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Recommended citation format for this publication: 

Fuglie, Keith O., Paul W. Heisey, John L. King, Kelly Day-Rubenstein, 

David Schimmelpfennig, and Sun Ling Wang. Research Investments 

and Market Structure in the Food Processing, Agricultural Input, and 

Biofuel Industries Worldwide: Executive Summary, EIB-90. U.S. Dept. 

of Agriculture, Econ. Res. Serv. December 2011.

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This report provides an Executive Summary of ERS Economic Research 

Report 130 with the same title. The longer report contains nine additional 

chapters with detailed analysis of seven agricultural input industries, the 

food manufacturing industry, and the biofuel industry, including fuller 

discussion of data sources and methods. For the full report, please see 

www.ers.usda.gov/publications/err130
United States

Department

of Agriculture

www.ers.usda.gov

A Report from the Economic Research Service

Abstract

Meeting growing global demand for food, fiber, and biofuel requires robust investment 

in agricultural research and development (R&D) from both public and private sectors. 

This report highlights the major findings of a study examining global R&D spending by 

private industry in seven agricultural input sectors, food manufacturing, and biofuel and 

describes the changing structure of these industries. For the full report, see Research 

Investments and Market Structure in the Food Processing, Agricultural Input, and 

Biofuel Industries Worldwide, ERR-130. In 2007 (the latest year for which comprehensive estimates are available), the private sector spent $19.7 billion on food and agricultural 

research (56 percent in food manufacturing and 44 percent in agricultural input sectors) 

and accounted for about half of total public and private spending on food and agricultural R&D in high-income countries. In R&D related to biofuel, annual private-sector 

investments are estimated to have reached $1.47 billion worldwide by 2009. Incentives 

to invest in R&D are influenced by market structure and other factors. Agricultural input 

industries have undergone significant structural change over the past two decades, with 

industry concentration on the rise. A relatively small number of large, multinational firms 

with global R&D and marketing networks account for most R&D in each input industry. 

Rising market concentration has not generally been associated with increased R&D investment as a percentage of industry sales.

Keywords: agricultural biotechnology, agricultural chemicals, agricultural inputs, animal 

breeding, animal health, animal nutrition, aquaculture, biofuel, concentration ratio, crop 

breeding, crop protection, farm machinery, fertilizers, Herfindahl index, globalization, 

market share, market structure, research intensity, seed improvement.

Research Investments and Market 

Structure in the Food Processing, 

Agricultural Input, and Biofuel 

Industries Worldwide

Executive Summary

Economic 

Information 

Bulletin 

Number 90

December 2011

Keith O. Fuglie, kfuglie@ers.usda.gov, 

Paul W. Heisey, John L. King, Kelly Day-Rubenstein, 

David Schimmelpfennig, and Sun Ling Wang
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Contents

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Objectives and Methods of Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Private-Sector R&D Investment in Agriculture, Food, and Biofuel . . . 4

R&D Spending Over Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

R&D Spending by Region and for Selected Countries . . . . . . . . . . . . . . 7

Market Size and Private Food and Agricultural R&D . . . . . . . . . . . . . . 11

Global Demand for Agricultural Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Price Trends for Some Agricultural Inputs . . . . . . . . . . . . . . . . . . . . . . . . . 13

Market Structure and R&D in Agricultural Input Industries . . . . . . . 15

Changes in Industry Concentration and R&D Intensity Over Time . . . . . . 15

R&D Spending By Firm Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Globalization of Private Agricultural R&D . . . . . . . . . . . . . . . . . . . . . . 19

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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Summary

What Is the Issue? 

Growth in the productivity of the global food and agricultural system will 

be largely determined by today’s investments in research and development 

(R&D). In recent decades, the private sector has become a major player in 

developing innovations for food and agriculture. Factors spurring private 

companies to invest in food and agricultural research include the emergence 

of biotechnology and other new scientific developments, the strengthening of 

intellectual property rights (IPR) over agricultural innovations, new regulatory requirements, the expansion of markets for improved agricultural inputs 

and food products, and rising consumer demand for more diverse foods. More 

recently, rapid growth in the market for biofuel has pushed companies to 

expand their R&D investments in this area as well. 

This report quantifies investment trends by for-profit companies in food 

manufacturing, biofuel, and agricultural input R&D and explores how these 

trends are affected by changes in market demand and industry structure. In 

particular, the report examines changes in the organization and structure 

of agricultural input industries (crop seed and biotechnology, crop protection chemicals, synthetic fertilizers, farm machinery, animal breeding and 

genetics, animal health, and animal nutrition) and whether increases in 

market concentration in these industries are associated with increases or 

decreases in the level and intensity of R&D investments. 

For comparative purposes, we present some aggregate statistics on publicsector research spending for food and agriculture and ways in which these 

investments differ or complement R&D in the private sector. However, 

we do not delve much into the interactions between public and private 

R&D. For a detailed examination of the evolving role of the public and 

private sectors in agricultural R&D in the United States, see Fuglie and 

Schimmelfpennig (2000). 

What Did the Study Find?

During 1994-2007 (the latest year for which comprehensive estimates 

are available), annual private-sector food and agricultural R&D grew 

from $11.3 billion to $19.7 billion, or 4.3 percent per year (or, in constant 

2006 dollars, from $14.6 billion to $19.2 billion, or 2.1 percent per year). 

In high-income countries, private-sector R&D spending appeared to be 

roughly equivalent to public-sector spending on food and agricultural 

R&D, although public R&D spending continues to be larger if only agricultural-related R&D is considered. 

Growth in R&D investment was uneven across industries. The most rapid 

increase in R&D was in crop breeding/biotechnology. Significant growth in 

R&D spending also occurred in farm machinery and food manufacturing. 

However, real (inflation-adjusted) R&D spending declined for crop protection 

chemicals and animal nutrition. 
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Other key findings include the following (figures below are in current or 

nominal dollars, unadjusted for inflation):

• In 2010, global private-sector investments in R&D related to agricultural 

inputs reached $11.03 billion, an increase from $5.58 billion in 1994.

• In 2007, global private-sector investments in R&D related to food manufacturing reached $11.48 billion, an increase from $6.02 billion in 1994.

• In 2009, global private-sector investments in R&D related to biofuel

reached $1.47 billion, with most growth in this area occurring since 2000. 

• Generally, the largest four to eight firms in each sector accounted for 

about three-fourths of the R&D in that sector, with larger firms spending 

more than smaller firms on R&D as a percentage of product sales (with 

the exception of small biotechnology firms). Typically, the large firms are 

multinational operations with global R&D and marketing networks. 

• In most of the agricultural input industries, market concentration 

increased during 1994-2009, with the highest levels observed in the 

animal breeding and crop seed sectors and the largest increase observed 

in the crop seed sector. 

• Rising levels of market concentration were not associated with larger 

R&D investment in agricultural input sectors. 

• The globalization of food and agricultural R&D may accelerate the rate 

of international technology transfer, reducing productivity differences 

across nations and regions. 

How Was the Study Conducted?

We used a number of approaches to construct estimates of private R&D 

spending by sector. For research-intensive agricultural input industries, we 

built a database of agriculturally related research spending firm-by firm 

over time, for all firms in the sector (including “legacy” firms, or firms that 

exited the industry during the period of study) that have or have had significant R&D expenditures. For large conglomerates, for which agriculture may 

be only one business segment, we separated agriculturally related R&D 

spending from R&D spending on nonagricultural business segments. We 

gathered this information by canvassing a broad set of material, including 

company annual reports and websites, reports by industry associations and 

consulting services, and personal interviews with company representatives. 

Altogether, we reviewed R&D information on more than 800 agricultural 

input companies worldwide. These firm-level data also enabled us to examine 

hypotheses regarding the relationship between industry structure and R&D 

spending: Do larger firms spend more (as a percentage of product sales) on 

R&D than smaller firms? Has the rising concentration of several agricultural 

input industries affected overall levels of R&D spending by that industry? 

For agricultural input industries in which firms do not often report their 

research spending, we estimated agricultural R&D for the industry by 

taking a percentage of total agricultural input sales, with the percentages 

(or research intensities) derived from observations on R&D spending from 

a subset of firms and from previous surveys of the industry. For the food 
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manufacturing industry, we relied on country-level estimates produced by 

the Organisation for Co-operation and Development, which covers primarily 

high-income countries. 

With these sources, we developed a global time series of R&D expenditure 

for agricultural input industries from 1994 to 2010, for the food industry from 

1990 to 2007, and for biofuel in 2009. We examined how trends in R&D 

spending were associated with changes in market demand and industry structure and reviewed the evidence on the factors causing structural changes in 

agricultural input industries.

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Objectives and Methods of Study

Over the past several decades, the private sector has become a major player 

in developing new innovations for food and agriculture. The emergence of 

biotechnology and other new scientific developments, the strengthening of intellectual property rights (IPR) over agricultural innovations, the global expansion 

of markets for improved agricultural inputs and food products, and consumer 

demands for more diverse kinds of food products are some of the key factors 

driving private companies to invest in food and agricultural research. More 

recently, rapid growth in the market for biofuel has spurred a diverse set of firms 

to expand their R&D investments in this area as well. This report seeks to quantify investment trends by for-profit companies in agricultural, food, and biofuel 

R&D and explore how changing market demand, industrial structure, and public 

policy may be affecting these trends. In addition, the report examines the role of 

government subsidies in stimulating private R&D in the biofuel sector. 

