TITLE: Tracking the trend towards market concentration: the case of the agricultural input industry AUTHOR: Irene Musselli Moretti PUBLICATION: UNCTAD report DATE: 20 April 2006 URL: http://www.unctad.org/en/docs/ditccom200516_en.pdf UNCTAD | April 20, 2006 TRACKING THE TREND TOWARDS MARKET CONCENTRATION: THE CASE OF THE AGRICULTURAL INPUT INDUSTRY Study prepared by the secretariat of the United Nations Conference on Trade and Development (UNCTAD) EXECUTIVE SUMMARY There is clear evidence suggesting a trend towards greater concentration at several stages in various commodity sectors. Focusing on the agricultural input segment, there has been a process of consolidation in the global agribusiness in recent years (by means of divestitures, mergers and acquisitions), the outcome of which is a few major integrated companies, each controlling proprietary lines of agricultural chemicals, seeds, and biotech traits. A significant increase in the concentration of agrochemical industry has been observed with three leading companies accounting for roughly half of total market. An upsurge in seed industry takeovers and changes in rankings (with the acquisition of Seminis in 2005, Monsanto surpassed DuPont in the global seed market) occurred between 2004 and 2005. Some of the largest agrochemical companies have branched out forcefully into plant biotechnology and the seed business, heralding a move towards unprecedented convergence between the key segments of the agriculture market (agrochemicals, seeds and agricultural biotechnology). Besides mergers and acquisitions, another aspect of structural change of interest in this area is increased "coordination", which typically refers to contractual arrangements, alliances and tacit collusive practices. At the horizontal level, evidence suggests a trend towards heightened strategic cooperation among the largest competitors in the agricultural biotechnology sector. It is also interesting to note vertical coordination upward and downward along the food chain, with the establishment of food chain clusters that combine agricultural inputs (agrochemicals, seeds and traits) with extensive handling, processing and marketing facilities. On the one hand, the need to consolidate patent portfolios and thus ensure freedom to operate appears to have created incentives for the extensive mergers and acquisitions that have occurred between agricultural biotechnology and seed businesses, and for other cooperative responses short of full integration (such as cross-licensing). On the other hand, because of the breadth of protection accorded to the patent holder (the seed or biotech company), concentration in agricultural biotechnology is giving the largest corporations unprecedented power vis-à-vis growers and other stakeholders. In particular, the privatization and patenting of agricultural innovation (gene traits, transformation technologies, and seed germplasm) have supplanted the traditional agricultural understandings on seed and farmers' rights, such as the right to save and replant seeds harvested from the former crop. In some jurisdictions, the privatization and patenting of agricultural innovation has resulted in a drastic erosion of these traditional farmers' rights, and the assertion of proprietary lines on seed technologies and genetic contents has changed farmers from "seed owners" to mere "licencees" of a patented product. Full report in PDF format: http://www.unctad.org/en/docs/ditccom200516_en.pdf (780MB)