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In the face of food shortages it has never been more important to protect our crops from the elements. Rachel Robson gets a taste for the biotech companies who will help feed the world

Earlier this month world leaders assembled in Rome at a United Nations summit to discuss potential causes and solutions to the current global food crisis.

It is a topic which is has been pushed to the forefront of current affairs and one that needs to be solved imminently as a shortage of food supplies continues to push up food prices, placing more and more lives at risk.

The finger of blame for soaring prices has largely been pointed towards biofuels, with farm land that was previously earmarked for food production now being used for biofuel crops.

When biofuels were initially introduced, they were given a big thumbs up because they were deemed as a way to tackle ongoing environmental concerns. But almost overnight it seems, biofuels have been turned into public enemy number one, meaning that biofuel stocks such as Renewable Power & Light, Renova Energy and D1 Oils have been hit hard.

The problem is that the likelihood of growing enough crops for renewable energy as well as enough crops for to meet the rising demand for food is pretty slim. With the world population expected to grow by 1.7 billion to more than eight billion over the next 25 years, there will be a lot more mouths to feed, placing even more pressure on food supplies.

Biofuel fallout

As well as being accused of pushing up food prices, biofuels have also been criticised because they may not be as much of a benefit to the environment as has previously been claimed. For a start, fertilisers are still required to help the crops grow, and secondly many tropical rainforests have been cleared to make room for additional land on which to grow the crops. Deforestation only adds to the world’s greenhouse gas emissions and as a result, stripping away rainforests for this reason may be doing more harm than good.

There has been some debate as to how fair the assumption that biofuels are to blame is, however, with other suggestions for the cause including rising energy costs. On top of this is the issue of climate change. Most recently, here in the UK, experts have warned that as a result of an exceptional cold snap in Spain earlier this year, which wiped out most of its harvest of lemons, and cold weather in Argentina, Britain could be facing a lemon shortage. The price of a lemon now varies from 28p to 32p in the supermarket, compared with only 19p to 21p last year and experts warn that by August the shelves could be empty of lemons.

Extreme weather is becoming an increasing problem, with scientists reckoning that global warming is likely to boost the number of dry spells we experience over coming years, placing even greater strain on crops. Food supplies have already been hampered by drought in some parts of the world such as Australia, and this means that water supplies will also come under far greater pressure as the years go by.

So how can these issues be solved? Some experts believe that technology may hold the answer. This is not to say that one single technology will conquer the world and save the day, however, but rather that variety could be key. ‘In my view, there isn’t one magic bullet,’ says Nomura Code’s Dr Chris Redhead, adding that ‘there are a number of different approaches which may all have a role to play.’

A range of companies in the agro-biotechnology sector are currently working towards solutions for enhancing crop protection and increasing yields. Large companies such as Switzerland’s Syngenta, Monsanto in the US, and German pharmaceuticals giant Bayer, for example, have all developed crop protection products and seed technology, including genetically modified seed.

GM crops can be highly valuable to farmers and they certainly have a part to play in helping to increase food supplies. However, there is still a degree of scepticism surrounding the safety of GM foods. Some people are concerned that through modifying genes, new proteins will be introduced to human and animal food chains which could potentially lead to health problems.

One example of GM crops are those that are resistant to herbicides which have the power to kill off all other plants in the surrounding area. This enables farmers to spray the land to get rid of unwanted weeds without harming the GM crop itself. But while fewer herbicides may be required overall in this process, it is still potentially damaging to the environment and local wildlife.

Another type of GM crops are those that are modified to become resistant to insects. This is done through producing a toxin that kills those insects that feed on the crop. Unsurprisingly, this also has problems. Redhead points out that over time, insects can still develop their own resistance to these toxins. ‘If insects develop a resistance to it, it is relatively difficult to develop new strains,’ he says. If a new commercial strain is to be developed, it will take a long time.

Despite this, some experts reckon that more countries will be forced to embrace GM technology over the next few years on the back of food shortages and starving populations. With many Asian states depending upon rice supplies in order to survive, they may have no other option than to accept GM technology. In addition, some companies, such as Belgium-based Devgen, are developing a more efficient way of creating insect-resistant crops.

Devgen develops proprietary innovative biotech trait technologies, some of which have been licensed to Monsanto for commercialisation in its crops of interest. The group is also implementing its strategy to become an important player in rice, sorghum, pearl millet and sunflower, with a geographic focus on India. Thus, over time, GM could have even more answers and an even bigger role to play.

A healthy alternative

But what are some of the alternatives? So-called ‘natural’ products could be another solution to helping boost crop production. A handful of smaller companies are focused on developing such technologies and are set to help farmers in their struggle to fight against problems such as temperature, salinity, drought and light.

