Financial Daily from THE HINDU group of publications
Saturday, Jun 10, 2006
Financial Daily from THE HINDU group of publications Saturday, Jun 10, 2006 |
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Agri-Biz & Commodities
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Bio-tech & Genetics Bt cottonseed producers face uncertain future Our Bureau
Chennai , June 9 With the pricing of Bt cotton caught in a legal wrangle, the sub licensees, the seed companies that have acquired the technology from Mahyco Monsanto, are facing an uncertain future that could have a long-term impact on their growth. The farmers stand to gain the most in the short term with prices of the genetically modified cotton nearly halved. The seed companies expect to see their revenues eroded by 35 per cent with the impact on profits yet to be assessed. But sales have jumped significantly.
The price war
For instance, when the Bollgard cotton prices ruled at Rs 1,750 a 450 gm packet last season, the trait value was Rs 1,250. Now at Rs 750, the seed companies say they have no idea what component of that would go towards trait value and how the revenue is to be shared. In Tamil Nadu, a conventional hybrid cotton seed packet costs about Rs 540. When it is genetically modified using Monsanto's technology, the price goes up to Rs 1,750. But now when the same company is constrained to sell the genetically modified seed at Rs 750, it has little left over the base price of Rs 540. A packet of genetically modified cottonseed also contains 120 gm of non-Bt cottonseed, a regulatory requirement. This comes to a hybrid seed cost of Rs 570 that leaves a balance of Rs 180 on the price of Rs 750 which, seed companies say, is too meagre towards paying the trait value, meeting the additional investments such as laboratory and extension services they provide to the farmers. The trait value of Rs 1,250, when the price of Bt cotton was Rs 1,750, was shared between the trade, Mahyco-Monsanto and the seed companies. Now they have little less than a sixth portion to share between them.
Bollgard triples growth
Pending a resolution to this issue, companies will have to rejig their strategies and reconsider further investments in seed biotechnology. According to industry sources, the sales of the Bollgard cotton has more than tripled in the cotton growing States and with the season expected to commence in mid-July in Tamil Nadu, a similar jump in sales is expected. One of the sub-licensees and leading seed seller said the companies had decided to stick to the pricing of Rs 750 a packet of 450 gm based on the situation in Andhra Pradesh. Last season the same packet had sold at Rs 1,750. This year, it had planned to sell at Rs 1,390 and had geared up for the expansion in area following the drop in prices. But now the seed packets are selling at Rs 750 and the area under genetically modified cotton is expected to more than triple. For instance, according to figures provided by Monsanto Holdings, in 2005, 31.3 lakh packets of Bollgard cotton were sold against 13 lakh packets in 2004. This year, the industry estimates that in Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Madhya Pradesh, Karnataka and Andhra Pradesh more than 90 lakh packets have been sold and Tamil Nadu sales are expected to commence in mid-July. The price for Tamil Nadu farmers is yet to be decided. The growth has come from the farmers who were cultivating conventional hybrid cotton. According to Monsanto, in 2005, Bollgard was planted by over a million farmers across 3.1 million acres in nine cotton growing States. For this season, farmers have a choice of 44 hybrids from 13 seed companies, which market Bollgard and expect Bollgard sales to be more than double of last year. However, one tangible good has come of the slash in prices of Bt cotton - the market for spurious or illegal Bt cotton has been wiped out, say industry sources.
More Stories on : Bio-tech & Genetics | Cotton | Seeds
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