Bayer Promises Benefits, But Offers Farmers Few Details
An article written by Sonja Begemann and published in Farm Journal, May 2016.
Bayer’s potential purchase of Monsanto, detailed Monday, has some farmers shaking their heads and looking for more answers.
“It’s one step closer to being a monopoly,” says Chris Porter, who raises corn, soybean, cotton and rice in southeast Missouri. “They can control so much—we need Bayer and Monsanto to compete. It leaves the farmer to suffer, and at the end of the day, everything stops with us.”
Bayer leaders said Monday if regulators force Bayer to sell parts of the combined operation, if its $62 billion offer to buy Monsanto is approved, the sale would be to another company and therefore preserve competition. “The agriculture industry has always been competitive,” and that won’t change, said Liam Condon, head of Bayer’s CropScience division.
The recent wave of proposed mergers in the agriculture industry puts the majority of farmer choices into the hands of a relative few. If this merger takes place, 70% of the global pesticide market and 83% of the U.S. corn seed market would be in the hands of three companies, according to The Wall Street Journal.
Some speculate regulators will force the company to drop its glufosinate (Liberty, LibertyLink) business, including the herbicide and seed traits tolerant to it since it is a direct competitor to Monsanto’s Roundup herbicide and Roundup Ready crops. There will likely be more areas of overlap the company will need to consider.
“Cotton and vegetable seed space will be their biggest hurdle,” says Garrett Stoerger, partner at Verdant Partners, LLC, a transaction advisory firm in Champaign, Ill.
The combined company would become the largest in the agricultural chemical and seed/trait sectors with an estimated value that could reach $67 billion, according to the Wall Street Journal. Some farmers fear a company this size could use its market strength to boost prices.
Bayer executives declined to say whether price increases are in the future. “At end of the day, we are trying to help farmers increase their yield with minimum inputs and without compromising the environment. If we get that right, we should be able to offer a superior package to farmers so they can increase their return on investment,” Bayer’s Condon said.
That answer doesn’t satisfy Porter. “We all know that’s a big old line of bull,” Porter said in response to Bayer’s comment. “If they control so much, they can increase prices. We need to keep a level playing field for the (farmer).”
Bayer says the proposed merger could have benefits to research and development and efficiencies, which would in turn benefit farmers and society.
Bayer executives declined to say whether the transaction would mean farmers would have to work with different crop consultants and other company representatives, citing a wide range of local needs across the company’s footprint. Bayer is also promising Wall Street investors $1.5 billion in “synergies” three years after the two are united, which would result “from optimizing product supply chains, marketing and sales and R&D teams, as well as overhead reduction,” the company said in a presentation to Wall Street analysts.
If the $62 billion cash offer is accepted, Bayer will nearly quadruple its business in North America overnight. “Right now agriculture only accounts for about 20% of Bayer’s business,” Stoerger says. Acquiring Monsanto would push the agricultural business to nearly 40% of Bayer’s overall revenue.