In a move that should chill the hearts of farmers across the globe, the two leading manufacturers of pesticides and herbicides, as well as dozens of GMO crops, are merging, with German-based Bayer taking over the U.S. giant Monsanto.
The takeover is the largest corporate consolidation of the year, and is certain to face critical scrutiny from governments and NGOs.
From Deutsche Welle:
After four months of public negotiations, US seed and weedkiller maker Monsanto agreed on Wednesday to be bought by German drug and farm chemical company Bayer.
The $128-a-share deal, up from Bayer’s previous offer of $127.50 a share, has emerged as the signature deal in a consolidation race that has roiled the agribusiness sector in recent years, due to shifting weather patterns, intense competition in grain exports and a souring global farm economy.
“Bayer’s competitors are merging, so not doing this deal would mean having a competitive disadvantage,” said fund manager Markus Manns of Union Investment, one of Bayer’s top 12 investors.
Grain prices are hovering near their lowest levels in years amid a global supply glut, and farm incomes have plunged.
“The combination with Monsanto represents the kind of revolutionary approach to agriculture that will be needed to sustainably feed the world,” Bayer chief executive Werner Baumann told investors in a conference call.
As Brad Plummer notes in a critical commentary for Vox:
That would put the new firm in a commanding position vis-à-vis our food supply. Which is why European Union regulators and the US Department of Justice are likely to scrutinize this deal more closely than usual, to make sure it doesn’t create an all-consuming monopoly that can crank up prices on farmers and shoppers. The deal comes amid a blurry rush of agribusiness consolidation in recent months, with ChemChina-Syngenta and DuPont-Dow Chemical forming their own multibillion-dollar Voltrons.
Some onlookers are fretting that the reduced competition could shrivel up innovation, leading to slower improvements in crop yields. Others worry that these new agricultural giants may have outsize political power. “They’ll have more ability to lobby governments,” says Phil Howard of Michigan State University, who studies consolidation in the food industry. “They’ll have a lot more power to shape policies that benefit themselves at the expense of consumers and farmers.”
It’s a big story, and not just because Monsanto is such a famous (or infamous, if you prefer) brand. The consolidation of the world’s seed, chemical, and fertilizer industries over the past two decades has been astonishing, with potentially large ripple effects for farms and food systems all over the globe.
Back in 1994, the world’s four biggest seed companies controlled just 21 percent of the market. But in the years since, as crop biotechology advanced, companies like Monsanto, Syngenta, Dow, Bayer, and Dupont went on a feeding frenzy, buying up smaller companies and their patents. Today, the top four seed companies and top four agrochemical firms command more than half their respective markets.
The merged corporate giant will exercise even more control of the political and regulatory processes of nations across the globe, something that should worry all of us.