The World Seed Market

Developments and strategy

1994
LEI - DLO Rabobank Nederland Ministry of Agriculture,
Agribusiness Research Nature Management and
Fisheries
A.F. van Gaasbeek A.M.A. Heijbroek P. Vaandrager
G.J. Boers
NLG 75-/US $40 -
Research and analysis were carried out by the Agricultural Economic Institute (LEI-
DLO) in cooperation with Rabobank and the Ministry of Agriculture, Nature
Management and Fisheries.

We are grateful for the active contribution of the following organisations in compi-
ling this report:
- Wageningen University of Agriculture, Department of Management Studies,
Wageningen;
- Netherlands Potato Consultative Institute (NIVAA), The Hague;
- Commodity Board for grains, seeds and pulses, The Hague;
- Dutch Seed Trade Association (NVZP), Zeist;
- Dutch Seed Potatoes Federation, (NFP) The Hague;
- General Netherlands Inspection Service for Agricultural Seeds and Seed Potatoes
(NAK), Ede
 Contents

1 Introduction 8 Outlook and strategic options 44

1.1 Definition of terms 8.1 Internal business organisation 44
1.2 The changing world of seed companies 8.2 Restructuring in the industry 44
1.3 Background to the study 8.3 Strategic options 45
8.4 Markets 49
2 Development of demand 51
2.1 Acreage development 8.5 Summary and outlook
2.2 Productivity 52
2.3 Consumer trends Appendix 1 Glossary of terms
2.4 Animal consumption 53
2.5 Industrial application Rabobank International Network
2.6 Agricultural policy 9
2.7 Summary and outlook 10

The agricultural seed market 12

3.1 The world seed market 12
3.2 World supply 15
3.3 Market structure of seed companies 16
3.4 Concentration 18
3.5 Financial position 19
3.6 Summary and outlook 19

4 World trade 21
4.1 Export 21
4.2 Import 25
4.3 Summary and outlook 26

5 International structure 27
5.1 The United States 27
5.2 France 30
5.3 The Netherlands 31
5.4 Central and Eastern Europe 36
5.5 Summary and outlook 36

6 Development of breeding and propagating 37

6.1 Seed technology 37
6.2 Biotechnology 37
6.3 Agrification 37
6.4 The importance of hybrids 37
6.5 Intensity of capital and know-how 38
6.6 Summary and outlook 38

7 The context of seed companies 39

7.1 Stagnating sales markets 39
7.2 Technological developments 39
7.3 Government 39
7.4 Entry barrier 42
7.5 Summary and outlook 42
 1.3 Background to the study
Our research is based on a thorough
Introduction study of the available literature, and
consultation with experts.
In the study, the following crops and
1.1 Definition of terms crop groups are described, and the most
The agricultural seed sector compri- significant countries analyzed.
ses the breeding, propagating and trade
of seed and seed products as propaga- Grains (wheat, barley, maize (corn),
ting material in commercial agriculture. rice)
Agricultural seed is produced and sown Oilseeds (soy, & other oilseeds)
in enormous quantities. The added Sugar-beet seed
value is limited compared to that of hor- Pulses (peas, beans)
ticultural seed. Agricultural seed can be Potatoes (seed potatoes)
propagated vegetatively (seed potatoes) Fodder crops (grasses, other fodder
as well as generatively (with seed). crops)
Good seed is basic to agricultural pro-
duction, because the quality of the seed In the study 'maize' has been called
is one of the factors determining the 'corn' when specifically referring to the
success of the harvest and the quality of USA. We have included seed potatoes
the product. in our definition of agricultural seeds.

1.2 The changing world of seed In chapter 2 a brief overview is

companies given of developments at world market
In the production and sales of agri- level, such as supply and demand.
cultural seed, much is changing in com- Trading aspects are dealt with in chap-
petitive position round the world. The ter 3. France, the Netherlands and the
establishment of the European Union United States play an important interna-
(EU), restructuring of the Common tional role in the agricultural sector, as
Agricultural Policy (CAP), the political covered in chapter 4. In chapter 5, im-
revolution in Eastern Europe and the portant developments in the area of
liberalization of world trade via the breeding and propagating are discussed.
GATT negotiations are bound to effect The seed industry is subject to external
both agricultural producers and the sup- influences, which may be experienced
pliers of agricultural seed. Agriculture either as new opportunities or as
faces significant change. Attempts are threats. We shall look into this in chap-
being made to minimise the overpro- ter 6. Chapter 7 reflects the outlook of
duction of various agricultural crops in the sector, and examines arange of stra-
the United States and Europe by letting tegic options.
fields lie fallow and converting to other Summaries are provided at the end of
crops. This results in a declining and each chapter for quick reference.
shifting demand for agricultural seed in
these parts of the world. In other re- This study has been published in
gions (Africa, Asia & South America), line with the long term commitment of
production is going to have to increase Rabobank to international food and
to meet the continuing growth in agribusiness. For more information we
population. We can also expect an in- refer you to the study 'International
crease in the demand for new, more pro- competitiveness in the propagating ma-
ductive varieties. Only a few countries terial sector' (1992, also written in
have a large agricultural seed industry. cooperation with the Ministry of Agri-
If companies are to make the most of the culture, Nature Management and Fishe-
many changes, a clear picture is needed ries) about developments in the area of
of the position of these countries and breeding and propagating in horticul-
their industries. ture, and to the studies 'The world grain
market' and 'The oilseeds complex',
published by Rabobank Nederland.
 The world acreage of grain has de-
clined over the last 10 years. In 1980 a
Development of demand total of 718 million hectares was culti-
vated, and has stabilised at around 700
million hectares since then. Grain
Developments in primary agricul- acreage has decreased in almost all EU
ture have direct consequences for the countries as a result of changes in EU
agricultural seed sector. Demand for agricultural policy.
agricultural seed is directly related to
world acreage trends in the respective Wheat acreage in Europe has in-
crops. Acreage development is in turn creased only slightly over the last 20
largely determined by agricultural poli- years, and fluctuates around 27 million
cy, productivity, developments in hu- hectares. In 1992 the figure fell to 25
man and animal consumption and by in- million hectares. In North and Central
dustrial applications. America, wheat acreage increased from
27 million hectares in 1970 to almost 46
2.1 Acreage development million hectares in 1982. Since then, the
The total acreage of cultivated land area has gone down again to around 40
in the world stands at over 1.4 billion million hectares. In Asia we see a grad-
hectares (over 10% of total land area), ual increase in acreage from a little
and has increased by almost 2% over under 70 million hectares in 1970 to
the last 10years. In Africa increase has around 85 million at the start of the
measured almost 5%, and in South 1990s. In Africa, acreage has increased
America a little over 10%, whereas in in an irregular manner from 7 to 8-9
Asia it has measured only 0.5%. In the million hectares. Oceania also showed
industrialised nations there has been acreage growth, peaking at almost 20
little or no increase, and in Europe there million hectares in 1982-1983, since
has been a significant decline. when it has declined steadily to around
9 million hectares.

