Analysis: Bayer-Monsanto Merger Increases World Food Security Risk


That's Farming's Tom Jordan takes a closer look at the Bayer-Monsanto Merger and what it could mean for the future of farming.

Analysis: Bayer-Monsanto Merger Increases World Food Security Risk

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That's Farming's Tom Jordan takes a closer look at the Bayer-Monsanto Merger and what it could mean for the future of farming.

Now that Bayer has had its $66bn bid to buy Monsanto accepted, there are many complications to be unravelled. Competition laws will be tested as the merger is likely to be subjected to close examination by regulatory bodies in Europe and the US. The European Commission is already investigating the merger of Dow and DuPont earlier this year, while the takeover of Syngenta by Chinacorp was recently authorised by the US Committee on Foreign Investment. If the Bayer-Monsanto deal goes ahead it will create the world's largest seeds and pesticides company. In its aftermath just three firms will control two-thirds of the world's seeds and pesticides. This has obvious dangers for both farmers and citizens and the consequences for world food production are potentially immense.

Reaction has varied from dismay to horror. Farmers are worried it will result in fewer options and higher prices for seeds and treatments, while Friends of the Earth called it “a marriage made in hell.” John Colley, professor of international business at Warwick Business School told the Guardian: “Apart from Monsanto’s shareholders, who have hit the jackpot, this looks like a lose-lose bid. Bayer have been forced into paying too much and face major integration and competition authority risks. The farmers will lose out as product ranges are rationalised and attempts are made to increase prices.”

In a statement from their president Chip Bowling, the US National Corn Growers Association said: “Our primary concern with respect to any merger is how it may affect input costs – particularly given the current farm economy.This concern is at the heart of farmers' groups worldwide. Concentrating so much power in the hands of so few will undoubtedly affect the ability of farming organisations to negotiate fair prices.

Constant rationalisation of growing systems is having dire consequences for essential pollinators. There is already much doubt about the ability of politicians to resist the demands of industrial heavyweights to approve controversial treatments, like neonicotinoids, linked with bee losses and flupyradifurone, a recently-approved Bayer product. This will soon play out in full, as a more powerful industrial lobby pushes hard for genetically modified crops in the EU, against the wishes of its people.

Bayer has agreed to pay $128/share which is 44% above Monsanto's share price in May, when an offer of $122/share was rejected. This is a very high price to pay and industry analysts are already forecasting a long and painful hangover, as the two giants attempt to consolidate and streamline their many arms. Naturally there will be job losses because so many of their subsidiaries operate in direct competition with one another. Bayer has agreed a $2bn payback to Monsanto if authorisation is not granted under competition rules, which is a bold expression of its confidence that the deal will go ahead.

As industry tightens its grip on world markets, it is likely that only the biggest growers will survive. Many suppose that the bigger the grower, the more efficient the production, but in the long run, this is not always so. Without diversity, an industry cannot adapt quickly to change. Larger entities are cumbersome and they can sink as suddenly as smaller ones, with obviously greater consequences. We all know the old saying about eggs in a basket. This deal threatens world food security by placing too much power and too many resources in the hands of too few, whose motives are not the welfare of mankind as they claim, but the boosting of annual profits. If regulators do their job it will be rejected and Monsanto will pick up an easy $2 billion.

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