Monsanto-Bayer mega-deal a nightmare for America?
Bayer's announcement that it intends to buy Monsanto, the world's largest seed producer, shocked farmers and consumers alike. The deal could have a profound -- and negative -- effect.
Seed prices could rise for farmers, consumers could see more genetically engineered foods on supermarket shelves, and our global agricultural system could end up depending on just a few companies to meet a high percentage of the world's agricultural needs.
In short, the $62 billion deal would further concentrate power in an already highly consolidated global seed and chemical industry.
It's time for anti-trust regulators, who have been allowing mergers and acquisitions such as this for decades, to look closely at how allowing this merger could hurt farmers and the environment.
Bayer-Monsanto is the latest in a series of high-profile mega-mergers proposed in the agricultural industry. Dow Chemical's planned merger with DuPont, and ChemChina's acquisition of Syngenta are both under review by regulators. A merger between St. Louis-based Monsanto and Germany's Bayer could further increase prices and limit options for farmers.
Even before these mergers were announced, the industry had been trimmed down to just six companies -- Syngenta, Bayer, BASF, Dow, Monsanto and DuPont -- that control 60% of commercial seed and more than 75% of agrochemical markets. If all of the mergers were approved, those top six dominant companies would shrink to four, with most power concentrated in just three.
Bayer's and Monsanto's catalogs of seeds and chemicals complement one another. Monsanto held a 26% market share of all seeds sold in 2011 to Bayer's 3%. By contrast, Bayer dominates in agrochemicals, selling 17% of the world total, compared with Monsanto's 7%. A joint Bayer-Monsanto would rival Syngenta to be the world's largest agrochemical company, with annual revenue of more than $67 billion.
Monsanto has been widely criticized for its aggressive tactics to expand its reach in the farming sector. The company has bought up dozens of its competitors to become the largest supplier of genetically engineered seeds.
But as its market share has grown, seed prices have risen dramatically. The Organic Center, a nonprofit research center that studies the environmental effects of organic food and farming, estimates that genetically engineered seed costs about twice as much as conventional seed, and that the cost of them has risen more than 140% since 2001.
The Department of Justice spent three years on an antitrust investigation of the company's practices but quietly closed the case in 2012 due to "marketplace developments," according to a department spokeswoman.
As Monsanto has become dominant, it has become increasingly difficult for farmers to avoid becoming reliant on the company. Monsanto has used a variety of strategies to ensure farmers must return to the company each year to buy new seeds, a costly upfront expense in an industry historically reliant on saving seeds.
At one time, Monsanto achieved this by using sterile "terminator seeds," which don't produce viable seeds for replanting season to season. Today, Monsanto has been known to take legal action against farmers who attempt to save and replant the company's seeds.
Other Monsanto seeds are genetically modified to work in tandem with Monsanto pesticides and herbicides. Farmers who plant these seeds must also invest in Monsanto's chemical products, furthering their reliance on the company. If the Bayer acquisition is approved, these farmers may soon be financially dependent on a German chemical and pharmaceutical company most famous for its production of aspirin.