Table 2.1 World surface of agricultural crops (million hectares)

1970 1980 1991 1992

grains 674 718 696 700

roots/tubers 48 47 47 48
pulses 64 61 70 67
oil crops 82 107 124 127
sugar-beet 8 9 9 8
Source: FAO

Figure 2.1 Development of world maize acreage (million hectares)

Source: FAO
 Over 90% of rice acreage is to be pearance of feed potato production. An
found in Asia, the major producer coun- all-time low was reached in 1989, with
tries being China, India, Indonesia, an acreage of 1.4 million hectares. The
Bangladesh and Thailand. In Asia, increase in potato acreage in 1991 was
acreage increased from 122million hec- largely the effect of the unification of
tares in 1970 to 132 million hectares in Germany. In France, Germany and the
1990. At present world acreage appears Netherlands acreage has increased since
to be stabilising. 1990. Acreage declined in Spain, Italy
and Portugal. The recent extension of
Maize (corn) acreage in Asia shows potato acreage in the EU reflects not
a steady increase from 31 million hecta- only relatively favourable prices in the
res in 1970 to at least 40 million hecta- period 1989-1991 but also the substan-
res in 1990, and therefore accounts for tial drop in the grain price, which
most of the world growth. Since 1990 caused a number of arable farmers to
acreage has stabilised. In North and move over to 'free' products, such as
Central America, acreage increased potatoes.
from 33 million to 39.2 million hectares
in the same period, to recover to 1980 Between 1980 and 1992 the world
levels. The United States holds a 75% acreage of pulses increased by 6% to 67
share. When production is measured in million hectares. Asia is the major pro-
tons, however, North and Central ducer of pulse crops, accounting for
America produce twice as much as 51% of the world acreage. At the start
Asia. Maize acreage in the EU has been of the 1980s pulse production and
on the increase again in recent years and acreage increased significantly in the
totalled 3.7 million hectares in 1992 - EU, a trend which is now being follo-
just 3% of world acreage. wed in world production as a whole.
France accounts for much of this in-
The world acreage of root and tuber crease, and production is destined pri-
crops increased by 3% between 1980 marily for animal fodder. The increase
and 1992, to 48 million hectares. came about as a result of EU policy to
Potatoes and cassava are responsible for support these crops. Since 1990 the
38% and 33% respectively. World pulse acreage in Europe has tailed off
acreage of potatoes declined between slightly.
1981 and 1992 by 6% to 18million hec-
tares. Potato acreage in the EU has been Among oilseeds, soybeans are by
halved in the last 20 years, falling from far the most significant on a world
3 million to 1.6 million hectares in scale. Over the last 10 years the world
1992. The two main contributory fac- acreage of soybeans has increased by
tors were a change in consumption 10% to 54 million hectares. It had risen
patterns within the EU and the disap- steeply to 58 million hectares in 1989,

Figure 2.2 Development in world soybean acreage (million hectares)

