The world鈥檚 largest seed company is attempting to swallow up the chemical operations of Syngenta, the world鈥檚 largest producer of pesticides and other farm inputs. Monsanto鈥檚 proposed deal signals a change in focus for the agricultural giant, and could have ripple effects across farm country.
By its own admission, Monsanto lags behind in chemistry research. To boost its research in chemistry, and possibly find new ways to combine chemicals and biotech crops, Monsanto wants to buy the Swiss chemical company.
It鈥檚 not just Monsanto. Lately, Syngenta鈥檚 chemical division has been the belle of the agrichemical ball, with a few potential suitors. a competitor in chemical production, Germany-based BASF, is preparing a bid as well.
The corporations proclaim that deals like this would allow them to bring new technologies to the farm faster and more efficiently, while academics and watchdogs ring the alarm for antitrust officials to crack down.
The deal-making between Monsanto and Syngenta has so far been decidedly one-sided, and uncharacteristically public. Twice now Syngenta has rebuked Monsanto鈥檚 offers, citing antitrust concerns. Syngenta representatives have taken to posting letters that lay out the proposed deal from Monsanto executives.
鈥淭his has been a very unusual deal. I鈥檓 kinda used to the situation where two parties meet, they argue, you usually walk out once or twice,鈥� says Monsanto鈥檚 Chief Technology Officer Robb Fraley.
He made the comments to journalists as part of a National Press Foundation program co-sponsored by the Organic Trade Association, the AARP foundation, the American Farm Bureau Federation and Monsanto.
鈥淭his has been a deal that has all played out in the public,鈥� Fraley says.
Monsanto鈥檚 been trying to explain itself to consumers in an attempt to change its brand to that of , rather than a shadowy seed conglomerate. Critics dismiss the move as 鈥�.鈥� The corporation has been on a buying frenzy, moving outside the seed sector into high tech. In the past few years it鈥檚 purchased and , betting that as climate change takes hold farmers will buy more technology to adapt. It is even looking at how drones can be deployed on farms.
Monsanto is widely known as the birthplace for the herbicide glyphosate, sold under the brand name RoundUp, currently the most widely used weed killer in the country. But it was discovered decades ago, and because of its ubiquity . Fraley notes that Syngenta鈥檚 chemical brands fill a gap at Monsanto.
鈥淲e have historically not been strong in the chemistry space. So the combination of Syngenta鈥檚 chemistry business with our seeds and traits will be a nice pairing,鈥� Fraley says.
In letters between the two companies, Syngenta executives raise antitrust concerns, and say joining forces with Monsanto brings up a 鈥渞eputational risk,鈥� alluding to Monsanto鈥檚 frequent inclusion on lists of . Monsanto officials suggested the new company would sport a brand new name.
鈥淭here鈥檚 no getting away from the fact that Monsanto鈥檚 name is tainted,鈥� says , a researcher with the ETC Group, a Canadian agriculture think tank.
鈥淚n the minds of consumers everywhere, Monsanto personifies the evils of industrial agriculture,鈥� Shand says.
A name change is a smart business move, Shand says. Leave the Monsanto baggage behind.
No matter how the cards fall, farmers will feel the results. Shand says the six large multinational corporations that produce seeds and chemicals for farms are primed to start feasting on each other, with global implications. that if the Syngenta deal never materializes, they鈥檙e ready to court Bayer, a German chemical conglomerate.
鈥淲hat we鈥檙e going to see is a whole feeding frenzy among these corporations. Basically we鈥檙e talking about narrowing farmers鈥� options,鈥� Shand says.
That squeeze would likely extend beyond farmers in the U.S. as well. One thing that makes Syngenta an attractive acquisition, Robb Fraley says, is its network of research and production facilities in Europe and India.
鈥淚 think it鈥檚 fair to say that no company has a really strong position in the various countries across Africa and the countries across Asia,鈥� Fraley says. 鈥淏ut if you actually look at the Syngenta footprint and our footprint and you put them together in a lot of these developing agricultural markets, it creates a company that can really make a difference in those geographies.鈥�
Consolidation in farm inputs, which includes everything from livestock drugs to tractors to seeds to pesticides, saw significant acceleration in the late 1990s. The USDA says the introduction of biotech crops spurred much of the consolidation in the seed industry. The six large companies that make up the market together control about .
鈥淕reater market power resulting from the structural changes in agricultural input industries means that farmers may pay higher prices for purchased inputs. With stronger legal protection over their intellectual property and fewer firms offering competition, firms can charge higher prices for their new innovations,鈥� reads . 鈥淚n fact, for the past two decades, the prices of farm inputs have been rising faster than the prices U.S. farmers receive for their crops and livestock.鈥�
Powerful players in the market for seeds and chemicals make up a tangled web of competitors and collaborators. Michigan State University rural sociologist
鈥淚f [the Monsanto-Syngenta deal] is to go through there are a lot of antitrust concerns,鈥� Howard says.
Monsanto argues its proposed deal wouldn鈥檛 trigger an antitrust crack down. And if it did, officials there say they鈥檒l pay Syngenta a $2 billion breakup fee. Even if it survives government scrutiny, Howard says another big concern is what deals like this mean for research.
鈥淐ompanies are very focused on blockbuster innovations,鈥� Howard says. 鈥淪o they put a lot of money into things that give them blockbuster profits, and they ignore innovations that are needed but are not necessarily going to give them huge returns.鈥�
That鈥檚 backed up by USDA research as well.
鈥淎s the seed industry became more concentrated during the late 1990s, private research intensity dropped or slowed,鈥� reads . 鈥淭hose companies that survived seed industry consolidation appear to be sponsoring less research relative to the size of their individual markets than when more companies were involved.鈥�
At a Monsanto lab in Chesterfield, Missouri, a St. Louis suburb, the company鈥檚 head of global regulatory affairs, Ty Vaughn, motions to what looks like a large refrigerator door. Inside the mirrored growth chamber, tomatoes, corn and soybeans grow under bright lights.
For the last few decades, rooms like this have been the testing grounds for the company鈥檚 game-changing and controversial genetically-engineered seeds. The same seeds that have spawned global protests against the corporation. Vaughn says while the company鈥檚 moves into chemistry, data collection, and maybe drones are broadening its focus, genetically-engineered crops will remain its bread and butter.
鈥淏iotech is here to stay,鈥� Vaughn says. 鈥淲e鈥檝e already shown the value of biotech. And we鈥檙e going to continue to have efforts into biotech. These other tools are just going to augment that.鈥�
