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Monsanto-Bayer Deal Could Increase Prices For US Farmers

St. Louis-based Monsanto, a world agribusiness leader, has agreed to be acquired by the German company Bayer.

Bayer will pay $57 billion dollars, or $128 per share, in a deal that has been in the works since last spring. Regulators still must approve the move. Two other mergers are underway in the industry, with Dow set to combine with DuPont (already the owner of Iowa-based DuPont Pioneer) and ChemChina planning to buy the Swiss company Syngenta.

For farmers confronting another season of massive production but low commodity prices, the prospect of fewer companies controlling the seed and inputs they rely upon can be daunting.

“In the short term there are not going to be dramatic differences for farmers,” says Phil Howard of Michigan State University, who has studied consolidation in the agricultural arena. “But in the longer term, we’re going to find policy changes shaped by these bigger firms that are going to increase prices for farmers and consumers.”

Howard says the remaining seed and chemical companies could be “too big to fail,” a term used to describe big Wall Street banks during the Great Recession. “It’s really bad news for farmers and everybody who eats because these companies are just going to become more powerful and have even more economical and political influence, greater ability to raise prices and dampen innovation and all kinds of negative impacts,” Howard says.

The companies insist growth is the only way to continue to bring innovation and technology to farmers because smaller companies cannot make the same commitment to research and development. “Farmers tend to believe they are better served by a lot of small players competing against each other,” Robb Fraley, chief technology officer at Monsanto, said in an interview a few weeks before the announcement.

Speaking generally rather than about a specific merger of Monsanto and another company, Fraley continued, “I think the changes we’re seeing in this industry are not only healthy, but they’re the kind of changes that are going to be needed in order to enable the kind of investments to bring the kind of products that farmers are going to need and want in the future.”

Monsanto had previously rejected several lower bids from Bayer and last year was the target of a failed takeover by Syngenta. Iowa Republican Sen. Chuck Grassley, chair of the Senate Judiciary committee, already had scheduled hearings on the agriculture company mergers for Tuesday Sept. 20.

“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,” Grassley said in a statement released today.

Grassley has also urged federal agencies reviewing the deals to include the U.S. Department of Agriculture in their deliberations.

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