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Analysis of China Corn Seed Market 2009
China Market Report, Oct 2009, Pages: 34
Seed shares a main part of agricultural planting cost and in the upper stream of agricultural products chain. The market competitive advantage of seed will determine the power of agricultural competitiveness. China is a large agricultural country. The amount of annual agricultural seeds is approximate 12.5 billion kg. In 2008, the total seed market capacity of hybrid corn, hybrid rice, vegetables, and cotton in 2008 was more than 30 billion yuan. Corn plays a vital role in China's food security system, it is an important fodder crops and also is the major raw materials of food, chemicals, fuel and medicine industries. Seed is the foundation in the development of corn industry chain. According to studies that corn seed plays the most active factor in the increase of maize production, accounting for 35.5% of the total contribution. The total market value of corn seed in China is between 10-11 billion yuan and has a great potential growth. But the Chinese corn seed marketability is relatively in a short time with competition disorder and a largely blindness of production and operation, and the relationship between supply and demand has been imbalanced for a long time. However, there are a few factors will affect the development of China corn seed industry, therefore, how to find a way to sort these matters out will be a challenge for China’s corn industry.
In terms of the supply and demand of corn seed in the past years, China's corn seed has showed an oversupply situation. Because of the seed production area in 2006 increased to 4.9 million mu, which caused a serious over-supply of corn seeds, in 2007 the unsold corn seeds reached to 870 million Kg. The reduction of seed production area had been for two consecutive years in 2007 and 2008, which led to the situation of oversupply has been relaxed in 2009. According to the forecast of Hybird Rice and Hybird Corn Conference that seed production area in 2009 will be 3.4 million mu, increasing 13% than 2008, and the unsold seed is expected that will be 560 million kg, the supply of seed will be still in an over-supply situation.
In 2009, Chinese corn seed market shows a positive trend. First, the pressure of oversupply of corn seeds has relaxed obviously. According to the Chinese Agricultural Technology Promotion Center’s forecast, due to the reduction of seed production area in 2008, a year-on-year reduction of 4.4 billion mu, the supply of seed in 2009 will be 1.63 billion kilograms, and the demand of seed will be approximately 1.1 billion kilograms in 2009, therefore, the stocks of seed will be 530 million kilograms (In 2008, it was 720 million kilograms), down 26.39% year-on-year; Secondly, the price of corn seed rose sharply year-on- year, according to Ministry of Agriculture’s data that the price of hybrid corn seed rose between 5% ~ 20%, of which Xianyu335 and Zhengdan 958 rose over 20%; Finally, the policy of seed’s subsidy has achieved full coverage, the payment of subsidies became cash instead.
In terms of the high elasticity of supply and low elasticity of demand of corn seed, it is expected that the over-supply situation of seed market will be normality. But when the market concentration is in a high level, the situation of oversupply will change. However, the current situation of Chinese seed market is relatively segmentation, marketization has just started, shortage of leading companies, therefore, in a short-term, it is difficult to expand market share sharply for any single enterprise and for companies to merger is also unlikely to happen, to raise the degree of market concentration is relatively difficulty, the over-supply of seed market will remain a long term.
When foreign companies enter the Chinese corn seed market, the lack of competitiveness of domestic enterprises, resulting in the direction of industrial development is in an uncertain future. The Chinese breeding system is in a high homogeneity, has not achieved fully commercial. Under the conditions of high homogeneous competition, the high technology does not bring such benefit for industry development; the industry service system has not built up, resulting in poor services to the farmers; Domestic seed production and processing systems is more and more difficult to meet the development requirements of industry; the level of industrial management is sometimes restricted the industry development.
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