Existing information on private spending on food and agricultural research 

is fragmentary. James (1997) and Alston et al. (2010) are among the few 

studies that have attempted to provide estimates of such expenditures on a 

global scale. Based on findings from both studies, private R&D expenditures 

from the mid-1990s to 2000 are estimated at $13 billion per year, or about 

two-thirds of total public sector spending for agricultural R&D (about $20 

billion per year globally) over the period. These estimates account for R&D 

by the food manufacturing sector and the agricultural input industries, but the 

studies did not break down these amounts by sector. Moreover, they provide 

limited detail (and quite different estimates) about the country-specific locations of private-sector R&D, with James estimating that about 85 percent 

was conducted in high-income countries and Alston et al. putting the share 

at 95 percent (in contrast, about 60 percent of public agricultural R&D is 

conducted in high-income countries, according to Alston et al.). 

Other studies have provided more detailed information on private-sector 

expenditures on food and agricultural R&D at the country level. Klotz et al. 

(1995) develop comprehensive estimates of private R&D by the food sector 

and for major agricultural input industries in the United States between 1960 

and 1992. Pray and Fuglie (2001) survey private companies in seven Asian 

countries about their agricultural R&D investments in the mid-1990s, and 

Echeverria et al. (1996) summarize available information for eight Latin 

American countries from around the same period. 

Some estimates of R&D in specific industries, such as the agricultural 

chemical, crop seed, and veterinary pharmaceutical industries, are provided 

by industry groups through surveys of their member companies or consulting 

services. This information, however, may cover only a portion of an industry 

and may not be in the public domain. 

Finally, a number of studies have examined publicly available data on a range 

of indicators of private R&D effort, such as number of agricultural patents, 

plant variety protection certifications, and biotechnology field trials issued or 

undertaken. For example, Huffman and Evenson (2006) make extensive use of 

historical patent data to investigate technology flows from manufacturing sectors 

to agriculture in the United States. The main conceptual difference between these 
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indicators and R&D expenditures is that the indicators reflect outputs from the 

R&D process whereas expenditures measure R&D inputs. It is expected that the 

two would be significantly correlated but with a timelag. Some of the main findings from studies assessing agricultural R&D indicators are summarized in Pray 

et al. (2007). In this study, we extend some of the work on R&D output indicators 

in the chapters on crop seed and agricultural chemicals.

This study provides new, detailed information on R&D spending by private 

industry for the food processing and biofuel sectors and for seven agricultural input sectors (crop seed and biotechnology, crop protection chemicals, 

synthetic fertilizers, farm machinery, animal health, animal breeding and 

genetics, and animal nutrition). For the food processing and agricultural input 

sectors, we report trends in private R&D spending over time. For the newly 

emerging biofuel sector, our estimates cover only one year, 2009. We also 

examine the location of private-sector R&D, but the multinational nature of 

many of the leading companies conducting food and agricultural R&D makes 

it difficult to do so. For agricultural input sectors, we can estimate total R&D 

for companies based in a particular country, but this estimate includes R&D 

by those same companies conducted in other countries and excludes R&D by 

foreign companies in that country. We discuss the globalization of privatesector R&D in terms of the growing international trade in agricultural inputs 

and how companies locate their R&D facilities to serve global markets.

The study also examines the changing structure of agricultural input industries. 

Several of these industries have undergone significant consolidation over the 

past couple of decades, with many firms exiting, merging, or being acquired by 

other firms. We discuss factors causing these changes and, for the agricultural 

input industries that do the most research, we quantify the change in concentration at the global level. Higher levels of concentration may impart greater market 

power to the largest firms in the industry. If this market power is exercised to 

raise premiums on firms’ proprietary technology, it could encourage these firms 

to invest more in R&D. We examine whether market concentration is correlated 

with the share of industry revenues that is invested in R&D. We do not, however, 

conduct any formal tests of competitive performance in these markets. 

To construct estimates of private R&D spending by sector, we use a number 

of approaches. For research-intensive agricultural input industries, we build 

a database of agriculturally related research spending firm by firm (both 

publicly traded and privately held) over time, for all firms in the sector that 

have (or have had) significant R&D expenditures. For large conglomerates, in 

which agriculture may be only one line of business among many, we separate 

agriculturally related R&D spending from other R&D spending. We gather 

this information primarily from firms’ annual financial reports and supplement it with information from industry associations, consulting services, and 

personal interviews with company representatives. These firm-level data also 

enable us to address questions on the relationship between industry structure 

and R&D spending: 

• Do larger firms spend more (as a percentage of product sales) on R&D 

than smaller firms? 

• Has the rising concentration of several agricultural input industries 

affected overall levels of R&D spending by these industries? 
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For agricultural input industries in which member firms do not conduct much 

research, firm-level data on R&D spending is often reported for only a subset 

of the major companies in the industry. Our estimates of agricultural R&D 

for such industries reflect a share of total agricultural input sales (or research 

intensities) derived from observations on R&D spending from a sample of 

firms in the respective industries. 

For the food industry, we rely primarily on country-level estimates 

provided by the Analytical Business Enterprise Research and Development 

(ANBERD) database produced by the Organisation for Economic 

Co-operation and Development (OECD). This database covers most highincome countries and a few developing countries. 

For biofuel, we examine R&D spending across a number of sectors that are 

developing technologies for both biofuel feedstocks and biofuel manufacturing. Because this is a relatively young industry, we derive an estimate of 

private R&D for only one year, 2009.

From these sources, we are able to develop a global time series of R&D 

expenditures by agricultural input industries from 1994 to 2010, food 

processing industries from 1990 to 2007, and the biofuel industry for 2009. 

Significant overlap or duplication occurs between R&D reported in the food 

and agricultural sector and the different segments of the biofuel market chain 

(i.e., some seed industry R&D is directed toward biofuel feedstocks and is 

counted as R&D in both sectors); therefore, to avoid double counting, we 

report biofuel R&D estimates separately from the estimate for total privatesector food and agricultural R&D.

Having assembled data on trends and levels of private food manufacturing 

and agricultural input R&D spending, we examine several factors that 

may be influencing these trends. First, we look at market demand. Large 

and growing markets for agricultural inputs or new food products can be 

expected to attract more R&D from private firms seeking to meet these 

needs. Second, we examine industry structure. Mergers and acquisitions have 

affected many agricultural input industries examined, with the result that 

fewer firms account for a growing share of the market over time. This development could influence incentives for private R&D positively, negatively, or 

not at all. The classic Schumpeterian view is that larger firms invest a greater 

portion of their revenues in R&D than smaller firms. However, in a detailed 

study of U.S. manufacturing industries, Cohen et al. (1987) do not find 

empirical support for this hypothesis. Regarding concentration, Levin et al. 

(1985) report a general tendency for R&D intensity to first increase and then 

decrease as industry concentration rises, but the authors note that the differences across industries can be much larger than changes within an industry. 

Finally, we discuss the effects of changes in policies and technology opportunity, namely, the influence of developments in biotechnology on structure and 

R&D in the research-intensive agricultural input industries. Policies toward 

intellectual property rights (what is considered patentable) and the regulation 

of new technology introductions may have significant effects on how much 

and what kind of R&D is undertaken by the private sector, and what kinds of 

firms can successfully navigate these policies. 
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Private-Sector R&D Investment in 

Agriculture, Food, and Biofuel

R&D Spending Over Time

Table 1 shows trends in private-sector R&D spending in various agricultural input sectors and the food manufacturing industry in both nominal 

and constant (inflation-adjusted) dollars. In constant 2006 U.S. dollars, total 

food and agricultural R&D expenditures in the private sector increased from 

$14.59 billion in 1994 to $19.18 billion in 2007, or at an average annual rate 

of 2.1 percent. R&D expenditures in food manufacturing rose faster than 

those in agricultural input industries, and by 2007, food manufacturing 

accounted for about 58 percent of the overall annual total. Food manufacturing has relatively low research intensity (R&D as a percentage of sales), 

but the overall size of the market is very large. R&D in the industry appears 

to be directed mostly toward new product development. Food sector R&D 

that is directly relevant to agriculture, such as R&D on animal feed manufacturing, is also included in our estimate of R&D in agricultural input industries (but not double counted in the total for food and agriculture). Among 

agricultural input industries, most of the increase in R&D spending between 

1994 and 2010 occurred in the crop input industries, with R&D spending 

in the animal-related sectors as a whole remaining essentially flat in real 

(inflation-adjusted) dollars. Across sectors, the most rapid growth in agricultural R&D over 1994-2010 was for crop seed and biotechnology, where 

annual R&D spending increased from about $1.5 billion in the mid-1990s to 

nearly $3.5 billion in 2010 (constant 2006 U.S. dollars). Real R&D spending 

declined for crop protection chemicals and animal nutrition. 

