Bayer-Monsanto Deal Closes as Farmers Warn of Higher Prices and Less Resiliency

On Thursday, Bayer closed its $62.5 billion purchase of Monsanto. This comes roughly a week after the Department of Justice (DOJ) approved the merger, on the condition that the corporations sell off $9 billion worth of assets, including seed divisions, intellectual property, research projects, and more. Yet even after these divestitures, the combined entity will be the largest global seed and agrochemical corporation, and U.S. based field crop growers fear the power of the new combine.

“Bayer’s acquisition of Monsanto culminates the latest and most disturbing round of consolidation amongst the handful of companies that control both U.S. and global agricultural markets,” said Roger Johnson, the President of the National Farmers Union in an official statement. “This extreme consolidation drives up costs for farmers and it limits their choice of products in the marketplace.” A recent survey found that 84% of farmers are “very concerned” about the merger.

DOJ lawyers claim their “comprehensive structural solution” of sell-offs will “[preserve] competition in the sale of these critical agricultural products and [protect] American farmers and consumers.” However, critics counter that the DOJ’s complex settlement will fail to preserve competition, ensure variety, foster innovation, and protect farmers from increased prices.

The seed and agrichemical industry was already dangerously concentrated before this deal due to a frenzy of mergers over the past four decades. Monsanto alone purchased 60 independent seed companies from the 1980s to the late 2000s.

By 2015, six major companies controlled 63% of the commercial seed market and 75% of the global agrichemical market. Then in the past two years, a mega-merger between Dow and Dupont shrank that field down to five, and Chinese agriculture input company, ChemChina, purchased another leading giant, Syngenta. A Bayer Monsanto merger will further consolidate this marketplace, giving the three largest firms an estimated 59% market share of global seeds and 64% of all pesticides.

Markets are even more concentrated within the United States, where the four largest corporations sell 76% of all soybean, 85% of all corn, and 91% of all cotton seeds. And when it comes to seed genetics, Monsanto’s patented traits can be found in 80% of US corn and over 90% of US soybeans.

“With fewer and fewer firms there’s a disincentive to develop new products and less innovation,” explains Patrick Woodall, the Research Director at Food & Water Watch. “Farmers are stuck, and they can’t shop around because there aren’t that many companies that are selling these critical inputs,” he says. “It ultimately puts the very biggest seed and agrichemical companies in the driver seat for all of agriculture.”

As two of the remaining five players, Bayer and Monsanto were each other’s central competitor in several fields. In its competitive impact statement, the DOJ identified 17 areas of overlap, including seed, seed treatment, and plant-traits for cotton, canola, and soybeans, as well as several vegetable seed lines and foundational herbicides. To resolve this, the DOJ required Bayer to sell all assets related to these product lines, as well as several R&D projects and their burgeoning agriculture technology business to Bayer’s German-based competitor, BASF.

For the DOJ remedy to work, BASF must use these assets to actually compete with Bayer/Monsanto in these lines of business. But, as we’ve previously reported, some farmer advocates worry that the exact opposite will happen and that a bulked up BASF will only further crowd out non-vertically integrated firms. Other critics doubt that BASF will be able to effectively compete even if it wants to, especially in fields that will be totally new to BASF, like vegetable seeds and digital farming.

“I doubt that selling these lines of business will increase competition,” says Maurice Stucke, Law Professor at the University of Tennessee and former DOJ antitrust attorney. “Whether or not it actually maintains competition, that remains to be seen.”

“It’s not just that the Bayer digital farming and vegetable seed assets are less valuable than Monsanto’s,” Woodall says. It’s “that they’re selling them to a company that has no presence in this market.”

What is certain is that this mega-merger between an existing monopolist – Monsanto – and one of the few rivals that might have been able to mount real competition to its dominance, stands only to further limit biodiversity and crop innovation at a time when our food system desperately needs more resilience.