2007: An “Unprecedented” Year

There are many adjectives to describe the happenings on June 19 of this year that knocked the seed world, and maybe even the entire cotton industry, on its behind. They would range from “this is the greatest thing to ever happen in the seed industry” to expletives that would have to be deleted.

We Love It

Obviously Monsanto and Delta and Pine Land were delighted on June 19.
Monsanto spokesperson Andrew Burchett said in an interview with Cotton Grower, “Everything was evaluated very thoroughly by the Department of Justice. The Department of Justice has taken plenty of time to review everything in great detail. That is part of the agreement we had with them, and we believe this will ensure competition.”
Also in an interview with Cotton Grower, D&PL president and CEO Tom Jagodinski said, “With the (Department of Justice’s) fixes that are in place, Syngenta will be in the cotton (seed) business – which is new – and with the germplasm Bayer got, they will be able to come into the Mid-South and Southeast in a big way. There is going to be a lot more competition. There is no question about that.”
Bayer now has Beltwide reach: The FiberMax lines have been extremely popular in the Southwest, particularly on the Texas High Plains, while Stoneville has a large and faithful following in the Mid-South and Southeast.

“Unprecedented” might be one everyone could agree upon.

And a comparison to the Butterfly Effect would be reasonably accurate. Monsanto, the world’s No. 1 transgenic traits company, flapped its wings, causing a coast-to-coast tidal wave of cotton-seed industry change.

As a look back, Monsanto’s courtship of Delta and Pine Land (D&PL) had been going on since 1998, with Monsanto making an offer of $1.9 billion in 2000. At the time, Monsanto owned Stoneville Pedigreed Seed Co. – then the nation’s No. 2 brand of cotton seed – and later came to doubt that, in purchasing D&PL, the deal would pass anti-trust scrutiny, given that Monsanto would own the world’s two largest seed companies. Consequently, the offer was pulled. D&PL then sued Monsanto, alleging that a good-faith effort had not been made to secure that approval. Ironically, D&PL seed varieties were the carriers of more Monsanto transgenic traits than any other brand.

However, Monsanto and D&PL continued to flirt, and in August of 2006, Monsanto agreed to buy D&PL in a $1.5 billion cash deal and would, upon closing, immediately divest itself of Stoneville. (At that time, Stoneville owned the NexGen varieties.) The decision to sell Stoneville – which had dropped to No. 3 in market share behind Bayer CropScience’s FiberMax brand – would prevent Monsanto from having a hammerlock on cotton-seed market share.

We Hate It

DuPont spokesman Doyle Carr said of the June 19 DOJ decision that the mergers and acquisitions would limit DuPont’s ability to access and compete in certain markets.
Others chimed in, including the National Black Farmers Association (NBFA) and the State of Arkansas’ chief deputy attorney general.
“This is not going to help the American farmer,” said NBFA president Justin Boyd. “(The Department of Justice) is going to let Monsanto shove this deal down our throats.”
Added Justin Allen of the Arkansas Attorney General’s office, “Our concern is that this will allow Monsanto to corner the market on certain biotechnology traits.”
Obviously the Justins were vexed.

This spring, the drums began to beat loudly. The Department of Justice, it was believed, would soon give its approval, and the only speculation was as to who would wind up with Stoneville. Conventional wisdom was that it would be Bayer, and it was correct.

So it was that on May 31, the DOJ gave its preliminary affirmative shake of the head to the deal and it was closed on June 19, but with considerable fanfare. Monsanto did, in fact, buy D&PL and sell Stoneville to Bayer, but not with the NexGen lines. Americot, in a surprise to all who were not extremely close to the deal, bought NexGen.

With Monsanto now owning D&PL, D&PL’s lawsuit against Monsanto became moot and was dropped.

In another surprise, D&PL agreed to part with 43 varieties that would carry Syngenta’s VipCot insecticide trait. It is unclear, at the moment, whether Syngenta will market those lines under its brand, or license them to another company. Shortly after the DOJ approval came down, Syngenta spokesperson Anne Burt told Cotton Grower Syngenta was committed to the development of VipCot-trait products and “that commitment has not been left wavering after all these actions.”

We Have No Dog In This Fight

Of the major cotton seed players, Dow AgroSciences was not involved in the deal and, well, didn’t seem to mind.
Dow markets its PhytoGen lines carrying its WideStrike insect-resistance traits. WideStrike uses double-stacked genes, as does Bollgard II, but is different enough to offer growers a viable option to Bollgard II.
Technically speaking, WideStrike, like Bollgard II, has two stacked Bt genes. WideStrike expresses the Cry1F and Cry1Ac proteins of Bacillus thuringiensis. Bollgard II also expresses the Cry1Ac protein, but the second is Cry2Ab.
PhytoGen Pima lines are the most popular in the Southwest and California.

But back to what we do know:
• Delta and Pine Land will operate as Monsanto’s southern business unit that will include Deltapine cotton and soybean varieties, DeKalb corn seed, Asgrow soybean seed and Roundup-brand agricultural herbicides.
• Bayer now owns Stoneville, but without what were Stoneville’s NexGen lines. Bayer paid $310 million for Stoneville.
• Americot now owns the NexGen lines, paying $6.8 million for them.
So if you are wondering who now markets your favorite brand of cotton seed, here goes:
• Delta and Pine Land will not change.
• Nor will FiberMax.
• Stoneville, less NexGen, will be marketed by Bayer.
• Americot also does not change.
• NexGen is now marketed by Americot.

Fairly simple, huh? And to make it even simpler at the moment, there will be no change in the Stoneville or NexGen brand names.

What If?

At the time the deals were closed, Delta and Pine Land continued to lead in market share with a commanding 42.9% of the market, according to the USDA’s “Varieties Planted, 2007 Crop” report, followed by Bayer’s FiberMax (29.3%), Stoneville (15.4%), PhytoGen (3.3%) and Americot (2.2%).
But what if the deal had been closed prior to this planting season? It would shakeout like this: Bayer with FiberMax, plus Stoneville less NexGen, would have moved to No. 1, with 43.3% of the market, using Bayer’s figure of a 14% share for Stoneville without NexGen. Delta and Pine Land would have been only 0.4 percentage points behind; statistically a dead heat. Meanwhile, Americot moves up to a 6% share, based on Americot’s figures of Americot plus NexGen. Obviously PhytoGen would have remained unchanged at 3.3%.

Captions:
The 2007 season was an historic year for the cotton seed industry.

Growers like Roundup Ready Flex’s extended window of application.

With Bollgard registration expiring in 2010, more and more varieties will become available with the Bollgard II trait.

Add graph:
USDA Market Share
(as a percentage)

Adjusted Market Share
(as a percentage)

Editor’s note: Adjusted percentage for FiberMax plus Stoneville minus NexGen was provided by Bayer CropScience. Adjusted percentage for Americot plus NexGen was provided by Americot.

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