Bayer's Plan to Buy Monsanto Means Fresh Headache for Farmers
They may still wake up early and work hard, but farmers just aren’t as independent as they used to be. Over the last few decades, thousands of small seed companies have been swallowed up by a handful of agrichemical giants. By 2011, just three companies controlled more than half the global proprietary seed market, according to a paper published in Crop Science. “These changes have had predictable effects for farmers, such as reducing the rates of saving seeds, increasing the prices of purchased seeds, and requiring the purchase of proprietary or additional inputs at greater expense,” author Philip H. Howard of Michigan State University wrote.
On Wednesday, one of the larger and more symbolic takeovers in an era of consolidation was announced: The German company Bayer (best known for its aspirin) announced it plans to purchase Monsanto in an all-cash, $66 billion sale. The merger joins DuPont-Dow and, more recently, ChemChina-Syngenta in awaiting government review. If approved, the deals will further consolidate the global market for agricultural inputs, which is already controlled by a small group of companies.
The Monsanto-Bayer merger “represents the most compelling value for our shareholders,” Hugh Grant, Monsanto’s chairman and CEO, said in a statement. It’s hard to argue with that, especially when the company expects a financial benefit of $1.5 billion from the merger after three years. Yet many are doubtful about the company’s claim that the combined businesses “are expected to result in significant and lasting benefit for farmers: from improved sourcing and increased convenience to higher yield, better environmental protection and sustainability.”
The National Farmers Union, a leading ag trade group, analyzes potential mergers from three perspectives: effects on price, future innovation, and rural jobs. On all accounts, according to government relations representative Zack Clark, Monsanto-Bayer fails. “Concentration for us is not good in any form,” he said. At first, large corporations like Bayer and Monsanto were buying up smaller, locally owned seed companies, and the fallout from those acquisitions was contained to the surrounding areas the acquired companies had served. Now, as the giants turn their attention on each other, the stakes are changing. “These are national and international companies,” Clark said, and the impact of their mergers will be felt on a global scale.
Environmentalists are also concerned about the merger. Together, Bayer and Monsanto will control 28 percent of the global pesticide market, according to Reuters. If all three mergers under antitrust review are approved, the trio of conglomerates will hold more than two-thirds of the global pesticide market. “The corporate control of farming is already beyond anything we would have expected,” said Marcia Ishii-Eiteman, senior scientist at the Pesticide Action Network. This mega-consolidation would “vastly limit farmers’ choices and access to seeds as well as further trapping farmers in this pesticide-dependent model of agriculture that we see as threatening not just the environment and community health but farmers’ livelihoods,” Ishii-Eiteman said.
The effect these mergers might have on farming communities has so far been of less concern to the public. A 2010 study on genetically modified soybeans from the University of Wisconsin–Madison found that “within-market consolidation” causes an increase in the price of seeds. Monsanto traits can be found in roughly 90 percent of all soybeans. In 2000, soybean seed cost roughly $19 per acre to plant, according to USDA ERS data. As of 2015, the price per acre has increased to $60.75—a huge leap considering that between 1975 and 2000 soybean seed cost only rose about $11.
During the Great Recession, prices for major commodity crops rose so fast—32 percent for seed corn and 24 for soybean seed—that the Department of Justice opened an antitrust investigation in 2009, focusing on Monsanto.
Every year, farmers pay premium prices to these soon-to-be three conglomerates for their fertilizers, pesticides, and seeds—even as their own bottom lines are shrinking. Though there have been increases in yields, Clark said, “The benefits of [input cost increases] are going to those companies, not farmers.”
Usually, a firm takes care of its customers first. Yet the last decade has shown that shareholders—not the farmers who buy these agri-giants’ goods—are the target audience. If farmers want to use high-yield seeds, they have little choice in what chemicals they put on their farm or in the environment. More troubling, the price of inputs often exceeds the amount farmers are able to sell their harvest for. The University of Minnesota calculated 2015 losses as $89 per acre for corn and $13.50 for soybeans.
In 1960, John F. Kennedy said in a speech, “The farmer is the only man in our economy who has to buy everything he buys at retail—sell everything he sells at wholesale—and pay the freight both ways.” His words have only become truer today.