Comparative statistics for government spending on agricultural research are 

only available for 2000 (Beintema and Stads, 2008; Alston et al., 2010, table 

6-1). Beintema and Stads (2008) estimate that total global public-sector agricultural research in 2000 was $16.3 billion in U.S. dollars and $20.8 billion 

in purchasing-power-parity (PPP) dollars.1 The private sector appears to 

account for between 39 and 45 percent of the total global investment in food 

and agricultural R&D worldwide, depending on whether comparisons are 

made using market or PPP exchange rates, and about half of the total in highincome countries (table 2). For high-income countries, Beintema and Stads 

estimate total public agricultural R&D in 2000 was $12.3 billion in U.S. 

dollars and $11.8 billion in PPP dollars, respectively. Of our estimated total 

of U.S. $13.1 billion (PPP $13.2 billion) in private food and agricultural R&D 

in 2000, U.S. $12.2 billion (PPP $11.8 billion) was attributed to companies 

based in high-income countries. 

Although none of the global estimates of public research spending break 

down this investment into food and agricultural sectors, the U.S. data may 

be illustrative, at least for high-income countries. According to USDA’s 

Inventory of Agricultural Research, in 2000, about 60 percent of total public 

agricultural R&D was allocated to research related to plant and animal 

systems, 15 percent went to food and human nutrition, 18 percent went to 

environmental issues, and the remaining 7 percent was spread across other 

topics not directly related to food or farm production.2 Alston et al. (2010) 

also estimate that about 60 percent of U.S. public agricultural research was 

1Beintema and Stads (2008) actually report figures in constant 2005 

dollars, which we convert to current 

2000 dollars using the U.S. implicit 

Gross Domestic Product (GDP) price 

index. Global totals in U.S. dollars 

are calculated using market exchange 

rates, while totals in purchasing-powerparity (PPP) dollars are derived using 

the PPP exchange rates. PPP exchange 

rates are estimated by the World Bank 

by comparing the cost of a common 

basket of consumer goods across countries. The main effect of using PPP 

exchange rates is to augment estimates 

of research and development (R&D) 

spending in developing countries; aggregate spending by high-income countries remains about the same whether 

market or PPP exchange rates are used.

2This breakdown of U.S. public 

agricultural research expenditures 

is according to Research Problem 

Areas as defined by USDA’s Inventory 

of Agricultural Research (USDA, 

2000). Alston et al. (2010) use a more 

detailed, project-by-project assignment to estimate (R&D) expenditures 

related to production agriculture. Their 

estimates show that the share of U.S. 

public agricultural (R&D) allocated to 

production agriculture has gradually 

declined over time.
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Table 1

Private research and development (R&D) expenditures for food and agriculture worldwide

Crop

protection

chemicals

Crop

seed &

biotech.

Farm

machinery Fertilizer

Food

animal

health1

Animal

breeding &

genetics2

Animal

nutrition

Total 

crop 

inputs

Total

animal

inputs

Total

agricultural

inputs 

Food 

manufacturing

Total food & 

agricultural

inputs3

Millions of nominal U.S. dollars

1994 2,296 1,130 920 61 664 196 314 4,407 1,173 5,579 6,016 11,282

1995 2,390 1,213 987 80 778 203 332 4,670 1,313 5,983 6,876 12,528

1996 2,523 1,322 1,110 84 767 210 373 5,039 1,350 6,389 6,468 12,483

1997 2,635 1,522 1,127 64 749 217 345 5,349 1,311 6,660 6,399 12,714

1998 2,636 1,721 1,164 56 720 225 324 5,577 1,269 6,846 6,417 12,939

1999 2,581 1,788 1,079 49 670 232 320 5,496 1,223 6,719 6,490 12,889

2000 2,352 2,055 1,197 56 655 240 329 5,659 1,224 6,883 6,516 13,071

2001 2,263 2,015 1,149 53 592 249 334 5,480 1,175 6,655 6,755 13,075

2002 2,076 1,976 1,136 56 590 258 345 5,245 1,193 6,438 7,203 13,295

2003 2,458 2,064 1,190 74 663 267 360 5,787 1,290 7,076 8,756 15,472

2004 2,628 2,180 1,275 97 712 276 377 6,181 1,365 7,545 9,620 16,789

2005 2,678 2,254 1,369 119 757 285 375 6,420 1,417 7,837 10,531 17,993

2006 2,633 2,374 1,470 99 794 295 375 6,575 1,465 8,040 10,899 18,564

2007 2,754 2,615 1,665 104 816 306 389 7,138 1,511 8,649 11,480 19,741

2008 3,012 3,093 2,003 96 960 316 400 8,205 1,677 9,882 n.a. n.a.

2009 2,987 3,342 2,310 100 930 327 405 8,739 1,663 10,402 n.a. n.a.

2010 3,116 3,726 2,394 100 941 339 410 9,335 1,690 11,026 n.a. n.a.

Millions of constant 2006 U.S. dollars

1994 2,968 1,462 1,189 79 858 253 405 5,697 1,516 7,214 7,778 14,587

1995 3,028 1,536 1,250 101 986 257 421 5,915 1,663 7,578 8,709 15,866

1996 3,136 1,643 1,380 104 953 261 464 6,263 1,678 7,941 8,039 15,516

1997 3,218 1,859 1,377 79 915 265 421 6,533 1,601 8,134 7,815 15,528

1998 3,183 2,078 1,406 67 870 271 391 6,735 1,533 8,268 7,749 15,626

1999 3,071 2,127 1,284 58 798 277 381 6,541 1,455 7,996 7,724 15,339

2000 2,739 2,394 1,395 65 763 280 383 6,592 1,425 8,018 7,590 15,225

2001 2,577 2,295 1,309 61 674 283 381 6,242 1,338 7,580 7,694 14,894

2002 2,328 2,215 1,274 63 662 289 387 5,880 1,337 7,217 8,075 14,905

2003 2,697 2,265 1,306 81 727 292 396 6,350 1,415 7,765 9,609 16,978

2004 2,805 2,326 1,361 104 760 294 402 6,595 1,456 8,052 10,265 17,915

2005 2,765 2,328 1,414 123 781 295 387 6,629 1,463 8,093 10,875 18,581

2006 2,633 2,374 1,470 99 794 295 375 6,575 1,465 8,040 10,899 18,564

2007 2,676 2,540 1,618 101 793 297 378 6,934 1,468 8,402 11,152 19,176

2008 2,864 2,941 1,905 91 913 301 381 7,802 1,595 9,396 n.a. n.a.

2009 2,814 3,149 2,176 94 876 308 382 8,232 1,566 9,799 n.a. n.a.

2010 2,908 3,477 2,234 93 878 316 383 8,711 1,577 10,288 n.a. n.a.

n.a. = not available. Current expenditures adjusted for inflation by the U.S. implicit Gross Domestic Product price deflator.

1Animal health R&D is for food animals only, excluding R&D for companion and equine animal health.

2Estimates of private animal genetics research spending are only available for 1996 and 2006. We extrapolate for other years assuming 5.24 

percent annual growth.

3Includes Organisation for Economic Development and Co-operation food industry R&D and total agricultural input R&D (animal nutrition is a 

subsector of the food industry and is not double counted in the total).

Source: USDA, Economic Research Service. See Fuglie et al. (2011) for sources and estimation methods for specific industries.
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allocated to research relevant to farm productivity but do not provide a breakdown for the other 40 percent. If these fi gures are representative of public 

agricultural R&D in high-income countries, it would imply that the private 

sector accounts for roughly 76 percent of total food-related research and 46 

percent of research on production agriculture in these countries (table 2). 

For the biofuel industry, we estimate total private R&D at $1.47 billion in 

2009 (table 3). This total includes $340 million spent by agricultural seed 

and biotechnology companies to improve biofuel feedstocks.3 Another 

$1.03 billion was spent by companies in the energy sector to improve the 

effi ciency of biofuel process manufacturing as well as to develop new types 

of biofuel feedstocks, such as algae. Enzyme and equipment manufacturers 

supplying inputs to energy companies for biofuel processing accounted for 

the remaining $71 million. Not included in these estimates is R&D spending 

by the transportation industry to modify vehicle and equipment engines 

for biofuel use. Although our estimates cover only one year, it is clear from 

industry sources that most of these R&D investments have arisen since 2000.

The largest driver of private biofuel R&D is the expectation of rising demand 

for alternative energy sources. This demand is sparked by the rising cost 

of fossil fuels relative to that for biomass-derived fuels and public concerns 

3Biofuel feedstocks are the crops 

and biomass materials used to produce 

ethanol and biodiesel. First-generation 

feedstocks include corn, sugarcane, 

soybeans, and palm oil. Secondgeneration feedstocks (under development) include sources of cellulosic 

biomass, such as switchgrass, miscanthus, corn stover, sugar bagasse, 

and forest-based materials. Thirdgeneration biofuel feedstocks include 

algae and synthetic life forms.

