Opinion: ADM-Bunge merger may leave farmers in the cold

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Here’s the latest jingle that’s moving up the ag-consolidation charts with a bullet (with apologies to the Jackson 5):

 A C D

What ever happened to B?

A C D, 1 2 3

Nothin’ in farming is free!

 A C D

What ever happened to B?

It’s easy as 1 2 3

Simple as no dough for me!

A C D 1 2 3

Bunge ADM, girl….

 Ask any farmer what are the ABCDs of agriculture and you’ll get Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus Corporation — four of the world’s biggest grain and oilseed suppliers and traders.

 For a while now, ADM has watched as Mega Ag companies merge and consolidate.

 Shuanghui lit the ag-conslidation fuse back in 2013 with its takeover of Virginia-based Smithfield Foods back in 2013.

 Since then, the pace and scope of agricultural company consolidation has been breathtaking:

  • ChemChina’s takeover of Syngenta,
  • the merging of DuPont and Dow Chemical
  • fertilizer giants Potash Corporation of Saskatchewan and Agrium coming together to form a new company named Nutrien,
  • a Bayer takeover of Monsanto deal currently before regulators in the U.S. and Europe.

All that consolidation has left ADM out in the cold. Yes, ADM.

ADM looked to diversify from its core grain business when it acquired natural flavorings company Wild Flavors in 2014.  Yet grain sales, trade, processing and marketing has traditionally been ADM’s bread and butter.

 But reports this week say ADM and Bunge are in serious merger talks.

 Why would this be?

Well, we’ve reached a moment in time when Bunge is ripe for takeover.

Bunge, the smallest of the ABCD ag companies, is finding it much, much harder to make money in the face of four years of bumper corn and soybean crops, resulting in depressed futures and cash grain prices and even more troublesome — a lack of volatility on the Chicago Mercantile Exchange.

In short, Bunge could use a dance partner.

Smart farmers have also stymied Bunge’s cash market strategies with acceletrated building of on-farm storage, which allow producers to capture money that otherwise would go to the grain training companies.

 For ADM’s part, Bunge is very attractive.

ADM and Bunge have very different geographical footprints.  ADM’s core business is in North America while Bunge is a yuge player in South America.

ADM’s acquisition would allow it to expand into Brazil and Argentina, which combined are neck and neck with the U.S. as the world’s biggest soybean producer.

 Here is the bottom line.

An ADM-Bunge merger would form a commodity trading behemoth of refineries and factories with an international network of marine terminals and barges.

 American grain and oilseed farmers should have some reason to be concerned.

Enduring a fifth straight year of depressed profits and facing potential increases in fertilizers, pesticides  and seeds should the Bayer-Monsanto merger be finalized, farmers face the bleak prospect that an ADM takeover of Bunge leaves them fewer players to sell oilseeds in particular.

 

About Dave Dickey

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 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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