Seeds and agrochemical business to be in hands of three mega-firms
Something is happening in the agri-food industry: six of the biggest worldwide companies have decided to merge in pairs at once. Last July, Dow Chemical and DuPont made the announcement of their 59$ million merger. One month later, in August, China National Chemical Corp. received a thumbs up by U.S. authorities to acquire Swiss company Syngenta. Finally, after several months of negotiations, Bayer confirmed $66 billion takeover of Monsanto, setting an unprecedent offer.
These are the agreements that companies have reached themselves. In order to make them effective they need to be cleared by the relevant U.S., European and global antitrust and regulatory agencies.
The massive implications that the mergers of these six companies could have in the agro-alimentary realm is already worrying some sectors. For instance, around 100 French chefs have written a letter expressing their concerns about their possible consequences. In the same vein, Iowa Republican Senator Chuck Grassley called a hearing in September 20 to discuss on the consolidation of the U.S. agrochemical industry. Representatives of 5 out of the 6 alluded firms attended the meeting, along with antitrust officers and farmers and growers unions spokermen.
"We know farmers are under tremendous financial pressure. And I know firsthand that seed costs have gone up exponentially over the last several decades. [...] Farmers don’t have the ability to simply raise the price of their crops when they sell them to pass on higher input costs" stated Senator Grassley before the panel. "I’ve been concerned about vertical integration in agriculture where companies own the entire process – from conception to consumer. [...] I’m concerned that further consolidation will diminish critical research and development initiatives which drive innovation and technological advances for the agricultural sector".
Their fears are that the mergers result in a raise on the prices of pesticides and seeds, a fall in biodiversity and a chain of health issues in the worldwide population derived from the abusive consumption of GMOs.
On the other hand, all the firms involved in the mergers are sharing the same vision. Robert T. Fraley, Monsanto's representative, highlighted that "these advances are urgently needed to address major challenges facing society, as we must feed 10 billion people by 2050, mitigate the impact of climate change, improve sustainability to produce more with less and help increase the efficiency and productivity of farmers".
The truth is that the merger between Bayer and Monsanto will unavoidable have to face social pressure and criticism. The name of the latter, Monsanto, has been dragging a bad reputation for decades , and it is generally associated to unethical practices contained in many explicit documentaries and websites. The operation has already been called "a marriage made in hell" and "the Frankestein merger", so now Bayer will have to deal with these image issues and clear its brand as much as possible.
The German firm has already set things in motion. Advancingtogether.com is a new website with information and FAQs, set up to accomplish with the rebranding of both companies while the regulatory bodies take a decision on the corporate takeover.
If everything goes as Bayer and Monsanto expect, it could take over one year to make effective the operation, the time that U.S and Europe need to review its terms and consequences. For the time being, the Justice Department is in charge of the Dow-DuPont merger, whereas the Federal Trade Commission is reviewing the one between China National Chemical Corp and Syngenta. Bayer-Monsanto is still pending a regulatory body to be assigned, but it seems that this is going to be a big litmus test for the winner party of the incoming U.S. elections, especially if it was the Democrats. They would have to possition themselves between the pressure of farmers and society and the weight of the industry.
Six of the biggest firms in seeds and agrochemical industry are arranging mergers:
- Dow Chemical and DuPont.
- China National Chemical Corp. and Syngenta.
- Bayer and Monsanto.
Opponents say that this will increase the prices, and affect biodiversity and human health due to the growth of GMOs in food; supporters, that it will help to tackle the challenge of feeding growing population, improve sustainability and increase the productivity of farmers.
The mergers must be now scrutinised by European and U.S. regulatory and antitrust bodies. In the case of the U.S., it will be done under the new U.S. Government forming after November elections.