Financial Daily from THE HINDU group of publications
Tuesday, Jul 16, 2002
Agri-Biz & Commodities
Monsanto gains early-bird advantage in cotton hybrids market
Monsanto-Mahyco's Bt cotton seeds variety.
AURANGABAD, July 15
MONSANTO'S Bt cotton may have made a quiet beginning in the farmers' fields this season. But it has triggered off a seemingly inevitable process of consolidation in the 10 million packets per year cotton hybrid seeds business.
Currently, the country has 80-odd companies/breeders who market over 400 cotton hybrid brands, produced from both proprietary and public-bred lines. Of these, the `major' players number around ten.
They include the Jalna-based Maharashtra Hybrid Seeds Co Ltd (Mahyco), Mahendra Hybrid Seeds Co Ltd (`Mahalakshmi' brand) and Krishi Dhan, the Guntur-based Nuziveedu Seeds Ltd (`Bunny'), the formerly Hindustan Lever Ltd-controlled Paras Extra Growth Seeds (`Brahma'), Syngenta (`Sandocot-35'), the Aurangabad-based Ajeet Seeds and Nath Seeds, the Nagpur-based Ankur Seeds, the Salem-based Rasi Seeds and Proagro (`Dhanno'). Then, there are various State-owned seed companies, mainly dealing in public-bred hybrids.
Significantly, Monsanto has already tied up with many of these breeders, starting with Mahyco, in which it has a 26 per cent stake. The two companies also operate a 50:50 joint venture, Mahyco Monsanto Biotech India Ltd (MMB), which is the Indian licensee for `Bollgard', the specific Bt gene construct patented by the US life sciences major.
But the story does not end there. The Bollgard gene has not only been incorporated in Mahyco's cotton hybrid seeds Mech-12, Mech-162 and Mech-184, which were cleared for commercial cultivation this year but is also set to be back-crossed with hybrids evolved by other companies.
MMB has so far sub-licensed the Bollgard gene to five players Rasi, Ajeet, Krishi Dhan, Ankur and India Seeds Holdings (ISH), which is a Mauritius-incorporated associate of two US-based private equity investment firms, Hicks Muse Tate Inc and Emergent Genetics LLC.
ISH, in turn, holds a majority stake in Mahendra Hybrid Seeds (acquired in February 2000), besides having, only in March this year, bought 74 per cent of HLL's share in Paras Extra Growth Seeds for Rs 115 crore. Interestingly, the two firms had, in December 1999, also acquired Stoneville Pedigreed Seed Company (which actually pioneered Bt cotton planting in the US) from Monsanto itself, reducing the latter to a `pure' gene supplier.
So, is the highly fragmented hybrid cottonseeds market headed for some sort of consolidation, with the underlying `software' (gene construct) being provided by Monsanto? This certainly seems so, when it is learnt that MMB is presently `in talks' with Proagro Seeds as well for collaboration in Bt cotton technology.
The all-India area under cotton is now roughly nine million hectares (22 million acres), corresponding to a seed requirement of 22 million packets. Considering that hybrids cover almost half of this area the rest being under various desi and American varieties the cotton hybrids seeds market comes to 10 million packets, with privately bred lines account for 40 per cent and public sector hybrids such as NHH-44 making up the rest.
According to Dr M.K. Sharma, Managing Director of MMB, ``we would like a 30-40 per cent share in the hybrid cotton seeds market, i.e 3-4 million packets''. And this would be achieved not just through Mahyco's Bt cotton, but also by incorporating the Bollgard gene into the hybrids of Ankur, Rasi, Mahendra, Ajeet, Krishi Dhan, Paras, etc.
``Just like Mahyco, all these companies would be back-crossing Monsanto's Bollgard varieties with their own hybrids. But these Bt hybrids will not have to undergo the various environmental and bio-safety trials, since the Bollgard gene has already cleared these tests. They will only have to go through the Indian Council of Agricultural Research's (ICAR) open field evaluation trials. So, we hope to see more Bollgard hybrids in the next couple of years,'' Dr Sharma noted.
In the current season, MMB has sold 1.05 lakh packets of Mahyco's Bt cotton. Given that each packet of 450 grams costs Rs 1,600 (farmer's price), it means that the Bollgard gene has generated business worth nearly Rs 17 crore in its very first year of commercial planting. For kharif 2003, MMB expects sales to touch 6-7 lakh packets. And if the 3-4 million packet `target' is achieved, the Bollgard's total business would be in the Rs 500-600 crore range!
``These projections assume that we will keep our prices unchanged. This need not happen because there are others, including ICAR and even private breeders as Nath Seeds, who are planning to introduce their own Bt cotton versions. Once these come into the market, there could be competition,'' Dr Sharma added. But for now, the `early bird' advantage definitely lies with the Monsanto-Mahyco combine.
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