Consolidation Continues in Seed Industry | Chengdu BrightView Partners Group

EDITOR'S NOTE: Row-crop farmers make dozens of decisions that affect the crops they grow, but perhaps none is more important than the seed they select. In a special series called Savvy Seed Decisions, DTN/Progressive Farmer examined often unseen facets of the seed industry that affect what farmers put in their planters.

Today, in our second story of the series, we examine how brand consolidation has continued to challenge competition within the seed industry.

ATKINSON, Ill. (DTN) -- Brand loyalty is often fierce among farmers. It can be found in nearly every aspect of their operations, from the color of equipment to the bags of seed they plant.

However, in 2025, farmers in more than 20 states will have fewer brands from which to choose. Bayer announced its plan last year to consolidate 10 regional seed brands under its Channel line, eliminating Fontanelle, Gold Country Seed, Hubner Seed, Jung Seed Genetics, Kruger Seeds, Lewis Hybrids, Rea Hybrids, Specialty Seed, Stewart Seeds and Stone Seed from its seed portfolio.

Many of these brands began as family seed businesses decades ago. Some had been around more than a century. Bayer said the move enables the company to strengthen dealer relationships and allows for "further investment in agronomic support and products that will benefit customers."

"It wasn't terribly surprising news," said Dean Cavey, co-founder of Verdant Partners LLC, an agribusiness brokerage and consulting group in Champaign, Illinois. "It's expensive to maintain multiple brands, but it's also risky to consolidate them, particularly those that have been in existence for a long time. So, you must balance the cost savings against the unit loss you're bound to suffer."

Cavey watched as other multinational companies also have acquired and then subsequently retired brands. Syngenta bought Garst and Golden Harvest in 2004, for example, only to jettison Garst a decade later. In 2020, Corteva Agriscience opted to shutter the nearly 40-year-old Mycogen brand in favor of Brevant.

Bayer's brand consolidation is the largest since AgReliant Genetics unified six regional dealer brands -- Eureka Seeds, Golden Acres Genetics, Great Lakes Hybrids, LG Seeds, Producers Hybrids and Wensman Seed Co. -- as the new LG Seeds in 2018. It continues a trend within the industry that began when the first genetically engineered traits were introduced to the market in the early 1990s. Since then, more than 200 seed companies have been acquired or went out of business, according to a March 2023 report from the USDA Agricultural Marketing Service (AMS).

The result is a concentration of market share among four seed companies. A June 2023 report by the USDA Economic Research Service (ERS) found that when combined, AgReliant, Bayer, Corteva and Syngenta accounted for 83.4% of corn seed sales and 78.1% of soybean seed sales in the United States from 2018 to 2020.

"At this point, I don't see a lot of opportunity for further brand consolidation," Cavey said. "I think the biggest challenge ahead for this industry is its ability to maintain the independent seed company."

FEWER CHOICES, GREATER HURDLES

Todd Martin, CEO of the Independent Professional Seed Association (IPSA), based in Fayetteville, Arkansas, paints an ominous picture for his organization's membership.

"When IPSA was formed in 1989, there were around 300 independent seed companies," he said. "In 2004, that number was still close to 200; and today, we represent about 100, including independent seed producers and seed companies. Our numbers are going down, and that's because of the competition -- or should I say lack thereof."

Some of the larger independent seed companies, such as Beck's Hybrids, Stine Seed and Wyffels Hybrids, have carved out niches and gained adequate market share in their regions, allowing them to compete. However, the same cannot be said for all independents, which are plagued by an inherent issue within the industry: the concentration of intellectual property (IP) in the form of genetics and traits.

The 2023 report from USDA-AMS estimated that today, 95% of corn and 84% of soybean IP is in the hands of BASF, Bayer, Corteva and Syngenta.

"All of the independents, to varying degrees, have been struggling with the annual increases in their access costs to these genetics and traits," Cavey explained. "At the same time, they're competing against the purveyors of these genetics and traits on product pricing."

As a result, independents are seeing a reduction in their margins year after year. Such financial pressure can ultimately lead to more industry consolidation.

"The economics are really stacked against them. Unless there is something done in regard to competition and IP patents, we'll be looking at fewer than 40 independent seed companies within five years," Martin said. "That's not good for competition. That's not great for innovation. And, I don't believe that's good for farmers."

Though the outlook may seem bleak, independents still possess a few special ingredients that can make a difference: tailored seed solutions and customer service.

"While independents may license genetics from the likes of Bayer or Corteva, they can offer what truly fits their local market best," Martin said. "They can also offer a more personal buying experience. If you're in Iowa buying from Cornelius Seed, and something's wrong, you can call Chuck Cornelius. He'll get it fixed because it's not just his name on that bag of seed, but it's his father's name, his grandfather's name and his great-grandfather's name on that bag. It's important because it's family."

Such generational relationships contribute to the strong sense of brand loyalty that pervades agriculture.

"For most growers, their first loyalty is to the person selling them seed. There's a level of trust," Cavey said. "After that personal loyalty comes the brand. It's hard to break that habit when growers trust a brand and the company behind it."

Despite such loyalties, USDA's forecast that net farm income will plummet more than 25% in 2024 will leave farmers looking for ways to cut costs.

"Loyalties may remain, but farmers also have to survive," Cavey concluded. "If they can find a better deal, they're going to be forced to seriously consider that."