Investing in Agriculture
Meeting the demands of the "new agricultural economy."

By Henry Gantz
hgantz@meistermedia.com

Growing demand for all things agricultural has taxed - and will continue to tax - available crop acreage to the breaking point. To meet that explosive demand, a "new agricultural economy" will have to bloom ... quickly.

Quickly, because at some point in the not-so-distant future, the world's demand for agricultural products will out-strip its production capabilities.

	The Bayer CropScience Brass. From left to right: Dr. Wolfgang Welter, Head of Industrial Operations; Dr. Dirk Suwelack, Head of Business Planning & Administration; Dr. Friedrich Berschauer, Chairman of the Board of Management, and Dr. Rüdiger Scheitza, Head of Global Portfolio Management.

Professor Friedrich Berschauer, Chairman of the Board of Management of Bayer CropScience AG, said at the company's Annual Press Conference in Monheim, Germany, in early September that "we expect a continuously growing demand for agricultural products, and in the future this demand will be driven not only by the production of food, feed and fiber, but also by the use of biofuels."

Berschauer also cited the "uninterrupted growth of the world's population and the impact of climate change" as serious threats to the global supply of food and fiber. Shortage-driven prices are leading to a "silent agricultural revolution," he added.

Notably, the world's unquenchable thirst for biofuels will benefit both the seed and crop-protection markets. To take advantage of this extraordinary opportunity, Bayer will increase its annual research and development budget to slightly over $1 billion dollars by 2015, up from nearly $860 million in 2006. The company will focus on new modes of actions for crop protection products, transgenic seed traits and new "biotechnological" approaches to making plants less susceptible to stress factors - heat, drought, cold and the effects of soil salinity.

"We are convinced," said Berschauer, "that we can only keep pace with the future requirements of the new agricultural economy if we use all the options available for safeguarding harvests and increasing yields.

"The increase in productivity which we will need to achieve in agriculture in the coming years will only be possible with modern crop protection, and the new approaches offered by plant breeding and plant biotechnology," he added.

Blast Off
In 2000, Bayer launched an ambitious product-development program with an objective of bringing 26 new crop-protection substances to market by 2011.

"We expect these substances to have a combined peak sales potential of approximately ($2.8 billion)," Berschauer said. Of those 26 compounds, 17 had been launched by the end of 2006, with sales totaling $1.4 billion.

And so far this year, Bayer has received regulatory approvals for three more active ingredients, has 10 more substances in late-stage development, and another nine in the early stages of development. Currently, the company has 45 new projects in early stages of research.

As for seed, Bayer, said Berschauer, has a "well-equipped seed and plant biotechnology pipeline" with over 40 projects in development. There are six herbicide-tolerance and insect-resistance trait projects in the late stages of development. These could hit the market beginning in 2010. "We are confident that our BioScience pipeline will be a major source of new impetus as we expand our business," he added.

Ten Years Later
Within the next 10 years, Bayer's goal is to expand its total bioscience sales to $1.4 billion, up from just over $483 million in 2006. To hit that target, Bayer will make substantial investments in research and development to expand its seed portfolio. One of the first steps was the much-publicized purchase of Stoneville Pedigreed Seed Co. from Monsanto this spring for $310 million. It was the largest single acquisition in Bayer's history.

In that Bayer-Stoneville deal, Monsanto purchased Delta and Pine Land Co. (D&PL), the worlds largest cotton seed company. Under terms of the U.S. Depart of Justice's approval of Monsanto buying D&PL, Monsanto was required to divest itself of Stoneville. Bayer eagerly scooped it up.

Now with Bayer's FiberMax varieties combined with those of Stoneville, the company is virtually on par with sales of D&PL varieties. With the acquisition of Stoneville, Bayer says it is better able to offer a wider range of varieties that combine attractive traits with high yields and excellent fiber quality.

Also within the last 12 months, Bayer acquired two other U.S. cotton seed companies - CPCSD and Reliance Genetics. Bayer will also become involved in two rice joint ventures in China with Lu Dan Seed Company and Nong Ke Seed Company. China is the world's largest hybrid rice market.