GM Traits, Seed Industry Structure and Biotech Policies in Developing Countries

Carl E. Pray & Latha Nagarajan pray@aesop.rutgers.edu

Research Funded by Templeton Foundation

View of GMOs from Uganda

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Source: Giregon Olupot, Assistant Lecturer, Soil Physics, Makerere University

Uganda II: Engineering plants with human genes or genes from pigs

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Source: Giregon Olupot, Assistant Lecturer, Soil Physics, Makerere University

Objectives of paper

•  Analyze the supply of GM proprietary traits for food crops to African and Asian through commercial channels.

•  Is Monsanto too big? Is there competition globally in biotech traits? Can Monsanto and other companies dominate/control a country’s agriculture? Is Gates Foundation subsidizing Monsanto’s take over of the East African seed market?

(We asked related questions here at 1999(?) which resulted in PIPRA and AATF)

•  Impact of Monsanto supplying most traits on politics of biotech –  Are local seed and biotech firms strong supporters of GM approval? –  Role of US & EU firms in lobbying?

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Outline

•  Structure, R&D and innovation in the global plant biotech industry.

•  Case studies of India, China with some comments on East Africa and Brazil

•  Lessons

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Global Seed Industry Structure (Fuglie et al 2010) Year Herfindahl 4-firm

concentra-tion %

R&D Intensity %

1994 171 21.1 11

2000 349 32.5 15

2009 999 53.9 10.5

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Big Six Biotech/Seed/Chemical Firms - Much cross licensing and collaboration between firms

Fuglie et al 2010

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Supplies GM traits (and improved conventional hybrids and open pollinated varieties (OPVs)) •  Many GM traits and crops approved for commercialization

–  Insect resistance (IR) –  Herbicide tolerance (HT) –  Virus resistance (VR) –  Product quality (PQ) –  Drought tolerance –  Intrinsic yield in soybeans

•  In a few crops –  Cotton, corn, soybeans, canola, sugarbeet, alfalfa –  No GM rice deregulated in US (IR rice “deregulated” but not

commercialized in China)

•  A few GM traits & crops grown extensively –  Only HT and IR –  Four crops - cotton, corn, soybeans, and canola

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Future: Trends in Traits: More yield and resource efficiency, less IR, HT, PQ

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The future in our study crops - maize and rice?

•  Maize field trials –  No field trials for yield before 1997 –  2009 to 2013 388 or 31 percent on yield often stacked with HT

or IR

–  Monsanto big lead but competition from others

•  Rice field trials --- –  Less IR and HT and now almost entirely on yields –

–  Dominated by BASF in last decade

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Large differences in sizes and structures of seed industries in developing countries drives company strategies •  Value of local seed industry 2012

–  China - $ 9 billion –  India - $2 billion –  Kenya - $60 million –  Uganda - $10 million

•  Structure –  Private sector has largest share of seed sales in all countries –  In China foreign firms not allowed in rice seed market and must be

minority owners of joint ventures in seed markets for other crops –  State owned seed enterprises play an important in all countries except

Uganda

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Supply of traits in developing countries

•  China – Only Bt cotton & small crops commercialized –  Monsanto sales Bt for cotton were through JVs in China, competes

with Bt from govt institute –  Working with State Owned Enterprise on maize.

•  India – Only Bt cotton commercialized –  Monsanto licenses Bt cotton and sells in own hybrids.

•  Seed companies pay royalties to Monsanto.. •  Africa – Maize, soybeans, cotton in S.Africa, Bt cotton Burkina

Faso and Sudan –  Monsanto licenses traits and sells through their subsidiary in South

Africa & BK –  China Bt in Sudan –  Royalty free maize lines and eventually traits through Gates Project

•  South America – –  Monsanto, Bayer, Syngenta and then Dow the main suppliers of traits –  Licensing and own sales –  End point royalties on soybeans in Brazil

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Small firms also supply traits – mostly through programs  Firms     Crops  &  Traits   Major  MNC  

partners  Collabora5ve  Research/

Licensing  LDCs(GMO/not?)    Assistance  from  donors  or  

governments    

Arcadia  (US)   Rice,  wheat  Salt  tolerance,  water  

&  N  efficiency  

No   MAHYCO  India  AATF  –  rice  Africa  

USAID  $3-­‐5  mil.  India  USAID/AATF  Africa  

Biocentury  Transgene  (China)  

