Racing to be China’s Monsanto

BEIJING (Reuters) — As China prepares to open its $120 billion corn market to genetically modified seed, little-known Dabeinong Biotechnology hopes to reap the benefits of early biotech investments and a law keeping foreign firms on the sidelines.

The long-anticipated commercialization of GM corn in the world’s second largest producer is set to significantly boost yields, reducing the need for imports.

It may also spur reform of a chaotic and oversupplied seed sector, industry experts say, creating a new multibillion-dollar market that may eventually open to global seed giants.

New regulations drafted last month lay out for the first time the steps needed in China for approval of corn varieties that integrate GM traits, paving the way for the market to open as early as next year.

Beijing has made clear it will champion home-grown leaders in seed technology, and Dabeinong is the larger of two local companies with an insect-resistant and herbicide-tolerant corn already approved as safe by the agriculture ministry.

“For the first two years, because we’re the first mover in the market, and we believe our technology is better, we’ll have two-thirds of the share,” said general manager Liu Shi.

By the third year, even with more competition, it could generate around $155 million in royalties, he estimated. The company will rely on seed breeders using its traits to generate revenues.

Dabeinong Biotechnology was founded in 2011 as a unit of large animal feed producer Beijing Dabeinong Technology Group Co. Ltd.

The parent firm made headlines in the United States after a senior executive was among several people charged with stealing corn seed from fields in Iowa and Illinois. The executive, the brother-in-law of group founder Shao Genhuo, was jailed for three years in 2016.

Dabeinong abides by the law and is trying to rebuild its image, said Liu, who joined the company earlier this year. He previously worked at Monsanto, now part of Germany’s Bayer, in the 1990s when the GM pioneer was trying to get its first products accepted.

Dabeinong, with a staff of 160, hopes to emulate the success of the U.S. seed giant, but above all wants to help farmers, Liu said.

For now, Dabeinong’s corn traits use genes that were discovered and commercialized by other firms but are off patent. The biotech firm is working on its own genes, although these are yet to be approved.

It may need to move quickly before its “me-too” products lose their value, said an executive at a multinational seed company who declined to be named.

To ensure its first-mover advantage, Dabeinong is hiring more commercial staff and in September invited seed companies to visit trial plots in Inner Mongolia and Henan province planted with corn containing its Fengmai brand traits.

It has licensing deals with almost 200 seed firms.

Early demand is likely to be strong. China harvested 261 million tonnes of corn in 2020-21 from some 101 million acres, largely to feed its huge herds of pigs and chickens. Each acre yielded only about 60 percent as much corn on average as in the United States.

About 70 percent of corn seed sold in China’s northeastern breadbasket is already illegally bred GM seed, said an October article in the state-backed China Seed Industry journal, highlighting its popularity with farmers.

But Dabeinong won’t be alone for long.

Though global seed giants like U.S.-based Corteva Inc. and Bayer cannot enter China’s GM market, Syngenta, the world’s third largest seed producer owned by China’s Sinochem Holdings, expects to become the market leader, according to the prospectus for its upcoming IPO.

Syngenta is a major player in GM grains, but because it was only bought in 2017, it is still playing catchup in China in the process to win biosafety certificates for its GM traits from regulators.

Hangzhou Ruifeng Biotechnology, a tiny firm founded by university professor Shen Zhicheng, has an insect-resistant, herbicide-tolerant trait approved as safe by Beijing. The company also uses some new genes.

Yuan Longping High-tech Agriculture Co. Ltd., backed by state-owned conglomerate CITIC, is also developing GM traits.

Meanwhile, the exact timing of GM corn is uncertain. Under the new rules, seed varieties that integrate GM traits must undergo a one-year production trial, and it is not clear if Beijing will accept data already gathered by Dabeinong.

“We have two plans: a more aggressive one for commercial seed production in 2022 and another for 2023,” said Liu. “We’re waiting for the government’s message.”