REPORT HIGHLIGHTS

• The total market for genetically altered crops, foods and ingredients reached $17 billion in 2001 and is expected to rise at an average annual growth rate (AAGR) of 3.8% to $20.5 billion in 2006.
• A few crops altered for desired characteristics and used for food ingredients are on the market but they represent but 2% of the total. They will experience the fastest growth, a 14.9% AAGR over the period.
• Herbicide-tolerant soybeans have the largest market share with sales of $11.7 billion in 2001 and will grow at an annual rate of 2.9% to nearly $13.5 billion by 2006.
• Insect-resistant crops will continue to gain market share as well, largely due to cotton. This segment of the market will increase by 4.1% per year and reach sales of $4.7 billion by 2006.
• Of the three primary biotech crops, stacked trait varieties will have the highest growth rate. Sales will reach $2.25 billion by 2006.

REPORT SCOPE

INTRODUCTION

STUDY GOALS AND OBJECTIVES

The potential benefits derived from agricultural biotechnology are plentiful and sometimes staggering. In addition to feeding an increasingly hungry world, agbiotech products can add nutritional benefits, provide a new alternative to pharmaceutical deliveries and become an important source of renewable resources.

Ever since the energy crisis in the 1970s our nation and many others have sought to develop alternative fuel sources. Fossil fuels are becoming scarcer and costlier to find and produce. Some companies are proposing to mine fuels in nature preserves and wildlife areas, under a great deal of protest. Biotechnology offers the possibility of a renewable source of fuel—a never-ending supply that is environmentally friendly and means that our wildlife and nature preserves would not be endangered.

The goals of this report are to examine the many opportunities and challenges facing this industry today and in the near future, and to identify the areas for future growth. This report will examine the important issues that impact the industry, its future growth and sales.

The report will also examine current and future agbiotech products, forecast their sales and growth as well as discuss potential new market applications. Five years ago the agbiotech scientist, whether working in an academic or setting was primarily concerned with food and farming issues such as, how can we use biotechnology to aid farmers and help feed a growing population with available farmland?

While today these issues are still important, the agbiotechnologist is also concerned with how to develop renewable resources, new materials such as silk, cotton and plastic and new means of delivering pharmaceuticals. There is practically no limit to what agriculture can produce, thanks to biotechnology. This report presents these broadening horizons as well as the challenges each will face to determine the most likely path agbiotech will follow, at least in the next 5 years.

WHO BENEFITS FROM AGBIOTECH?

Developing nations may benefit from biotechnology in many ways. Some crops are being developed that are tolerant to extreme heat, cold or dry conditions. This means that some developing countries may be able to grow their own grain for food, rather than depending on imported grain. And in many developing nations injectable vaccines are difficult to store and administer because of a lack of refrigeration. Future biotech products include crops such as bananas and potatoes that contain vaccines against common diseases.

Industrialized nations and consumers benefit from agbiotech through positive environmental impacts, such as fewer chemicals used on crops. Crops that are engineered to express enhanced nutrition and taste are also being developed.

These benefits are just a few of the many that biotechnology can bring to the world—if the world will allow them. Increasing consumer concern may overshadow the opportunities that go hand-in-hand with such promising technology.

Currently almost every product we use in our daily lives, from our skin care lotions, to the food for the family dog may somehow have been touched by a biotechnology product or ingredient. Yet in the last few years the technology has been re-examined due to a growing number of consumer groups that are concerned about its long-term environmental and health effects.

CONSUMER CONCERNS

In 2000 StarLink corn, a product made by Aventis CropScience approved only for animal use, was found in taco shells on grocery store shelves. The publicity surrounding this occurrence caused many people to ask, just how many food products contain genetically modified ingredients? The American population has been buying and consuming these products since 1996 and they are a pervasive presence in our food supply. But according to a series of USDA-conducted focus groups with consumers, most Americans want to know when a product contains a genetically modified ingredient. And they also want the ability to choose between biotech and non-biotech.

In Europe the consumer situation is far worse, with a large percentage of the consumers there dead-set against biotech products. Many experts believe this is due to a less successful regulatory system abroad. In Europe there have been outbreaks of mad cow and other dangerous diseases that have shaken the faith of the European people in their food regulatory system. Exports of biotech crops and the approval of marketing some biotech crops abroad—especially those that are modified for insect-resistance—has been halted while the European Union and other international regulatory agencies decide on a common method for assessing their risks.

These are the biggest challenges facing the agbiotech industry today. Although it is not likely the USDA will require mandatory labeling of genetically modified food ingredients, it is encouraging companies to voluntarily do so. This means the nation's food chain will need to make many changes to its system in order to guarantee a high degree of segregation between the two types of crops.

