top of page

Top Producer: Where Big Ag Mergers Stand

An article written by Eric Berger for Top Producer published November 27, 2017. Reprinted with permission of Top Producer.

There might soon be fewer seed and chemicals choices because of the spate of mergers and acquisitions. But analysts and economists say the deals won’t necessarily hurt farmers’ profit margins.

“Despite consolidation, I think the product offerings will largely still be available as they are today and competition will remain high,” says Garrett Stoerger, a partner with Verdant Partners, a Champaign, Ill.-based consulting firm. “This is possible as some of the merged companies are complementary and result in minimal overlap. For crops, geographies or products deemed problematic, the antitrust authorities will step in and take action.”

Garrett L. Stoerger Partner

Yet the mergers could stifle innovation if the new corporations spend less on research and development, says Gary Schnitkey, an agricultural economist at the University of Illinois. For example, Bayer and Monsanto aim to merge in part because becoming a larger entity will make it easier to sell new herbicides and products that need approval in the U.S., Europe and China, Schnitkey says. But the number of new products could decrease.

Still, the new companies could acquire smaller seed companies to offer new hybrids and varieties more resistant to disease, says Christopher Narayanan, president and CEO of Memphis, Tenn.-based GA Capital, an agribusiness-focused investment banking firm.

Tech Trends. The market for agricultural equipment could change in light of mergers and acquisitions. In August, Mexico-based Mexichem spent $1.5 billion for an 80% stake in the Israeli firm Netafim, a pioneer in drip-irrigation technology. Another notable purchase came when Deere and Co. acquired Blue River Technology, maker of smart spraying equipment, for $305 million.

Companies such as DowDuPont also are likely to continue exploring digital agriculture, which will impact how efficiently farmers can place nutrients, crop protection and seeds on an acre to maximize yield and revenue, Stoerger says.

It’s possible new agribusinesses or start-ups could create an online interface for farmers to trade with end users, cutting out the middleman, Narayanan adds. For example, a cattle feeder in Texas could look at prices from various corn producers in Iowa and make a direct purchase.

Supply Chain Shifts. There also have been business deals in the food supply chain. Amazon purchased Whole Foods for $13.7 billion with an eye on creating a private label, such as Target’s Archer Farms, for products such as granola, says Michael Boland, an agricultural economist at the University of Minnesota. Amazon also plans to sell more groceries online.

The e-commerce company might also try to deal directly with farmers to provide identity-preserved foods, Stoerger adds. “How far back up that value chain will Amazon choose to follow? We could soon see farmers drop-shipping products right out of their fields, a true farm-to-table model,” he notes.

A Big Year for the Big Six

Bayer is bidding $66 billion to purchase Monsanto. As of press time, the European Commission’s review should wrap up March 5. To facilitate the move, BASF is set to acquire roughly $7 billion in Bayer assets, which includes the company’s global glufosinate-ammonium non-selective herbicide business and soybean and cotton seed businesses in the Americas.

Dow Chemical Co. and DuPont completed their merger Aug. 31 in a $130 billion deal. DowDuPont is reorganizing into three businesses: agriculture; material sciences, which include industries such as packaging; and specialty products such as electronics and nutritional items.

In June, ChemChina successfully completed its acquisition of Syngenta for $43 billion.


bottom of page