Bayer-Monsanto consolidation – media backgrounder

There has been a flurry of “merger and acquisition” (M&A) activity among global agribusiness corporations since 2016.

• Chinese state enterprise ChemChina acquired Swiss multinational Syngenta;
• US-based chemical companies Dow and DuPont merged and will re-brand their agriculture business as Corteva Agriscience;
• Fertilizer giants Potash Corp and Agrium merged, and now do business as Nutria;
• Global grain companies Archer Daniels Midland and Glencore United (which owns Viterra) are both interested in buying US-based grain company Bunge;
• On May 29, 2018 the US Department of Justice approved Bayer’s plan to buy up Monsanto (already approved with conditions by regulators in China, Brazil and the European Union);
• On May 30, 2017 Canada’s Competition Bureau announced it had reached a consent agreement with Bayer in its proposed acquisition of Monsanto

In March 2018 the National Farmers Union (NFU) provided information to Canada’s Competition Bureau about concentration of the canola market that shows Bayer and Monsanto have expanded their market share and increased seed prices to farmers in ways that appear more collaborative than competitive. Should Bayer sells its seed and chemical business to BASF, it would not significantly change the dynamics of this highly concentrated market. We urged the Competition Bureau to use this opportunity to reduce the dominance of these few companies by requiring seed and agro-chemical divisions to be broken up into smaller entities.

Price of canola seed versus wheat seed: In 1996 Monsanto and Bayer introduced their patented genetically modified herbicide tolerant canola seed. Monsanto’s seed is “Roundup Ready” (RR) – tolerant to glyphosate, sold by Monsanto under the brand name “Round-up”. Bayer’s seed is “Liberty Link” (LL) – tolerant to glufosinate, sold by Bayer under the brand name “Liberty”. The traits are patented, which allows the patent owner to restrict access to their product and charge royalties for its use. Monsanto and Bayer require farmers to buy seed every year and pay a royalty — or face a patent infringement suit. Until 2012 Monsanto charged a per-acre royalty, called a Technology Use Fee, while Bayer has always incorporated the royalty in its selling price. Input price data shows canola seed prices rising significantly and steadily since 2000, with Roundup Ready and Liberty Link going at the same rate in lock-step, while wheat seed prices remain fairly low and constant. The nominal competition between Bayer and Monsanto has not had any effect on the rate of seed price increase, while the ability of farmers to use farm-saved wheat seed has helped keep its price down.

Seed price versus commodity canola: The price of canola seed is rising at a faster rate than is the price farmers receive when selling canola as a commodity at the elevator.

Canola acres: Canola’s share of crop acres in Canada has been increasing.  The Census of Agriculture reports 28% of cropland was planted to canola in 2016. To prevent disease issues, agronomists recommend farmers grow canola on the same field no more often than once every four years. Thus, the maximum acreage of canola should be 25% or less. Monsanto and Bayer benefit from increasing acres. With their ability to influence farmers’ decision-making through advertising and commodity group sponsorship, they wield a degree of influence that may be contributing to short rotations that undermine disease prevention measures.