Six of the world’s largest agricultural firms, those that control seed patents, produce pesticides and fertilizers and effectively dominate the worlds agricultural output are about to become three. Dow Chemical, Monsanto, Syngenta, Du Pont, Bayer and ChemChina have deals to absorb each other, further consolidating the industry and firming up their strangle hold on farmers and the means of production.
Of great concern to regulators and the agriculture industry alike is that the industry is already very much consolidated and with these three mergers the resulting companies will control over 60% of the global pesticide industry. Because of a desperate need for biodiversity and variety of crops in the agricultural industry, any reduction in the ranging of seeds or pesticides available will be a huge risk to the security of the global food supply. A further issue is that these companies are not all financially healthy either meaning we will inevitably see a great number of redundancies, loss of facilities and reduction of R&D budgets as they attempt to use the mergers to make efficiencies and recover.
The agricultural industry has already undergone huge consolidation and none of this is new to the industry, these are merely the peaks following many years of buyouts and mergers. For instance in 1996, 600 independent seed companies existed in the agricultural market and the majority was absorbed as part of mergers and takeovers up to the present day creating the giants that dominate the global industry today.
A further concerning aspect of these recent merger propositions is that the players themselves have been in poor financial health recently. With the exception of Bayer, the rest have failed to grow revenues for at least two years in a row 2015 & 2016. What this suggests is that the players are attempting to consolidate in order to provide an opportunity to recover their financial health and make efficiencies in the process.
Current business models are designed around seed and crop protection solutions working together and they use practices which encourage farmers over time to become reliant on patented seed and herbicide and pesticide solutions. Where farmers would previously use their own saved seeds from the year previous to grow a crop, the current business model encourages farmers to buy patented and genetically altered seed varieties that have to be bought and re bought year after year by the farmer, locking them into the seed buying process.
It is unlikely that any of these deals will be stopped by regulators before completion as previous mega mergers of this kind do tend to get approved in the long run, with some concessions and forced sales of assets usually deemed necessary by the regulator. If that is the case, it will be a concerning blow for an agriculture industry that is already very highly consolidated and facing multiple pressures and difficulties.
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