Vilmorin & Cie - Annual report 2017-2018

PRESENTATION of Vilmorin & Cie 1 ANNUAL REPORT Vilmorin & Cie 18 2017-2018 The field seeds market in Europe The European market is dominated by corn, straw cereals (wheat, barley), and by rapeseed and sunflower. It has experienced varying trends depending on the crop, and has been disturbed by an unfavorable global environment since fiscal year 2013-2014. Due in particular to the impact of the low prices for agricultural production, the drop in cultivated acreage for corn concerned most countries during fiscal year 2017-2018, whereas sunflower acreage increased slightly over the same period in greater Europe, driven by the increase in acreage in Ukraine and Russia. Marginal acreage of GM* crops Growing, selling and importing genetically modified plants are subject to European directives and regulations. To date, only one GM* variety (MON810 corn) is authorized for growing and selling in the European Union, whereas more than fifty types of transgenic corn, soybean, cotton and canola, including combinations, are authorized for import, mainly for animal feed. Certain member states have nevertheless decided to suspend authorization to grow MON810 corn, triggering different clauses provided in European regulations. This is specifically the case of France, Germany, Italy, Hungary, Austria and Greece. A procedure allowing member states to prohibit the cultivation for commercial purposes of transgenic plants in their country was adopted in March 2015 (directive 2015/412) by the Parliament and the Council; it offers greater liberty and a seemingly wider legal base to prohibit such cultivation. Consequently, GM* varieties were only marginally grown in Europe in 2017 with about 132,000 hectares (mainly in Spain and Portugal). Down by 4% this past year, they remain modest on a world scale, and represent much less than 1% of world acreage (Source: ISAAA 2018) . The market for corn seeds in North America Cultivated corn acreage in the United States recorded a drop this year of 1% (Source: USDA 2018) , covering more than 36 million hectares. At the same time, acreage planted with soybean also decreased slightly (-1%), reaching 36 million hectares. The predominant position of genetically modified plants Representing 40% of the world acreage for all crops combined (Source: ISAAA 2018) , the United States is by far the biggest producer of genetically modified plants. Today they cover 93% of cultivated acreage in corn. Varieties stacking several resistance traits* represent a significant share of the market, estimated to be 80% of GM* corn acreage (Source: USDA 2018) . Genetically modified seeds enable farmers to reduce their running costs significantly, for example agrochemical treatment, while guaranteeing a much more abundant harvest. They are therefore sold at a significantly higher price than conventional seeds. Agrofuels, a significant outlet for corn production As of 2000, corn production in the United States was stimulated by agrofuels. High demand from bioethanol factories in particular was behind the strong increase in corn acreage. A large proportion of the use of corn in the United States is intended for this market: in 2017-2018, it stood at 38%. Acreage 17-18 Evolution over 1 year Total corn 13.1 -3% > Grain corn 7.3 -5% > Forage corn 5.8 +1% Soft wheat 23.0 -1.5% Sunflower 3.9  1) -7% (1) Rapeseed 6.2 +1% Source: internal estimates. (1) Sunflower acreage in greater Europe reached 20 million hectares in 2018 (+2% compared to the previous year), with Ukraine and Russia representing 14 million hectares. Evolution of cultivated acreage in the European Union 28 (in millions of hectares) Evolution of the acreage of genetically modified corn in the United States (as a %) Traits* for insect resistance Traits* for herbicide tolerance Stacked traits * Source: ISAAA 2018. 100 90 80 70 60 50 40 30 20 10 0 2001 20022003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201320142015 2016 20172018 1.3. The seed market