Major agrochemical players are focusing future growth in agriculture biotechnology as the market for crop protection chemicals matures.

Syngenta, BASF and DuPont recently unveiled plans to increase their research and development in plant biotechnology in order to further compete with Monsanto, which currently holds 88% of this $5.6 billion global market.

BASF, through its subsidiary BASF Plant Science, is investing more than $320 million over the next three years to develop next-generation plant biotechnology products. The company will focus on genetically modified (GM) crops that can withstand pests, diseases and drought; value-added plants that can yield beneficial ingredients for human and animal nutrition; and plants that can serve as feedstock to produce alternatives to certain traditional chemicals.

“Biotechnology has the potential to create value for our company and customers, and no doubt will fundamentally change the business areas of nutrition, agriculture and specialty chemicals,” notes Hans Kast, president and CEO of BASF Plant Science. Kast adds that BASF is using a number of its research companies, such as Germany-based Metanomics and SunGene, and Canada-based DNA LandMarks, to facilitate development of new opportunities in plant biotechnology.

Compared to other agrochemical participants, BASF’s current presence in the agbiotech market is said to be very small, according to analysts. DuPont and Syngenta are considered the runners-up in the agbiotech market behind Monsanto in terms of sales.

Syngenta recently launched its $100 million venture fund company LSP BioVentures, which will invest in growth companies and technology start-up opportunities focusing on crop biotechnology, crop protection and growth areas such as biomaterials and biofuels. The Boston-based venture fund will be managed by Life Sciences Partners (LSP), a biotech venture capital firm.

Syngenta also formed a 50-50 joint venture with DuPont through GreenLeaf Genetics LLC. GreenLeaf will offer licensing of seed genetics and biotech traits to independent seed companies in North America. The companies also agreed to cross-license certain corn and soybean traits including DuPont’s herbicide tolerant trait for both soybeans and corn, which will come out in 2009, and Syngenta’s next-generation insect resistance technology for corn.

“The joint venture deal is a good strategic move to compete with Monsanto,” says Citigroup Research analyst Andrew Benson. “Syngenta is now in transition, trying to turn itself from being a crop protection company, albeit with $2 billion of low-margin seed sales, into an integrated crop science company that offers an integrated combination of germplasm, traits and crop chemical products. Syngenta should have a portfolio roughly competitive by 2008.”

DuPont is expected to strengthen its agbiotech business with the GreenLeaf deal. DuPont already established an array ofjoint venture partners for its seeds and traits business including its deal with Dow Chemical for Dow’s Herculex insect-resistant corn trait, and with Delta and Pine Land’s herbicide-tolerant cotton.

The company’s seed subsidiary, Pioneer Hi-Bred, also recently opened a new research center in South Dakota to help develop new corn inbreds and commercial hybrids.

Citigroup says DuPont’s R&D in GM technology is still one to two years behind Monsanto’s. “While it is the global leader in seeds, it is still a small traits player,” reports Citigroup. “In 2005, the business appeared to lose market share in the seeds market, notably to Monsanto, as it lacked the trait offering of its key competitors.” In the global conventional seeds and agbiotech market, DuPont holds 39% of the market in terms of 2004 sales, followed by Monsanto (34%), Syngenta (18%), Bayer (6%) and Dow (3%). Citigroup expects the agbiotech market, which include GM seeds and traits technology to reach $8.9 billion by 2009 at a rate of 12% per year.

“Monsanto has been the pioneer in this market and is still likely to still have 80% of the market both directly and indirectly through licensees at the end of 2009,” says Citigroup. “However, competition is playing catch-up and we expect them to make some inroads notably in the corn and cotton segments.”

Dow’s Herculex deal with DuPont as weil as its recent cross-licensing agreement with Monsanto also signal Dow’s growing focus in the agbiotech market. lt’s first corn stacked trait product will launch in 2007.

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