Whoa Nelly!

The Independent Professional Seed Association shares insights on today’s business landscape for independent seed companies.

my chIldren, lIke yourS or your grandchildren, are growing up quickly in a world of incredible technological advancement. In fact, an individual today has access to more information at any one time than our forefathers had over the course of their lifetimes.

And while I love my technology – laptop, smartphone, internet access, e-mail, text – I also worry about the path we face. Society benefits from more interaction and conversation, not less. Buyers should expect great customer service and specialization, not a self-serve “commoditized” marketplace.

The seed business has also seen the impacts of technology first-hand, especially with the advent of biotech traits since the mid-1990s. Generally speaking, the impact for farmers and consumers has been positive – reduced production costs and higher quality food, feed and fuel products.

Independent regional seed companies have certainly faced consolidation, especially in recent years. Although history shows expansion and contraction has occurred throughout time, current changes suggest ongoing consolidation may be for reasons other than natural industry attrition.

During most of the twentieth century, seed companies proliferated in response to the need for better germplasm to take advantage of improving agronomic knowledge. By way of example, the number of primarily seed corn companies grew to over 250 by the mid-1990s.

Since then, the number of seed companies has declined due to a number of factors – acquisition by chemical companies to increase market share, attrition and consolidation of brands at every level.

But, even in the face of consolidation, market share remains relatively unchanged. Since 1965, local and regional seed companies (historically independent) have represented about 22% of seed corn market share. Today, that market share remains relatively unchanged, but the space also includes farm supply branded products and regional companies that have been joined under common management relationships.

What Seed Companies Face

In my view, the more interesting (and challenging) aspect of
the modern seed industry has to do with structural changes,
which can be both positive and negative for seed companies
and the farmers they support:
• New product developments provide independents with choices
in genetic and trait platforms, and the chance to select from
one or several combinations. These new products also expose
all seed companies to more narrow margins, as well as inventory
challenges due to rapid and costly product obsolescence.

• An increasingly competitive retail market allows seed companies to differentiate. Unfortunately, the marketplace is also confused by input suppliers who also sell seed under several brands and compete with their independent seed company customers.

• Agriculture remains in transition, led by larger farmers who are more informed, with better access to data and information and who use multiple products to spread risk.

• Changes in the nature of the seed business – trait suppliers limit their own national and regional brands to the genetic and trait packages they own are cross licensing with others. At the same time, independents can choose from among several input platforms to provide customers with broad choices and more localized customer service (“seed for your farm, not your time zone”).