Source: FAO
but then fell back to 54 million hectares. Table 2.2 Productivity of grain,
Major producers are the United States, rice and maize in 1992
Brazil. China and Argentina. Produc- (tons/hectare)
tion in these countries has risen in re- Grain Rice Maize
sponse to the increase in international
demand, particularly from the EU.
World 2.6 3.6 4.0
Asia 2.5 3.7 3.3
In the EU rapeseed and sunflowers
Africa 1.6 1.9 1.3
are the major oilseeds, with an acreage
USA 2.7 6.4 6.8
of 2.4 and 2.7 million hectares respecti-
South America 2.0 2.6 2.5
vely. The increase in production of
Europe 4.5 5.6 4.7
these crops in Europe is a result both of
Oceania 1.7 8.2 5.1
an increased demand for vegetable oils
CIS 2.0 4.4 2.0
and the EU agricultural policy.
Source: FAO
In 1992 we find approximately half
of the world's sugar-beet acreage in ding. In Asia, as a result of the Green
Europe. Sugar-beet is influenced revolution and the use of much impro-
strongly by EU agricultural policy, ved wheat and rice varieties, yield per
which includes aproduction quota anda hectare has increased significantly in
system of guaranteed prices. Between the last ten years. Population growth,
1990 and 1992, EU acreage went down increased consumption and restricted
by 6c/c. largely due to the decrease in acreage in Asia and South America
acreage in Germany following unifica- point to the need for further improve-
tion. ments in production per hectare, and
hence for new varieties and new tech-
The demand for grass seeds comes nology.
from two specialist market sectors: fod-
der grass and grass for recreational use. In developed countries the producti-
The market for fodder grass is stagna- vity of certain crops is increasing. In
ting. Following the introduction of milk addition to this aim for breeding seed
quotas and the increase in cattle per companies increasingly include the in-
hectare, grassland acreage in the EU ternal and external quality of varieties
has declined by 3% over the last 10 and resistance in their research pro-
years, to stand at 48.4 million hectares; grammes.
maize for silage has also replaced the
use of grass in silage. Demand for grass 2.3 Consumer trends
seed is also dependent on weather con- World consumption of grain and
ditions, as grassland frequently requires vegetable oils measured in kilograms
reseeding after frost or drought. The per capita continues to rise; consump-
market for recreational use is reasona- tion of sugar and confectionary is stabi-
bly stable now. but cyclically sensitive. lising but shows a shift towards confec-
Demand is affected by factors which in- tionary: the consumption of sweets is 2
clude government expenditure on rec- to 3 times as high in developed coun-
reation facilities and private expendi- tries as in Asia and Africa but is decli-
ture on gardening. ning slightly in per capita terms.
Consumption of root and tuber crops is
2.2 Productivity falling worldwide.
The improvement of plant varieties,
along with the use of natural or artificial In developed countries, the
fertilizer and pesticide, plays an impor- consumption per capita of all major ar-
tant role in the increase of crop yields. able crops is either levelling off or fal-
In the US and EU wheat productivity ling, with the exception of vegetable
has increased by an average 1%per year oils. General prosperity has ensured
for many years, half of which is ac- that maximum food consumption has
counted for by the improved seed been reached, in terms of both kilo-
quality. Maize yield increases have grams and calorie intake; public health
largely been achieved through bree- departments suggest that it has, in fact,
been exceeded. As prosperity increases 2.5 Industrial applications
still further, it stimulates the consump- The industrial non-food use of
tion of luxury and exotic vegetables and arable products is generally low. Less
fruit, pushing aside such traditional than 2% of total world grain production
staples as potatoes and grain products. is processed. In North and Central
The market in this part of the world is America this figure stands at 3.5%, and
consequently showing clear signs of is on the increase. In Brazil alcohol for
saturation, especially as population fuel is produced from sugar on a large
growth has slowed. scale. In the EU starch is extracted from
potatoes and maize for raw materials.
In developing countries consump-
tion per capita of all categories is on the In the US and the EU extensive re-
increase, with the exception of root and search is being carried out into new in-
tuber crops. Population growth is high, dustrial uses for arable products.
leading to growth in total consumption Attention isfocused particularly on bio-
of arable products. Asia in particular is plastics, paper, cardboard and energy.
significant: in both quantity and rate of However, high production costs
growth, it is the most important con- involved in agricultural raw materials,
sumer; it has a huge, growing popula- uncertainty concerning delivery and
tion and some regions show significant fluctuating quality and price prevent
economic growth. In countries which arable products becoming a major
are developing rapidly, the basic food source of industrial raw materials.
package is broadening with a shift
towards wheat (alongside traditional Some analysts expect EU non-food
rice), vegetables, fruit and meat. oilcrops for the production of bio-ethe-
nol and bio-diesel to increase further
World consumption of foodstuffs is from 200,000 hectares in 1993 to
expected to increase by 1.6% a year up 700,000 hectares in a few years time.
to the year 2000. In developing coun- This would represent approximately
tries, an increase in consumption of 3% 14% of EU oilseed production.
a year is anticipated.
2.6 Agricultural policy
2.4 Animal consumption Almost all countries which are
Animal consumption is an impor- major arable crop producers use some
tant factor in the demand for arable form of protection or support for their
products. In Europe, North and Central own arable sector.
America and the CIS especially, most
grain products are sold for cattle fodder. EU
A compound feed industry exists in the EU agricultural policy focuses pri-
US and the EU; heavy use is made of marily on the development of the agri-
imported grain substitutes such as cultural sector, and has a strong tend-
tapioca, corn, gluten and soya meal to ency to shield the internal market from
mix compound feeds in northwest world market influences. Falling prices
Europe. Alterations to European agri- and sales problems in the international
cultural policy have led to a fall in grain market have, however, increased the
prices. Lower grain prices may lead to costs of the policy and given rise to a
more grain being sold as cattle feed in number of policy changes. The
the EU, at the expense of imported grain MacSharry policy provides for a drastic
substitutes. reduction in guaranteed prices and
overproduction by only offering income
On a world scale, animal consump- compensation to large farmers if they
tion of arable crops is rising. In the EU, allow 15% of their acreage currently de-
however, demand is stagnating as live- voted to grain, protein-containing crops
stock levels fall in the face of manure and oilseeds to lie fallow; grain pro-
problems, environmental pressure and duction in the EU will decrease, as will
the milk quota. acreages for sugar-beet, oilseed, fodder
crops and rape. The fodder pea market
will remain stable.
 EU estimates for 1993 show an differences can be seen from region to
average fallow rate on agricultural land region. The acreage of oil crops is still
of 8%. Percentages vary from country rising. The acreage of arable crops is
to country because of differences in determined by both government policy
scale of farming. In the United and the demand for end products.
Kingdom and France, fallow percen- Demand for propagating material is in-
tages stood at an estimated 14% and creasingly determined by the factor of
11% respectively in 1993; in Germany quality, whereby consumer demand is
and the Netherlands these are estimated passed on to suppliers of propagating
at 5% and 2%.This will have short-term material via retailers, wholesalers, pro-
consequences for the agricultural seed cessors and farmers.
sector, and a 5% reduction in grain seed
is anticipated. In Southeast Asia acreage is in-
creasing only slightly, for lack of suita-
Lower sales prices will also force ble farming land. Required increases in
farmers to attempt to reduce production production will have to be achieved pri-
costs by decreasing the intensity of marily through higher productivity.
grain production. The lower grain
prices resulting from the MacSharry World consumption of grain and
policy will therefore lead to lower grain vegetable oils (in kilograms per capita)
seed prices. In order to reduce cultiva- continues to grow; consumption of
tion costs, European farmers are in- sugars is stabilising, with a shift from
creasingly propagating seed of wheat, natural sugars to sweeteners. Consump-
barley, oats, rape seed and pulses for tion of root and tuber crops is falling. In
themselves from their own crops. developed countries, the general trend
for arable crops is towards falling or
The common agricultural policy stabilising per capita consumption, with
(CAP) also affects 'free' crops. the exception of vegetable oils. Popula-
Potatoes are a good example of this, tion growth is slow. The market in de-
facing 'push' side effects from the veloped countries is therefore unlikely
CAP. Restrictions on dairy, wheat and to increase.
sugar-beet have resulted in an increase
in potato production. Potato prices have In Asia. Africa and South America
fallen considerably as supply exceeds consumption of all major arable crops is
demand for both seed potatoes and po- growing, with the exception of root and
tatoes for consumption. tuber crops. The high rate of population
growth in these regions, together with
The United States growing consumption, will of course
US agricultural policy has also af- cause demand for arable products to rise
fected cultivation acreages. Farmers in sharply.
the US and Canada are supported to the
same extent as those in the EU. In order The agricultural sector increasingly
to limit production, the United States operates as abuyers' market rather than
applies fallow regulations which vary a sellers' market. Each link in the chain
according to the product and the fore- raises its own quality standards in an at-
cast production level. A US grain pro- tempt to provide the increasingly dis-
ducer only qualifies for subsidy if he cerning consumer with a high quality
complies with the acreage restrictions product. The market is gradually divi-
laid down by the government. The US is ding into market segments each with its
also planning a reduction in agricultural own specific quality standards. Mass
subsidies in order to reduce the federal produced goods are being replaced by
deficit. products with higher added value or in-
novative images, with repercussions for
2.7 Summary and outlook the choice of propagating material.
Total demand for agricultural seed Apart from phytosanitary standards,
is determined in part by the world buyers are becoming increasingly con-
acreage of arable crops. In most product cerned about the cultivation methods
groups, acreage is stabilising although employed, and are looking for a greater
choice of varieties. The increase in inte- Under current market conditions it will
grated and biological cultivation of be difficult to demand higher prices for
arable crops will result in a limited de- new high-quality varieties.
mand for biologically cultivated seed
for the time being.

