Sowing seeds of success

Dongbu Group’s latest move has seen local companies dominate the domestic agricultural seed market some 15 years after the Korean unit of Monsanto rose to the top spot and clung on tenaciously.

Dongbu Farm Hannong, a subsidiary of the group, said yesterday it has bought the Korean operation of the U.S. multinational agriculture and biotech company, as well as some of its overseas assets.

This includes the rights to 300 breeds of seeds, as well as 600 business clients tied to Monsanto Korea.

The acquisition, for which Dongbu declined to provide a sum, makes it the unchallenged market leader here with a combined 23.8 percent share, after it swallowed up Monsanto Korea’s 16.8 percent market share.

In the last 15 years or so, the agricultural seed market has been dominated by foreign companies as many top Korean firms crumbled during the Asian financial crisis in the late 1990s.

Major foreign companies took the opportunity to swoop in and buy local players, including market leader Hungnong Seed and third-largest player Choong Ang Seed, to consolidate their positions in the market. Both companies were acquired in July 1998 by California-based Seminis. The U.S. company was subsequently acquired by Monsanto in 2005.

Since then, Korea has lost many of its royalty ownership of the seeds of major vegetable products. About half of the local vegetable seeds of popular fresh produce, including Napa cabbage and hot chili pepper, are now owned by multinational companies. One of the biggest hits the Korean agricultural industry has suffered is the loss of its rights to the popular local chili pepper known here as Cheongyang peppers. The seed was developed by then leading Hungnong Seed.

Although Nongwoo Bio, a local company, leads the market with a share of 19.4 percent, foreign companies controlled more than 50 percent of the market before Monsanto Korea was bought out.

Korean companies’ presence in the global market is worse. The six major developed economies, including the United States, France and Germany, currently take up 54 percent of the global seed market. For commercial seeds, the top 10 multinational companies like Monsanto hold a dominating 70 percent share. On the contrary, Korea’s market share is just 1.5 percent.

One side effect of this is that Korean companies now have to pay additional royalties for fresh produce including citrus fruit, blueberries and seaweed.

According to the Ministry for Food, Agriculture, Forestry and Fisheries, Korea will have to pay 800 billion won ($709 million) to foreign companies in seed royalties from this year, a trend that is expected to last for the next decade.

Things took a turn for the worse this year as it marked the end of a decade-long grace period the country had enjoyed since 2002 courtesy of a decision by the International Union for the Protection of New Varieties of Plants.

“The increased royalty payments from this year will likely affect Korea’s competitiveness in the global agricultural market,” said an analyst at Nonghyup Economic Research Institute.

By Lee Ho-jeong [ojlee82@joongang.co.kr]