(Saskatoon – Sept. 19, 2016) Bayer’s September 14 announcement that it will buy Monsanto for $66 billion comes just days after fertilizer companies PotashCorp and Agrium confirmed their $30 billion dollar merger deal. Meanwhile, the Chinese agro-chemical giant, ChemChina is in the process of buying Sygenta for $43 billion. Dupont and Dow expect to complete their $68 billion merger by the end of this year.
“Mergers and acquisitions are not investments in new productive capacity,” said Terry Boehm, Chair of the NFU’s Seed and Trade Committee. “These transactions are a way for large corporations to restructure their existing assets to obtain higher profits and greater control by eliminating competition within the market.”
Conventional economic theory assumes competition in the marketplace pushes competitors to constant improvement, usually making their products ever more cheaply. Consumers choose the competing option that offers them the best combination of price and quality. Producers look for buyers who will pay them the best price for the product they are selling. The theory hinges on the belief that all operate with full transparency on a level playing field and thus the common good is served.
Yet in the real world, some competitors do better than others. As the most competitive companies get bigger, smaller rivals are bought up or go out of business. With fewer firms there is less competition in the sector. Eventually consolidation results in the sector dominated by a small handful of companies that no longer need to be so concerned about price, quality or service. To do business, buyers and sellers must meet these companies’ terms. If the impending mergers go ahead, the seed and farm chemical sectors will have reached this point.
If national anti-trust and competition bureau regulators allow the Bayer-Monsanto, ChemChina-Syngenta and Dow-Dupont deals to proceed, just three companies will control 61% of the world’s commercial seed sales and 65% of the world’s pesticide sales. The shareholders of these companies have vast amounts of money that they can use to buy out other companies. Meanwhile, both consumers’ and farmers’ debt levels are at record highs. The degree of control over agricultural production and the ability to extract wealth from farmers and consumers these companies would gain through these deals should ring alarm bells.
“When one multinational agribusiness swallows another, it increases its lobbying power along with its market share,” noted Jan Slomp, NFU President. “These mergers make it all the more important for the people of the world to stop trade agreements like CETA and the TTP that tie the hands of governments to regulate in the public interest.”
“The companies involved in these mergers have been increasing their control over agricultural production, especially seed, for a long time. By controlling seed, you control the food system,” said Boehm. “When you control the food, ultimately you control people. Should this kind of power be in the hands of so few?”
For more information:
Terry Boehm, Chair of NFU Seed and Trade Committee: (306) 255-2880 or (306) 255-7638
Jan Slomp, NFU President: (250) 898-8223 or (403) 704-4364