World animal consumption of

arable crops is rising. In the EU demand
is stabilising because of restrictions im-
posed on the cattle breeding sector.
Lower grain prices, resulting from
amendments to EU agricultural policy,
will lead to larger sales of grain as cat-
tle fodder. Southeast Asia is a growth
market; as aresult of changing food pat-
terns, meat consumption is increasing,
and will in turn lead to a rise in animal
consumption of arable crops.

Industrial use of arable products is

generally low, and only in the long term
is any wide-scale use as industrial raw
material likely.

The influence of the government

on arable farming is significant, both in
the EU and in the US. Current agricul-
tural policy affects not only selling
prices but has also reduced cultivated
acreage of crops. The EU requirement
to let land lie fallow has led to an in-
creased demand for set-aside cover
crops. Demand for fodder grasses is
stagnating because of the quota restric-
tions placed on cattle breeding in the
EU. The market for grass for recrea-
tional use remains stable. Grain acreage
has fallen following changes in the EU
agricultural policy.

Agricultural policy will therefore

have a number of short-term conse-
quences for the agricultural seed sector.
Lower sales prices will force farmers to
attempt to reduce production costs by
decreasing the intensity of grain pro-
duction and to use more farm-saved
seed, which they have produced them-
selves. At the same time, letting land lie
fallow will also result in reduced sales
of grain seed. Both developments will
lead to areduction in grain seed demand
and, in turn, prices. A fall is also anti-
cipated in the acreage of sugar-beet,
maize, oilseeds and fodder crops in the
EU. For all markets, the development of
demand for certified seed in relation to
levels of farm-saved seed is important.
 use of more productive varieties. In de-
veloping countries, the increasing use
3 The agricultural seed market of improved varieties primarily invol-
ves the three most important crops, na-
mely wheat, rice and maize. Modern va-
3.1 The world seed market rieties with high yields are used widely
World consumption of agricultural in some developing countries. The de-
seed (including farm-saved seed) stabi- mand for seed is still low, though, as
lised between 1980 and 1990 at 118 annual refreshment of wheat and rice
million tons. Trends in patterns of varieties is low. For rape, potatoes and
consumption have differed from region pulses there are few good varieties
to region. In 1990 Asia was the largest available, because of the low priority
consumer of agricultural seed, con- given to improvement.
sumption rising by 18% to 38.4 million
tons during the last decade. Rice In 1980 the CIS was still the largest
accounts for thirty per cent of this. The consumer in the world (35%), but
increase in consumption in Asia has af- consumption fell by over 10% between
fected all crops. Barley seed consump- 1980 and 1990, to stand at 37.3 million
tion has risen by 24%, greater than the tons. The falling production of agricul-
16% increase in rice seed, because of tural crops in the CIS caused a reduc-
the shift from rice to grain consumption tion in the consumption of agricultural
in this region. The growing demand for seeds, affecting all crops.
arable crops, stimulated by increased
prosperity and high population growth In terms of weight, wheat and
rates, necessitates higher productivity. root/tuber crops are by far the most im-
Part of this may be achieved through the portant agricultural seeds in the world;

Table 3.1 Total world consumption of agricultural seed, by continent

(million tons, including farm-saved seed)

1980 1985 1990

CIS 41.7 37.7 37.3

South America 4.3 4.4 4.2
Europe 23.2 23.6 21.3
N & C America 10.9 10.4 11.0
Asia 32.6 35.0 38.4
Africa 3.9 4.3 4.6
Oceania 1.2 1.4 1.1

Total world 118.8 117.7 118.7

Source: FAO

Table 3.2 Total world consumption of agricultural seed, by crop (million tons)

1980 1985 1990

wheat 34.0 33.2 35.0

barley 11.8 11.6 11.1
rice 11.5 12.2 13.0
maize 6.4 6.5 6.8
other grains 9.5 9.3 8.9
root/tuber crops 36.8 35.4 33.3
pulses 3.4 3.9 4.0
oilseeds 5.4 5.6 6.6

Total 118.8 17.7 118.7

Source: FAO
in value however maize may be con- tions. The latter is particularly promi-
sidered the most important commercial nent in developing countries and plan-
seed. Since 1980 consumption of seed ned economies. In more than 60% of
for wheat, rice, corn, pulses and oil- African countries for example, govern-
seeds has increased. In the 1990/91 ments have full control of the procure-
season consumption of seed potatoes in ment and distribution of seeds, while in
the EU measured 3.2 million tons. 28% of the countries both government
Germany, with 784,000 tons, held the and private sector are involved. The ab-
largest share, followed by the United sence of competition leads to a lack of
Kingdom (537,000), the Netherlands innovation and efficiency and a poor
(400,000) and Spain (385,000). The EU seed quality may lead to agricultural
market for grass seed has a turnover of stagnation.
approximately 116,000 tons per year.
The total value of commercial seed
The value of world market for agriculture and horticulture in
The world market for seed is valued OECD countries measured $13 billion
at $45 billion. It can be divided into 3 in 1990. The largest markets are the EU,
main categories, each accounting for the US and Japan. Turkey, Argentina
roughly similar proportions of the total and Brazil also form important sales
value: commercial seed, farm-saved markets for commercial seed.
seed and seed from government institu-

Figure 3.1 Certified seed consumption (agricultural and horticultural) in

OECD countries in 1990 ($ million)

US 4 5 2 1 ^ ^ Ä |
| ^ ^ ^ Finland77

Switzerland60 ^ ^ ^ ^ ^ ^ ^ H
Canada357 f ^ ^ ^ ^ ^ B y \ Japan2780
Austria357 MwHMM*i^S^

V v^J ^ ^ ^ Australia196
/ Sweden69
\
EU5 8 0 0 ^ ^

Source: OECD, USDA

Figure 3.2 The EU agricultural seed market

($ million, estimates, excluding horticultural seeds)

