By Marie-Josee Cougard, Les Echos via Checkbiotech

The world leader in agrichemicals is all-set for external growth in the seed sector, the new strategic focus of the heavyweights in this industry. The target market – the United States and the six West European countries in a first phase – is estimated to be worth six billion dollars.

It is brown and fleshy, always “tasty” and “juicy”. Its ancestors, some wild, others cultivated, came from various regions: this is the latest idea from Syngenta which is launching a resolute attack on the world tomato market with a top-of-the-range non GM product called Kumota, for which the group has developed the seeds under the S&G brand.

Selling at 1.5 to 2 times the price of standard tomatoes it will be grown in Spain from November to May when sunshine is guaranteed and in Belgium and Brittany for the rest of the year. The originality of this approach resides in a partnership between Syngenta, the producers and the distributors. Convinced that the quality of the final product is heavily dependent on the seed used at the outset, the Swiss group is offering its technical assistance to farmers and distributors in exchange for which it will recover a share (it is not prepare to disclose how much) of the margin achieved on the final product.

Syngenta’s target market – initially the United States and the six West European countries – is estimated to be worth 6 billion dollars by André Goig, Director of the vegetables department of the Swiss giant. But the prospects for this fruit eaten as a vegetable all over the world and produced on a scale of 71 million tons a year are enormous. Confronted, like its agrichemical competitors, with the flat market for pesticides and the hostility of the Europeans to GMOs, Syngenta regards seeds as a “long term growth reservoir” and an “essential strategic axis”.

The markets can look forward to strong development of crops for biofuels, biopharmacy and enzymes already utilised by Syngenta to modify the metabolism of pigs and reduce their excreta which are regarded as highly polluting. China, India, South East Asia and Latin America are markets which the seed producers have not yet exploited.

Pressure of competition

Seeds already account for between 15 and 20% of the world giant’s sales and these are growing at an impressive rate, unlike pesticides for which few growth prospects now remain outside the developing countries. Syngenta reported 6% growth of seeds sales in 2004 followed by a 70% leap in the first three months of this year. The acquisition of the American Golden Harvest company and the US business of Garst (Advanta Seeds) in 2004 has obviously made a major contribution to this result. But, even disregarding the change of consolidation scope, the increase in first quarter sales still stood at 15%.

Syngenta has announced that other acquisitions will follow, especially as competition is growing. Monsanto, which has invested vast sums in the development of GMOs, has decided to reap the benefits of its research by also developing its seeds business in which it became the world leader in January when it bought up Seminis, a specialist in fruit and vegetable seeds, at a price of 1.4 billion dollars.

Copyright by Les Echos