What China’s GMO Approvals Could Mean for the Seed and Agrochemical Markets
8 February 2022 According to a press release on the AgriBusiness Global website, China plans an overhaul of its seed rules that will pave way for GMO approvals. It is a big step for China’s modern agriculture and a new business opportunity for upstream ag input suppliers.
On July 9, 2021, the 20th meeting of the Commission for Deepening Overall Reform of the China Central Committee deliberated and approved the “Action Plan for Revitalizing the Seed Industry.” It showed China’s top management puts great importance on the innovations brought on by biological breeding, especially the R&D and industrialization of genetically modified organisms (GMO). The growing domestic demand for food, protein, and high pricing of food commodities pushed China’s GM adoption so the government can guarantee the ability to feed the country’s 1.4 billion people. Even though the safety of authorization will be very strict, the national trend has been set.
The Ministry of Agriculture and Rural Affairs has issued a number of safety certificates for maize and soybean transformants in recent years. And commercial promotion can be carried out after the varieties are approved. Accordingly, the Ministry of Agriculture and Rural Affairs is also preparing the new regulations about seed authorization, commercialization and production permit, and naming of the agriculture varieties. It will support the future intellectual property protection in the China seed industry for sustainable development.
The basic policy of China GMO development will be to follow the route from non-edible to edible. So, the first crops will be maize and soybean. Rice is the main food for Chinese, which would be a later option for GMO commercialization. From current progress, there is not a very clear timeline for the first GMO maize or soybean commercialization. But it also could be very soon.
The first GMO maize could launch in the Chinese marketplace in 2022 or 2023. That’s mainly because maize has wider downstream utilization to transfer into key protein, which can fulfill the China consumers’ demand for meat and eggs. In 2019, China’s pork consumption was 20.3 Kg/person in 2019. The huge population is the basis for the increasing demand for meat from China. According to the National Food and Oil Information Center, Chinese maize planting areas were 42.9 million Ha, which could have huge potential to growth in the future.
Moreover, China’s agrochemical regulation is also adjusting for the future GMO policy. On November 26, public comments were solicited on the Requirements of Herbicide Registration Data for Genetically Modified Crops with Herbicide-Tolerant (Draft). The new regulation requests to have the safety certificate for target GM crops when herbicides will be registered on GM crop application. And the variety transformant shall be also mentioned in the herbicide registration process. It showed that China is willing to improve the level of regulations related to GM crops. The high entrance requirement will cause the consolidation of the Chinese seed industry to have resources concentrated into leading seed companies. The higher return of investment would also increase the total China market value up to 50% to 100% growth in coming decades.
According to the 2020 Seed Development Report, the market value of China’s seed industry was 118 billion CNY (about 18.49 billion USD) in 2019. The maize market value was 28.5 billion CNY (4.46 billion USD), hybrid rice market value was 13.4 billion CNY (2.1 billion USD), and wheat seed value was 16.5 billion CNY (2.58 USD). Meanwhile, the soybean seed market was just 4.3 billion USD (673 million USD).
Modern agriculture’s goal is to provide farmers with a good income, so agribusiness can become sustainable for growth. The higher quality and yield of GM crops will bring more income for China’s farmers. Considering the global high price of key food commodities, China GM crops adoption will also empower the total food value chain for Chinese agriculture.
It will also drive the enthusiasm of China’s farmers or farming companies to invest in agriculture for Chinese food security and safety. New regulations and new Law of Seed will cause more merger and acquisition activity in the Chinese seed market, especially for the seed industry in the northern part of the country. A changing of the seed industry resource allocation is highly possible.
Moreover, the regulations will protect the varieties and intellectual properties, which could attract more investment in agriculture. Accordingly, the upstream seed industry, like the Chinese agrochemical industry, will be affected. Ag inputs, such as key herbicides 2,4-D, glyphosate, or glufosinate, will also have an opportunity in the Chinese market. Within China’s agrochemical market, seed treatment, biologicals for soil enhancement, and nutrients will be developed with the GM crop expansion.
On the other hand, GM crops adoption in China will also decrease the total agrochemical application. It would increase the maize yield between 7% and 17% and decrease the total quantity of agrochemical application in Chinese fields up to 60%, according to Tianfeng Securities. It opens a new gate for China’s leading agrochemical companies to introduce novel sustainable formulation and solutions for China’s domestic GM market in the future. In the China market, there is similar solution for conventional maize crop protection and GM maize. The existing programs of crop protection will be sufficient for farmers’ choice in the future. In such a red ocean of crop protection competition, farmers will benefit from low cost crop protection portfolios and strong demand from China’s domestic market.
In China’s domestic agriculture market, the most important problem is the aging of the agricultural population. There are mainly growers more than 50 years old in rural areas. In the coming 10 years, the structure of China agriculture producers will be swift to the professional farming companies. The traditional small famers will disappear. Most aging people in agriculture will move into an urban setting. The young generation showing an interest in agriculture investment will become the mainstream. The GM crops would be the convenient and efficient way for new investors to get involved into Chinese agriculture. Agriculture really needs young people. The year of 2022 will be a critical watershed not only for China seed industry, but most importantly for China’s modern agriculture development.
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