Table 2

Public and private spending on food and agricultural research and 

development (R&D) worldwide in 2000

Food 

R&D

Agriculture 

R&D

Food & ag 

R&D

Food & ag 

R&D1

———— Billion U.S. dollars ———— Billion PPP$

Global total

Public n.a. n.a. 16.3 20.8

Private 6.2 6.9 13.1 13.2

Total 29.3 33.9

Private share of total (%) 45.0 39.0

High-income countries

Public 1.9(est) 7.4(est) 12.3 11.8

Private 5.8 6.3 12.2 11.8

Total 7.7(est) 13.7(est) 24.5 23.6

Private share of total (%) 76.0 46.0 50.0 50.0

n.a. = not available. 

est. = estimate only. The allocation of public R&D into food-related and agriculture-related R&D 

in high-income countries is based on U.S. public R&D allocation shares and assumes these are 

roughly similar among all high-income countries. U.S. public R&D allocation is from the USDA's 

Inventory of Agricultural Research (USDA, 2000), which reports that in 2000, about 60 percent 

of total public agricultural R&D went to production agriculture, 15 percent went to food and nutrition, and the rest went to environmental and other topics. The total for public "food & ag R&D" 

includes all categories of research at public agricultural research institutions, while the food and 

agriculture sectors only include research directly related to that sector.

1The last column estimates international public R&D using purchasing-power-parity (PPP) exchange rates rather than the market exchange rates from which the U.S.$ estimates are derived. 

PPP exchange rates are based the relative price of a common basket of consumer goods. Using 

PPP exchange rates raises dollar estimates of R&D spending in developing countries signifi -

cantly but affects spending estimates for high-income countries only marginally. PPP exchange 

rates are from the World Bank.

Source: USDA, Economic Research Service. Estimates of public food and agricultural research are from Beintema and Stads (2008). Estimates of private food and agricultural R&D 

are from this study. Private R&D on animal nutrition is included in agriculture excluded from the 

food sector. 
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about national energy security and greenhouse gas emissions from fossil 

fuels. While Government subsidies and regulations have helped stimulate 

demand for biofuel, public-sector investments in biofuel R&D now appear 

to be considerably less than private-sector investments. Moreover, business 

spending on biofuel R&D appears to be almost entirely from private capital: 

Government subsidies for private-sector biofuel R&D in the United States, 

historically the country with the largest Government biofuel R&D program, 

amounted to only $24.4 million in 2009.

R&D Spending by Region and for 

Selected Countries

Our estimates of private agricultural input R&D expenditures in specific 

countries or regions are based on the R&D expenditures by companies incorporated in that country or region.4 The estimates of food industry R&D are 

based on national surveys of manufacturing enterprises as reported to the 

OECD, so they should reflect in-country R&D by domestic and foreign firms. 

While information on R&D spending by the food manufacturing industry 

is not available for most developing countries, our estimates include data for 

several, including China, Turkey, South Africa, Chile, and Mexico.

Among all countries in 2006, the United States was the leader in private 

food and agricultural R&D, accounting for about one-third of the global 

total (table 4). U.S. companies were particularly dominant in the crop seed/

biotechnology and animal breeding sectors, accounting for about half of 

global private R&D in each sector. This high level of investments partly 

reflects the large U.S. domestic market for agricultural inputs, a strong and 

complementary public agricultural R&D system, and a relatively favorable 

regulatory environment for the commercialization of genetically modified 

(GM) crops (Fuglie et al., 1996). European firms accounted for about half 

of total R&D by agricultural input industries and just over a third of total 

R&D by the food industry (with Germany, Switzerland, and the Netherlands 

4This is only an approximate 

measure of actual (R&D) expenditures within a region or country, as it 

includes (R&D) conducted by those 

same companies in other regions or 

countries and excludes (R&D) in those 

areas by companies based outside the 

region or country. For example, to 

the extent that U.S.-based companies 

conduct some of their R&D in foreign 

countries, the estimates will overstate 

research in the United States. But they 

also understate research in the United 

States because they exclude research 

conducted by foreign companies in 

the United States. Our assessment 

is that these measures are roughly 

correct for OECD countries, although 

they may understate R&D taking 

place in developing countries. While 

private-sector agricultural R&D in 

most developing countries is relatively 

small, the contribution of foreign firms 

to that R&D may be significant. In a 

survey of private business enterprises 

in seven developing countries in Asia, 

Pray and Fuglie (2002) find that about 

45 percent of total private agricultural 

R&D in those countries was conducted 

by foreign firms. 

Table 3

Global expenditures for biofuel research and development (R&D) 

in 2009

Sector and type of firm R&D

Million U.S.

dollars

Private-sector market segments

Agricultural input sectors (agricultural seed-biotechnology companies, plantations, forest product companies, and cellulosic biomass 

firms

340

Energy sector (biofuel producers, biofuel equipment manufacturers, 

and oil companies) 1,030

Enzyme and equipment input suppliers for biofuel processors 71

Total private biofuel R&D 1,470

Total public bioenergy R&D in industrialized countries 627

Source: USDA, Economic Research Service. Public-sector bioenergy R&D is from the 

International Energy Agency. The 2009 total includes a one-time increase of $224 million in the 

United States due to the American Recovery and Reconstruction Act (economic stimulus funding). See Fuglie et al. (2011) for sources and estimation methods for specific industries.
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Research Investments and Market Structure in the Food Processing, Agricultural Input, and Biofuel Industries Worldwide: Executive Summary / EIB-90 

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being the leading countries in this region). Japan led R&D in the Asia-Pacific 

region. Japan had the second highest amount of R&D spending in the food 

industry (after the United States). In the agricultural input industries, Japan 

was among the leading countries in investing in R&D in the agricultural 

chemical and farm machinery sectors. 

Table 5 presents historical data on R&D spending by U.S. food processing 

and agricultural input industries. These time series data are reasonably 

complete for the food manufacturing, agricultural chemical, farm machinery, 

and animal health sectors. Estimates of R&D spending by the crop seedbiotechnology sector are available for 1993 onwards and for occasional earlier 

years but enough to establish a trend. R&D data are limited for fertilizer, 

animal nutrition, and animal genetics, but relatively little R&D is conducted 

by private companies in these sectors. The available data are sufficient to 

clearly show substantial growth in private food and agricultural R&D in the 

United States over the past three decades. Between 1979 and 2006—2 years 

with R&D estimates for all sectors—R&D spending by the private sector in 

the food and agricultural sectors increased more than fourfold (and more than 

doubled, from $2.86 billion to $6.03 billion, when viewed in constant 2006 

U.S. dollars), although this growth is less than that for U.S. industry generally. By comparison, total R&D funded and performed by all U.S. private 

industries increased nearly ninefold, from $25.6 billion to $223.4 billion 

(nominal dollars), over the same period (NSF, 2010).

Private spending on food and agricultural R&D in the United States has 

exceeded public-sector agricultural research expenditures most years since 

the late 1970s (fig. 1). Federal and State governments invested on average 

Table 4

Private-sector expenditures for food and agriculture research and development (R&D) by region in 2006 

Sector

North America EuropeMiddle EastAsia-Pacific Latin 

America

Global

All total United 

States All Japan

Million U.S. dollars

Crop protection chemicals 599 599 1,596 404 368 34 2,633

Crop seed 1,287 1,261 983 96 66 6 2,374

Fertilizers 28 19 33 35 1 3 99

Farm machinery 573 513 579 309 189 9 1,470

Animal health1 279 236 477 36 8 3 794

Animal nutrition 66 63 232 71 19 7 375

Animal breeding 147 132 144 5 0 0 295

Crops 2,486 2,392 3,191 844 623 52 6,575

Animals 491 432 852 111 28 10 1,465

All agriculture 2,978 2,824 4,043 955 651 62 8,040

Food industry2 3,400 3,267 3,692 3,735 2,808 73 10,899

Food and agriculture3 6,312 6,028 7,503 4,619 3,440 128 18,564

1Animal health R&D includes R&D for food animals only. Globally, we estimate that food animal health R&D made up about 60 percent of total 

animal health R&D in 2006, based on the percentage of animal health product sales for food animals. 2Food industry R&D is mainly for Organisation for Economic Co-operation and Development countries only.

3Sum of food industry R&D and all agriculture R&D. Animal nutrition is a subsector of the food industry and is counted in both food industry R&D 

and agricultural R&D but not double counted in the total. 

