Aspirin, Monsanto, and the Future of Farming
On Mergers and Mayhem in the American heartland
Last week, Aspirin-Aficionado Bayer popped the question to Monsanto with $66 billion dollar ring (spoiler alert: she said yes). For the average American, this news falls under the heading of “things I would care about if I had time”, which is fair. Announcements about company mergers in obscure industries aren’t exactly front page news. Their not even AirPod-level news.
Except they are.
This merger, and the others that were announced in the last few weeks, will have enormous, lasting impacts on farmers, rural communities, and American eaters. And they won’t particularly positive.
Economics are at the core of this story, the simple “fewer companies -> less competition -> higher prices” fact of consolidation. But wrapped around that not-so-sexy principle are the realities that have the potential to set the whole ag industry back twenty years.
For context, the proposed Bayer-Monsanto merger comes on the heals of no less than 4 major mergers or acquisitions in a matter of weeks. First, ChemChina, a massive chemical company run (in part) by the Chinese government, set out to buy Syngenta, a European chemical company, and US regulators gave their approval. Then, the Dow Chemical Company and Dupont, another European agri-chemical company, along with Agrium and Potash Inc., two Canadian fertilizer giants, both announced that they’d be going forward with their respective merger plans. And finally, as the single ray of hope, the DOJ earlier this month filed a suit to prevent Precision Planting, an ag equipment manufacturer, from selling to John Deere, which would have given Deere close to 90% marketshare in precision planting equipment. And when BASF, the final uncoupled player in ag, was asked why they weren’t pursuing a merger, they acknowledged the likelihood that they would buy businesses divested by these companies in their merger.
In other words, prepare yourself to witness the birth of the largest agricultural oligopoly in history.
But what does all of this mean? Bottom line, it means that the constellation of companies that farmers have relied on to compete (read: lower their prices) to provide the seed and fertilizer that farmers need is about to be cut in half. John Deere came right out and said in their merger filings that their acquisition would allow them to avoid cutting prices by 5%–15%. Translation: With no other players in the game, John Deere will be able to charge farmers whatever they want, and farmers will have to pay.
Farmers will undoubtedly be hit hard by merger-fallout, and it could not come at a worse time. The view from the American farm right now is, to put it lightly, bleak.
Farming is a tough gig. It’s one of the few jobs where the better everyone is doing, the worse off everyone is (welcome to commodity markets). Despite the fact that 2016 is predicted to be one of the highest yielding years on record, farmers are tilling crops back into the ground rather than harvesting them because the money they’ll get for the crop won’t cover the cost of running the harvester. On top of that, farmers have lost over 60% of their income since 2012. And the cost of seeds and fertilizer just keep rising. And with these mergers, it’s about to get even worse. A Texas A&M study suggests prices will rise, in cotton seed for example, by as much as 18%.
Farmers are hurting, consolidation or no, but in the long term, they won’t be the only ones. Despite the recent NYTimes article by Secretary of Agriculture Tom Vilsack touting the recovery of rural America, the piece made me wonder how familiar Sec. Vilsack actually is with those community whose destinies are tied to farming. When farmers suffer and aren’t able to pay their bills or to sell their crop, their whole community suffers. If we have any hope that the recent report of wage growth in rural America might be a trend and not a fluke, addressing the current pricing issues in the industry (or at the very least developing a strategy to address them!) is vital. Might we humbly suggest a little less editorial congratulation, Mr. Secretary, and a little more policy-making.
If you eat food, these mergers effect you, too. Allowing just a few companies to have complete control over agricultural inputs is trusting our national food security to the whims of just four major multi-nationals, one of which is owned by the Chinese government, and two of which are headquartered in Europe. If there ever was a moment where we have a view of what “too big to fail” might look like before it happens, it’s right now.
And that’s not to mention the years of activism that’ll be undone.
For better or worse (alright, it’s definitely just for worse), everyone knows Monsanto. It has become a devilish touchstone for conversations around genetic modification and biotechnology in food, and though that is, well, not so great for Monsanto, it’s wonderful and terribly important for everyone else (though it should be about the science). Activists have fought for years to build a national conversation about what we eat, and it’s one of the most important conversations that we’re having. Monsanto is a central part of that dialogue, and with this merger, it will likely disappear into Bayer (who has already admitted it will likely drop the name given its bad rep). Bayer, the lovable preventer of heart attacks and hangovers, soon to be a global giant with over 30% marketshare in seed genetics and ag chemical. And no one will be any the wiser.
People will say, “Monsanto is gone! We’ve won!” And the vigilance will die, and the conversation will be over, and nothing will change.
To be fair to these companies, many of them made a good point during Tuesday’s Senate hearing. The main argument for consolidation is that they have to work together (or perish, one assumes), to streamline their operations and take advantage of the absolute maximum economies of scale to afford their R&D budgets under current regulations. But that doesn’t mean we should allow companies to absorb their would-be competitors or that we should relax the regulations around the food that goes into our bodies. It means that we should step up federal funding for agricultural research. Funding for ag hasn’t increased in more than 30 years (which means, re: inflation, it’s actually declined). That is a government failure. Agricultural research is vital for our future health and the health of our environment, and we need to be active participants in supporting it. It is far too important a question to be left in the hands of so few.
So what do we do? Well, talking about it doesn’t hurt. If the regulatory agencies who have control over these issues refuse to stand up for the rights of farmers, rural communities, and American consumers, the least we can do is raise hell about it. Understanding the issue takes us a long way, it will help us stay in the conversation even while the industry shifts and squirms and tries to sell us a lie. It’ll mean something if the next time you pick up a bottle of Aspirin, it gives you pause to realize that a company that sells poison and the cure might not be so lovable after all.
Thanks for reading. If you enjoyed this, a click on the green heart below would be wonderful. Looking forward to comments from disagreers! Then, you might enjoy exploring what exactly it means to be a farmer/person. @sarah_k_mock
