Seed Company Executives Appear on Capitol Hill -- Update
20 September 2016 - 11:03PM
Dow Jones News
By Jacob Bunge
U.S. Senators on Tuesday challenged executives from the world's
largest seed companies to justify a wave of mergers, which some
lawmakers said could lead to higher prices for farmers and
consumers alike.
Senior officials from Monsanto Co., Bayer AG, DuPont Co. and Dow
Chemical Co. said their combinations would yield higher-performing
crops and more effective chemical sprays by integrating research
and sharing regulatory costs. If successful, the mergers would
shrink the seed and pesticide industry's top six global players to
four companies.
The tie-ups were catalyzed by a deep slump in the U.S. farm
economy, which was hurt by four consecutive bumper crops that sent
commodity crop prices plunging. The deal-making boom could reorder
the $100 billion global market in seeds, pesticides and plant genes
that enable crops to survive herbicides and repel bugs. Net farm
income in the U.S. is projected to drop 11.5% this year, a third
straight annual decline, and some farmers are skeptical their
bottom lines will benefit from the cost savings and improved
products envisioned by merging seed makers.
The merger splurge crested last week when German pharmaceutical
conglomerate Bayer agreed to acquire Monsanto, the world's largest
seed company by sales, for $57 billion. In February Swiss pesticide
and seed maker Syngenta AG agreed to sell itself to China National
Chemical Corp., or ChemChina, for $43 billion, while Dow Chemical
Co. and DuPont Co. in December announced a merger that would lead
to the spinoff of three independent companies, including one
focused on seeds and agricultural chemicals.
"To me, it looks like this consolidation wave has become a
tsunami," said Sen. Charles Grassley (R., Iowa), chairman of the
Senate Judiciary Committee, who convened the hearing. "I'm
concerned that further concentration in the industry will reduce
choice and raise the price of chemicals and seed for farmers, which
ultimately will affect choice and costs for consumers."
Mr. Grassley, who farms with his son Robin in Butler County,
Iowa, said he has watched the price of a bag of corn seed rise from
less than $50 when he started farming decades ago to more than $300
a bag currently.
Sen. Amy Klobuchar (D., Minn.) warned that fusing companies with
different specialties -- such as Bayer's focus on pesticides and
Monsanto's deep portfolio of seed genetics and biotechnology
capabilities -- could leave few avenues for upstarts to penetrate
the research-intensive business. "It poses a question of whether
some mergers are too big to fix," she said.
Seed and pesticide executives defended the deals as necessary to
speed the development of new crops and chemicals that can take
around a decade and hundreds of millions of dollars to bring to
market.
"This is an industry that desperately needs to invest more,"
said Robert Fraley, Monsanto's chief technology officer, who
estimated that Monsanto spends about $1.5 billion annually
developing new products. Asked what would happen if the mergers
weren't permitted to advance, Mr. Fraley said it was unlikely
Monsanto and its rivals would be able to release new products as
swiftly.
The executives played down concerns about reduced competition by
pointing to longstanding agreements to license biotech crop genes
to competitors. They also talked up the potential for smaller
rivals, such as Indiana seed developer AgReliant Genetics LLC or
Philadelphia pesticide manufacturer FMC Corp., to peel off
businesses that top players may need to divest to secure antitrust
clearance for their mergers.
Syngenta's planned sale to ChemChina, a Chinese state-owned
company, drew specific concerns from senators worried that the
Chinese government could favor Syngenta's products over those of
rivals, or wield influence among U.S. farmers.
Erik Fyrwald, Syngenta's chief executive, said the company would
remain independently run and that the deal gives China an incentive
to "improve their regulatory process," which the seed industry has
criticized as slow and opaque.
Mr. Fyrwald also pledged that Syngenta, upon closing its sale to
ChemChina, wouldn't invoke a sovereign immunity defense to shield
itself against litigation in the U.S. Syngenta is battling a raft
of lawsuits from farmers and grain companies alleging they suffered
losses after Chinese import authorities in late 2013 began
rejecting corn shipments after detecting an unapproved crop gene
developed and sold by Syngenta.
Farm group representatives, including the American Farm Bureau
Federation and the National Corn Growers Association, said while
each merger on its own may not raise competitive concerns, the
industry's potential reshaping through multiple mergers in less
than a year has challenged farmers to keep up.
"The challenge we face as an industry is having all these occur
at the same time," said Bob Young, the Farm Bureau's chief
economist. "Obviously, you'd rather have six companies than four,
but we do recognize that market forces are at work."
Write to Jacob Bunge at jacob.bunge@wsj.com
(END) Dow Jones Newswires
September 20, 2016 16:48 ET (20:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
DuPont de Nemours (NYSE:DD)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
DuPont de Nemours (NYSE:DD)
Historical Stock Chart
Von Jul 2023 bis Jul 2024