Monsanto, the world's largest seed seller, is the target of a takeover bid from Bayer
Leah Douglas: Deal would further concentrate power in already highly consolidated industry
Editor’s Note: Leah Douglas is a reporter and policy analyst with the Open Markets program at New America. She is the editor of Food & Power, a resource on consolidation in the food system. Follow her @leahjdouglas. The views expressed are her own.
Bayer’s announcement that it intends to buy Monsanto, the world’s largest seed producer, shocked farmers and consumers alike. The deal could have a profound – and negative – effect.
Seed prices could rise for farmers, consumers could see more genetically engineered foods on supermarket shelves, and our global agricultural system could end up depending on just a few companies to meet a high percentage of the world’s agricultural needs.
In short, the $62 billion deal would further concentrate power in an already highly consolidated global seed and chemical industry.
It’s time for anti-trust regulators, who have been allowing mergers and acquisitions such as this for decades, to look closely at how allowing this merger could hurt farmers and the environment.
Bayer-Monsanto is the latest in a series of high-profile mega-mergers proposed in the agricultural industry. Dow Chemical’s planned merger with DuPont, and ChemChina’s acquisition of Syngenta are both under review by regulators. A merger between St. Louis-based Monsanto and Germany’s Bayer could further increase prices and limit options for farmers.
Even before these mergers were announced, the industry had been trimmed down to just six companies – Syngenta, Bayer, BASF, Dow, Monsanto and DuPont – that control 60% of commercial seed and more than 75% of agrochemical markets. If all of the mergers were approved, those top six dominant companies would shrink to four, with most power concentrated in just three.
Bayer’s and Monsanto’s catalogs of seeds and chemicals complement one another. Monsanto held a 26% market share of all seeds sold in 2011 to Bayer’s 3%. By contrast, Bayer dominates in agrochemicals, selling 17% of the world total, compared with Monsanto’s 7%. A joint Bayer-Monsanto would rival Syngenta to be the world’s largest agrochemical company, with annual revenue of more than $67 billion.
Monsanto has been widely criticized for its aggressive tactics to expand its reach in the farming sector. The company has bought up dozens of its competitors to become the largest supplier of genetically engineered seeds.
But as its market share has grown, seed prices have risen dramatically. The Organic Center, a nonprofit research center that studies the environmental effects of organic food and farming, estimates that genetically engineered seed costs about twice as much as conventional seed, and that the cost of them has risen more than 140% since 2001.
The Department of Justice spent three years on an antitrust investigation of the company’s practices but quietly closed the case in 2012 due to “marketplace developments,” according to a department spokeswoman.
As Monsanto has become dominant, it has become increasingly difficult for farmers to avoid becoming reliant on the company. Monsanto has used a variety of strategies to ensure farmers must return to the company each year to buy new seeds, a costly upfront expense in an industry historically reliant on saving seeds.
At one time, Monsanto achieved this by using sterile “terminator seeds,” which don’t produce viable seeds for replanting season to season. Today, Monsanto has been known to take legal action against farmers who attempt to save and replant the company’s seeds.
Other Monsanto seeds are genetically modified to work in tandem with Monsanto pesticides and herbicides. Farmers who plant these seeds must also invest in Monsanto’s chemical products, furthering their reliance on the company. If the Bayer acquisition is approved, these farmers may soon be financially dependent on a German chemical and pharmaceutical company most famous for its production of aspirin.
Monsanto’s dominance has also contributed to diminishing biodiversity in large-scale agricultural production. Today, Monsanto seed traits can be found in 80% of corn and more than 90% of soybeans grown in the United States. Planting vast acres of these identical crops alongside ample application of pesticides and other chemicals can deplete the soil’s structure and resilience, leading to runoff of pesticides and fertilizers into waterways.
Monsanto has already achieved even greater control of the seed marketplace through licensing agreements with competitors. DuPont agreed in 2013 to pay Monsanto $1.75 billion over 10 years for rights to its genetically modified, pesticide-resistant soybeans. Today, Monsanto’s exerts nearly total control over genetic traits for pesticide-resistant soybeans.
There are indications that Monsanto will try to resist the Bayer deal. Though Monsanto’s market value is about 35% below its peak in 2014, its recent attempt to buy Syngenta suggests it may fancy itself an acquirer rather than the target of an acquisition. And as recently as March, Monsanto had been exploring deals with the Germany company BASF, the third-largest agrochemical company in the world.
The recent involvement of the Department of Agriculture in reviewing the ChemChina-Syngenta deal suggests a growing awareness that consolidation in this sector poses dangers to the environment, to agriculture and the economy.
But without dramatic action from regulators, when the dust settles from this flurry of deal making, the seed and agrochemical sectors will be consolidated as never before. And farmers, consumers and the environment will pay the price.
Leah Douglas is a reporter and policy analyst with the Open Markets program at New America. She is the editor of Food & Power, a resource on consolidation in the food system. Follow her @leahjdouglas. The views expressed are her own.