and also licenses them to bigger companies like Monsanto that, as part of the bargain, give Stine Seed priority access to the newest genetically modified traits that help farmers control weeds and bugs. 

Licensing Revenue 

Closely-held companies account for about 20 percent of U.S. sales in corn seed and 22 percent in soybeans, according to Todd L. Martin, executive director of the Independent Professional Seed Association, which has 118 regular members. 

The bulk of Stine Seed profit comes from licensing its genetics research to bigger rivals. But customer backlash from the big mergers means the company's revenue from its retail sales could “easily double,” Stine said in a telephone interview. The company declined to provide sales figures. 

Smaller companies also may find an edge over pricier biotech products, said Jason Miner, an analyst at Bloomberg Intelligence. 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 said. 

“Traditional breeding may actually be on the rise,” Miner said. “Farmers are less interested in speculating on high-cost, potential yield boosters. They want cost-effective solutions.” 

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Source:  Agri-Marketing



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