Bad: Big Ag Mega-Mergers in Play
December 2015. In this new report, ETC Group examines corporate consolidation in four agricultural input sectors: seeds, pesticides, chemical fertilizers and farm equipment. With combined annual revenue of $385 billion, these companies call the shots. Who will dominate the industrial food chain? And what does it mean for farmers, food sovereignty and climate justice?
The Big Six agrochemical corporations (BASF, Bayer, Dow, DuPont, Monsanto, Syngenta) that dominate commercial seed and pesticide markets worldwide now insist they must get bigger, faster if the world wants food security in the midst of climate chaos. According to agribusiness, the extreme pressures of population, demand for meat, and climate crisis require Big Science and Big Money - and that means extreme Mergers all along the industrial food chain.
The fate of the six dominant pesticide and seed companies (and their $93 billion market) is in play. For all the talk of "Climate-Smart Agriculture," their R&D strategies are collapsing and, among them, there are more sellers than buyers. Simultaneously, the much bigger ($175 billion market) greenhouse gas-intensive fertilizer industry is caught in the headlights of climate change negotiators and is wrapping itself in the mantle of Climate-Smart Agriculture to protect its assets. The four companies that control 56% of the $116 billion farm machinery industry already have the robotics hardware; are acquiring the software (Big Data, satellite surveillance) technologies; and are thinking about adding the bio-based software (seeds and pesticides) to their shopping cart. It's too soon to tell which companies or sector will become the one-stop shop for farm inputs - but farm machinery, seeds, fertilizers and chemicals are now linked like never before. Monsanto collaborates with the world' s three biggest farm equipment companies (Deere & Co, CNH Industrial, AGCO). Deere has strategic alliances with five of the Big Six companies. Ultimately, the company that controls the data on soil, historical weather and crop yield, as well as the Big Box robot that deposits the seeds, pesticides and fertilizers will be the company that can gain most from crop insurance contracts that increasingly dictate inputs to the farmer. In the short term, the big shifts will likely be among the existing seed and pesticide enterprises, but even in the mid-term, watch out for the muck and machinery majors to rule the roost.
Ag mega-mergers threaten to undermine the basis of our food supply and jeopardize efforts to build climate resilience. Allowing more farm inputs to fall into fewer hands is a recipe for disaster. Nationally and internationally, governments must strengthen their anticombines/ cartel regulations to break up agricultural input sectors so that pesticide companies can't also be seed companies and farm machinery companies can't control chemicals, seeds, crop insurance, etc. Secondly, governments need to take a hard look at corporate "innovation," recognizing that today's intellectual property system smothers useful innovation and retards progress. To move us all toward food sovereignty, the world needs a new configuration of true innovators, including smallholder producers and public researchers - who are not undermined by spineless regulators.
The international battleground is wherever the Big Six - and their Bigger Brothers in farm equipment and fertilizers - push for even greater market power under the guise of "Climate-Smart Agriculture" while evading antitrust constraints and regulatory scrutiny for new, high-risk technologies (e.g., synthetic biology). Beyond the urgent need to suspend (better yet, end) exclusive intellectual property monopolies, the most important battleground is in the global South, the prime growth region for industrial agribusiness. There is no benefit for farmers or consumers if Argentina, Brazil, South Africa, China or Indonesia, for example, accept foreign corporate control over the first links in their food security chain. If two or three of these countries "just say no," the mergers won't happen and everybody's game plan changes.
Global Agribusiness Mergers NOT a Done Deal
New ETC Group report, Breaking Bad, shows how Dow-DuPont, Monsanto and Syngenta seed and pesticide deals could be blocked by Global South
Submitted on 15 December 2015
The $130 billion Dow-DuPont merger announced last week has rekindled ChemChina's $44.6 billion bid for Syngenta which, in turn, may provoke a fourth takeover try by Monsanto. If ChemChina prevails, Monsanto is likely to look for a deal with either BASF or Bayer. If they get their way, the world's Big Six agricultural input companies controlling 75% of global agricultural R&D may be reduced to three or four. Even if only the Dow-DuPont deal gets past competition regulators, the new enterprise will control 25% of global commercial seed sales and 16% of world pesticide sales, meaning that, together with Monsanto, just two companies would control 51% of seed sales and one quarter of the pesticide market.
But regulatory acceptance is far from a done deal according to a new 20-page report issued today by ETC Group. While US and EU anti-competition watchdogs are likely to roll over and accept the combinations, the growth markets for seeds and pesticides are in the Global South. Brazil, China, India and Argentina combined already account for one third of agrochemical sales worldwide and that share will increase in the future. If any one or two of these countries object, shareholders in the companies involved will get cold feet. ETC Group's report highlights the truth and consequences of greater corporate control of agriculture in four inputs - seeds, pesticides, fertilizers and farm machinery. Although the deals on the table now are confined to the Big Six and ChemChina, the world's biggest fertilizer and farm machinery companies may soon get into the act. ETC's report concludes that farm machinery companies like Deere & Company already have the hardware, are making deep investments in the software (Big Ag Data) and could move to suck up seeds, pesticides and fertilizers into their robotic boxes.
"We expect more Big Ag Mega-Mergers to be announced in the coming weeks, or even days," notes ETC's Asia director Neth Da๑o, "but we should remember that the global South is the prime growth region for industrial agribusiness. The South has a huge stake in all this," says Da๑o, "and anti-trust regulators in those markets could and should put their foot down."
Pat Mooney, ETC's executive director, returning from the Paris climate conference, warns that unchecked mergers could have devastating impacts on smallholder producers and rural livelihoods. "Peasant organizations around the world will be hit by higher costs, tighter monopolies, and narrow corporate-serving R&D targets. Countries like Brazil, China and India also have national business champions who have nothing to gain from bigger monopolies at home and overseas. Ministers of finance and agriculture in the South have much to lose when they have to subsidize agricultural inputs or crop insurance. The South's farmers and regulators, together, have good reason to unite and send the agribusinesses un-packing."
According to agribusiness, the extreme pressures of population growth, limited arable land, and climate chaos require Big Science and Big Money - and that means extreme mergers all along the industrial food chain. "But behind the PR, it's the bottom line that matters: while CEOs celebrate 'growth synergies,' jobs get slashed, research is redundant, and farmers pay more for fewer choices," explains Silvia Ribeiro, ETC Group's Latin American director. (DuPont expects 10% of its global work force to be "impacted" as the company "simplifies" its structure.) "These deals aren't done yet," adds Ribeiro. "The regulatory review process will take months and that means that those opposed have time to organize."
For more information:
Pat Mooney (Ottawa, Canada) Office: +1 (613) 241-2267 ext. 23; Mobile: +1 (613) 240 - 0045
Neth Da๑o (Davao, Philippines) mobile: +63 917 532 9369
 Note that the report was completed prior to the Dow-DuPont announcement but includes market share information on several mergers scenarios.
 Beki Winchel, "DuPont, Dow announce merger in jargon-laden press release," Ragan's PR Daily, 11 Dec. 2015: http://www.prdaily.com/Main/Articles/DuPont_Dow_announce_merger_in_jargo....