SEED INDUSTRY ENTERS HIGH-STAKES GAME FOR BIOTECH LICENSING RIGHTS AND MARKET SHARE.
IT MIGHT LOOK like business as usual on the outside, but behind closed doors, the once-quiet seed industry now resembles a TV poker game being played with heavy bets, bluffs and big pots.
Feeding the high-stakes game are the profits involved in licensing biotech traits. Today, the cost of a trait in a bag may be more than the cost of the seed. For example, the glyphosate-resistant trait in soybeans is estimated to cost about $12 to $14/bag for this year's crop. If you start doing the math, those tech fees translate into big profits after a company recoups its initial up-front research and development expenses, which can be substantial.
Monsanto with its Roundup Ready technology has earned by far the most money from biotech trait licensing. But this may change as other big seed company players compete for the rapidly growing biotech pot. Syngenta upped the ante the most with its purchase of Golden Harvest and Garst Seed. It intends to sell its own traits (including one purchased from Bayer CropScience) in its own brands. As a result, Monsanto could lose an estimated $20 to $30 million in licensing fees. Meanwhile, Syngenta and Monsanto are calling one another's bluff with lawsuits over licensing rights regarding these traits. Only a court will be able to sort out the winners.
Monsanto just made another big play to ensure customer base. As reported last month, it formed a holding company called American Seeds Inc. (ASI). ASI then purchased Channel Bio Corporation, a seed company that includes the brands of Crow's Hybrid Corn, Midwest Seed Genetics, and Wilson Seeds. Monsanto didn't hide the fact that this company may make more purchases.
As this high-stakes game progresses, growers should start to see more competition for the biotech trait business. One seed company expert even suggested the trait business will someday be the commodity business and germplasm will be the high-priced item. So if the price of your biotech traits hurts now, wait a few years and it may change. Poker games, even in the seed business, can end up with big surprises.
PRICE OF STEEL
STEEL PRICES HAVE SKYROCKETED
EQUIPMENT manufacturers face a chilling situation with the price of steel. A survey of farm equipment and construction manufacturers reports steel prices have increased from 60 to 100%. The Association of Equipment Manufacturers (AEM) conducted the survey. Across the board, every company reported some price increase. AEM says, as a result, many of the surveyed companies have delayed hiring new workers, scaled back business expansions and shifted some production to non-U.S. sources. About 45% of the surveyed companies expect steel prices to continue to rise during the first quarter of 2005.
NEW TAX ACT PROVISIONS HELP FARMERS
FARMERS MAY find some changes in how their federal income tax is figured. The new American Jobs Creation Act of 2004 includes changes in the Alternative Minimum Tax (AMT) calculation and extension of Section 179 depreciation. Farmers using income averaging are no longer subject to the AMT calculation regarding federal income tax. This increases the value of income averaging and potentially lowers federal tax for farmers.
The Section 179 depreciation allowance was increased from $25,000 to $100,000 in 2003 and applied to tax years 2003-05. The new law extends the allowance through 2007. This deduction is for new or used property placed into use by farmers. Tile is included in the qualifying property.
— GARY HACHFIELD, UNIVERSITY OF MINNESOTA EXTENSION SERVICE
Deere & Company has announced worldwide net income of $356.7 million, or $1.41 per share, for the fourth quarter ended October 31, compared with net income for the same period last year of $70.6 million, or $0.27 per share. For the full year, net income was $1.406 billion, or $5.56 per share, versus $643.1 million, or $2.64 per share, last year. The company said it expects earnings growth to continue, but at a slower pace, in 2005.
Learn about tillage systems at the Conservation Tillage Conference & Expo, scheduled February 8 and 9 in Sioux Falls, SD, at the Ramkota Hotel. The conference covers a wide range of tillage topics and displays the latest in tillage equipment. Cost for the event is $100 per person. Farm Industry News is a sponsor of the conference.
For more information or to register, call 800/722-5334, ext. 4698, or visit www.farmindustrynews.com. For room reservations, call the Ramkota Hotel at 605/336-0650 and mention the Conservation Tillage Conference for a rate of $69 per room.
NEW COLUMN AND DESIGN
Farm Industry News introduces a new column on page 4. Here we will take on subjects that affect the inputs that you, our readers, buy.
This new column accompanies a redesign of Farm Industry News. Senior Art Director Lynn Varpness created our new look. We hope the new design will improve your reading experience.
If you have any comments, write to Editor Karen McMahon at [email protected] or call her at 952/851-4680.