SEPTEMBER 11, 2001 TERRORIST ATTACKS

The terrible events of September 11, 2001 have affected the American people in many aspects of their lives, including economic ones. The stock market continues to suffer and consumer spending has decreased, while the American population waits to see if the already-slowing economy will recover. While these economic concerns may impact many industries, experts in the agbiotech industry agree that they will have little to no effect on this industry because the demand for food is historically constant, since it is an essential commodity. And while there may be some decrease in government-funded research due to the re-allocation of money to defense and military budgets, the weak economy is still expected to have a minimal impact on the industry.

With the concern of biochemical warfare, food safety scrutiny may increase, but since agbiotech companies already go through a stringent approval process this should not have a significant impact on the market. Overall, the impact of these events on the agbiotech industry will be slight enough that they will not have an effect on future sales of agbiotech products.

REASONS FOR DOING THE STUDY

This report was designed to achieve the following objectives:

• To identify the various types of biotech crops, food products and ingredients and their altered traits, since current agbiotech products are primarily used as food and animal feed.
• To identify products currently marketed by agri suppliers such as agrichemical, biotech and seed companies.
• To identify future biotech products expected to appear on the market within the next 5 years and beyond.
• To identify the most promising new products and product applications.
• To understand how current and future agbiotech products can bring benefits to farmers, food processors, and consumers.
• To examine current social, regulatory and technological environments, both here and abroad, and how these can promote or hinder the development and marketing of current and future biotech products.
• To analyze the structure of the agbiotech industry, the types of companies involved and to show how they develop biotech products through various research and marketing agreements with public and private sources.

CONTRIBUTION OF THE STUDY AND FOR WHOM

This study seeks to shed light on two primary areas: 1) What is the current state of the agbiotech industry, and where is it headed in the near and distant future? and 2) How can agbiotech companies best meet the needs of their customers—food processors and consumers?

In order to answer these questions BCC first examines the products currently on the market. How have they been genetically altered and why? Have these products achieved their goals? Have their intended customers accepted them?

Then BCC discusses future products. What do companies have in their pipelines, and why? Are they developing the right products for their customers? How are these products being altered?

In addition to examining these issues the report takes an in-depth look at today's regulatory environment. What changes have taken place both in the U.S. and abroad in regulatory statutes and what impact will these changes have on the industry?

The report looks at the technology itself, how it began, how it is conducted and future trends. How will genomics impact the technology? And will consumer pressure mean fewer funds for researchers both academically and commercially?

The world market plays a key role in the success or failure of agbiotech since nearly one-fourth of our crops are exported. The report examines the world market, as well as competition for the agbiotech dollar abroad. Where is the competition?

Finally the report looks at the companies that are shaping the industry, from the seed companies to food processors. Where are these companies taking agbiotech and what are their important strategies?

This report was written for anyone with an interest in agbiotech, with various levels of technological understanding. Background information and details are included for those new to the industry. Explanations of the technology, patent and regulatory processes are included in the analysis, as well as sales projections of current and future products. The professional, scientist or layperson should have a clearer understanding of where agbiotech is today, and where it will be in the next 5 years and beyond

SCOPE AND FORMAT

Although agbiotechnology today means genetically altered livestock, aquaculture, environmental products as well as countless others, BCC sought to keep the focus of this report mainly on food and food ingredients. However, since the need for new biotechnology crops that can be used for a fresh variety of applications is growing, this report also touches on four new product applications as well: alternative fuel sources, plastics, pharmaceuticals and enzymes. In the future the farmer will have a choice as to whether his crop will be used to produce ethanol, fibers or vaccines—besides the traditional food and animal feed.

First the report examines current crops being used for food and animal feed. What are the products currently being marketed? How have they been altered? What are their current and forecast sales and why? BCC describes the current buying environment, product uses, regulations, patent issues and many other forces combining to play a role in the future of the agbiotech market.

METHODOLOGY

In each forecast section, BCC took current data on the percentage of biotech usage on particular crops, and after examining the issues and buying environment, forecast future sales, through estimating the new number of acres to be planted with biotech crops. Once an acreage amount was derived, BCC used USDA information to calculate its production and value. Factors that were considered in the forecasts include: consumer opinion both in the U.S. and abroad, current and pending regulations and changes, the world export market and competition and the opinions of many experts in the agbiotech industry. All of these factors are discussed in some length, so the reader can understand the assumptions made in forecasting future product sales.

Current market data are supplied and are the basis of all calculations in the report.

INFORMATION SOURCES

The USDA data, industry associations and extensive interviews with those in the industry comprise the primary information sources used to develop this report. BCC spoke with over fifty members of the agbiotech community both in the academic and commercial setting and asked for their input on the future direction of the agbiotech industry. These sources spoke at length about current research, products under development and new areas of product application.

Secondary sources of information were trade journals and on-line industry publications, as well as news articles and web sites.

RELATED WORK CREDENTIALS

The author has spent many years as a biotechnology writer, covering the industry for the web site, Office.com. This experience included extensive interviews and research with top companies and executives as well as academic and association leaders.

There are other BCC reports that go into more detail of specific new agbiotech applications, such as enzymes and animal feed. A listing of related report titles are included here as an added resource for more information.

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