CoWon    Bt  

No     Nath  Seeds  India  coWon   Chinese  Acad.  Ag.  Sciences  owns  share  of  

firm  Ceres  (US)   Mainly  biofuel  but  

also    traits    Monsanto   BioSeed  (India)   USAID  $3-­‐5  mil  

Evogene  (Israel)   Yield,  stress  tolerance  in  rice  

Monsanto  &  others  

Rasi  India  DBN  China  

KeyGene  (Netherlands)   Wheat,  non-­‐GM,  yield,  stress  tolerance    

Bayer  first  wheat,  possibly  rape,  rice,  

coWon  

Bioseed  (India)    Shanghai  Ins5tute  for  Biological    Research  

Mendel  plant  sciences  (US)  

Soybeans,  yield,  stress  resistance  

Monsanto     China  on  grasses  for  biofuel      

PPI    (Canada)   DT   Bayer,  Pioneer,   DBN  for  maize,  rice,  soybean    &  Biocentury  Transgene  China  

India  -­‐    DT  White  maize  to  Kenyan  

Founda5on  

Venganza  (US)   RNAi  for  potato  late  blight  

No     Potato  blight,  Banana  –  black  shigatoka,  wheat  rust,    

USAID  $3-­‐5  mil  13

How have firms in developing countries accessed GM traits so far?

•  Commercial licensing of patented traits •  Private – Bt cotton in India and China •  Public sector – Bt cotton in India and China

•  Subsidized or royalty free licensing •  Royalty free (Golden rice, Bt eggplant in India) •  Government and donor subsidy programs – USAID, Gates, Indian &

Chinese government programs

•  “Piracy” “Stealth” seed •  India: Bollgard 1 NavBharat & CICR Bt cotton, Nuziveedu tried but

biosafety authority would not register it…. •  China: Bt cotton from Anyang Cotton Research institutes was from

Monsanto, Origin’s maize GM trait is probably from Pioneer via the public sector, disease resistant papaya from Hawaii

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Future possibilities for access

•  Commercial licensing of yields and abiotic stress resistance

•  Subsidized/royalty free access to Bt and DT maize in Africa through AATF

•  Small and medium firms can E-license traits from Syngenta

•  Expired patents – Monsanto’s Bt corn in 2014, RR soybean 2015 under consideration by Dabeinong

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Pathways from proprietary traits from big six and political support or opposition to GMOs •  Economic groups - Support

–  Big six biotech companies – lobby through CropLife or local organization

–  Local seed companies with strong position in hybrids who license traits - lobby through local seed associations

–  Farmers who get the benefits – lobby through commodity organization.

•  Economic groups – Opposition –  Seed companies that can not license the traits –  Farmers who can’t adopt trait –  Farmers who think their organic farms or exports to Europe will be

affected –  Marxist, socialist, greens who are anti-MNC

•  Government concerns about companies controlling food supply. This particularly strong with Chinese government.

•  16

Industry Structure, Profits and Political for GM traits in India

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Indian Private Seed Industry R&D and Industry Structure (Data from surveys by Pray and collaborators(1987-2009)

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1987 1995 2005 2009

R&D expenses (mill.2005 US$) 1.3 4.9 26.9 88.6

Seed sales of firms (mill. 2005 US$) 34.9 133.7 723.5 1,286

Research Intensity (%) 3.72 3.66 3.72 6.89

4 firm concentration ratio (% private sales by top 4 firms) 68 51 49 36

Share of firms with foreign ownership (% of private sales) 10 33 45 40

No. of R&D firms in sample 17 38 28 37

India --- Monsanto Bt in 95% of Bt cotton

•  Licensing to 40 firms through 50:50 joint venture with Indian firm Mahyco –  Licensees pay lump sum and then royalties on sales – originally royalty

was 70% of sales price –  Has been adjusted since price controls

•  Sales through own firm and expansion by acquiring cotton seed firms

•  Compete with Chinese Bt which may have 5%, Indian Bt sales, other traits have not been competitive so far.

•  Royalties about US$ 80 million in 2009/10 – 50% Monsanto, 50% Mahyco 19

Licensing spreads benefits to 40 companies - large market shares before Bt trait & early license, made money (Rs. Millions, 1 US$ about Rs 50)

Companies   2004/05   2005/06   2006/07   2007/08   2008/09   2009/10  

Rasi   869   3,095   3,333   2,933   3,756   3,588  

Nuziveedu   625   2,264   2,919   4,496   4,769  

Mahyco   1,660   1,178   1,107   1,359   2,111   3,120  

Ankur   695   557   803   1,095  

Krishidhan   180   477   632   1,332  

Nath   119   620   485   850  

JK Agri-

Genetics  

187   460   260   350  

Metahelix   60   66   97   N/A  

Source: Pray and Nagarajan 2010  20

Also small firms that sold “illegal” Bt cotton benefitted from GM cotton

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India: MNCs likely to dominate GM maize; Indian firms could be more competitive in rice

