Texas Agriculture October 7, 2016 : Page10

What impact will ag mergers have on farmers, ranchers? By Shala Watson Staff Writer Sluggish markets and tight mar-gins face farmers and ranchers. And those market forces have also impact-ed seed and pesticide companies, lead-ing to several mergers. The most recent proposed merger, the $66 billion Bayer-Monsanto deal, could potentially create the world’s largest crop protection and seed com-pany in the world. This acquisition is only the latest in the agricultural consolidation wave that’s sweeping across the agribusiness realm. “I absolutely believe there is a new wave of technology that is going to hit agriculture driven by data science and integrated solutions that’s going to help us meet the challenges going forward,” Brett Begemann, Monsan-to’s president and chief operating offi-cer, told the Texas Farm Bureau board of directors at a Sept. 27 meeting in St. Louis. “To me, I believe this drives the next wave of innovation faster. At the end of the day, that’s what we have to help them do is increase their pro-ductivity and do it in a cost-effective way for them to continue to be profit-able.” The two companies say the pro-posed deal, which is still subject to regulatory approval in Germany and the U.S., will help agriculture and feed an expanding population sustainably. “There are huge layers of data that just weren’t accessible to us in previ-ous years. Now we can use [the data] to help farmers to make better deci-sions,” Begemann said. “Not that they were making bad ones, we just need to make better ones to drive productiv-ity and efficiency. I think that’s really going to happen in the next five to 10 years.” But farmers are concerned that the wave in agricultural mergers will re-duce competition and stifle innovation in agriculture. The Agricultural and Food Policy Center at Texas A&M University con-ducted a study to show the potential impact agribusiness mergers would have on market share and farmers. The companies were going to look to rationalize to find some partnerships that they could set up to kind of roll forward and that’s certainly what’s going on,” Young said. “I think it also probably made some sense, given where our technology sits today, for a chemical company to say let’s go talk to a genetics company.” He also noted AFBF has received assurances from all parties involved that they fully intend to continue to provide research and development funds, at least at the level they are now. “So it won’t surprise me to actually see a bump in the research and devel-opment budget for Bayer-Monsanto or a bump in the research and develop-ment budget for Dow-DuPont.” Five of the six largest seed and ag-rochemical companies currently are involved, or engaged, in merger and acquisition discussions. ChemChina is planning to purchase Syngenta. Last December, Dow Chemical Co. and DuPont agreed to merge, and the Bayer-Monsanto deal of this year. With the proposed mergers, these top companies could control about two-thirds of the entire global seed and pesticide markets. The Senate Judiciary Committee held a hearing Sept. 20 to look at the impacts of the consolidation trend in seed and chemical industries. Wit-nesses who represented the compa-nies involved, along with commodity groups and organizations like AFBF and National Corn Growers Asso-ciation (NCGA), were present to give their varying perspectives on the mergers. “In addition to the transactions in-volving five of the ‘Big 6’ in the seed and agrochemical industry, two Ca-nadian companies—Potash Corp. and Agrium—announced they were merging to create the largest fertil-izer company in the world,” Senator Chuck Grassley said in the opening statement prior to the Senate Judi-ciary Committee hearing. “To me, it looks like this consolidation wave has become a tsunami.” 10 According to the study, the chang-es in market concentration resulting from the mergers meet criteria “that the Department of Justice and Feder-al Trade Commission would consider them ‘likely to enhance market power’ in the seed markets for corn and cot-ton.” The study revealed significantly higher seed prices for farmers could result from the mergers, particularly for cotton growers. Based on these findings, more stud-ies should be done to evaluate the im-pact on other production inputs from the proposed merger of these large suppliers. “Farmers and ranchers, in particu-lar, are interested in how these deals will impact research and development budgets for companies like Bayer and Monsanto,” Bob Young, Ameri-can Farm Bureau Federation (AFBF) chief economist, said in a statement. “We depend on access to enhanced technology and would hate to see ag-ricultural innovation suffer at the cost of business decisions.” Young said farmers and ranchers understand the wave of agricultural mergers is the result of market forces such as low commodity prices and the economic climate. “Well, I think when you look at what’s been going on in the ag sector, what’s been going on at the farm and farm income levels, it’s not at all sur-O CTOBER 7 , 2016 Monsanto Company Pr esident and Chief Operating Officer Brett Begemann discussed his company’s proposed merger with Bayer at a recent meeting with the Texas Farm Bureau board of directors in St. Louis. prising,” Young told the Texas Farm Bureau Radio Network. Bayer’s final offer accepted last month concluded months of negotia-tions. “I think it’s perfectly understand-able that again as the ag economy has slowed down from some of those heydays we had in 2011 and 2012.

