USA
June 2012
Source: USDA Amber Waves
- In 2010, global private-sector investments in research and development (R&D) to improve agricultural inputs reached $11.0 billion, up from $5.6 billion in 1994.
- R&D spending as a share of product sales exceeded 7 percent in the industries supplying crop protection chemicals, crop seed and biotechnology traits, animal health products, and animal breeding and genetic inputs to agriculture.
- Many of the leading agricultural input firms have located R&D facilities around the world; this globalization may accelerate the rate of international technology transfer
Private sector firms becoming leaders in developing new innovations in agriculture
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.
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