France 1600
Italy 600

UK470

Germany 1000 Spain450

Others300

Source:Agrarbericht, Cultivar, estimates

For many farmers seed is too expensive. There are around 1500 seed compa-
The development and production of nies in the world, of which 600 are
new wheat and rice varieties is carried based in the USA and 400 in Europe.
out primarily by government agencies. The 26 largest companies listed in table
Some rice varieties are improved and 3.7 have a combined turnover of about
produced by the International Rice $7.0 billion, representing nearly 50% of
Research Institute (IRRI) in the the commercial market for agricultural
Philippines. The International Maize and horticultural seed. Their market
and Wheat Improvement Center (CIM- share in a number of countries and in a
MYT) improves maize and wheat varie- number of products groups is even
ties. higher. The US company Pioneer, for
example, holds around 40% of the US
EU corn seed market.
Between 1983 and 1991 grass seed
production in the EU increased by 66% The market share of these major
to 162,000 hectares. Denmark supplies seed companies can be expected to in-
around 50% of total production, and the crease still further. A similar situation
Netherlands around 25%. Between exists in poultry farming, nine large
1985 and 1991 stocks in the EU in- breeding companies alone supply ap-
creased by 58%,- to 144,000 tons, 42,000 proximately 90% of the total commer-
tons of which was Italian rye grass and cial world parent stocks for broilers; the
55,000 tons English rye grass. In 1992 remaining supply comes from local
the grass seed acreage fell to 150,000 breeding companies.
hectares. Stocks remain high, due to the
unfavourable sales market. Of the 26 largest seed companies,
half are specialist seed companies and
The land area devoted to seed pota- half are owned by larger corporations:
toes between 1983 and 1991 increased all the parent companies are involved in
by 25% to almost 124.000 hectares. In supply to the agricultural sector, and in-
1993 the land area for propagation fell clude most notably producers of agro-
back to 1 14.000 hectares. In Germany chemicals (fertilizers, pesticides). In
acreage fell sharply, from almost Europe, in France and the Netherlands
29.000 hectares in 1992 to over 20,000 particularly, a number of cooperatives
hectares in 1993. In the Netherlands are involved in the seed business.
acreage remained stable at 36,000 hec-
tares. Of the 26 largest seed companies,
six are located in the US, seventeen in
3.3 Market structure of seed Europe and two inJapan. Japanese com-
companies panies concentrate on horticultural
Commercial agricultural seed com- seed. Most of the major companies are
panies operate within a very fragmented clearly internationally oriented. Some
sector, and are primarily active in companies specialise narrowly, holding
Europe and the United States. high market shares with a small product

Table 3.6 EU seed production of major arable crops (1000 hectares)

1983 1988 1991

Grains 759 728 793

Maize 42 37 59
Grasses 99 132 162
Other fodder crops 43 35 49
Pulses 51 117 59
Sugar-beet 8 5 7
Seed potatoes 95 99 124
Oilseeds 29 42 49
Total 1.126 1.195 1.302
Source: UNIS
Table 3.7 The world's largest seed companies (turnover refers to seed sales only)
company main country main subsidiaries/countries seed turn- core seed
activity over $mln products

Pioneer seeds USA more than 40 countries 1.260 corn, soybeans

Sandoz chem Switzerland Northrop King, Rogers, 625 hort. seeds, oilseeds,
Zaadunie, Hilleshög corn, sugar-beet
Limagrain* seeds France Force Limagrain, Nickerson, 440 corn, oilseeds, forage
Tézier, Vilmorin hort. seeds
Takii seeds Japan Japan, USA, Europe 360 hort. seeds
Upjohn chem. USA Asgrow, Bruinsma 300** corn, soybeans
Sakata seeds Japan Japan, USA, Europe 300 hort. seeds
Cargill ag.trader USA Cargill hybrid seeds 275** oilseeds, corn
Amylum starch Belgium Orsan 275 corn
Cebeco* coop NL Europe, USA 260 hort. seeds
ICI chem. UK ICI Seeds, SES, Zeneca 250 corn, sugar-beet
KWS seeds Germany Betaseed, Vanwaveren 247 sugar-beet
Dekalb seeds USA Europe, S.America 225 corn
Mai'sadour seeds France Sunflor, Orsem 225 corn, sunflower,
soybeans
Coop de Pau* seeds France Rustica 220 corn, cereals, sunflowers
Suiker Unie sugar NL Van derHave, Mommersteeg 215 sugar-beet, forage
RAGT seeds France 210 corn, sunflower, forage
Pioneer seeds France 200** corn, sunflower
France Mais
Ciba Geigy chem. Switzerland Ciba seeds, Funk seeds 175 corn, oilseeds, cereals
Sigma* seeds France Semences de France 170 small grain cereals
Rhône Poulenc chem. France Clause, Ceres, Harris Moran 155 hort. seeds, seed potatoes
/Orsan
Geo. J.Bail, Inc seeds USA Petoseeds, PanAmerican seed, 150** hort. seeds
Ball seed, Burpee
DLF* seeds Denmark Trifolium, Eurosemences 135 forage
Royal Sluis seeds NL France, USA, Italy 130 hort. seeds
Mycogen biotech. USA Agrigentics 125 corn, oilseeds
SLR* coop Sweden Svalöf/Weibull 122 oilseeds
Rhône Poulenc chem. France Rhône P. Agrochimie 100 oilseeds, corn,
wheat hybrids
Total 26 ± 7,000

Sources: Cultivar, annual reports

* coop **estimate

package, whilst other companies offer a ZPC (seed potatoes),

very broad package. Both options have Pennington seeds (hort. seeds,
their advantages and disadvantages. forage),

