Since World War II, the U.S. food supply has come from a network of fewer but larger farms. And the groups representing those highly mechanized operations told the Senate Judiciary Committee that they could accept, with sufficient safeguards, mergers that would convert the six largest seed and agricultural chemical companies into a “big three.”
They took a somewhat more sanguine view than Judiciary chairman Charles Grassley, who said the wave of mergers “has become a tsunami” that will transform the industry. The Judiciary Committee heard from executives from Dow, DuPont, Bayer, Monsanto and Syngenta and farm-group leaders, while the government conducts antitrust review of the mergers. “The bottom line is that our industry is undergoing a healthy and sorely needed transformation,” said chief technology officer Robb Fraley of Monsanto. “This type of change enables more innovation and delivers better products to the farm even faster.”
“Strong competition can result from having several evenly-matched companies fighting for market share within the seed, chemistry and trait development markets,” said Christopher Novak, chief executive of the National Corn Growers Association. “The combination of resources that results from a consolidation may provide farmers with better access to the technology.”
Bob Young, chief economist of the American Farm Bureau Federation, the largest U.S. farm group, said “we are better served as an industry” with at least two titans competing for sales than a market dominated by one behemoth. “As plant genetics technology is ever more connected to the chemistry, there appears to be some real benefits in having a chemical company combine with one more focused on crop genetics,” said Young, pointing to the proposed Dow-DuPont and Bayer-Monsanto unions.
Besides those deals, state-owned ChemChina is acquiring Swiss-based Syngenta, a seed and chemical company active in U.S. sales and research. Two Canadian companies, Agrium and Potash Corp, are combining into the world’s largest fertilizer company.
Key to the mergers, said Young and Novak, is continued high investment into research and innovation. “These agribusiness research investments are vital to the future of food production,” said Novak, who spoke on behalf of NCGA and the American Soybean Association. Young said merger partners have assured AFBF they will not cut research funding. “These are just words to a certain extent,” he said, but they also represent a company’s best self interest.
The National Farmers Union was critical of the mergers and said it was inevitable that new giant companies would raise prices, narrow their product lines and scale back on research. “Increased consolidation in the sector puts family farmers and their communities in jeopardy,” said NFU president Roger Johnson. The American Antitrust Institute raised similar objections.
To watch a video of the Judiciary Committee hearing or to read testimony by witnesses, click here.
Bayer is considering an elimination of Monsanto’s name if the $66 billion merger of the two companies goes forward, said Bloomberg. The news agency quoted Monsanto chief executive Hugh Grant as saying, “I’ve been very flexible. The key is less about the name and more about the products developed.” Monsanto was a pioneer in agricultural biotechnology and has become a symbol for many activists of every flaw in modern agriculture. Rumors of the demise of the company name surfaced soon after the companies announced their merger.