•  Maize – advantage to Multinationals –  GM traits – only from MNCs led by Monsanto –  Hybrids –

•  Monsanto, DuPont and Syngenta already lead hybrid market & have massive global R&D on maize hybrids

•  Indian firms continue to contest market: Bioseeds, Rasi, and Kaveri with some help from ICAR & CIMMYT

•  Rice – more open market –  GM traits – no commercial products but R&D indicate competitiveness

•  MNCs lead in number of Indian field trials: BASF/Bayer, Syngenta & DuPont •  Indian: Metahelix a spinoff from Monsanto’s early rice research, Rasi working

with Evogene. –  Hybrids –

•  Bayer the clear leader but DuPont and Syngenta coming up. •  IRRI & ICAR provide major support to Indian (& MNC) hybrid breeding

programs: Mahyco, Nath, Advanta, Bioseed, J.K. –  OPVs – led by Indian firms based on ICAR & IRRI lines - 22

Who actively supports plant biotech? Companies who licensed or developed Bt cotton •  Industry organizations that officially support biotech

–  ABLE- AG is the main organization •  Indian companies Advanta India, Mahyco, Metahelix, Nath Biogene,

JK Agri Genetics, •  MNCs BASF India, Bayer BioScience, Dow AgroSciences, Monsanto, PHI

Seeds (DuPont), and Syngenta India

•  Monsanto most active –  ABLE – coalition of Ag, Medical and industrial biotech –  NSAI – national seed association of India –  Small companies like Gujarat Seed Industry supported NavBharat & its

illegal seed, A.P. seeds men support GM if the government can help them get access to Bt cotton

–  Crop Life – MNCs and Indian pesticide companies •  But there are degrees of support -

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Trait Demand on GM Politics in China

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China maize and rice industry policies driven by concerns about control of seed industry •  GM trait development and commercialization

–  Many public sector GM research programs –  No MNC biotech research to produce new traits is allowed –  Unwritten rules of the game: Chinese traits will be commercialized first

and MNCs will be excluded for at least 5 years. –  Consensus that GM maize will be commercialized first and rice later (if

ever)

•  Maize seed sales – –  Mandatory registration of all new hybrids and OPVs –  MNCs can only sell maize seed through joint ventures in which they are

minority owners, –  Government limits the number of JVs a MNC can have

•  Rice seed - no MNCs are allowed to sell rice seed

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Monsanto supply of GM traits in China

•  Bt cotton (Bollgard I) through JV with 2 Provincial Seed companies

•  Competes with Chinese Government Bt cotton and other companies selling their Bt

•  Sells some conventional maize hybrids through JV with China Seeds which is owned by SinoChem a state owned enterprise. –  Monsanto’s Roundup licensee. –  Monsanto has 8 maize breeding programs in China, “will become our

2nd largest breeding program in world.” Monsanto CEO 2013

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Who benefitted from Bt cotton in China?

•  GM trait providers –  CAAS’s hybrid Bt - Biocentury Transgene licenses CAAS Bt to Chinese

seed companies •  Many companies do not pay royalties. •  Biocentury expanding seed operations because can’t make money licensing

–  Monsanto’s Bollgard I had 10% of market maximum in early years so some royalties to Monsanto – Chinese JVs. (no licensing beyond JVs)

•  Seed companies – mainly OPVs unlike India which is mainly hybrids –  Chinese seed companies make some profits but it is very competitive so

margins are low – 300 companies. Top 15 companies have 60% of market

•  Top companies are Zheng Mian (CAAS), Shandong Xinqiu, Hebei Guoxin, Hubei Huimin, Biocentury

–  Monsanto’s 2 joint ventures break even – sold Hebei company; other is for sale 27

Who could benefit from GM Maize •  Traits – Bt and Ht would be very useful – stalk borer & army

worm major pests in recent years; weeds also a big problem. •  Chinese biotech leaders – Dabeinong, Origin, & public sector

– CAU, CAAS •  MNCs

–  Monsanto is in waiting – It has a joint venture with China Seeds in maize

–  Pioneer also

•  Hybrid sales - licensing from public research & using own R&D; some hybrid developed in China by foreign firms –  Deng Hai (about 25-30% of which Pioneer is half), –  Heilongjiang Kenfeng (State Farm system), –  Liaoning East Asia, –  Dabeinong, Henan Qiule, Origin, DunHuang (mainly Pioneer) , Denong. –  China Seed sells a small amount of Monsanto seed in Yunnan 28