In addition to the companies men- This indicates that the 35 largest

tioned, there are afurther ten companies seed companies have a combined
with a turnover of around hundred mil- market share of about 53% of the com-
lion dollars. These include: mercial seed market.
Danesco (Maribo,
sugar-beet), A number of medium-sized compa-
Land o'Lakes (forage, soybeans, nies also exist together with avery large
corn), number of small companies. The smal-
Delta and Pineland (cotton), ler companies tend to function as re-
Barenbrug (grass seeds), gional traders (retailers), sometimes
Goldsmith (flowers), offering only a limited range of varie-
Agrico (seed potatoes), ties.
 The large number of seed compa- maceutical and agrochemical industries
nies means that more and more varieties nevertheless remain active in the seed
are corning onto the market which, in sector, and have made seed into a stra-
terms of technical value, are no great tegic activity, investing in companies
improvement on varieties already avail- and the development of new biotechno-
able. This makes it difficult for buyers logical techniques.
to have a clear view of the market and
to identify seeds of higher quality The development of disease re-
which really merit higher prices. The sistant plant varieties may also have
number of varieties available can be ex- played a part in the acquisition process.
pected to grow still further. One benefit From a strategic point of view suppliers
this brings is that more and more value of chemical inputs may involve them-
is added to seed, which increases its gap selves in the sector to be able to com-
over farm-saved seed. Hence pre-treat- pensate falling herbicide demand with
ment of seed with agro-chemicals, for the increasing demand for expensive
example, can significantly reduce total seed. Moreover, knowledge about plant
use of pesticides. disease and the existing distribution ap-
paratus for inputs can be put to better
3.4 Concentration use.
Concentration in the sector is on the
increase. A number of factors have The wave of concentration seems to
encouraged this process, including re- have subsided for the time being, given
placement of old management with to the current unsecured market outlook
family enterprises, increased demand for seeds. On the whole, existing com-
for knowledge and capital, and the need panies are already strongly committed
to access new sales markets. and are engaged in further strengthe-
ning their position in both distribution
The outcome of acquisitions of seed and in their product package. The
companies by multinationals involved accent is currently on restructuring and
in the petrochemical, agrochemical and reorganisation, rather than on growth
pharmaceutical industries have been and investment in new activities.
mixed. On the one hand, seed industries
showed attractive growth and earnings In addition, seed companies are
potential, making purchase an attractive looking for opportunities to cooperate
option as part of adiversification strate- with each other through joint ventures
gy. Seed companies also hold a strate- in research and sales. Limagrain, for
gic position at the beginning of the food example, has established joint activities
production chain. With hindsight, how- with both Rhône Poulenc and DLF.
ever, takeover by companies unrelated
to the sector is problematic given that The seed treatment companies are
the seed business is highly specialized, a distinct group. Many are subsidiaries
with long payback times for R&D and of the major seed companies, but some
changing sales opportunities. A number are independent. Other companies spe-
of petrochemical industries have since cialise in the distribution of seeds,
resold their interests in the industry. though many seed companies have their
own sales organisations which sell
For a number of companies a link directly to farmers. In Europe, and par-
exists between the breeding activities ticularly in France, distribution is in the
and their own research. Some know- hands of cooperatives.
ledge in the area of biotechnology and
gene-technology available from the With the introduction of biotechno-
pharmaceutical and food industries can logy for the improvement of plants, new
be applied to the breeding of plants. specialised biotechnology companies
Existing distribution networks of other have sprung up in the United States and
agricultural inputs, such as fertilizer in Europe. These companies focus par-
and pesticides, can also be used for ticularly on the development and licen-
seed. The potential for synergy, how- sed sale of biotechnological methods
ever, has been limited. Major phar- and techniques, or themselves apply
these techniques to the development of sure on the chemical industries with re-
new varieties. gard to their commitment to maintain
their presence in the seed industry.
The major agricultural seed compa-
nies direct their energies towards the It is worth noting that the perfor-
breeding of hybrids in particular. Most mance of the large specialised agricul-
breeding of non-hybrid varieties is car- tural seed companies is more or less
ried out by public bodies. Investment by comparable with that of the large horti-
private seed companies in these crops cultural seed companies. Gross mar-
depends very much on the extent of pro- gins of European horticultural seed
tection given to the varieties developed. companies are generally higher -round
If varieties are not offered adequate 70%- than with other seed companies,
protection, it is unprofitable for private being more R&D oriented.
seed companies to make large invest-
ments, and they will be increasingly in- Many agricultural seed companies
clined to concentrate on the breeding of have a limited product range only,
hybrid crops. whilst the large horticultural companies
stock a wide range of varieties, some-
3.5 Financial position times running into thousands. To main-
Table 3.8 provides some financial tain a range of this extent is extremely
ratios pertaining to groups of seed com- expensive. Average net profit margins
panies. They represent the average of a seem satisfactory, compared to other
large group of internationally operating sectors, but have to be viewed in the
seed companies; any significant devia- light of the considerable investments
tions from the average are not included. required. R&D activities in these com-
Margins however may vary considera- panies account for 5-15% of turnover.
bly and can depend on whether seed In addition to that an average of more
production is contracted out or grown than 10% of turnover is spent on distri-
by the seed company itself. US seed bution and marketing.
companies usually have higher margins,
focusing more on hybrid seed. Poor results for specialised interna-
tional grass-seed companies are the re-
In general, separate figures are not sult of a weak sales market. The seed
available for the seed interests of agro- potato sector shows comparable
chemical companies. Consolidated fi- figures, although these companies hold
gures show that these companies tend to no stocks at the date of balance sheet.
be relatively strong, while both sol- Specialised companies should produce
vency and net profit are generally satisfactory profits in the long term and
higher than within the group of large must create sufficient financial strength
specialised seed companies. Assuming to survive difficult periods.
profit levels matched those of these
large independent seed specialists, the 3.6 Summary and outlook
seed divisions of chemical companies The world market for certified seed
would appear to contribute profits is estimated at around $15 billion, $13
which are lower than those made in core billion is accounted for by OECD coun-
activities. This would put some pres- tries. The most important markets are

Table 3.8 Financial position of categories of seed companies (average 1990- 92)
equity gross net days
% balance margin profit stock
total %turnover %turnover

agro chemicals 50-60% 70% 5-15% 70

large spec, seed companies 40-50% 50% 6.5% 100

hortic. seed companies 60% 50-70% 6.5% 100
spec, grass-seed companies 15-25% 30% 1.5-2.5% 125
the US and the EU. In addition to com- rising demand for arable crops. The
mercial seed, seed is supplied by share of farm-saved seed, which has al-
government institutions and other seed ways been high in this region, will fall.
is farm-saved; the value of both seg- It will be necessary to make more use of
ments is comparable on a world scale to modern commercial varieties if pro-
the market for commercial seed. The duction is to be increased sufficiently.
relationship between commercial and This will require good protection of
farm saved seed is important to seed non-hybrid varieties. Without adequate
companies, particularly in OECD coun- protection, private agricultural seed
tries. companies will not invest in the deve-
lopment and production of non-hybrid
There are around 1500 seed compa- varieties in this region.
nies in the world, 25 of which hold a
combined market share in commercial The market conditions described
seed of more than 50%. The major seed will put seed company margins under
companies, with a wide range of prod- pressure.
ucts, are generally in a strong position
financially, and under present market
conditions tend to yield better profits
than smaller specialists. The concentra-
tion of seed companies is expected to
increase further, but mergers and acqui-
sitions will be more precisely targeted
than in the past.

Developments in agricultural seed

production depend to a large extent on
developments in primary agriculture in
the region concerned. Consumption of
seed has stabilised in the markets, but is
expected to fall in some under the in-
fluence of the government policy on
primary agriculture. The production of
grain seed in the EU will fall by 5% as
a result of set aside and expanding cul-
tivation. Acreage reduction program-
mes may result in increased demand for
grass seed to improve nitrogen fixation
of set aside land. Between 1980 and
1990 the costs of seed for farmers in the
EU rose by 10%. The reforms within
agriculture in Europe are stimulating
farmers to produce at the lowest pos-
sible cost price. To achieve this, grain
cultivation will have to be extensified.
and, because of competition with farm-
saved seed, the price of certified grain
seed will fall.

Seed consumption amongst farmers

in the United States is expected to re-
main more stable, including the
consumption of corn seed. The turnover
of US companies will increase as new
markets develop abroad.

