The lines are drawn in the controversy over Bayer’s purchase of Monsanto for $57 billion, the latest of three proposed ag business mergers that have angered activists and excited the industry. Food & Water Watch Executive Director Wenonah Hauter told the progressive news outlet Common Dreams:
The shocking consolidation in the biotech seed and agrochemical industry turns our food system over to a cabal of chemical companies, undermining family farmers and consumers.
Meanwhile, Bayer CEO Werner Baumann views his company’s planned merger as a model for the future. In an interview with the The Wall Street Journal, he described it as:
[A] fantastic combination for modern agriculture, to cater to the needs of society by providing the tools needed to feed a rapidly growing population.”[i]
Whether any of the controversial deals go through will depend on decisions by anti-trust government officials in the US and elsewhere around the world. The question is, will there be public benefit?
Clearly, the USDA sees promise in the Bayer merger. According to Secretary of Agriculture Tom Vilsack, combining these companies will lead to “a spurt of innovation.” [ii] But National Farmers Union’s president Roger Johnson counters that the merger “will result in fewer choices for farmers, higher prices, and less innovation.” [iii] Common Dreams called the proposal a “Five-Alarm Threat to our Food Supply.”[iv]
On September 20, the Senate Judiciary Committee conducted hearings about all three consolidations: Bayer-Monsanto, Dow-DuPont, and ChemChina-Syngenta. In their testimony, the companies’ spokespeople promised more innovation and better products for farmers. But Farmers Union members came to Washington to protest these agribusiness plans, with Johnson, their president, testifying that the merged companies “would have more than 80% market share of the U.S. corn seed sales and 70% of the global pesticide market.”[v]
Mother Jones recently calculated the effect of the mergers at a global scale: the top four agribusiness companies are poised to control more than half of the global patented seed sector and more than 60 percent of commercial pesticides.[vi] Open Secrets, the money-in-politics watchdog, notes that both Bayer and Monsanto already spend substantial funds on lobbying and on support of political candidates. A combined company would likely wield even more influence in Washington.[vii]
Do these mergers produce public benefits? Bayer and Monsanto argue that theirs will be a plus for the environment.
So, will the wave of mergers between fertilizer, seed and pesticide companies lead to oligopoly prices for farmers and global control of food by a few industries, or a more productive, more sustainable, data-driven agricultural sector? Industry analysts have responded ambivalently. According to The Wall Street Journal, “Bayer plans to fuse its prowess in pesticides—it ranks among the world’s largest suppliers—with Monsanto’s capabilities in seed genetics and biotechnology,” making the merged company “the largest supplier by sales of both seeds and pesticides.” [viii]
Monsanto’s major products are a combined technology of seeds and chemicals, particularly the newest generation of herbicides and herbicide-resistant seeds. Yet patents are expiring on the first round of these herbicide technologies – like Roundup and its GMO “Roundup-Ready” seeds — and weed resistance is plaguing Monsanto’s herbicide products. Bayer could bring to the Monsanto merger the brain-power to develop the next generation of products that meet these challenges. However, some analysts argue that the merger will in fact starve the company of the R&D funds necessary to continue innovation in its chemical businesses.[ix]
The question remains: do these mergers produce public benefits? The answer economists give depends on their approach. From a theoretical perspective, some take the Schumpterian view, positing that mergers create synergies among scientists, as well as greater efficiencies in administration and therefore more funds for R&D. This is the Bayer-Monsanto argument. Yet, these economists are mostly contradicted by more empirical academic research that has looked at past mergers and generally found very little relationship between mergers and a rise in R&D.[x] Sometimes mergers by corporations with complementary technologies do gain innovative energy from combining the knowledge efforts of their scientists. More often, studies show that the vast amount of debt taken on by companies reduces the money available for R&D.
It is now in the hands of anti-trust regulators to decide whether this merger is a good thing for farmers, for consumers and for the earth.
Are there other reasons why companies merge? Yes, but few have to do with what economists refer to as “consumer welfare.” In many cases the motive is to control markets and therefore raise prices. With fewer competitors, consumers can’t shop around. Farmers in particular are concerned about oligopoly leading to higher seed prices in an era of extremely low farm commodity prices. Consumer groups worry about the effect of this control on their choices at the supermarket. And food activists consider corporate control of the “life science sector”, as analysts call it, a frightening dominance of profit-seeking entities over global nature.
Yet both Bayer and Monsanto argue that this merger will be a plus for the environment. The merged company, they argue, would enable scientists to develop the sustainable agricultural technologies of the future, as leader in the data-heavy technologies of “precision agriculture.” A suspiciously timely article in The New York Times argues that precision agriculture is the harbinger of a more sustainable food sector.[xi] However, a look at the Monsanto’s current bottom line reveals that most of its recent profits derive from sales of its technical package of herbicide combined with herbicide-resistant soybean seeds.[xii]
Argentina and Brazil have greatly expanded soybean production, in response particularly to the rise in Chinese meat consumption, which has more than doubled in the last decade.[xiii] Vilsack’s argument that the Bayer-Monsanto merger will help feed the world may be true, but that’s a world of meat-eaters, leading to an expanding number of acres to feed livestock. Much of this new soybean production is happening in environmentally sensitive parts of Brazil. “Precision” or not, profits based on expansion of soybean acres for livestock are hard to justify as green.
It is now in the hands of anti-trust regulators to decide whether this merger is a good thing for farmers, for consumers and for the earth. In the event that regulators allow these mergers, an even smaller number of agribusiness companies will have an even more powerful hold on the future of food and agriculture. The question regulators should answer first is: who will benefit?
E. Melanie DuPuis, PhD is Professor and Chair of Environmental Science and Studies in the Dyson College of Arts and Sciences here at Pace. Her work focuses on sustainable governance, political agroecology, environmental politics and policy, consumption, food, agriculture, technological change, social history, theory, social justice and social change. She is the author of the recent book, Dangerous Digestion, which reimagines the American body politic through a new metaphor — digestion — opening social transformations to ideas of mixing, fermentation, and collaboration.
[i] Bunge, J., & Alessi, C. (2016, Sep 14). Bayer-monsanto deal would forge new agricultural force; the German pharmaceutical and chemical conglomerate aims to add monsanto’s world-leading position in seeds and crop genes to its stable. Wall Street Journal (Online) Retrieved 9/21/16 from http://search.proquest.com.rlib.pace.edu/docview/1819065163?accountid=13044
[x] De Man, Ard-Pieter, and Geert Duysters. “Collaboration and innovation: a review of the effects of mergers, acquisitions and alliances on innovation.” Technovation 25.12 (2005): 1377-1387.