Hybrid rice

•  Traits – Bt – big insecticide reduction, little yield increase –  Huazhong Ag University developing major research program with China

Seed 200 PhD scientist now going up to 1000 PhDs in few years. –  Chinese Academy of Sciences –  Dabeinong -

•  Hybrids – MNCs can not sell rice seed even through Joint ventures. Market leaders are: –  Yuan Longping Hitech – 20% of market –  Others are much smaller

•  Fengle 8% •  Dabeinong 7% •  Delong 6% •  China seed small

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So far Chinese seed firms made limited profits and have limited expectations •  Nobody made big profits from Bt cotton

•  China Seed, Dabeinong, and Origin Agritech the only commercial firms who see potential profits from GM rice and maize.

•  Government program has supported research but had little impact

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Politics – A few Chinese firms support GM •  Pressure through China Seeds and Sinochem?

–  Professor Qifa Zhang is pushing hard for GM rice in public and through China Seed which is part of Sinochem a major pesticide, fertilizer, and other bulk chemicals SOE.

–  Monsanto is also encouraging Sinochem to push for commercialization •  Monsanto has JV with them to develop maize hybrids •  Monsanto licenses Roundup to them •  Encourages them to become the Monsanto of China with HT and Bt traits

for maize –  Limitations – CEO is a bureaucrat who wants to stay away from

controversy so that he can move to be CEO of larger SOE or Governor of a Province….

•  Origin and Dabeinong work with MNCs for biotech •  Seed Association is housed in MOA and headed by a former

bureaucrat –  Membership is split on GMOs

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Politics – MNCs •  Monsanto little hope for $s from GM traits in near future

–  Reduced biotech research to virtually nothing –  Are working with China Seed on maize – CEO says they are expanding

maize breeding R&D rapidly –  Lobbying through Croplife (and US government?)

•  Pioneer has had some success with conventional hybrid maize –  Positioning themselves to license GM traits from Dabeinong when they

become available (summer 2013 maybe not now) –  Has a large maize breeding program –  Also have a very effective new insecticide against borers and army cut

worm in maize which would –  Mainly active through Croplife: maybe more active than Monsanto

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Conclusion and policy implications for governments and donors

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How do you get maximum benefits for your farmers? •  Big country policies

–  India – protect local industry until 1990 and then let all MNCs in –  Brazil – protected seed industry until 1988 then let all MNCs and GM

traits in major crops after 2006. –  China – opposite extreme – control MNCs and don’t commercialize GM

until your firms develop their own

•  Results for farmers –  Brazil has the latest GM technology some which is developed for their

needs; soybean, maize, and cotton farmers have benefitted. –  India has a few GM cotton technologies, cotton farmers have clearly

benefitted. –  China has the oldest GM cotton varieties

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Impact of these policies on seed industry •  Internal market

–  Chinese – thousands of firms compete on price not R&D - many SOEs of varying commercialization – some very big companies

–  India – science based Indian evolving, foreign firms making major investment in basic research concentration in sales declining

–  Brazil – seed industry lead by foreign firms who are making major investments in research

•  Any firms to challenge Monsanto? –  Chinese government wants big firms the could challenge

Monsanto but none yet. Sinochem could be in rice and maize. Dabeinong a possibility

–  India – generic pesticide company bought Advanta but they seem to have stalled

–  Brazil no big companies 35

Role of seed companies in GM policy debates

•  India: Monsanto doing most of the advocacy with support from JV partner, other MNCs and licensees. But large parts of seed industry are not actively supporting GM expansion

•  China: Most vocal advocates Chinese scientists associated with China Seed, Origin Seeds, and Dabeinong. Monsanto and DuPont play a very limited role.

•  Brazil: Big 6 biotech firms are doing the advocacy and commercial farmers are very active in support of biotech. Smaller local seed companies who can not get access do not support

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Africa:MNCs making major investments in conventional breeding – making local companies nervous

•  DuPont bought African multinational Pannar and building an African research center in South Africa Now market for maize seed in South Africa is DuPont vs. Pioneer.

•  Limagrain bought 25% of Seedco the other African multinational and the Indian firm Mahyco is buying Seedco’s cotton seed business.

•  Syngenta has committed themselves to invest half a billion to build a $1 billion business in Africa – –  Purchased MRI – leading Zambian seed company

•  Monsanto expands biotech research and breeding with $60 million support from Gates Foundation 37