Source: USDA, Economic Research Service. See Fuglie et al. (2011) for industry-specific sources and estimation methods. 
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Table 5

Private food and agricultural research and development (R&D) spending in the United States 

Year

Crop 

protection 

chemicals

Crop 

seed & 

biotech

Fertilizers Farm 

machinery

Animal 

health 

(all animals)

Animal 

health 

(food animals

only)

Animal 

nutrition

Animal 

genetics

Food 

industry

Million nominal U.S. dollars

1960 27 4 75 6 104

1961 38 65 11

1962 42 70 13 121

1963 45 76 15 130

1964 48 79 20 144

1965 64 6 96 23

1966 77 100 28 164

1967 92 102 35 181

1968 99 96 36 184

1969 104 99 34

1970 126 11 89 45 222

1971 130 90 48 238

1972 108 93 53 258

1973 114 120 62 268

1974 137 131 74 297

1975 176 24 3 138 79 28 335

1976 205 168 87 355

1977 236 221 84 415

1978 3 86 30 44 472

1979 292 43 3 295 96 33 55 528

1980 111 620

1981 487 278 125 636

1982 115 129 777

1983 587 290 147 824

1984 22 154 42 1,081

1985 432 368 159 1,136

1986 179 1,280

1987 398 483 191 1,206

1988 221 1,229

1989 561 272 281 243 1,275

1990 245 1,414

1991 614 413 276 1,277

1992 331 1,386

1993 686 409 276 315 176 1,345

1994 707 425 302 244 134 1,476

1995 751 507 361 337 182 1,566

1996 834 636 471 342 181 49 118 1,564

1997 897 791 507 353 183 1,908

1998 847 963 520 369 188 1,949

1999 756 991 371 374 187 1,563

2000 703 1,045 420 358 175 1,562

2001 531 985 395 349 168 1,971

2002 534 1,010 372 342 161 2,204

2003 558 1,012 403 417 192 2,160

2004 606 1,078 453 478 215 2,809

2005 612 1,095 504 524 230 3,255

2006 599 1,261 19 513 549 236 63 132 3,267

2007 614 1,393 628 641 269 74 2,939

2008 683 1,707 813 830 340 92 n.a.

2009 740 1,897 1,057 783 313 71 n.a.

2010 793 2,176 1,120 772 309 n.a.

Sources: USDA, Economic Research Service. For 1993-2007 continuous time series, see Fuglie et al. (2011) for industry-specific sources and 

estimation methods. For pre-1993 data: crop seed research: 1960-1979 (Perrin et al., 1983); 1982 (Kalton and Richardson, 1983); 1989 (Kalton 

et al., 1989). Animal genetics research: 1978-79 (Malmstead, as reported in Ruttan, 1982); 1996 (Narrod and Fuglie, 2001). Agricultural chemicals, farm machinery, and food industry (NSF, various issues). Animal health (Pharmaceutical Research and Manufacturers of America, annual 

reports). Fertilizer and/or animal nutrition: 1975 (Wilcke and Williamson, 1977); 1978-79 (Malmstead, as reported in Ruttan, 1982); 1984 (Crosby, 

1987), 1996 (Fuglie et al., 2000).
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Research Investments and Market Structure in the Food Processing, Agricultural Input, and Biofuel Industries Worldwide: Executive Summary / EIB-90 

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$4.40 billion annually (constant 2006 dollars) in agricultural research 

between 1980 and 2007, while the private sector spent an average of $4.95 

billion per year (constant 2006 dollars) over the same period. But each sector 

focuses its research resources differently. The private sector accounts for 

about 80 percent of total food-related research and about 47 percent of total 

research related to production agriculture. Within these areas, public research 

is more oriented toward basic or fundamental science and scientific training, 

as well as topics like food safety, genetic resource conservation, and farming 

practices to conserve natural resources, research that has high social value 

but for which private incentives are relatively weak. 

Figure 1

Trends in public and private food and agricultural research spending 

in the United States

Billions constant 2006 U.S.$

Source: U.S. public agricultural research and development (R&D) spending is from 

USDA, Economic Research Service. U.S. private R&D spending is derived from the data 

in table 5, with interpolations for missing data. Nominal research expenditures are adjusted 

for inflation by the agricultural R&D price index developed by ERS. This price index takes into 

account changes in the cost of research inputs (scientist salaries, scientific equipment, etc.).

1975 80 85 90 95 2000 05 10

0

1

2

3

4

5

6

7

Private R&D

Public R&D
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Research Investments and Market Structure in the Food Processing, Agricultural Input, and Biofuel Industries Worldwide: Executive Summary / EIB-90 

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Market Size and Private Food 

and Agricultural R&D

One key determinant of private investment in R&D is the size of the market 

for products or processes developed from the R&D. Sales of new products or 

cost savings from manufacturing (process improvements) are necessary for 

firms to earn a return from their R&D. Moreover, firms must be able to price 

new products above their cost of manufacture, at least for some period of 

time, to help recoup the sunk costs of R&D, regulatory approval, and market 

development. Appropriability is the ability of firms to exercise some market 

power in the marketing and pricing of new products derived from their R&D 

investments. Securing patents and other forms of intellectual property rights 

enables firms to exercise appropriability over the economic benefits provided 

by the application of new technology.

Global Demand for Agricultural Inputs

Information on the size of global markets for agricultural inputs is not 

readily available. Thus, we assembled data from a variety of sources or made 

estimates of the wholesale value of market sales for agricultural inputs by 

product type. We estimate that in 2006, total company sales of these inputs 

were $355 billion (table 6). Fertilizers and animal feed (not including medicated feeds, which we include in the animal health sector) are the largest 

markets in terms of sales and consist of mostly bulk inputs that do not involve 

much R&D. These products accounted for about 60 percent of total agricultural input sales. Another 21 percent was for farm machinery and equipment. 

Crop protection chemicals and crop seed together accounted for about 15 

percent of inputs purchased by farmers, while animal health and breeding 

materials accounted for the remaining 4 percent. Measures of the size of the 

various input markets vary somewhat depending on the source. Estimates 

of private-sector sales of crop seed and animal breeding materials vary the 

most. Historically, farmers have met a portion of their demand for crop seed 

and animal breeding stock through self-supply or by obtaining these inputs 

through informal markets or from neighboring farms. Over time, specialized 

breeding firms have increasingly helped meet this demand. By 2006, private 

seed companies appeared to be supplying about two-thirds of the crop seed 

used globally. The private-sector share of animal breeding stock is not known 

with much precision but appears to be very high for poultry, high and rising 

for swine and dairy cattle, and relatively low for beef cattle, small ruminants, 

and aquaculture (with the exception of some species, such as salmon). 

A comparison of private-sector sales of farm machinery, crop protection 

chemicals, crop seed, and food animal health products worldwide since 

1994 shows that only the markets for farm machinery and crop seed have 

grown significantly in inflation-adjusted dollars (fig. 2). Global sales of crop 

protection chemicals recovered somewhat from their low in 2002 but only to 

mid-1990s levels (to some extent, the increasing use of GM crops with pesticidal properties may be substituting for chemicals in crop protection). Most 

of the growth in sales of animal health products was attributed to markets 

for nonfood animal species, such as companion and equine animals. The 

figure does not show market trends for the animal feed and fertilizer markets. 

Although these are the largest agricultural input markets (in terms of sales), 
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Research Investments and Market Structure in the Food Processing, Agricultural Input, and Biofuel Industries Worldwide: Executive Summary / EIB-90 

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Table 6

Global market for agricultural inputs supplied by the private sector

in 2006

Industry Segment

Privatesector sales

Million US$

Crop protection 

 chemicals

Total for agricultural uses 31,962

Herbicides 15,246

Insecticides 7,895

Fungicides 7,671

Other 1,151

Crop fertilizers Total (168 million tons) 74,692

N fertilizer (99 million tons) 48,076

P2O5 fertilizer (39 million tons) 17,875

K2O fertilizer (30 million tons) 8,741

Crop seed Total proprietary seed sales 19,600

Conventional seed (proprietary) 11,800

Genetically modified seed (proprietary) 7,800

Public seed sales and farmer-saved seed 

(not included in total) 9,400

Farm machinery Total 73,579

Farm tractors 21,321

Harvesting machinery 16,455

Planting and fertilizing machinery 35,802

Animal health Total for food animals 9,455

Total (food, companion and equine animals) 16,065

Pharmaceuticals 10,410

Biologicals (vaccines) 3,660

Medicated feed additives 1,995

Animal nutrition Total 141,833

Compound feed (656 million tons) 137,429

Nutritional feed additives 4,404

Medicated feed additives 

Animal breeding Total 4,062

Poultry 1,742

Pigs 1,303

Cattle 931

Aquaculture 87

All private-sector sales of farm inputs 355,182

Sources: USDA, Economic Research Service. Agricultural chemicals from AGROW Reports 

(2007); crop seed sales from Context Network (2007); fertilizer sales derived from quantities 

of nutrients reported in Food and Agricultural Organization multiplied trade prices (dollars per 

metric ton of nutrient) from Haver Analytics; animal health products from Vetnosis as reported 

in International Federation for Animal Health (2007); animal feed sales derived the quantities 

reported in Best (2008) multiplied by International Monetary Fund corn and soy meal prices 

adjusted for processing costs; animal breeding are authors' estimates; farm machinery from 

Freedonia (2006). 

(see animal health)
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Research Investments and Market Structure in the Food Processing, Agricultural Input, and Biofuel Industries Worldwide: Executive Summary / EIB-90 

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they are mostly characterized by bulk, homogeneous products and little 

private R&D. Data are unavailable for trends in commercial sales of animal 

genetics products.

