Merger Fever

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If you follow ag news you must be aware of the high profile mergers and buyouts going on in agribusiness. After months of trying to sell itself or merge with another agribusiness company, Monsanto seems as if it is going to be snapped up by pharmaceutical giant, Bayer, so the German company can increase it’s ag presence. Bayer is already a major maker of pesticides and snapping up Monsanto would give it a significant presence in the GM seed market as well.

It is not a done deal by any means. It still has to be passed by antitrust regulators both here and in the EU. There seems to be considerable resistance to the merger in Germany and in the EU as a whole, and a lot of politicians over there have been making disapproving noises.

This isn’t the only big ag merger going on, either. Dupont and Dow Chemical are in the process of merging, with the details still a bit up in the air. Swiss company Syngenta, which Monsanto had attempted to cut a deal with earlier, is being snapped up by the China National Chemical corporation, which is owned by the Chinese government. All four of these companies are major players in the agricultural chemical industry. (ChemChina seems to be on a buying spree. Last year it bought Pirelli, the Italian tire maker)

Mergers, acquisitions, buyouts, etc. aren’t anything new, especially in the ag industry. It’s been going on for ages. And generally the results, at least for the farmers, aren’t pretty. Over the years we’ve seen virtually every small, independent co-op, feed processor, seed maker, machinery dealer and independent mechanic be bought up, forced out of business or merged into ever larger semi-monopolistic businesses. And while competition has dwindled, farmers have fewer choices of where to go to buy seed, fertilizer, feed, chemicals and equipment, prices have, of course, skyrocketed.

The problem with all of these mergers is that they don’t seem to benefit anyone except a handful of investors, lawyers and, of course, the upper management of the companies themselves. They certainly don’t benefit the consumers, that is the farmers and you, the people who buy the milk, cheese, eggs, meat, vegetables and fruit that the farmers produce.

We used to plant 30 to 40 different types of soybeans in the US. Today, 90% of all the soybeans planted in the US are a single variety, produced by Monsanto. The fact that Monsanto has a literal monopoly on soybean seed isn’t the only problem with the situation. It’s the fact that we could be facing a very serious biological crisis. If a new disease pops up that this one variety of bean is susceptible to, the entire US soybean crop could be jeopardized because of this lack of genetic diversity. These monopolies have resulted in such a lack of genetic diversity in our agricultural systems that many of them now lack the genetic diversity to be sustained if a disease strikes them.

What these companies try to do, want to do, is lock farmers into a specific “system” of agriculture. You buy a specific type of seed to plant. That plant comes along with a specific program of herbicide and pesticide control systems, also sold by the company. Farmers do it because it’s easy. Sort of one stop shopping. They get everything they need from one vendor. And generally these systems are profitable.

At least at first. What generally happens is the company starts to get greedy. After releasing the system at a relatively decent price, the company starts ratcheting the price up once farmers get hooked into it. Prices go up until farmers realize the system isn’t all that profitable any longer. But by that time, well, they have such a heavy investment in the system they can’t really get out of it any more. Besides, where else are they going to go because the company has driven all of it’s competition out of business.

Farmers who want an alternative have enormous trouble even trying to find one. These semi-monopolies claim there is still a lot of competition out there. And it’s true that there are some competitors. But not many, and even fewer who could provide large scale farmers with the quantity of seed they need at a price they can afford to pay.

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