Plant Health Care which floated in 2004 has seen its shares rocket from 55.5p back then to their current 390p. The group offers biologically based products to improve the health and yield of major field crops such as corn, soybeans, cotton, rice and tobacco, alongside specialty crops such as fruits, vegetables and citrus. Many of its products feature the Harp-N-Tek technology which uses Harpin Protein. This causes the plant to believe it is being attacked by pathogens, and therefore the plant triggers natural defences, helping to boost yield. Plant Health Care’s Myconate seed treatment applications, meanwhile, help to boost the rate of plant root colonisation by beneficial fungi which extract nutrients from the soil to benefit the plant. This in turn means the plant can grow more quickly and with greater resistance to disease.

ProAct, for example, is a Plant Health Regulator product based on Harp-N-Tek and when applied to rice, the harpin protein active ingredient binds to harpin receptors on the plant. Receptors respond to the harpin as if it was a pathogen, and this reaction initiates a plant response that turns on rice’s own intrinsic growth and stress-defence capabilities. ProAct activates growth mechanisms that lead to improved plant vigour, increased plant stamina, and healthier plants which reinforce the plant’s ability to generate growth and stress-defence responses. ProAct has been shown to increase rice yield by six bushels per acre.

Philip Sparks at house broker Evolution Securities is bullish about the outlook for Plant Health Care, believing that ‘the higher food prices go, the more cost-effective Plant Health Care’s products become.’ Plant Health Care also has the backing of Monsanto and Bayer, and Sparks believes that ‘based on the Harpin roll-out projections from Monsanto and our Myconate forecasts for Bayer, Plant Health Care could conceivably deliver $40 million of annual earnings by 2012.’ Sparks concludes that ‘while 2007 was the year of validation for Plant Health Care, 2008 could be the year that soaring food prices boost the shares to record highs.’

Different strategies

Whereas Plant Health Care’s technologies focus on methods to help crops develop more defensive characteristics, other companies are focused on developing natural repellents and pesticides.

TyraTech, for example, which has already secured the backing of large multinational corporations such as Syngenta, Kraft and Arysta LifeScience, is focused on powerful natural technology to effectively, and safely control insects and parasites. One of the company’s advantages is that its technology can be applied to a range of sectors such as consumer home, lawn and garden; agriculture and horticulture; institutional (hospitality and food service businesses, hospitals, governmental institutions, etc); vector control (such as malaria-bearing mosquitoes); human and animal health.

TyraTech’s platform brings many of the principles of drug discovery and development to the fields of insecticides and parasiticides. By targeting specific chemoreceptors that are found in invertebrates but not in humans and animals, TyraTech can produce products that use natural plant derived compounds targeting these receptors. The main source of the natural materials used in TyraTech products are plant essential oils. These oils are naturally occurring chemicals which have evolved for plant defence against invertebrate attackers, and which can act as insecticides or repellents.

TyraTech’s Sustainable Solutions Division has solved several problems for both horticulture and dairy farms through developing environmentally friendly products with dairy waste. These fall into several categories – Nature’s Natural, which is a soil amendment or substitute for Sphagnum peat moss; Natural Blend, which is Nature’s Natural with TyraTech natural insecticides to knock-down and repel soil based common insects and pests; WasteSolver, a patent pending unit used to separate and compost manure; and Natural Bedding, which is Nature’s Natural used for bedding on the dairy farm.

There are many benefits to these technologies. Natural Blend, for example, is a natural replacement for methyl bromide, which, although banned globally, is currently temporally exempted until next year in the US. Developing products that do not damage the environment, or pose health concerns, is important considering rules surrounding the use of chemical pesticides and fertilisers are becoming stricter. Redhead points to the fact that the threshold is becoming much lower in terms of the level of pesticide residue permitted on fruit and vegetables. As a result, technologies such as those used by TyraTech could help to overcome the barriers to entry for imports/exports.

Winning where GM can’t

Plant Impact has also developed a range of natural technologies such as its PiNT technology which is a yield maximiser. PiNT is a unique controlled nitrogen release technology that promotes improved growth habit and vigour. The technology slows the natural breakdown of desirable amine and ammonium nitrogen to undesirable nitrate and minimises leaching. ‘The nitrogen stays on the plant and doesn’t run off,’ says chief executive Peter Blezard. As a result, the soil is enhanced and the quality and yield of the plant improves, reducing the need for pesticides and fertilisers. Plant Impact is the only company in the world with such technology.

The company’s CaT technology also holds potential. This is a calcium absorption aid which in trials has been found to deliver calcium to the plant up to 50 times more effectively than traditional calcium products and with fewer applications and less input.

In addition, Plant Impact has its own benign insecticide/miticide based on plant extracts and essential oils called BugOil. Highlighting the potential for the product, Blezard points out that there is currently a scarcity of raw materials to make chemical-based fertilisers, and as a result food prices are likely to continue rising. This means Plant Impact’s natural-based product could easily tap into this market.