In Asia, production of agricultural

seed will increase further in response to
 value of many crops. Agricultural seed
companies therefore tend to breed and
World trade produce in the sales region, or have va-
rieties propagated under licence.

The use of certified seed is in- 4.1 Export

creasing worldwide. Because of this, Total world exports of agricultural
and because various countries have spe- seed (grass, sugar-beet, wheat, maize
cialised in the breeding of certain crops, and seed potatoes) measured $1.9 bil-
international trade has increased in im- lion in 1991. This is about 14% of the
portance. Trade in agricultural seed total market value of commercial seed.
takes place primarily between indus- Compared to agricultural seeds, the ex-
trialised nations. In 1992 8% of total port of horticultural propagating mate-
EU exports in agricultural seed went to rials is far more significant; exports
developing countries. For the United from OECD countries amounting to
States, exports to developing countries, $1,0 billion, represent about one-third
measuring 24%, are considerably of total market value. Transport costs
greater. There is relatively little inter- relative to weight and added value are
national trade in wheat, barley and rice. less of a problem.
International trade in agricultural seed The US is the largest seed exporter and
is restricted by, amongst other things, will be discussed in chapter 5.1.
large differences in climate between the Countries within the EU have a 60%
world regions, and relatively high trans- share in the world export of agricultural
port costs compared to the low added seed.

Figure 4.1 Major exporting countries, agricultural seed exports only

1992, ($ million)

600

500

III. •
400

300

200

100

US Netherlands France Germany Denmark Italy Canada Other

Source:EXM1S,USDA

Table 4.1 EU exports of various agricultural seeds, 1992

$million % 1000 ton %

Maize 209 16 61 4
Wheat 38 3 98 7
Other grains 48 4 117 8
Pulses 69 5 42 3
Sugar-beet seed 295 23 25 2
Oilseeds 67 5 30 2
Grasses 203 16 166 12
Seed potatoes 361 28 836 61
Total 1.290 100 1.376 100
Source:EXMIS
Figure 5.1 Estimated market value of agricultural seed in the United States
($ million)

Corn 1600

Soja 700

Wheat 230
Sorghum 53 Forage 450

Source: SEED WORLD. June 1993,Cultivar seed business. USDA

Table 5.2 Total seed consumption of major crops in the United States
(1,000 tons)

1987/88 1990/91 % growth

87/88-91

Wheat 2,550 2,670 + 5%

Barley 377 350 - 7%
Oats 506 306 -40%
Rice 150 160 + 7%
Corn 482 540 + 12%
Sorghum 36 36 0%
Soybeans 1,684 1,722 + 2%
Source: USDA

