Special Edition: Feed Industry Consolidation Review

US farmers campaign against Dow Chemical merger wtih DuPont

By Aerin Einstein-Curtis contact

- Last updated on GMT

©iStock.com/BsWei
©iStock.com/BsWei

Related tags: Soybean

The US National Farmers Union (NFU) is asking for the US Department of Justice (DoJ) to block a proposed merger between Dow Chemical and DuPont.

The American Antitrust Institute (AAI), Food and Water Watch (F&WW) were also involved in drafting and sending a letter warning about the potential downsides of the merger to the Justice Department’s Antitrust Division.

The trend toward consolidation in an already small agricultural market has the potential for some negative outcomes for producers, said Barbara Patterson, government relations representative with NFU. “This is a disturbing trend, this consolidation, [and] where does it stop?" ​she asked. 

The NFU and other organizations expect to be called to the DOJ to give a deposition on the topic, said Patterson.

The campaigners are concerned about what the proposed merger might mean for feed crop producers and others in the agricultural sector, she explained.

“There aren’t a lot of smaller or regional seed companies left and now it’s the merger of the big ones," ​said the NFU representative. 

When seed companies merge the fears include the loss of competition, potentials for increases in prices, a loss in innovation and decreased choice for farmers, she said.

“Between 1985 and 2000, the Big 6 firms—Monsanto, Syngenta, Bayer, DuPont, Dow and BASF—acquired about 75% of small to medium-size enterprises engaged in biotechnology research,” ​said the groups. “When the largest companies absorbed the majority of independent conventional and hybrid seed breeders, they captured their seeds and germplasm and significantly constrained non-biotechnology (i.e., conventional) commodity crop seed lines. Among other adverse effects, this foreclosed choice for farmers who often cannot find conventional seeds.”

Lack of seed competition 'will result'

The proposed merger would eliminate head-to-head competition in corn and soybean seeds, said the NFU and other lobby groups. Monsanto currently holds 35% of the market for corn, while DuPont has 35% and Dow has 6%. In soybeans, Monsanto has a 28% share, while DuPont has 33% and Dow has 5%. The merger would therefore give Dow-DuPont about 41% of the market for corn seeds and 38% of the market for soybean seeds, they noted.

The largest expense in seed cost is the technology, said Patterson. As agribusiness giants amalgamate, that cost becomes an increasingly large portion of a producer’s budget, she added.

“Despite prices being so low, the seed cost have not gone down in parallel,” ​she said​"Syngenta and ChemChina, and Dow and DuPont and Monsanto and Bayer – this is a significant decrease in competition when farmers are hurting already,”​ she added.

Additionally, it can be beneficial to feed crop producers to have more choices when picking what seed variety to plant, said Patterson. A smaller number of companies can reduce those options for growers: “There’s less data, and there are a lot fewer varieties.”

A cap on future research and innovation is also a growing concern. “Scientists are going to be laid off in this merger,” ​she said.

The campaign groups said investor documents indicate that elimination of 'duplicative R&D programs including breeding, traits and chemical discovery' are a key component of the $1.3 billion in cost synergies claimed by Dow and DuPont.

In their letter to the DoJ they said: "We note that that Dow and DuPont appear already to be winding down substantial R&D capabilities, well in advance of any conclusion to an antitrust merger review.  But eliminating duplicative R&D programs is inextricably intertwined with the very anti-competitive effects on innovation markets that are likely to result from the merger."

Consolidation drivers

There are several factors driving the move toward greater concentration in the US agri-business, said Patterson.

“The globalization of agriculture, that’s one piece that’s driving it,” ​she said. “Increased pressure from shareholders for efficiencies and larger profits – those in combination are driving consolidation.”  

The trend has been seen before, notably within the meat packing markets in the 1930s, she said. However, much of those amalgamation efforts were undone when anti-trust laws broke up large consolidated companies.

But the regulators in the US has been increasingly permissive to large companies in this respect in recent years, said Patterson. 

Currently, Monsanto and DuPont have each a 35% share of the market in corn, and Dow has 6%, added the groups. DuPont has 33% of the market share in soybeans, Monsanto has 28% and Dow has 5%.  

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