BugOil is the only unregistered product Plant Impact has, but Blezard says the company is in the process of submitting the registration dossier to the Pesticide Safety Directorate so that it can be distributed in Europe. This organisation supports the UK and EU reviews of the safety of pesticides on the market. In most cases, the granting of registration can take a long time, but the PSD has promised to fast track and grant Plant Impact’s registration in 12 months. The company is also submitting BugOil to the US EPA for registration.

However, the use of plant oils can equally have its problems. Redhead points out that many companies have claimed they have great technology using plant oils, but in fact they often don’t work. ‘There is now a lot of cynicism from farmers and agchem companies,’ says Redhead. ‘BugOil might work but it has got to get above the noise created by products that don’t work.’ This means that Plant Impact ideally needs to clinch a deal with a larger company in order to differentiate itself and get itself heard. This is something the company is working on and if it gains registration it is more than likely that a number of companies will want to distribute the product across the world. Most recently the company signed an exclusive agreement with DVA Agro, a global crop protection business, to distribute BugOil in Tanzania, East Africa.

Although it can be a challenge, getting products noticed is possible, as Plant Health Care has demonstrated with its Harpin Technology which it acquired from Eden Bioscience in February 2007. Redhead points out that Eden had difficulty positioning the technology but Plant Health Care successfully repositioned it, and got Monsanto onside, giving the product the catalyst it needed.

Combining approaches

Overall, a combination of technologies could be key to improving the current food situation. Redhead believes more natural technologies are likely to be better suited to the horticulture industry because pesticide residue is more of an issue in this market. ‘The resistance to GM will be in crops that we eat directly,’ says Redhead, who suggests that GM technology is therefore likely to be more suited to row crops.

Ultimately the larger companies such as Monsanto are set to be the big winners due to the powerful position they are in. With production coming down to only a few multinational corporations, there are some concerns that they will end up having far too much control over global food production. That’s not to say that the smaller firms with niche technologies and strong patent protection won’t get some of the attention – they are still an attractive investment. Of course let’s not forget that eventually these smaller firms may get snapped up by the more dominant players in the market.

30 second Plant Impact (PIM:AIM)

• Floated on Aim in October 2006

• Market cap of £11.8 million

• Concerned with solving the problems of abiotic stress in crops

• In process of obtaining UK and US registration for BugOil

• Looking to collaborate with larger companies such as fertiliser firms

30 second Plant Health Care (PHC:AIM)

• Floated on Aim in 2004

• Market cap of £177.4 million

• Clinched deals with Bayer and Monsanto

• Main technologies include Harp N-Tek and Myconate seed treatment

• First Myconate-based Bayer product expected to be launched by 2010

• Monsanto believes that Harpin products could be available to growers by next year

30 second TyraTech (TYR)

• Created by XL TechGroup in May 2004

• Floated on Aim in June 2007

• Market value of £88.6 million

• Developing a range of pesticides using natural active ingredients

• Has signed deals with Syngenta, Kraft and Arysta LifeScience

• Launched its Crawling Insect Spray and its Sustainable Solutions business last year

Food crisis: potential and pitfalls

Winners

• ‘Natural’ technology companies

• GM producers

• Companies focused on water conservation and/or efficiency, such as Qonnectis

• Chemical fertiliser producers due to higher demand

• Farmers if they earn more money for their efforts

Losers

• Biofuel producers

• Supermarkets if margins are squeezed due to rising food prices

• Consumers absorbing rising food prices

•Chemical fertiliser producers if residue restrictions become tighter

WHO ARE THEY?

Monsanto (MON:NYSE)

• Agricultural company which was first incorporated as a subsidiary of Pharmacia in 2000, and then spun off as a separate company in 2002. Structured into two divisions – seeds and genomics, and agricultural productivity.

• Produces leading seed brands in large-acre crops like corn, cotton and oilseeds (soybeans and canola), as well as small-acre crops such as vegetables.

• Also produces in-the-seed trait technologies for farmers that are aimed at protecting their yield and reducing costs.

•Manufactures herbicides used by farmers, consumers and lawn-and-garden professionals.

Bayer (BAY:DAX)

• The general partnership ‘Friedr. Bayer et comp.’ was founded on 1 August, 1863.

• Bayer is a global enterprise with core competencies in the fields of health care, nutrition and high-tech materials.

• Bayer CropScience focuses on crop protection, non agricultural pest-control (environmental science), seeds and plant biotechnology (bioscience).

• Crop protection activities are focused on four fields: herbicides, insecticides, fungicides and seed treatment.

• Environmental science offers solutions to control pests.

• Bioscience uses plant biotechnology and modern plant breeding

techniques to improve the quality of crops and vegetables.

Syngenta (SYNN:Zurich)

• Created in 2000 but stems from an industrial tradition going back almost 250 years

• Headquartered in Basel, Switzerland.

• Provides two main types of products: seeds and crop protection.

• Listed on Swiss Stock Exchange (SYNN) and New York Stock Exchange (SYT).

• Ranks third in the high-value commercial seeds market.

• Employs over 21,000 people in more than 90 countries.