Analysts, Policymakers, Industry Leaders React to Bayer-Monsanto Deal
A deal the size of the pending $66 billion Bayer-Monsanto merger, even when it’s expected, generates a tidal wave of media coverage and opinion-sharing.
We share a few excerpts here.
Business Media
History will say Bayer got a bargain in its purchase of Monsanto.
Monsanto has always considered itself the top-shelf player among the six big worldwide sellers of seeds and crop chemicals, yet the agriculture giant is selling for less, in relation to its earning power, than it offered to pay for Swiss rival Syngenta last year.
With its genetics expertise and investments in futuristic digital-farming technology, how did Monsanto end up in the bargain bin?
Blame the deep slump in world agriculture and, to some extent, the short-term nature of U.S. capitalism.
It’s no accident that, among those six ag-chemical giants, all three U.S. companies are involved in mergers. Meanwhile, the industry’s two big German firms remain independent.
Bayer, like other German companies, has substantial worker representation on its supervisory board, a structure that helps insulate it from the whims of the stock market. All of Monsanto’s directors, by contrast, are elected annually by shareholders. In the U.S., a board that rejects a credible takeover offer is vulnerable to lawsuits, fierce criticism on CNBC and a nasty proxy fight.
U.S. Senator/Farmer
Senator Judiciary Committee Chairman Chuck Grassley (R-Iowa) opened the committee’s hearing last week on the merger, saying among other things that the consolidations of seed and chemical suppliers can be troublesome at any time, but now, for the farm industry, it is especially so.
Grassley told the committee he is concerned that the merger of the two seed and chemical companies could put farmers in an even bigger bind financially.
He said he’s concerned such mergers “have an enhanced adverse impact on competition in the industry and will raise barriers to entry for smaller companies by altering agricultural input markets for seeds and chemicals.”
Grassley said his farm in Iowa loses about $600 an acre compared to revenues in 2012, and the trend is similar for soybeans and wheat, he said. The cost of seed has risen from $50 a bag when he first started farming to around $300 a bag today.
Data from Iowa State University shows that the collective cost of seed, chemicals, and fertilizer for an acre of soybeans has gone up 94 percent over the last 20 years.
Meanwhile, the ag biotech industry has produced cutting edge innovations, higher yields, and multiple efficiencies for the agriculture industry, he said. Crops are more resilient and better able to withstand threats ranging from insects to drought. Yields today are “unimaginable” compared to decades ago.
“However, when does the size of companies and concentration in the market reach the tipping point, so much that a market becomes anti-competitive,” he asked at the hearing.
Farm Organizations
Response from the National Corn Growers Association and like-minded groups was nuanced.
Chris Novak, chief executive for NCGA said the current “wave of consolidation is first and foremost an offshoot of the current struggle within the farm economy.”
If ag companies can’t count on farmers spending more money, they must become more efficient.
Novak told the Senate Judiciary Committee the industry groups believe the move toward mergers also reflects a response to the increased regulatory burden in the agriculture industry.
“Domestic regulatory hurdles for crop protection chemicals and delays in international approvals for new seed traits represent significant barriers to market entry,” he said. “These barriers slow down innovation and drive up the cost of seed and chemicals.”
Novak said the process of developing and testing new products, and then securing regulatory approval to bring them to market, is requiring an increasing investment of time and money.
“As a result, fewer and fewer companies have the resources to be players in the market,” he said. “This trend toward consolidation will continue unless and until Congress addresses these regulatory hurdles.”
Sources: Delta Farm Press, St. Louis Post-Dispatch