If the mergers announced for this summer are successful, four groups will control more than 80% of world's production of herbicides and seeds. Last week's announcement of Bayer purchasing Monsanto fired alarms and even Bernie Sanders, the Senator who disputed the US Democratic presidential nomination with Hillary Clinton, stated that these mergers were a threat to all because they would increase the profits of large corporations, and the American consumer would have to pay increasingly higher prices for food. He has asked the Government to block the purchase.
Bayer's purchase of Monsanto is the largest acquisition, paid in cash, in history and the largest business transaction ever made by a German firm (59 billion euro). The American companies, Dow Chemical and Dupont, announced their merger in December through an exchange of shares, valued at 61 billion. Meanwhile, the Chinese state-owned company ChemChina announced in June the purchase of the Swiss company, Syngenta, for 42 billion.
Bernie Sanders was only expressing a growing concern shared by agricultural producers from the US and the rest of the world. Oscar Alfranca, a researcher and professor at Barcelona's l'Escola Superior d'Agricultura, said that "the higher the concentration, the less competition there is in the market. Smaller companies will find it more difficult to survive. Additionally, this would probably slow down innovation in the sector: the big companies, which have the economic capacity to do research, will have little incentive to do so because they can control the selling prices of their products." Alfranca said, "it is very dangerous to leave the world's food in the hands of 3 or 4 multinationals."
This concentration in the agrochemical sector, however, "follows the same logic that globalisation has imposed on other sectors, such as the automotive industry, the electrical sector, or aircraft manufacturers," said Albert Sagues, an economist and professor at the UPF Barcelona School of Management. "You purchase another company, or another company purchases yours, as in the case of Monsanto, which failed to buy Syngenta and had to be sold to Bayer." According to Sagues, mergers have become the price of globalisation: being a global supplier and having global customers gives such great investment, cost, economical advantages, and innovative capacity that the companies that lag behind are doomed to disappear.
This has clearly been the road travelled by the agrochemical industry in recent years: 40 years ago there were more than 7,000 companies worldwide and now there are only 200, but only the top ten really count. The turning point in the industry was 1997, when Monsanto launched the first transgenic: a corn seed designed to be resistant to the aerial spraying of Roundup, its star herbicide, which would allow producers to completely automate the spraying of fields, even with planes; the weeds died and the corn crops suffered no damage. Currently, 92% of the corn grown in the United States is genetically modified. 94% of the soybeans are also genetically modified, and other crops, such as cotton or canola have similar percentages. Only Europe, where the mobilisation of environmentalists has restricted the approval of these seeds; Africa where poverty prevents the development of intensive agriculture, and China and Russia, for political reasons, no longer grow transgenic grains. All the large firms produce them. However, almost all of the reputational damage falls exclusively on Monsanto.
The success of genetically modified seeds allowed patented seed prices to triple in relation to traditional seed prices, multiplying the sector's profits. However, the slowdown of the emerging economies in the last five years has caused a drop in the price of commodities in future markets that has led to a reduction in crop areas and a return to traditional seeds to save costs. In parallel, genetically modified seeds have lost some effectiveness because pests have become resistant to the complementary herbicide (Roundup mainly) and the Research and Development areas of the large companies have failed to develop seeds that are resistant to other products. That, or they haven't been able to market them. Paradoxically the powerful environmentalist opposition makes it expensive and slower to develop new products, as governments make more demands to authorise them, which forces the companies to have a huge investment capacity.
According to "Ecologists in Action", these firms "promote an agricultural model that depends heavily on oil, concentrates land ownership, and is based on the cultivation of large areas dedicated to products that are traded on international markets." Therefore, one of the greatest risks of concentration is that the research on minority products, such as the fruits and vegetables of Mediterranean agriculture, are ignored.
The 109 Nobel laureates who recently signed a letter in support of GM, recognised that their use enhances the development of industrial agriculture, over traditional small labour-intensive farms. However, some doubt that traditional agriculture could feed the world population and intensive livestock farming is using grain as feed.
"The concentration leaves the agricultural producers trapped among colossi: the suppliers of seeds and herbicides are concentrated, and their customers, the major food groups, are also concentrated," said Alfranca. "The only way to maintain a certain level of income is vertical integration, participating in some way in the industrialization of food and its marketing," he said, giving Catalonia's "Guissona" as an example.
Source: La Vanguardia.