Corn growers say Dow-DuPont merger will concentrate seed market, but will also have benefits for farmers

31 January 2017 9:56am

15 July 2016. By Curtis Eichelberger.

The National Corn Growers Association said the Dow-DuPont merger will lead to increased concentration in the corn seed market, but will also create a competitor that is large and powerful enough to take on industry leader Monsanto in seeds and Syngenta and Bayer in crop protection.

The association, which represents 40,000 US corn farmers, spent months researching the proposed merger to determine overlaps, market concentration, benefits that might accrue to farmers post-merger, and the steps that could be taken to mitigate any negative impacts of the combination.

Increased price competition and innovation are viewed as being among the benefits when the number of competitors increases, but the NCGA letter proposes that the market is already so consolidated that it could benefit from the creation of another large competitor.

The association said that Monsanto’s strength has been in developing new seed traits that stave off weed and pest problems. DuPont’s strength has been its germplasm (the living tissue from which new plants can be grown) and seed distribution network. Combining that with Dow’s trait development expertise would put the combined company in better position to compete with Monsanto.

Likewise, by combining Dow’s seed retailer network with DuPont’s farmer-dealer network, farmers could see greater access to a broader range of seed products, the association said in a letter sent to Renata Hesse, the Department of Justice’s principal deputy assistant attorney general, on Thursday.

A Dow-DuPont coupling will also create a stronger crop protection chemical market, allowing the company to compete with Bayer and Syngenta, which dominate the global market, the association said.

Proposed agriculture mergers between Dow-DuPont, Syngenta-ChemChina and possibly Bayer-Monsanto could reduce the number of big biotechnology players in the US from six to as few as four — those three combined companies plus BASF.

ChemChina is owned by the Chinese government.

Proponents of the Dow-DuPont merger acknowledge the potential for considerable consolidation in the industry, but argue that previous mergers have already created a handful of giants. And that ensuring competition might require the creation of a few more players with the financial resources to compete at the highest level.

The association said it costs almost $300 million to register and launch a new crop protection chemical, and about $136 million to launch a new seed trait. Only the largest companies can afford these capital investments with such long lead times from innovation to product launch.

The NCGA’s position on the merger comes at an uncertain time for farmers.

Net farm income fell 55 percent from 2013 to 2015 and farm debt-to-asset ratios are climbing to levels that haven’t been seen since 2002, according to the association.

“These financial indicators signal a weakness in the farm economy that is reverberating through the agribusiness industry,” the NCGA said in its letter. “Layoffs in the agriculture equipment industry and the crop input sector are a natural and expected response to the drop in farm income. Just as lower commodity prices are forcing changes at the farm level, agribusiness companies are also looking for ways to adapt to today’s changing economic environment.”

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