Private R&D spending on agricultural inputs grew 4.4% from 2009 to 2010, according to the US Department of Agriculture Economic Research Service’s December 2011 report entitled Research Investments and Market Structure in the Food Processing, Agricultural Input and Biofuel Industries Worldwide. The report analyzes worldwide private R&D spending for seven agricultural-input areas, as well as private R&D spending for food manufacturing and biofuels. Agricultural input is defined as a collective measurement of land, labor, capital and materials used in agricultural production. All figures are in constant 2006 dollars.

The areas of agricultural inputs in the report are crop seed and biotechnology, crop protection chemicals, farm machinery, fertilizer, animal health, animal breeding and genetics, and animal nutrition. Total global agricultural inputs increased 4.4% to $10.2 billion in 2010.

The report reveals that the fastest-growing agricultural-input area for R&D was crop seed and biotechnology. From 2009 to 2010, R&D spending in this sector soared 10.4%. As seen in the graph above, R&D spending on crop seed and biotechnology in the US grew even faster, increasing 14.7% to $2.2 billion in 2010. The report attributed the rapid global growth to acquisitions and economies of scale. The table shows that this sector also accounted for the largest chunk of global R&D spending among the input areas listed in the report, making up more than a third of the total. The R&D intensity, which is the ratio of R&D spending compared with sales, was 10.5% for the crop seed industry in 2009.

R&D investment in crop protection chemicals grew at a more modest rate in 2010, increasing 3.3%. The limited growth was due to environmental and safety regulations, maturing markets and the upsurge in generic products. US R&D spending on crop protection chemicals rose 7.2% to $793 million. R&D intensity for crop protection chemicals was 6.4% in 2009.

R&D spending on animal health products grew less than 1% to reach $1.4 billion in 2010. Animal health product sales were estimated to account for 3.0% of global drug sales. Within this sector, the market for pharmaceuticals was the largest, growing 12.4% to account for $11.7 billion in 2009, but sales of biologics grew the most rapidly, increasing 28.4%. The report surmises that sales of biologics surpassed pharmaceutical sales due to key drugs going off patent. Also within the animal health market, sales of medicated feeds grew 3.7% to $2.2 billion. In 2009, the R&D intensity of animal health products was 8.6%. In the US, overall animal health R&D spending fell 1.4% to $772 million. Private R&D spending for food-animal health also grew less than 1% in 2010. In the US, food-animal health R&D spending slipped 1.3% to $309 million.

Fertilizer, animal nutrition, and animal breeding and genetics accounted for relatively little private R&D spending in 2010. Private spending for fertilizer R&D declined 1.1% to $93 million in 2010. R&D intensity in this industry is estimated at just a quarter of a percent. The low R&D spending can be attributed to few prospects for companies to set their products apart and reduce costs. The industry itself, however, is thriving. The market for fertilizer soared 194.1% from 2005 to 2008 to more than $200 billion due to a spike in fertilizer prices, which was caused by increases in global nutrient demand and costs of transportation, energy and materials, as well as the diminishing value of the US dollar.

Animal nutrition R&D spending increased less than a percent in 2010. The Economic Research Service estimates that nutritional feed additives constituted 57% of total R&D investment in this sector. With limited information, the report estimates that in high-income countries, the R&D intensity in 2009 was 4.7% for producers of nutritional feed additives and half of a percent for producers of bulk feeds. The R&D intensity for developing countries, which chiefly manufacture bulk feed products, was estimated at a quarter of a percent.

Animal breeding and genetics R&D investment grew 2.6% to $316 million in 2010. About half of this amount was spent by poultry firms. R&D intensity for animal breeding and genetics was 7.3% in 2007.

The report also examines biofuels R&D investment, which was estimated to have reached $1.47 billion worldwide by 2009. Seventy percent of R&D spending was performed by energy firms to make biofuel process manufacturing more efficient and to develop new kinds of biofuels. Nearly a quarter of the global R&D investment came from agricultural seed and biotechnology companies for the improvement of ethanol and biodiesel production. The remaining R&D funding was supplied by enzyme and equipment manufacturers.

 Global Private Agricultural R&D Spending (Millions)

                                2008     2009     2010

 Crop Protection Chemicals    $2,864   $2,814   $2,908

 Crop Seed and Biotech        $2,941   $3,149   $3,477

 Fertilizer                      $91      $94      $93

 Food Animal Health             $913     $876     $878

 Animal Breeding and Gen.       $301     $308     $316

 Animal Nutrition               $381     $382     $383

 Total Crop Inputs            $7,802   $8,232   $8,711

 Total Animal Inputs          $1,595   $1,566   $1,577

 Total Agricultural Inputs    $9,396   $9,799  $10,288

 Pie Graph: Share of 2010 Private Global Agriculture R&D Spending

 Crop Seed & Biotech         3477

 Crop Protection Chemicals   2908

 Farm Machinery              2234

 Food Animal Health           878

 Animal Nutrition             383

 Animal Breeding & Genetics   316

 Fertilizer                    93

 2010 US Private Food and Agricultural R&D Spending (Millions)

 Year   Crop Protection Chemicals     Crop Seed & Biotech       Animal Health (all animals)     Animal Health (food animals)

 2008              $683                     $1,707                          $830                             $340

 2009              $740                     $1,897                          $783                             $313

 2010              $793                     $2,176                          $772                             $309