What Impact Will Ag Mergers Have on Farmers, Ranchers?

Shala Watson

Sluggish markets and tight margins face farmers and ranchers. And those market forces have also impacted seed and pesticide companies, leading to several mergers.

The most recent proposed merger, the $66 billion Bayer-Monsanto deal, could potentially create the world’s largest crop protection and seed company in the world. This acquisition is only the latest in the agricultural consolidation wave that’s sweeping across the agribusiness realm.

“I absolutely believe there is a new wave of technology that is going to hit agriculture driven by data science and integrated solutions that’s going to help us meet the challenges going forward,” Brett Begemann, Monsanto’s president and chief operating officer, told the Texas Farm Bureau board of directors at a Sept. 27 meeting in St. Louis. “To me, I believe this drives the next wave of innovation faster. At the end of the day, that’s what we have to help them do is increase their productivity and do it in a cost-effective way for them to continue to be profitable.”

The two companies say the proposed deal, which is still subject to regulatory approval in Germany and the U.S., will help agriculture and feed an expanding population sustainably.

“There are huge layers of data that just weren’t accessible to us in previous years. Now we can use [the data] to help farmers to make better decisions,” Begemann said. “Not that they were making bad ones, we just need to make better ones to drive productivity and efficiency. I think that’s really going to happen in the next five to 10 years.”

But farmers are concerned that the wave in agricultural mergers will reduce competition and stifle innovation in agriculture.

The Agricultural and Food Policy Center at Texas A&M University conducted a study to show the potential impact agribusiness mergers would have on market share and farmers.

According to the study, the changes in market concentration resulting from the mergers meet criteria “that the Department of Justice and Federal Trade Commission would consider them ‘likely to enhance market power’ in the seed markets for corn and cotton.”

The study revealed significantly higher seed prices for farmers could result from the mergers, particularly for cotton growers.

Based on these findings, more studies should be done to evaluate the impact on other production inputs from the proposed merger of these large suppliers.

“Farmers and ranchers, in particular, are interested in how these deals will impact research and development budgets for companies like Bayer and Monsanto,” Bob Young, American Farm Bureau Federation (AFBF) chief economist, said in a statement. “We depend on access to enhanced technology and would hate to see agricultural innovation suffer at the cost of business decisions.”

Young said farmers and ranchers understand the wave of agricultural mergers is the result of market forces such as low commodity prices and the economic climate.

“Well, I think when you look at what’s been going on in the ag sector, what’s been going on at the farm and farm income levels, it’s not at all surprising,” Young told the Texas Farm Bureau Radio Network.

Bayer’s final offer accepted last month concluded months of negotiations.

“I think it’s perfectly understandable that again as the ag economy has slowed down from some of those heydays we had in 2011 and 2012. The companies were going to look to rationalize to find some partnerships that they could set up to kind of roll forward and that’s certainly what’s going on,” Young said. “I think it also probably made some sense, given where our technology sits today, for a chemical company to say let’s go talk to a genetics company.”

He also noted AFBF has received assurances from all parties involved that they fully intend to continue to provide research and development funds, at least at the level they are now.

“So it won’t surprise me to actually see a bump in the research and development budget for Bayer-Monsanto or a bump in the research and development budget for Dow-DuPont.”

Five of the six largest seed and agrochemical companies currently are involved, or engaged, in merger and acquisition discussions. ChemChina is planning to purchase Syngenta. Last December, Dow Chemical Co. and DuPont agreed to merge, and the Bayer-Monsanto deal of this year.

With the proposed mergers, these top companies could control about two-thirds of the entire global seed and pesticide markets.

The Senate Judiciary Committee held a hearing Sept. 20 to look at the impacts of the consolidation trend in seed and chemical industries. Witnesses who represented the companies involved, along with commodity groups and organizations like AFBF and National Corn Growers Association (NCGA), were present to give their varying perspectives on the mergers.

“In addition to the transactions involving five of the ‘Big 6’ in the seed and agrochemical industry, two Canadian companies—Potash Corp. and Agrium—announced they were merging to create the largest fertilizer company in the world,” Senator Chuck Grassley said in the opening statement prior to the Senate Judiciary Committee hearing. “To me, it looks like this consolidation wave has become a tsunami.”

Read the full article at http://texasagriculture.texasfarmbureau.org/article/What+Impact+Will+Ag+Mergers+Have+on+Farmers%2C+Ranchers%3F/2611051/347263/article.html.

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