Price Trends for Some Agricultural Inputs

Markets for agricultural inputs can expand through either larger volumes of 

sales or through higher unit prices. Upward trends in unit prices may reflect 

rising quality of inputs, such as new technologies embodied in the inputs 

due to past investments in R&D. Higher input prices may also stem from 

increases in manufacturing costs due to rising labor, capital, or material 

costs. Based on a comparison of five categories of agricultural input prices 

received by farmers in the United States,5 the largest change during 1994-

2010 was in crop seed prices, which more than doubled relative to the price 

received for agricultural commodities sold by farmers (fig. 3). This increase 

5Global average prices of agricultural inputs are not available, although 

they can be derived from trade statistics. Using trade data, we constructed 

global price series for farm machinery, fertilizer, and animal feed and 

compared these with global indexes 

of agricultural commodity prices. We 

found similar trends to the price trends 

for the United States shown in figure 3.

Figure 2

Global market sales of selected agricultural inputs

Billions constant 2006 U.S.$

Source: USDA, Economic Research Service. See sources listed in notes to table 6.

1994 96 98 2000 02 04 06 08

0

20

40

60

80

100

Farm machinery

Crop projection chemicals

Crop seed (all sources)

Crop seed (proprietary)

Animal health products (all animals)

Animal health products (food animals only)

Figure 3

U.S. agricultural input prices relative to prices received by farmers

Index, 1990=1.00

Source: USDA, Economic Research Service. Indexes of prices paid and received by farmers 

from USDA (various issues).

1990 92 94 96 98 2000 02 04 06 08 10

0

0.5

1.0

1.5

2.0

2.5

3.0 Fertilizer

Crop seed

Farm machinery

Animal feed

Agicultural chemicals
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was due, at least in part, to the increase in value-added characteristics developed by private seed and biotechnology companies through R&D programs. 

Le Buanec (2008) estimates that between 32 and 74 percent of the price of 

seed for corn, soybeans, cotton, and sugar beets in the United States and the 

European Union (EU) reflects technology fees or the cost of seed treatments. 

The sharp rise in the price of fertilizer in 2008-09 was driven by a significant 

increase in the cost of energy and materials used to manufacture fertilizer 

(especially natural gas, sulfur, and phosphate rock), as well as an increase in 

transportation costs and the falling value of the U.S. dollar (Huang, 2009). 

For agricultural chemicals, prices rose relative to commodity prices during 

1994-99 but have since fallen. The recent decline partly reflects the rise in 

crop commodity prices after 2005 as well as an increasing market share for 

off-patent (generic) crop protection chemicals. 
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Market Structure and R&D in Agricultural 

Input Industries

The growth rates in the global market size for agricultural inputs is generally consistent with the trends in private spending on agricultural input R&D 

(see table 1), with the important exception of crop seed-biotechnology, where 

R&D grew more rapidly than sales value. We generally expect research 

investments to be correlated with industry sales (i.e., that research intensity, 

or the R&D-to-sales ratio, remains stable over time) unless other factors are 

changing incentives for private R&D. Other factors include (1) expectations 

that future demand growth will accelerate, (2) advances in scientific knowledge that have created new technological opportunities for commercialization, and (3) stronger IPR or changes in market structure that have made it 

easier for private R&D investors to appropriate economic benefits of new 

technology. Greater industry concentration, like stronger IPR, can increase 

appropriability if it strengthens the market power of large firms. Market 

power enables firms to charge more for new or existing products and recoup 

their sunk investments in R&D and market development. These factors may 

not be acting separately but may be working concurrently to change incentives for private R&D. For example, scientific advances in molecular biology 

have created new technological opportunities in agricultural biotechnology 

and changes in IPR have increased appropriability over biological innovations (Fuglie et al., 1996). In such an environment, firms may consolidate to 

acquire complementary technology and marketing assets, capture economies 

of scale in R&D, and strengthen their market power. Indeed, across a number 

of agricultural input industries, mergers, acquisitions, and consolidation 

among firms are affecting industry concentration and structure. 

Changes in Industry Concentration 

and R&D Intensity Over Time

In each of the five agricultural input industries with significant R&D, the 

degree of concentration in the global market rose significantly over 1994-

2009, although a lack of data prevented us from quantifying this change for 

the animal breeding sector (table 7). We measure concentration using the 

Herfindahl index and by four-firm and eight-firm concentration ratios.6 By 

the end of the present decade, the largest four firms accounted for at least 50 

percent of global market sales in each of these five agricultural input sectors. 

By 2006/07, market concentration was particularly high in the animal 

breeding sector, where the four-firm concentration ratio reached 56 percent. 

Growth in market concentration over time was most rapid in the global seed 

industry, where the market share of the four largest firms more than doubled 

from 21 to 54 percent between 1994 and 2009.

Table 1.7 also shows the trend in R&D intensity (i.e., R&D spending as a 

percentage of sales) for each agricultural input industry. With the exception 

of the crop seed-biotechnology sector, R&D intensity for each sector 

remained fairly constant over 1994-2009, although it varied significantly 

across sectors. R&D intensities averaged 8.6 percent for the animal health 

industry, 6.7 percent for the agricultural chemical industry, and 2.3 percent 

for the farm machinery industry. For the crop seed industry, R&D intensity 

increased from 11.0 percent in 1994 to 15.0 percent in 2000 and then fell back 

6The Herfindahl index (or 

Herfindahl-Hirschman index, or 

HHI) is a commonly used measure of 

market concentration. Higher levels 

of HHI indicate that sales are concentrated among a smaller group of 

firms and the potential for an increase 

in market power by the largest firms. 

The Herfindahl index is calculated as N 2

i i HHI S = å , where Si

 is the market

share of firm i in a market with N 

firms. The (four- and eight-firm) concentration ratio measures the market 

share of the (four and eight) largest 

firms. Unlike the concentration ratios, 

the Herfindahl index reflects the distribution of the market shares among 

the top firms and the composition of 

the market outside the top firms. It also 

gives proportionally greater weight to 

the market shares of the larger firms 

(Scherer and Ross, 1990). Note that 

the concentration measures in table 7 

refer to an entire global agricultural 

input sector. Market concentration in 

a particular country or for a particular 

product (corn seed, or a class of herbicide, for example) could be considerably higher.
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to 10.5 percent by 2009. For the animal breeding sector, we have an estimate 

of R&D intensity for 2006/07 only: an average of 7.3 percent across species. 

Greater concentration was not associated with a permanent rise in R&D 

intensity in these input industries. In the crop seed industry, there was a 

temporary increase in research intensity in the late 1990s and early 2000s as 

the industry sought to commercialize a number of genentically modified crop 

varieties. But by the late 2000s, research intensity in the crop seed industry 

was back to its mid-1990s level. In fact, the underlying causes of growing 

concentration in these sectors appear to be quite specific to each sector and 

may not have affected private incentives to invest in R&D (table 8). In the 

crop seed and animal breeding sectors, the emergence of biotechnology 

was a major driver of consolidation. Firms sought to acquire relevant technological capacities and serve larger markets to spread the large fixed costs 

associated with meeting regulatory approval costs for new biotechnology 

innovations. In the poultry and livestock sectors, vertical integration enabled 

some large firms to acquire capacity in animal breeding as part of their integrated system. In the farm machinery industry, many of the major mergers 

and acquisitions can be traced to large financial losses sustained by some 

leading firms during periods in which the farm sector was in prolonged recession, which substantially reduced demand for farm machinery as farmers 

delayed major capital purchase. Firms experiencing large financial losses are 

Table 7

Market concentration and research and development (R&D) intensity in 

global agricultural input industries

Year

Herfindahl 

index

4-firm 

concentration 

ratio

8-firm 

concentration 

ratio

Industry 

R&D intensity

Share of market (%) R&D/sales (%)

Crop protection chemicals

1994 398 28.5 50.1 7.0

2000 645 41.0 62.6 6.8

2009 937 53.0 74.8 6.4

Crop seed and traits

1994 171 21.1 29.0 11.0

2000 349 32.5 43.1 15.0

2009 991 53.9 63.4 10.5

Animal health

1994 510 32.4 57.4 8.6

2000 657 41.8 67.4 8.5

2009 827 50.6 72.0 8.6

Farm machinery

1994 264 28.1 40.9 1.9

2000 353 32.8 44.7 2.3

2009 791 50.1 61.4 2.7

Animal genetics

1994 n.a. n.a. n.a. n.a.

2000 n.a. n.a. n.a. n.a.

2006/07 1,025 55.9 72.8 7.3

n.a. = not available.

Source: USDA, Economic Research Service estimates based on firm-level sales and R&D expenditure data collected for this study. See Fuglie et al. (2011) for sources and methodology. 
17

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Economic Research Service/USDA

often vulnerable to acquisition. The crop protection sector has been heavily 

affected by changes in regulations governing the health, safety, and environmental impacts of new and existing pesticide formulations. The consolidation 

in the animal health sector appears to be largely a byproduct of mergers and 

acquisitions in the pharmaceutical industry (as most of the leading animal 

health companies are subsidiaries of large pharmaceutical companies).

R&D Spending By Firm Size

Large firms usually account for most of the R&D spending in an industry. 

They may have, on average, higher R&D-to-sales ratios than smaller firms. 

