US Senate panel eyes Bayer-Monsanto, other deals

19 September 2016 17:03 Source:ICIS News

Set 4368954 Image 4368954a Photographer Cultura/REX/Shutterstock VARIOUS MODEL RELEASED, Farmer driving tractor and drilling seed corn in field 29 Oct 2014
The US Senate Judiciary Committee will hold a hearing on Tuesday to take testimony from North American farmers, as well as CEOs from Bayer, Monsanto, Dow, DuPont and Syngenta. (Cultura/REX/Shutterstock)

Focus article by Mark Milam

HOUSTON (ICIS)--North American farmers' groups are raising their voices over the proposed merger by Bayer and Monsanto, while a congressional panel convenes on Tuesday to look into that and other deals.

German chemical major Bayer would acquire US agriculture titan Monsanto for $66bn, which represents $128/share, by the end of 2017 in a deal that would capture a lion’s share of the US seed and crop protection business. However, it is subject to regulatory approvals, speculated to be a lengthy undertaking.

Monsanto shareholders still need to approve the deal but if finalised it has been estimated that the new company would control about 29% of seed sales and 24% of pesticides sales. In the US it would have the majority of cottonseed sales at about 58%.

As soon as it was announced farmers in the US and Canada started expressing concerns that the proposed deal could limit competition in the market, result in higher prices for seeds and crop chemicals and make new technology like digital farming tools a luxury rather than a necessity.

One of the first to react was the National Farmers Union.

“Consolidation of this magnitude cannot be the standard for agriculture, nor should we allow it to determine the landscape for our future. The merger between Bayer and Monsanto marks the fifth major deal in agriculture in the last year," said Roger Johnson, president.

He cited the Syngenta-ChemChina acquisition and proposed mergers between Dow-DuPont, Potash Corp-Agrium and John Deere-Precision Planting.

“For the last several days our family farm and ranch members have been on Capitol Hill asking members of Congress to conduct hearings to review the staggering amount of pending merger deals in agriculture today," Johnson said. "We will continue to express concern that these megadeals are being made to benefit the corporate boardrooms at the expense of family farmers, ranchers, consumers and rural economies.”

The Senate Judiciary Committee, prompted by committee chair Republican Senator Chuck Grassley of Iowa, has scheduled a hearing for Tuesday, 20 September, to take testimony from the CEOs of Bayer, Dow, DuPont, Monsanto and Syngenta and several farm groups.

“Iowa farmers who I've spoken with are worried about rising input costs, especially in an increasingly weak agriculture economy,” said Grassley.

“As mergers continue to occur in the seed, agrochemical and fertilizer industries, federal antitrust regulators must be ever more vigilant to ensure a robust competitive environment in this important sector,” he added.

Grassley pointed out that Dow and DuPont and ChemChina and Syngenta are being reviewed by the US Department of Justice (DOJ) and the Federal Trade Commission (FTC).

“With several proposals under review, it’s crucial that the antitrust authorities collaborate as appropriate with each other, and the Department of Agriculture, in their analysis, to ensure that competition is preserved for farmers and consumers,” Grassley said.

“We are pleased that ... the Senate Judiciary Committee will be reviewing the alarming trend of consolidation in agriculture that has led to less competition, stifled innovation, higher prices and job loss in rural America," said Johnson of the National Farmers Union.

Other groups concerned about the proposed merger include the American Farm Bureau Federation (AFBF), the National Corn Growers Association (NCGA) and the American Soybean Association (ASA).

The corn growers group said it has completed an analysis of one of the previously announced mergers and filed it comments to the DOJ. The group expects to do the same for the Bayer-Monsanto deal.

“The National Corn Growers Association is committed to protecting the best interests of our nation’s corn farmers. Our primary concern with respect to any merger is how it may affect input costs, particularly given the current farm economy,” said Chip Bowling, president.

The soybean industry groups are also paying close attention to the ramifications of the combination.

ASA president Richard Wilkins said his group will first and foremost evaluate the acquisition with respect to its impact on soybean farmers.

“ASA intends to closely analyse the potential impacts of this proposed merger on soybean farmers to provide comments to the companies and US regulatory authorities that must approve any acquisition, including the Justice Department," said Wilkins.

"If our analysis identifies areas of concern, ASA would urge divestiture of any segments of the proposed merger where competition would be significantly impacted, or disapproval of the merger," he added.

Canada farmers also have aired their thoughts over the two titans joining forces.

Saskatchewan farmer Terry Boehm, chairman of the seed and trade committee for the Canadian National Farmers Union, told local media that this merger is a concern based on his experience with past agricultural industry consolidation.

He said higher cost and less power to negotiate are the result when behemoths in agriculture are created.

Representatives from the Agricultural Producers Association of Saskatchewan also spoke on the issue. That group stressed less competition if Bayer acquires Monsanto. Officials said they will raise formal concerns with Canada's federal Competition Bureau.

"It's just one less competitor out there. We're seeing it across the board, whether it's in the fertilizer business, the chemical business, the grain buyers the consolidation continues," said Norm Hall, association president. "They call it the greater good, but it's the greater good of the shareholders, not necessarily the producers."

INSET IMAGE: Grain corn early growth development from seed stage to two-leaf stage. (Design Pics Inc/REX/Shutterstock)

By Mark Milam