Genetically modified canola © FT Graphic / Getty

Bayer chief executive Werner Baumann pledged to create a “global leader in agriculture” when he unveiled the company’s blockbuster takeover of Monsanto in September.

Making a success of the $66bn deal will depend in significant part on the continued expansion of the market for genetically modified seeds, which Monsanto has led since the first commercial GM crops were planted in 1996.

Yet global planting of GM crops declined slightly in 2015, after two decades of rapid growth, and there is little sign of a sustained upturn in the near future. The markets for the crops that have led GM expansion so far — maize, soyabeans, cotton and canola — are largely saturated in the countries that are politically and agriculturally hospitable to GM, and few others are poised for introduction.

According to the International Service for the Acquisition of Agri-biotech Applications, which surveys biotech crops annually, the total area planted fell from 181.5m hectares in 2014 to 179.7m last year. Randy Hautea, ISAAA global co-ordinator, says the small decline, the first in the history of GM crops, reflects low agricultural commodity prices rather than any rejection of the technology by farmers. “We expect it to increase when crop prices improve,” he adds.

The agrochemicals and crop biotechnology consultancy Phillips McDougall says seeds worth $37.2bn were sold in 2015, of which $19.8bn were GM. The total market fell by 8 per cent from 2014, while the GM segment was down 6 per cent, adds Allister Phillips, associate director. He is predicting further small declines in the global seeds market in 2016 and 2017 as crop prices remain low.

The downturn in the agriculture industry has been a key catalyst for the wave of deals sweeping through the suppliers of farmers’ seeds and crop sprays, including Bayer’s bid for Monsanto. The other large transactions are Dow Chemical’s proposed takeover of DuPont, and ChemChina’s planned acquisition of Syngenta.

Chart: Monsanto earnings

All the deals are expected to face intense regulatory scrutiny, partly because of the risk that the enlarged companies will have the ability to charge farmers higher prices for seeds and sprays.

Monsanto is the undisputed GM market leader, with $10bn revenues in 2015, which came both from selling seeds and licensing genetic “traits” to other companies. The second-biggest seeds company including GM is DuPont’s Pioneer unit, and Syngenta is also a big player in the technology.

The agricultural consultancy PG Economics says farmers have good reason to buy GM seeds, even though these cost more than conventional alternatives, because they deliver “substantial economic and environmental benefits, allowing farmers to grow more with fewer resources”.

“Where farmers have been given the choice of growing GM crops, the economic benefits realised are clear and amounted to an average increase in profit of over $100 per hectare in 2014,” says Graham Brookes, director of PG Economics. These benefits come from several factors, including increased yields through reduced pest and weed damage, lower pesticide and herbicide costs, and less time and fuel spent spraying chemicals on crops — set against the higher price of GM seeds.

However, Pat Mooney, executive director of ETC Group, an agribusiness monitoring organisation, says farmers in countries where GM seeds are marketed aggressively by suppliers buy them for two reasons that have nothing to do with the technology’s intrinsic merits.

Chart: GM crop experiments

“One is that farmers have little choice,” adds Mr Mooney. “Speaking as a Canadian, it is almost impossible to buy conventional canola in Canada. The other reason is that for the last 20 years the companies have put their plant breeding talent into the GM portfolio and neglected conventional crops.”

The GM technology used so far is not intended directly to increase crop yields, says Mr Phillips. “Farmers adopt [GM] because it saves them money by reducing the cost of other agricultural inputs,” he adds.

Today’s GM crops have two main characteristics, or “input traits” as they are known in the seeds business. Herbicide tolerance enables the farmer to get rid of weeds by spraying the field with a product such as Monsanto’s Roundup that does not harm the crop. Insect resistance adds a bacterial gene that produces a toxin lethal to pests, so the farmer has to apply less pesticide.

The suppliers of GM seeds are now developing more sophisticated input traits — partly to deal with the resistance that weeds and insects are inevitably evolving in response to the first generation of products. This involves adding several herbicide and insect resistant genes to a single seed.

“I do think there is growth left in the GM seeds industry,” says Mr Phillips. The first driver of expansion will be the spread of current input-based technology to regions outside North America where markets are not saturated, particularly in Latin America and Asia.

Map: GM crop data

In the long run GM technology will expand through the introduction of “output traits” which directly enhance crops’ yields or quality.

One that is beginning to make progress in the US is Monsanto’s DroughtGard maize, which is designed to thrive in prolonged spells of dry weather. Other yield-raising characteristics nearing commercialisation are tolerances of exceptional heat and salinity.

New GM crops reaching the market include apples that do not turn brown when sliced, and potatoes that resist “late blight” disease.

But the biggest boost would come from GM varieties of two of the world’s staple crops, rice and wheat, which have been genetically manipulated successfully in the laboratory but not yet commercialised.

This month UK researchers announced plans to grow a trial crop of GM wheat designed to generate higher yields through more efficient photosynthesis. “If we can show that yield increases in the field, even by 5 or 10 per cent, that would be an important development because wheat yields globally have reached a plateau,” says Malcolm Hawkesford, head of plant biology at Rothamsted Research in Hertfordshire.

“In the long run an expansion of GM technology into wheat and other crops could play a big role in ensuring food security, which is a major challenge, given the projected need to increase world food production by 40 per cent in the next 20 years and 70 per cent by 2050,” he adds.

ST LOUIS, MISSOURI, MAY 2009: Research Biologist Heidi Windler takes tissue samples from genetically modified corn plants inside a climate chamber housed in Monsanto agribusiness headquarters in St Louis, Missouri, 21 May 2009. Windler is attempting to breed a Corn Root Worm resistant strain of corn which will one day form the basis of a root worm resistant corn crop of the future. Monsanto is at the forefront of biotechnology in the agribusiness sector. These climate chambers are designed and built inhouse and they allow the technicans to monitor plant growth daily. These plants are monitored for the perfect DNA of an elite corn seed and then those plants that make the grade are forwarded to the next stage of the selection process. Monsanto is a controversial global corporate with a history of strong litigation against those it assumes are interfering with its stringent patent laws. This practise as well as its advanced genetically modified technology approach in the agricultural sector have led many to be suspicious of Monsanto and the ultimate good of GM foods. Monsanto argues back that sufficent food production for the future is simply not possible without adequate GM technology in agriculture. (Photograph by Brent Stirton/Getty Images.)
GM maize in a laboratory at Monsanto's St Louis headquarters © Getty

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