If R&D-oriented large firms acquire small firms that do not make considerable investments in R&D, such consolidation could lead to greater R&D by 

the industry as a whole. On the other hand, mergers between R&D-oriented 

firms could reduce overall R&D spending as duplication and redundancies 

in their merged R&D programs are eliminated. Merger activity may also be 

led by firms that specialize in off-patent generic products. A growing market 

share by these firms may lead to lower R&D in the industry as a whole. But 

the results reported earlier suggest that with the exception of the crop seedbiotechnology industry, market consolidation has generally not been correlated with changes in overall R&D by the sector. 

An examination of average R&D intensities, global R&D shares, and global 

market shares for different classes of firms in four agricultural input sectors 

reveals trends between R&D and firm size (table 9). The general pattern is 

for four to eight of the largest firms to have the highest R&D-to-sales ratio 

and account for most R&D by the sector. For crop protection chemicals, five 

large, research-oriented (“discovery”) firms accounted for 74 percent of total 

R&D and 57 percent of total market sales for this sector. Another group of 17 

midsized firms also invested in the discovery of new proprietary products and 

accounted for most of the rest of the R&D related to agricultural chemicals. 

Table 8

Factors driving changes in market structure in global agricultural input industries

Sector Factors driving consolidation and concentration

Change in real R&D 

spending between 

1994 and 20101

Percent

Crop seed & biotechnology Acquisition of complementary technology and marketing assets, 

economics of scale in crop biotechnology R&D 138

Farm machinery Financial losses of major manufacturers during farm sector 

business cycles (which strongly influence demand for large capital 

purchases)

88

Animal breeding & genetics Vertical integration of poultry and livestock industries; economics of 

scale in animal biotechnology R&D 25

Animal health 

(food animals only)

Forces driving consolidation in the pharmaceutical industry: loss of 

profit streams and idled capacity when major drugs go off-patent 2

Crop protection chemicals Stricter environmental and safety regulations; maturing markets; 

rise of generic products -2

1We have data on research and development (R&D) spending by the animal breeding and genetics industry for 1996 and 2006/07 only. The estimate of 25 percent growth between 1994 and 2010 is derived by applying the 1996-2006 average annual growth rate to these years. Changes in 

real R&D spending calculated from the data in table 1.

Source: USDA, Economic Research Service. See Fuglie et al. (2011) for discussion of specific industries.
18

Research Investments and Market Structure in the Food Processing, Agricultural Input, and Biofuel Industries Worldwide: Executive Summary / EIB-90 

Economic Research Service/USDA

The average R&D intensity for the smaller sized firms was slightly below 

that of the largest. Generic producers (firms not investing in new product 

discovery) conducted a small amount of R&D related to product manufacture 

and registration. In the crop seed-biotechnology sector, the largest eight seed 

sellers plus BASF (a firm investing significantly in agricultural biotechnology 

R&D but with few direct seed sales) accounted for 76 percent of privatesector seed research and had an average R&D intensity more than double that 

of midsized seed firms. However, small agricultural biotechnology firms had 

by far the largest research intensity in this sector, at about 42 percent. These 

operations tend to be startup organizations seeking to commercialize new 

research discoveries. If they are successful, they are likely to partner with 

large seed-biotechnology firms or be acquired by one of them. They play an 

important role in bringing high-potential but high-risk technologies into the 

marketplace. In the animal health and farm machinery sectors, the leading 

firms also had the highest average R&D intensities. (A number of biotechnology firms are conducting research on animal health, but few specialize in 

the agricultural sector and none are included in table 9.)

Table 9

Company size and research and development (R&D) spending in agricultural input industries in 2006

Sector Companies Average R&D 

intensity

Global R&D 

share

Global 

market share

——— Number——— ——— Percent ———

Crop protection chemicals

Large discovery companies (>$2 billion sales) 5 9.0 74.1 57.4

Second-tier discovery companies (<$2 billion sales) 17 7.3 19.6 18.7

Other manufacturers 23 2.3 7.7 23.9 est.

Crop seed and biotechnology

Large seed companies (> $600 million sales) + BASF 8 15.8 75.6 48.8

Midsize seed companies ($50-600 million sales) 29 7.3 13.7 19.2

Other seed companies n.a. 2.0 3.1 16.0 est.

Agricultural biotechnology companies 58 42.1 7.6 1.8

Animal health

Large animal health discovery companies (>$800 million in sales) 8 10.0 66.7 79.6

Midsize animal health companies ($250 million-$800 million sales) 5 7.6 11.8 10.6

Other manufacturers n.a. 3.8 21.5 9.8 est.

Farm machinery

Leading multiline farm machinery companies (>$5 billion sales) 4 3.0 57.4 38.7

Second-tier farm machinery manufacturers 30 2.4 27.6 22.9

Other manufacturers n.a. 2.4 0.6 0.5 est.

est. = authors' estimate. n.a. = not available.

Source: USDA, Economic Research Service. See Fuglie et al. (2011) for industry-specific sources and estimation methods. 
19

Research Investments and Market Structure in the Food Processing, Agricultural Input, and Biofuel Industries Worldwide: Executive Summary / EIB-90 

Economic Research Service/USDA

Globalization of Private 

Agricultural R&D

All of the leading firms and many of the second-tier firms in food manufacturing and agricultural input industries are multinational, offering product 

sales spread across several continents. In fact, global trade in agricultural 

inputs has grown rapidly over the past two decades (table 10). Between 

1990 and 2007, international trade in animal breeding material grew by 260 

percent and trade in farm machinery grew by 190 percent (in constant 2006 

U.S. dollars). Trade in crop protection chemicals and crop seed also grew 

over the period (trade statistics for animal health products are not available). 

Since the performance of agricultural technologies tends to be site specific 

(due to variations in weather, soil type, and other environmental conditions), 

many of the leading agricultural input firms have located R&D facilities 

around the world. This global R&D presence not only allows firms to develop 

and adapt new technologies to regional conditions and meet local regulatory 

requirements, but it also may enable them to achieve cost economies in some 

R&D activities (e.g., by conducting certain kinds of research in countries 

where highly trained personnel or specialized R&D services can be hired 

more cheaply). 

While we do not have direct information on R&D investment in foreign 

countries by these firms, we have assembled information on the global 

R&D presence for several of the leading agricultural input firms (see table 

11). Based on information from company websites, we indicate the sectors 

in which these firms made R&D investments in 2007 and the countries or 

regions of their principal agricultural R&D facilities. In addition to these 

principal research locations, the companies may have field-testing stations 

and manufacturing facilities in several other countries. For comparative 

purposes, the last three rows of table 11 show R&D spending by some of 

the largest public-sector agricultural research institutions. It is noteworthy 

that at least five firms made larger investments in crop improvement than 

the world’s largest public-sector agricultural research agency, USDA’s 

Agricultural Research Service (ARS), and several times the investment in 

crop genetic conservation and breeding than the network of centers that 

Table 10

Global trade in agricultural inputs

Value of global exports

Input type 1990 2000 2007

Billion constant 2006 U.S.$

Farm machinery 24.1 33.3 69.6

Crop protection chemicals 10.6 13.0 18.2

Crop seed 4.1 4.3 6.0

Animal breeding material 0.3 0.5 1.2

Sources: USDA, Economic Research Service. Farm machinery and pesticide export values 

from Food and Agriculture Organization; Crop seed export value from the Le Buanec (2007) 

and International Seed Federation; trade in animal breeding material includes value of exports 

of day-old poultry chicks, swine and bovine live breeding animals, and bovine semen (UN 

ComTrade). Export values adjusted for inflation by the U.S. Gross Domestic Product implicit 

price deflator (Economic Report of the President, 2009).
20

Research Investments and Market Structure in the Food Processing, Agricultural Input, and Biofuel Industries Worldwide: Executive Summary / EIB-90 

Economic Research Service/USDA

Table 11

Agricultural research and development (R&D) spending by major multinational corporations and public 

institutions in 2007

Company

Country of 

incorporation Sector of R&D activity

Agricultural R&D 

spending (estimate only)Principal agricultural R&D locations

Million U.S.$

Bayer1 Germany Ag. chemical, crop seed, 

animal health 978 Germany, France, Belgium, Netherlands, U.S., Japan

Syngenta2 Switzerland Ag. chemical, crop seed 830 Switzerland, UK, U.S., China, Australia

Monsanto3 U.S. Ag. chemical, crop seed 770 U.S., France, Brazil, Argentina, India, 

Australia

BASF4 Germany Ag. chemical, crop seed, 

animal nutrition 655 Germany, U.S., India

Dupont5 U.S. Ag. chemical, crop seed, 

food ingredients 633 U.S., France, Japan, India

Dow6 U.S. Ag. chemical, crop seed 294-380 U.S., Japan, Argentina, Puerto Rico

Limagrain7 France Crop seed 171 EU, U.S., Brazil, Chile, China, Japan, 

Israel, Morocco

KWS8 Germany Crop seed 104 EU, U.S., Argentina, China, Turkey, 

Russia

John Deere9 U.S. Farm machinery 461 U.S., India, Israel

CNH9 Netherlands Farm machinery 272 U.S., EU, Brazil, Turkey, India, China

CLAAS10 Germany Farm machinery 150 Germany

Pfizer11 U.S. Animal health 317 U.S., UK, Japan

Merial11 U.S. & UK Animal health 250 U.S., France, 9 global locations

Schering-Plough11 U.S. Animal health 113 U.S., 14 global locations

Fort Dodge (Wyeth)11 U.S. Animal health 115 U.S., EU

DSM12 Netherlands Animal nutrition 114 Netherlands

Genus13 UK Animal genetics 33 U.S., UK

Public – USDA/ARS14 U.S. Crop science 456 U.S. 

