Concentration in Seeds Markets

agriculture policy brief

Concentration in Seeds Markets

December 2018

ompetitive and innovative seed markets are essential for sustainable productivity growth in C agriculture. However, recent mergers have led to concerns about market concentration. arket concentration in seed varies strongly across crops and countries, but is typically higher M for genetically modified (GM) technology. esides competition policy, several policy options exist to stimulate competition and B innovation in seed markets.

What’s the issue?

Well-functioning seed markets are essential for agriculture and global food security. A sustainable increase in agricultural productivity worldwide will depend on public and private investments in research and development (R&D) to develop improved varieties. For this reason, it is important to ensure seed markets remain competitive and innovative.

The global seed industry has recently been reshaped by the merger of Dow and DuPont, the acquisition of Syngenta by ChemChina, and the merger of Bayer and Monsanto. This consolidation process raises the question whether market concentration leads to reduced competition, higher prices and lower innovation, which could hurt both farmers and consumers.

Market concentration across crop seed markets, 2016 Most concentrated

Mexico

South Africa

Germany

South Africa Uruguay Hungary Bulgaria Argentina Paraguay United States

Bulgaria France

Ukraine Romania

United States

Spain France

Ukraine

Austria Romania Germany

Poland

France Poland Belarus

Ukraine

Least concentrated Cotton

Soybean

Spain Mexico Brazil United States Argentina

Russia Brazil

Denmark South Africa Greece

Brazil

Denmark

Canada

Belarus France Romania

Bulgaria Germany Romania Ukraine

Bulgaria

United Kingdom Poland

Netherlands Germany

Rapeseed

Potato

United Kingdom Austria Ukraine Germany Russia

Sunflower

Sugar beet

Maize

Source: OECD analysis using the Kleffmann amisÂŽ AgriGlobeÂŽ database.

www.oecd.org/agriculture

Mexico

tad.contact@oecd.org

@OECDagriculture

Wheat and barley

Concentration in Seed Markets Consolidation in global seed markets has been ongoing for several decades and is driven both by high fixed costs (in particular for R&D) and by technological and commercial complementarities between seeds, GM technology, and crop protection chemicals. A new complementarity may be emerging today with digital technologies and precision agriculture. Due to divestitures imposed by competition authorities, the risk of harmful effects on prices and innovation from recent mergers currently appears limited.

Concentration in seed markets varies considerably across different crops and countries. Concentration tends to be higher in seed markets for sugar beet, cotton, sunflower, maize, and rapeseed, but lower for potato, soybean, and wheat and barley. Regional firms often play important roles in seed markets. So far, there does not appear to be a clear negative effect of market concentration on either prices or innovation. For genetically modified (GM) traits, which can be incorporated into seed, market concentration is much higher; in contrast with seed markets, the market for GM traits is dominated almost exclusively by large multinationals.

Further reading • OECD (2018), Concentration in Seed Markets: Potential Effects and Policy Responses, OECD Publishing, Paris, https://doi. org/10.1787/9789264308367-en.

• OECD/Richard Gray (2012), “Intellectual property rights and the role of public and levy-funded research: Some lessons from international experience”, in Improving Agricultural Knowledge and Innovation Systems: OECD Conference Proceedings, OECD Publishing, Paris, https://doi. org/10.1787/9789264167445-16-en.

• OECD (2016), OECD Agricultural Codes and Schemes: Seed Schemes, OECD Publishing, Paris, https://issuu.com/oecd.publishing/docs/ oecd_agricultural_codes_and_schemes

What should policy makers do?

Consolidation in the seed industry has led to discussions about how competition authorities should evaluate the mergers. Yet, in addition to competition policy, several other policy options exist to stimulate competition and innovation in the industry. Policy makers should: • Avoid unnecessary regulatory barriers to entry, which is of particular importance given the emergence of new plant breeding techniques potentially accessible to smaller enterprises. While a sound regulatory framework is necessary to ensure markets function properly, regulation may also inadvertently create transaction costs and barriers to entry, which could in turn contribute to higher levels of market concentration.

• Ensure that plant breeders have access to the necessary inputs, for instance by supporting efficient procedures for accessing genetic materials and by facilitating efficient licensing of intellectual property. Successful innovation depends on access to genetic resources as well as intellectual property.

• Stimulate both public and private R&D. The public sector has historically played an important role in plant breeding and it continues to do so in many countries.

However, as private-sector investment is growing, the public sector can evolve toward more fundamental research, where the private sector typically underinvests.

Policy makers can also stimulate private R&D through public-private partnerships, for instance by providing matching funds.

• Use precise data when investigating market concentration. Highly aggregated estimates of global market concentration have been cited in the public debate, but they present a misleading picture of the important variations by crop and by country.

www.oecd.org/agriculture

tad.contact@oecd.org

@OECDagriculture