When it comes to buying soybean seed, Tracy Quinlin has connections. Her brother is a local dealer for Monsanto Co., the biggest seed company in the world.
But family ties weren't enough to win Quinlin's business this winter when she shopped for seeds to plant on her 200-acre farm. She was won over by Tim Flowerree, a salesman for Pioneer Hi-Bred International Inc., one of Monsanto's biggest competitors. "Tim made us a better deal for beans," Quinlin said.
Standing behind the counter of a small farmer's co-op where she works, Quinlin said there were no hard feelings from her brother. After all, business is just business in this farming town of 1,000 people. "You can't be cutthroat, because everybody knows everybody," she said.
The same might not be true at the corporate level, where Pioneer and Monsanto are competing more fiercely than ever for a share of the multibillion-dollar market in genetically engineered crops. About 123 million acres of U.S. farmland were planted with biotech seed in 2005, according to the Biotechnology Industry Organization. Just a handful of companies control the market because they can produce the high-tech crops.
Johnson, Iowa-based Pioneer, a subsidiary of chemical giant DuPont, represents some of the stiffest competition ever faced by Monsanto, which has been the undisputed king of biotech crops since introducing the first strains 10 years ago. Companies such as Pioneer got into the market largely by riding Monsanto's coattails, paying fees to incorporate the company's patented genes into their own lines of seed.
Pioneer is trying to change that. The company is developing and selling its own biotech products and has many more slated for release. It hopes eventually to take market dominance away from Monsanto for the first time.
"It's no longer about a single dominant player providing biotech tools to the marketplace," Pioneer President Dean Oestreich said. "We are competing head-to-head."
In this David and Goliath battle, Pioneer is clearly not the giant. Its total revenue in 2004 was $2.6 billion, up 13%, but still less than half of St. Louis-based Monsanto's $5.42 billion. Monsanto's revenue grew 16% in 2005 to $6.29 billion; Pioneer will report later this month.
Analysts say Pioneer won't seriously upset Monsanto soon, but its long-term plans might pose a threat as it rolls out more of its own biotech crops in coming years.
For now, Pioneer has narrowed its line of attack to what it knows best: corn.
Maize was the first crop Pioneer developed when the company began in 1926. Since then, it's grown to control about 31% of the U.S. market in corn seed, according to Bank of America.
In 2003 Pioneer introduced the Herculex line of corn, genetically engineered to resist the corn borer insect, and is building on the technology with new varieties that resist root worms and other pests.
Corn could be considered Monsanto's Achilles' heel. The company dominates the soybean market, leaving little room for growth there, according to analyst Kevin McCarthy with Bank of America. Monsanto is rolling out new corn breeds, and penetrating that market could account for 48% of the company's overall value during 2006, McCarthy calculates.
McCarthy cited DuPont's competition when he downgraded Monsanto's stock in early December. But he applauded Monsanto this month when it reported an 18% boost in corn sales for the first quarter of its fiscal year.
Chief Executive Hugh Grant told investors recently that Monsanto had gained market share for corn seed every year since 2001. "When you do this for five years in a row, it's no longer luck. It's a trend line," Grant said.
His message hit home with investors, who have sent Monsanto's stock from $54.47 a share to as much as $81.90 over the last year. The shares fell 80 cents to $79.50 on Wednesday.
Monsanto plans to eventually dominate the corn market by exploiting a head start it garnered in 1984, when it opened its first biotech research lab in Chesterfield, Mo., where it now develops experimental crops that won't see the marketplace until 2012 or later.
Oestreich pointed to one Pioneer advantage that seems decidedly low tech: sales calls. The company has about 5,500 sales representatives and dealers throughout the Midwestern crop-belt. When biotech crops were first introduced 10 years ago, this sales team helped their quick adoption nationwide, he said.
"At that time, Monsanto was not a seed company. We were their route to market," he said.
Fifteen years ago, Pioneer decided it didn't want to simply distribute Monsanto's genes, Oestreich said. Pioneer could keep more profit by selling its own patented crops, he said.
To match Monsanto's Chesterfield facility, Pioneer upgraded its global network of plant research centers, some of which date to the 1950s, Oestreich said. More important, the company hired 1,700 researchers during that time to play catch-up in the gene-splicing race, he said.