Two of the world’s largest agricultural firms plan to merge, and some Texas farmers fear the move will diminish competition in an already shrinking market and cause prices for seeds and other essential products to spike.
German conglomerate Bayer, a global distributer of seeds best known for its pharmaceuticals like aspirin, hopes to buy Missouri-based agricultural firm Monsanto, which sells agricultural chemicals. But the merger must first gain approval from European antitrust regulators.
The market for seeds and other agricultural materials has been dominated by six firms, including Bayer and Monsanto. Recent mergers — one between Dow and DuPont, and another joining ChinaChem and Syngenta — dropped that number to four, and a Bayer-Monsanto merger would leave just three giant companies in the sector.
A Texas A&M University study released in September 2016 — before the most recent mergers — said the mergers would lead to higher crop prices due to lower competition. The study predicted the price of cottonseed would increase by about 20 percent if the mergers happened — a dramatic increase for farmers in a state that dominates national cotton production.
The European Commissioner for Competition is investigating the merger and doesn’t plan to rule on it until at least next year. Activists and members of Congress have called on the U.S. Department of Justice to conduct a similar investigation. Mark Abueg, a Justice Department spokesman, said in an email the department does not confirm or deny if a matter is under investigation.
Dee Vaughan, chairman of the Texas Corn Producers’ Issues Committee and a Dumas-area farmer, said he is concerned research and development will stagnate without “competition forcing them to stay innovative.” He added that less competition will increase seed prices and could prompt firms to start charging for services that are currently free, like delivery.
Ultimately, farmers may be priced out of the profession, he said.
“We have to buy seeds; they have us in a situation where we have to buy their product,” Vaughan said. “But they still have the ability to go even higher on their prices.”
Bayer spokesman Chris Loder said in a written statement that the market will remain competitive after the buyout and that the merger will increase research and development opportunities by consolidating the firms’ resources. The statement said Bayer has cooperated with regulators and is confident the merger will go forward.
“As we’ve said from the beginning, this opportunity is about combining highly complementary businesses and bringing new innovative solutions to our customers,” the statement said.
Monsanto spokeswoman Christi Dixon said the firms are “two very different but highly complementary companies.” She said there is little overlap between the two firms and Bayer will address the overlap through divestitures.
But Judith McGeary, executive director of farmers’ advocacy group Farm and Ranch Freedom Alliance, said the firms’ products rely on each other, with Bayer’s genetically engineered seeds needing Monsanto’s patented chemicals to thrive, effectively forcing farmers to rely on the firms for every step of production. Ultimately, higher prices for farmers means higher prices for consumers, she said.
“It’s important to realize how much agriculture contributes to Texas — we’re talking about $100 billion annually for Texas’ economy,” McGeary said. “So anything that takes out of the pockets of the farmers and puts it into large corporations that are headquartered elsewhere is a drain on our economy.”
Several states’ attorneys general previously joined a Justice Department investigation into the merger between DuPont and Dow, which was approved by the department and finalized this summer. Some activists hope Texas Attorney General Ken Paxton will do the same for the proposed Bayer-Monsanto merger.
McGeary said her organization asked Paxton’s office to join in the investigation in October, but they have not heard back from the office. Vaughan said he met with staff from Paxton’s office requesting the same thing, but they “basically took no action.”
A spokesperson from Paxton’s office said in an email to the Tribune that she could “neither confirm nor deny” there was an investigation.
Disclosure: Texas A&M University has been a financial supporter of The Texas Tribune. A complete list of Tribune donors and sponsors is available here.
Source: Texas Tribune Economy