lion of which is accounted for by home areas, around 90% of seed potato requi-
gardening and $500 million by the pro- rements are purchased.
fessional market.
In the last twenty years, there has
The use of commercial seed differs been a fall in the number of varieties
significantly from state to state. In used for each crop in the United States.
Kansas, the state with the highest win- The need to improve productivity has
ter wheal acreage, only 27% of seed re- stimulated the rapid spread of new, ge-
quirements are met by purchase, whilst netically uniform varieties. Modern
in the state with the lowest winter wheat varieties are also more suited to mecha-
acreage, 70% of seed requirements are nical harvesting, enabling extensive
purchased. In Colorado, only 4 5 % of agricultural production.
seed potato requirements were bought
in, the lowest percentage in the United The cost of seed makes up only a
States. In the largest potato production small fraction (approximately 3%) of
total production costs incurred by
Table 5.3 Use of commercial seed American farming companies. Expen-
in the US (%) diture on agricultural seed in the United
States measured $3 billion in 1991. The
Winter wheat 36%
cost of seed varies considerably from
Seed potatoes 84% crop to crop. The percentage of variable
Soya 77% cost per crop accounted for by seed is as
Corn, sorghum, beans, follows: rice 8%, sorghum 7%, wheat
grasses, sugar-beet > 95% 11%. corn 17% and soya 2 1 % .
 The breeding of agricultural crops is sing, service and regional crop demon-
carried out in both private seed compa- stration fields.
nies and the public sector. Seed compa-
nies focus on the breeding of hybrid Trade
varieties, whilst public research bodies For seed companies in the United
breed non-hybrid varieties, including States, the sale of corn seed abroad
wheat. Those varieties developed by forms only a relatively small part of the
public bodies (universities, USDA and total sales (10-30%), though it is in-
Agricultural Research Services) are creasing. Most of their production is
often put on the market by private seed sold on the huge domestic market.
companies. As a result of far-reaching Sixty-five per cent of US corn exports
cuts imposed by both federal and state go to the EU, with Italy, France and the
governments, basic and applied re- Netherlands as the largest markets.
search into seed breeding carried out by Exports to Italy tripled between 1988
universities and institutes has decreased and 1992 to $52 million, 98% of which
drastically. Private seed companies consisting of corn hybrids. After an ini-
work in close cooperation with univer- tial fall from $24 million in 1990 to $3.5
sities in the area of fundamental re- million in 1991/92, US exports to for-
search. mer Comecon nations recovered to $29
million in 1992/93.Exports to the value
At present in the United States there of $27 million went to the Ukraine.
are almost 600 companies involved in Exports to central Europe have all but
breeding. Of these, more than 200 are ceased as American companies nowa-
active in the production, sale and distri- days cultivate corn seed locally them-
bution of corn seed. Most of these com- selves. In 1992/93, wheat seed made up
panies sell seed for other crops along- 34% of total US agricultural seed ex-
side their corn seed range. There is a ports; in value terms however it made
wide diversity in the type of company to uponly 10%,namely $50 million. Saudi
be found in the United States. Arabia is the largest sales market, ac-
Companies operating nationally and/or counting for 95%, which makes the
internationally distribute their seed wheat seed export rather vulnerable.
throughout America, and some have
subsidiaries orjoint ventures in Europe, The value of agricultural seed ex-
South America and Asia. The regional, ports to the EU in the 1992/93 season
medium-sized seed companies focus on measured $223 million. Of this, corn
one or more states. The hundreds of hybrids took a 46% share. The most im-
local seed companies sell a wide assort- portant sales markets for grass seed are
ment within a small geographical area. Japan, Canada and Mexico.
Small local companies are often family
businesses, focused primarily on provi- In the 1992/93 season the United
ding extra service. States imported agricultural seed to the
value of $98 million, most of this being
Given the large distances involved, made up of grasses, pulses and corn.
dealers are very important in the USA. Canada is the largest supplier. Imports
A decline in the number of traditional of agricultural seeds from the European
dealers with little added value may be
expected as a result of the declining Figure 5.2 US agricultural seed
number of traditional farmers, while exports ($ million)
dealers that support their customers
1986/87 1992/93
with information, through which they
can improve their yields will have
Wheat 18 50
better opportunities. At the same time
Corn 59 190
large farmers may chose to buy directly
Sorghum 18 31
from the seed company. Highly-
developed distribution networks are Pulses 34 39
forming for corn, and, increasingly, for Oilseeds 27 38
soya. What is more, the sale of these Grasses, other forag es 82 122
two crops is well supported by adverti- Total 238 470
Source: USDA
tries the government has a direct rally runs smoothly in the United
relationship with seed companies. The Kingdom.
location of seed company headquarters
is partly determined by the presence of Dutch government policy highlights
a number of specific factors, including three major areas: knowledge infra-
highly qualified labour and basic re- structure, education and regulation.
search, and secondary conditions such Partly thanks to the high standard of re-
as distribution, financial infrastructure, search and university education, Dutch
taxation and the regulatory environ- agricultural seed companies have ma-
ment. The seed industry is an extremely naged to establish a strong position in
know-how intensive industry, highly techniques for breeding and propaga-
dependent on the quality of its person- ting.
nel. In this area particularly the govern-
ment is able to exercise influence on the The Dutch government is currently
establishment or retention of the seed working to expand measures to stimu-
industry. It can create an attractive late the sector through fiscal R&D con-
climate through the provision of educa- cessions in order to reduce R&D costs
tion and research opportunities, thereby within companies. At present around
ensuring the availability of appropriate $53 million a year is being invested in
labour and research. While government publicly financed research into agricul-
subsidies are generally on the decrease, tural biotechnology. This is comparable
involvement is increasing through envi- to the contributions made by the
ronmental policy, quality control, and governments of the United Kingdom
the protection of intellectual property. and Japan into plant biotechnology re-
search.
Subsidies
Within the EU, policy on subsidies Environment policy
is gradually being harmonized. The EU The methods by which various na-
itself also grants subsidies, to stimulate tional governments attempt to reduce
the development of innovative plant environmental effects varies from
biotechnology and to encourage the country to country. In the United States
cross-border cooperation of companies regulations range from subsidies for
and research bodies. crop tests to imposing extra tax on fer-
tilizers. In the US a new law proposal is
The national governments of the under discussion which will result in
United States, France and Japan attach further restrictions on the use of pesti-
great value to the development of bio- cides. The health of farmers and consu-
technology. The American government mers is central and is given a higher
has formulated liberal policy concer- value than agricultural needs.
ning the introduction of biotechnologi-
cal products onto the market. In 1992 EU member states have set up va-
government expenditure on agricultural rious programmes to restrict the use of
technology measured $190.5 million. In fertilizers and chemical pesticides.
France, larger companies are given par- There are guidelines which apply to the
ticular support. A number of govern- EU as a whole concerning the concen-
ment institutes are engaged in funda- tration of fertilizers and pesticides in
mental and applied research. The ground water and surface water, with
German government, through its which all member countries have to
'Biotechnology 2000' research pro- comply by the year 2000. The way in
gramme, provides considerable finan- which the policy is implemented is left
cial support to the development of bio- to the individual member states.
technological techniques in the bree-
ding of plants. In the United Kingdom, The Dutch government has a crop
investment in agricultural technology protection plan to be implemented over
measures around $53 million. Most re- a number of years which aims to halve
search is carried out in the public the use of chemical crop protection by
sector. The transfer of biotechnological the year 2000. Seed companies contri-
knowledge to private companies gene- bute to this through the development of
resistant varieties and seed coating (wheat, barley, oats) and of potatoes,
treatments. cabbages and pulses, for which the
breeder receives no reimbursement. In
Quality policy the revised UPOV agreement (1991) it
Quality research in breeding focu- is left to individual members to decide
ses on the development of resistance, to what extent they make room for far-
vitality and purity. Phytosanitary mers' privilege in national law.
quality is also of importance.
Rising R&D costs in breeding make
New varieties are tested for quality it necessary to improve the legal protec-
before being released onto the European tion of propagating material. Without
market. At the EU level quality is regu- adequate protection of nursery products
lated through commercial guidelines, it is virtually impossible for private
setting standards for the product before companies to invest in costly biotech-
it can be sold. Crop varieties traded nological research. Governments recog-
within Europe have to be checked for nise the social importance of this
registration and plant breeders rights, question. In Europe and the United
and for value for cultivation and use States, legal protection of varieties has
(vcu). The purpose of vcu standards is led to the stimulation of breeding acti-
to provide users with information about vities by private seed companies, as a
the features of new varieties, and field result of which the quality of seed has
cultivation tests are aprerequisite to ap- greatly improved.
pearing on the list of varieties. By ma-
king such tests compulsory, 2or 3 years As part of the internal market 1992,
is added to the time it takes for a new the European Community is formula-
variety to appear on the market. This is ting community plant breeders rights.
an important barrier in the current This means that if a breeder applies for,
market climate in which ever higher and is granted, breeders rights in one
production standards have tobe met. On member state, he is automatically enti-
the other hand, once a product has been tled to breeders rights protection in all
approved in one country, it can be 12 member states. In general the UPOV
released onto the market throughout the recommendations have been followed.
EU. The implementation of this regula- At the end of 1993, the EU agricultural
tion has not yet been fully harmonised, council reached political agreement
and arrival of the internal market within (with the exception of Denmark) con-
the EU has not yet, in the case of seed cerning the agricultural aspects of com-
potatoes, led to a complete removal of munity plant breeders rights, including
trade barriers. the farmers' privilege.

In the United States there is no na- Under the agreements, farmers' pri-
tional list of varieties for agricultural vilege is rooted in the regulations. This
seed, and no tests are carried out on vcu. exception to the principle of plant bree-
ders rights effectively allows farmers to
Intellectual property use legally protected varieties which
In many countries, new varieties are they themselves have harvested for
protected by national law, often based their own cultivation in the following
on the 1961 UPOV Agreement (Union season without having to obtain permis-
Internationale pour la Protection des sion from the breeder. This allowance
Obtentions Vegetables). The updated applies to a number of fodder crops,
version of this agreement, dated 1991, certain grains, potatoes and a few oil
provides for increased plant breeders crops and fibre plants.
rights.
To be able to exercise farmers' pri-
This change in the law has given vilege, farmers have to pay a token sum
rise to much discussion, centring on far- to the breeder, which is considerably
mers' privilege. Considerable quanti- less than the amount normally charged
ties of seed are retained by farmers, par- for licences.
ticularly from harvests of certain grains