Opinion: Ag ‘mergerpalooza’ is all the rage

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Photo by Darrell Hoemann/Big-AgWatch.org

A central Illinois farmer harvests his corn crop toward the end of the 2016 harvest season.

Dave Dickey

Dave Dickey

Usually when I write an end-of-year recap of top agricultural stories, I don’t rank them.

After all, what is important is often in the eyes of the beholder, and your millage may vary. But 2016 is different. And it’s not even close. With two months until we sing Auld Lang Syne, 2016 will long be remembered as a year of big (and small) ag mergers that will shape agriculture around the world for decades to come.

The agri-merger tango began in December when we heard news of DuPont and Dow joining forces.

The $130 billlllllion merger is still in regulatory review, but Dow-DuPont opened the merger floodgates.

The dust had barely settled on initial analysis of what Dow-DuPont meant for agriculture when ChemChina announced Syngenta agreed to its $43 billlllllion takeover bid. That deal flew through the U.S. regulatory process but may have hit a snag in recent days, as there are reports that ChemChina is having difficulties with financing.

Still, all of a sudden, other ag biggies such as Archer Daniels Midland, Monsanto, Bayer and Cargill came to the realization that without their own agricultural dance partners, competing in a global market against these new behemoths could be a YUGE losing proposition.

So it was just a matter of time before the next shoe dropped, with Bayer bidding up Monsanto until the St. Louis-based agri-giant said uncle to a $66 billlllllion all-cash offer. And, oh yeah, a $2 billion reverse antitrust breakup fee should the regulatory review process go sour.

But not only are the biggest of the big agri-companies merging, so are those just a little bit further down the earnings pecking order. Lost in the shadow of Bayer-Monsanto, two significant fertilizer giants north of our border, Potash Corp. of Saskatchewan Inc. and Agrium Inc., agreed to their own $27 billlllllion partnership.

Stunning.

Of course pro- and anti-ag merger forces were out en mass trotting out well-worn arguments such as at this September hearing of the Senate Judiciary Committee.

The pros often come from the equity and finance communities who see dollar signs in trading the new companies. The cons are peppered with environmental and consumer activist groups who have little regard for big business, agricultural or otherwise.

In farm circles, the American Farm Bureau Federation has generally supported ag mergers, while the National Farmers Union has been more suspicious.

I suspect that lots of producers are mostly indifferent about the mergers, at least until they impact their operations’ bottom-line.

But when 2018 rolls around, the agricultural landscape will be far different than it is today. I fully expect that ALL these deals will eventually pass regulatory scrutiny, at least when it comes to U.S. review.

Up to now it has been the European Commission that has been most critical, especially on issues surrounding market share.

Yes, some tweaks may be needed.

For example, Bayer-Monsanto (BayMonto? BayMoSaner? Monyer? Baysanto?) may need to shed some portion of Roundup Ready, GT traits, Xtend and LibertyLink weed-fighting technologies to avoid monopoly concerns.

So from that starting assumption, what are a few of the key things to keep an eye on going forward?

Research and development: This is actually THE big question. Will these new shiny YUGE ag companies not only maintain but significantly INCREASE dollars for feeding the earth’s exploding world population? They talk the talk. It remains to be seen if they’ll walk the walk.

Competition: Here, I am not going to reach for the obvious – that too few companies control too much market share making the impulse to conclude on prices too much of a temptation. Rather, I think that it will be much difficult to initiate agri-startups, especially in seeds and chemicals. And standalone companies (think AgriGold), may find it more difficult over time to keep up with vertical integration offered by their bigger siblings.

Will small shareholder farms eventually be affected: For now, it is U.S. farmers who will bear much of whatever comes out of these agri-mergers. But some day the rest of the world’s producers could also be directly affected by the few agri-giants left standing on top of the consolidation mountain.

Federal oversight: With so few agri-companies sprawling new footprints both in the U.S. and worldwide, it more than ever before falls on USDA, FDA, EPA and CFTC just to name a few federal agencies, not to be asleep at the switch. It is probably fair to say the record has been a little spotty.

Welcome to the new normal.


About Dave Dickey

Dickey spent nearly 30 years at University of Illinois at Urbana-Champaign’s NPR member station WILL-AM 580 where he won a dozen Associated Press awards for his reporting. For the past 13 years, he directed Illinois Public Media’s agriculture programming. His weekly column for Big Ag Watch covers agriculture and related issues including politics, government, environment and labor. Email him at dave.dickey@investigatemidwest.org.

This column reflects the writer’s own opinions and not those of Big Ag Watch


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