by Mitch McAndrew | email@example.com
In a Tuesday morning Senate Judiciary Committee hearing, Iowa Sen. Chuck Grassley expressed concern about farmers in the wake of several proposed agriculture-sector consolidations.
The most recent of these mergers, a $66 billion deal between Bayer, a German company most known for developing pharmaceuticals such as aspirin, and St. Louis seed company Monsanto, the world’s largest supplier of genetically modified seeds, would greatly reduce competition in the biotech-seed industry, Grassley said.
“To me, it looks like this consolidation wave has become a tsunami,” Grassley said in a prepared statement at Tuesday’s hearing.
The biotech-seed industry is dominated by six companies worldwide: Monsanto, Bayer, DuPont, Syngenta, Dow, and BASF. Five of these companies are now in merger talks, a development that Grassley said will tighten farmers’ already slim margins.
DuPont and Dow announced a $122 billion merger in December 2015, and a U.S. security panel in August approved ChemChina’s $43 billion acquisition of Swiss seed producer Syngenta.
“Farmers are unique; their profession involves accepting prices from input providers and commodity markets while hoping for good weather in-between,” Grassley said. “I’m concerned that further concentration in the industry will reduce choice and raise the price of chemicals and seed for farmers, which ultimately will affect choice and costs for consumers.”
Grassley also pushed for American antitrust regulators to coordinate their oversight of the various mergers because they all affect agriculture markets.
The Justice Department is reviewing the Dow-DuPont merger, while the Federal Trade Commission has been charged with overseeing ChemChina’s acquisition of Syngenta. No federal regulatory body has been assigned to review the Bayer-Monsanto merger yet.
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Bayer CropScience North America President Jim Blome (left) and Monsanto Executive Vice President Robb Fraley (right) raise their right hands to be sworn in on Capitol Hill on Sept. 20 prior to testifying before the Senate Judiciary Committee on a proposed $66 billion merger of American seed and weed-killer company Monsanto and German medicine and farm-chemical-maker Bayer. (Associated Press/Pablo Martinez Monsivais)
Representatives from Monsanto, Bayer, Dow, DuPont, and Syngenta participated in Tuesday’s panel before the committee. The panel invited ChemChina to testify, but the company declined.
The agriculture executives at the hearing argued that the mergers and acquisitions would spur innovation and bring new investment into the industry.
“This type of change enables more innovation and delivers better products to the farm even faster,” Monsanto Executive Vice President Robb Fraley said. “Farmers are best served when companies invest more in new technologies and accelerate the pace of their [research and development], which in turn spurs robust competition.”
While Grassley commended the companies at the hearing for the innovation they have brought to farming, he contended that the companies, and the agriculture industry, were approaching a tipping point.
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“The innovations of the companies in this room today have helped the world reach productivity levels that ease fears over meeting the long-term demands of our growing global population,” he said. “However, when does the size of companies and concentration in the market reach the tipping point so much that a market becomes anti-competitive?”
Iowa State University Economics Department head Joshua Rosenbloom said both sides of the argument are well-founded and that the key to the difference lies in innovation.
Because almost all products in the agrochemical industry are patented, the real competition exists in developing alternatives to those products, he said.
“As you reduce the number of players, it does lessen the incentive [to innovate],” Rosenbloom said. “But it also requires deep pockets to take a product from development to the market, so in that sense, an enormous [research and development] budget could be better than many small, financially challenged firms.”
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