Public – USDA/ARS14 U.S. Animal science 171 U.S. 

Public – CGIAR14 Global Agricultural biodiversity and 

genetic improvement 178 9 centers with crop breeding programs, all in developing countries

1Bayer reports spending 506 million euros on crop protection R&D and 131 million euros on environment science/bioscience in 2007 (bioscience is mostly seed and 

crop biotechnology research while environmental science includes nonagricultural applications of crop protection chemicals and related products). Since 2006, Bayer 

no longer reports animal health R&D separately from its Consumer Health business segment, but it did report animal health product sales of 956 million euros in 2007. 

We estimate Bayer spent 8 percent of animal health sales on R&D, or 76 million euros. These figures are from Bayer (2008). 2Syngenta reports spending $496 million 

on crop protection R&D, $283 million on crop seed R&D, and $51 million on new business development (mostly crop biotechnology) R&D in 2007 (Syngenta, 2008). 

3 Monsanto reports spending $770 million on agricultural R&D in 2007, mostly for its seeds and genomics division, with the remainder to support its crop protection 

products (Monsanto, 2009). 4BASF (2007) reports that the company spent 328 million euros on crop protection R&D in 2007 and 400 million euros on plant sciences 

R&D over 2006-08 (the latter is included as part of its corporate"Verbund" research for future business development). We assume it spent about one-third of this 3-year 

total, or 135 million euros, for plant sciences R&D in 2007. In addition, BASF develops animal nutrition specialty products (vitamins, enzymes, and minerals). It does 

not report animal nutrition sales or R&D separately but includes this in its fine chemicals business segment, although for 2009 it reported that animal nutrition sales 

made up 16 percent of product sales from this segment (BASF, 2010). We assume animal nutrition products accounted for 16 percent of sales of fine chemicals in 

2007 (485 million euros) and that BASF invested 3 percent of this, or 15 million euros, in animal nutrition R&D in 2007. 5Dupont (2008) reports that its agriculture and 

nutrition division spent $633 million on R&D in 2007. Net sales from this business segment included crop seeds (49 percent), crop protection chemicals (34 percent), 

and food ingredients (17 percent). 6Dow does not report R&D spending by business segment but is known to invest significantly in both crop protection and crop seed 

and biotechnology R&D. In 2007, Dow's total R&D spending was $1,305 million (Dow Chemical Co., 2009). We derive a lower bound estimate of Dow’s agricultural 

R&D spending by multiplying total R&D by the share of agricultural science patents in Dow's total U.S. patent holdings, which were 508 out of 2,266 patents as of 

December 31, 2008, according to Dow Chemical Co. (2009). Our upper bound estimate is derived assuming Dow invested 10 percent of its crop protection sales and 

33 percent of its seed sales in R&D. While this research intensity for seed is high, it reflects Dow's stated intention to expand its market presence in the global seed 

industry. 7Limagrain spent 102 million euros in crop seed research in 2006/07 (Limagrain, 2007). 8KWS spent 75 million euros in crop seed research in 2006/07 

(KWS, 2008). 9John Deere and CNH report total spending for research, development and engineering for agricultural, construction, and other equipment sales. We 

estimate their R&D spending for agricultural equipment by taking the proportion of agricultural sales in total equipment sales. For Deere, this implies 56 percent of 

its total R&D spending of $817 million was for agriculture in 2007 (Deere & Company, 2007) and for CNH, 66 percent of total R&D spending of $409 million was for 

agriculture in 2007 (CNH, 2008). 10CLAAS reports spending 110 million euros on research, development, and engineering for agricultural equipment in 2007 (CLAAS, 

2009). 11These pharmaceutical companies do not report animal health R&D separately, although they do report animal health product sales. To estimate animal health 

R&D for these countries, we use estimates of R&D as percentage of animal health sales as reported in Animal Pharm Reports (2007). These are: 12 percent for Pfizer, 

10 percent for Merial and Fort Dodge, and 9 percent for Schering-Plough. See chapter 6 for recent merger activity in animal health. 12DSM develops and markets both 

animal and human nutrition and health products. Its total R&D spending in 2007 was 136 million euros. We assume that 57 percent of this was for animal nutrition R&D, 

the same proportion of animal product sales out of total nutrition sales. (DSM, 2007). 13Genus reports 17.7 million euros in R&D spending for livestock (cattle and pigs) 

research in 2007 (Genus, 2007). 14For comparative purposes, we show agricultural R&D spending for two prominent public-sector institutions: USDA’s Agricultural 

Research Service (USDA/ARS) and the research centers that are supported by the Consultative Group for International Agricultural Research (CGIAR). USDA/ARS 

expenditures for crop and animal sciences are from USDA (2007); CGIAR spending on biodiversity conservation and genetic improvement (which is mostly for food 

crops) is from CGIAR (2007).

We convert foreign currencies into U.S. dollars using the exchange rates reported in the Economic Report of the President (2009).

Sources: USDA, Economic Research Service and others, as noted above.
21

Research Investments and Market Structure in the Food Processing, Agricultural Input, and Biofuel Industries Worldwide: Executive Summary / EIB-90 

Economic Research Service/USDA

make up the Consultative Group for International Agricultural Research 

(CGIAR).7 The three companies that made the largest investments in agricultural research in 2007 were the European firms Bayer and Syngenta and 

the U.S. firm Monsanto, each with over $700 million in R&D spending for 

crop and/or animal agriculture. By 2007, the agricultural R&D investment 

by these three firms together was $2.47 billion (and it rose further to over 

$3 billion by 20098).

Another indicator of the degree of globalization of agricultural input markets 

is the global distribution of agricultural input sales (see fig. 4). In 2006, 

member countries of the North American Free Trade Agreement (NAFTA—

United States, Canada, and Mexico) accounted for about 23 percent of 

the global seed market and 30-36 percent of global sales of agricultural 

chemicals, farm machinery, animal feed, and animal health pharmaceuticals (including those for nonfood animals). The Europe-Middle East-Africa 

market (which is mostly Europe) had the largest aggregate seed sales in 2006, 

whereas Asia-Pacific countries used the most fertilizers and bought the most 

farm machinery. Together, Asia-Pacific and Latin America are indicative of 

a rough estimate of the developing-country share of global agricultural input 

markets.9 They account for 37-51 percent of global sales of crop seed and 

chemicals, farm machinery, fertilizers, and animal feed. 

These indicators—trade in agricultural inputs, location of R&D facilities, and 

the wide distribution of agricultural input sales—demonstrate the multinational nature of private-sector investments in agricultural R&D and the role 

of these companies in developing and transferring agricultural technology 

around the world. One implication of the globalization of private-sector food 

and agricultural research is that the rate of international technology transfer 

may accelerate, eventually serving to reduce productivity differences across 

nations and regions. Moreover, the location of principal R&D centers may be 

less important than the location of markets and flow of trade in the agricultural inputs that embody the technology developed through this R&D.

7These figures are presented to 

characterize the scale of private R&D, 

but it should not be inferred that the 

public and private sectors engage in 

similar kinds of research. Rather, each 

sector is likely to play complementary roles. A detailed 1994 survey of 

public and private crop breeding in 

the United States, for example, found 

that about 80 percent of private-sector 

crop breeding research was on varietal 

development, while breeders at USDA’s 

Agricultural Research Service focused 

exclusively on more “upstream” (basic) 

research like developing new breeding 

methods and introducing new genetic 

diversity into breeding pools (Frey, 

1996). See Fuglie et al. (1996) for more 

information on the roles of the public 

and private sectors in agricultural 

research and development.

8Bayer reports $907 million in 

agricultural R&D by its CropScience 

division in 2009, while its Consumer 

Health division likely spent an additional $110 million on animal 

health R&D (Bayer, 2010). Monsanto 

reports total R&D spending of $1.1 

billion in 2009 (Monsanto, 2010), 

while Syngenta reports $960 million 

in agricultural R&D in the same year 

(Syngenta, 2010).

9This is not a precise estimate for 

developing countries, however, because 

the Asia-Pacific region includes Japan, 

South Korea, Australia, and New 

Zealand (high-income countries) while 

the Europe-Middle East-Africa region 

includes some developing countries. Figure 4

Global distribution of agricultural inputs sales in 2006

Note: Global distribution of sales of animal genetics is not available.

USDA, Economic Research Service. See Fuglie et al. (2011) for sources on specific industries.

Percent of global sales

Fertilizers

Animal feed

Animal health products

Farm machinery

Agricultural chemicals

Crop seed

0 20 40 60 80 100

NAFTA Europe-Middle East-Asia Latin America Asia-Pacific
22

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