Wednesday, August 14, 2013

Corn seed market still enveloped in oversupply nightmare in 2013

In 2013 the domestic corn seed market is experiencing serious oversupply, falling prices, uneven quality of varieties and poor performance by seed companies, according to Seed China News issued by CCM in July 2013.

Oversupply continues

"Both old and new products are experiencing excess inventory," says Tong Pingya, a well-known research expert in the seed industry. "Some new corn varieties, such as Jingke968, Zhongdan909 and Weike702, have excess inventory of more than 40%, or even as high as 60% for individual ones, not to mention the old varieties like Zhengdan958 and Xianyu335." Because of this, seed production bases in Northwest China have cut production this year, especially for old varieties.

Prices decline further
Prices decline further High inventories are pushing seed prices down in 2013 and seed companies have been waging a price war in the seed market, while farmers took a wait-and-see attitude. For example, the retail price of Zhengdan958 seeds for monoseeding marked by seed producers (Beijing Doneed Seed Co., Ltd., Henan Goldoctor Seeds Co., Ltd., Henan Qiule Seed Industry Science and Technology Co., Ltd., etc.) is generally USD6.47 (RMB40) or USD7.28 (RMB45) per bag (around 5,000 grains), but the selling price decreased to below USD4.85 (RMB30) per bag in some regional markets early this year.

The deluge of infringing seeds (counterfeit seeds, seeds that are bred without authorization, ect.) has further depressed the prices. For instance, the selling of the bulk seeds of Zhengdan958 and Xianyu355 is quite prevalent in some regional markets, and Zhengdan958 and Xianyu355 bulk seed prices sell for USD2.59/kg (RMB16/kg) or lower. However, it is illegal to sell seeds in bulk in China without packaging (except tubers and seedlings that are not suitable for packaging), in accordance with China's Seed Law.

Uneven quality of varieties
Although a number of new corn varieties win the provincial or national approval each year, few can really surpass the currently leading varieties like Zhengdan958, Xianyu335 and Xundan20. It is reported that there are over 1,000 corn varieties in the domestic corn seed market in 2013, most of which are just spurious products imitating the leading varieties. Actually, the planting of most other corn varieties is small and scattered, usually with respective planting area below 30,000 ha., compared with 2 million ha. of planting area of each leading variety. Actually, many of those small varieties without prominent advantages are not competitive in the market and will be easily eliminated in a short time.

Companies face underperformance
Faced with oversupply, most corn seed companies are not optimistic about their performance in 2013. For those lacking promising varieties, the circumstance is even worse. It is the same with those large seed companies. For instance, Beijing Doneed Seed Co., Ltd. (Beijing Doneed), the core subsidiary of listed Wanxiang Doneed Co., Ltd., had declining performance in H1 2013 following a lackluster in 2012. The company continues to rely heavily on an old seed variety, Zhengdan958, which has further hurt performance, coupled with the deluge of infringing seeds. Gansu Dunhuang Seed Co., Ltd. (Gansu Dunhuang) will also fare poorly due mainly to shrinking sales of Xianyu335, the largest contributor to company profits.

Some companies in possession of promising varieties may still fare well. Shandong Denghai Seeds Co., Ltd. (Shandong Denghai), an R&D-focused corn seed company, has been promoting proprietary varieties such as Denghai605 and Denghai618, gradually reducing its reliance on Xianyu335. Shandong Denghai forecasts a 80%~130% YoY growth in net profits in H1 2013.

With increasing oversupply and high inventories, a number of producers have cut production, especially those less competitive companies. Some companies are also trying to clear inventory by selling at cut-rate prices. In this case the pressure from high inventory would be somewhat alleviated next year.

Table Contents of Seed China News 1307:
Vegetable seed companies in need of policy support
Mulch film causes increasing troubles to China's agriculture
Corn seed market still enveloped in oversupply nightmare in 2013
S&W Seed to conduct dormant alfalfa variety hay trials in China
Hybrid rice seeds trapped in excess supply
Longping High-tech to take full control of three key subsidiaries
Hefei Fengle resumes its real estate business
Wheat yields decrease sharply in some parts of Henan
GM rice taste tests held in China
Highland Barley 2000 expected to boost Tibet's grain output
Xi'an Jinpeng vigorously promoting Jinpeng8, an anti-TYLCV pink tomato variety
China's soybean import in H1 2013 sees 5% YoY decline
Winall Hi-tech forecasts a performance loss in H1 2013

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