Private Industry Investing Heavily, and Globally, in Research to Improve Agricultural Productivity

By Fuglie, Keith; Heisey, Paul et al. | Amber Waves, June 2012 | Go to article overview

Private Industry Investing Heavily, and Globally, in Research to Improve Agricultural Productivity


Fuglie, Keith, Heisey, Paul, King, John, Schimmelpfennig, David, Amber Waves


Over the past several decades, private-sector firms have become major players in developing new innovations for agriculture worldwide. The emergence of biotechnology and other scientific developments, the strengthening of intellectual property rights (IPR) over agricultural innovations, the global expansion of markets for agricultural inputs, and changing government regulations are some of the factors driving private companies to invest in agricultural research. A recently completed ERS study provides, for the first time, detailed information on global research and development (R&D) spending in seven agricultural input sectors-crop seed and biotechnology, crop protection chemicals, synthetic fertilizers, farm machinery, animal health, animal breeding and genetics, and animal nutrition, focusing on the 1994-2010 period. Findings show that private-sector R&D expenditures in input industries increased by more than 40 percent in real (inflation-adjusted) dollars over the period.

Global Market for Agricultural Inputs

Firms supplying inputs to the agricultural sector invest in R&D to develop or improve their products with the aim of increasing or maintaining sales and earning a profit. The expense and risk associated with R&D require firms to align these investments carefully with anticipated market trends and opportunities. When planning R&D, market size is one consideration that varies widely across agricultural input markets. In 2006, animal nutrition was the largest single input sector, with an estimated $142 billion in global sales consisting mostly of manufactured feed, feed concentrates, and nutritional feed additives (a related type of input, medicated feed, was included in the animal health sector). This market was nearly twice the size of the next largest input markets - farm machinery and crop fertilizers.

Firms planning R&D also consider the anticipated growth of markets, new technological opportunities for product improvements, and competition from other firms. Within the crop input sectors, average annual growth in global input sales during 1994-2010 was highest in the fertilizer market, mainly due to rising prices. Over the same period, growth in commercial sales of crop seed and biotechnology traits was also high, particularly after widespread commercial release of genetically modified (GM) seed in the late 1990s. On the other hand, sales of crop protection chemicals grew more slowly as the introduction of GM seeds increased demand for some herbicides but reduced demand for other herbicides and some insecticides. Producers of crop protection chemicals with expiring patents also faced greater competition from generic versions of these products.

Private-Sector Investment in Agricultural Research

Total private R&D expenditures in the seven agricultural input sectors combined increased from $5.6 billion in 1994 to $1 1 billion in 2010 - an average annual growth rate of 3.6 percent (or, in inflation-adjusted dollars, by 1.4 percent per year). Crop improvement accounted for most of the increase in R&D spending between 1994 and 2010, with inflationadjusted R&D spending in the animal-related inputs remaining essentially flat. The most rapid growth in agricultural R&D over 1994-2010 was for crop seed and biotechnology traits. Seed-biotechnology research expenditures grew particularly fast in the 1990s and between 2007 and 2010. By 2008, they surpassed research expenditures in crop protection chemicals for the first time. Farm machinery research also increased substantially, with much of the growth occurring since 2006. Part of this change reflects rising demand for farm mechanization, and part is in response to more stringent regulatory requirements on farm vehicle exhaust emissions in the United States.

Among all countries, the United States was the leader in private agricultural R&D during 1994-2010, accounting for over one -third of the global total. …

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