The $66 billion Bayer-Monsanto merger just got a major green light — but farmers are terrified

Discussion in 'The Entertainment & News Center' started by DOS_patos, Apr 11, 2018.

  1. DOS_patos

    DOS_patos Unverified Legion of Trill member

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    A blockbuster deal between Bayer and Monsanto appears to be moving ahead.

    On Monday, the US Department of Justice approved the German pharmaceutical and chemical group's bid to buy the US seed giant for more than $60 billion, The Wall Street Journal reported. Bayer agreed to sell off additional assets to alleviate anti-trust concerns.

    The two companies first announced the potential deal in September 2016, saying the move would boost agriculture research and innovation.

    "By the time 2050 rolls around, the world will have 10 billion people, and the demand for food will double," Robb Fraley, Monsanto's chief technology officer, told Business Insider last year. "The whole point here is that the business combination between Monsanto and Bayer will allow the companies to invest in and create more innovation, and it's going to take a huge amount of innovation in order to double the world's food supply."

    Farmers aren’t so sure.

    “From my perspective, they're saying the exact opposite of what most people in the industry actually believe," Clay Govier, a farmer in central Nebraska, told Business Insider in January 2017. Govier is the fifth generation to work on his family farm of 3,000 acres, which primarily grows corn and soybeans. The farm has used Monsanto products for at least 12 years, and Govier's family expects seed and chemical prices to increase due to the merger.

    That could put many small family farms in tough positions.

    "I just sat down to chat with my banker the other day, and fortunately we're in a position that I don't think we're going to have to have a hard conversation when it comes to loans for next year," Govier said. "But he said there are a lot of guys out there that are going to have a really hard conversation."

    Consolidation on the rise
    According to the US Department of Agriculture, farm production in the US has consistently shifted away from smaller farms, to larger ones. Whereas just 15% of all cropland was held by farms with at least 2,000 acres in 1987, that percentage had jumped to 36% by 2012.

    With the increasing consolidation of the agriculture supply industry (Monsanto-Bayer is the biggest of three major mergers — preceded by Dow-DuPont and Syngenta-ChemChina), Govier doesn't expect things to get easier anytime soon.

    "They're locking in their profit and they're cornering the market by getting bigger, not by creating new products," he said of Bayer and Monsanto. "They're just choking out the rest of the competition."

    [​IMG]© Provided by Business Insider Hugh Grant MonsantoThe size of the Bayer-Monsanto deal — it was the biggest merger announced in 2016 after AT&T and Time Warner — means the companies have to seek approval from regulators in 30 countries.


    Last month, the deal won antitrust approval in the European Union. US approval was expected as well, given that the CEOs of Bayer and Monsanto, Werner Baumann and Hugh Grant, visited President Donald Trump before he took office and said in a statement that the three had a "very productive meeting" at Trump Tower.

    Baumann and Grant suggested that Trump shared their view of the agriculture industry's need for innovation. To that end, the companies highlighted their plan to spend $16 billion on research and development worldwide over six years — an average of $2.67 billion a year.

    But a look at their past R&D budgets reveals that, added up, the two companies already spent approximately $2.59 billion a year as of early 2017, so the combined increase in funds amounts to less than $500 million over six years.

    "Let's just cut to the chase: These companies want to make more money, they want to raise prices," Mark Connelly, an agriculture analyst at the brokerage and investment group CLSA Americas, previously told Business Insider. "No company in this industry needs these deals in order to innovate."
     
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  2. DOS_patos

    DOS_patos Unverified Legion of Trill member

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    Higher costs for farmers
    Data compiled by the Farmers Business Network, a data-distribution network that collects crowd-sourced information from members, backs up Connelly's concern. FBN analyzed corn-seed yield (the number of bushels farmers can produce per acre) in relation to the seed brands' market share, based on data from 5.75 million acres of corn. It found that while greater market share was correlated with higher yield — a primary goal of agricultural innovation — the rise wasn't proportional.

    "After you got to a few percent market share, it really tapered off quite quickly," FBN cofounder Charles Baron told Business Insider in 2017. "So going from 5 or 10% to 20 or 30% market share didn't lead to a massive yield increase."

    [​IMG]© Provided by Business Insider Corn seed price vs market share Farmers Business NetworkWhen plotting seed prices in relation to market share, FBN data also showed that greater market dominance was correlated with higher corn seed and chemical prices.


    That doesn't bode well for farmers, since the newly consolidated agricultural companies already make up a significant portion of the market, according to Connelly's analysis.

    "If you look at how much of the farmers' seed and pesticide dollars are going to these companies, Monsanto-Bayer — if it were one company today — would be getting $1 out of every $3," Connelly says. "Dow-Dupont would be taking one out of every $4. Think that's a problem? Holy crap, right?"

    Such consolidation isn't the only headache for farmers under the Trump administration. Some farm owners who depend on immigrant workers have concerns about Trump's immigration policies, since they say they can't find enough American citizens to fill their staffs. Agriculture industry groups also strongly opposed Trump's trade restrictions on China, since the country is likely to retaliate with high tariffs of its own.

    "We’ll make it up to them," Trump reportedly said on Monday, according to Politico. "The farmers will be better off than they ever were."

    Bayer and Monsanto's motivation to merge
    Bayer representatives acknowledged in a 2017 statement to Business Insider that they were often confronted with the allegation that the merger would raise prices and reduce innovation and competition.

    [​IMG]© Provided by Business Insider Werner Baumann Bayer"We disagree with this and are convinced the opposite is true," the company wrote. "We are competing with other very strong companies that offer similar products and have strong R&D capabilities. We will only succeed with pricing and selling our products if our value proposition to our customers is better than that of our competitors and if we continue to innovate. We are also convinced that in a competitive business such as the agriculture industry, the efficiency gains generated by innovation will increase returns for farmers."


    Monsanto's Fraley estimated that, under the current system, it takes about a decade for a company to develop and get approval for a new herbicide. Then if that product is popular, it'll take the company another 10 years to make a seed trait that responds to the new chemical. But since Bayer and Monsanto's combined resources might allow them to develop paired products in tandem, he said they could halve the time it takes to bring those new products to farmers.

    Connelly has a different hypothesis. Monsanto has historically sought out partnerships and joint ventures with other companies that are developing innovative products. But that means dividing up profits. So Connelly predicts the size of a combined Monsanto-Bayer will lead the new company to favor a mediocre product or solution that it can develop in-house over a more promising one that would require a revenue-sharing partnership.

    "We're not going to be chasing the best solution anymore — we're going to be chasing the good-enough solution," Connelly said.

    [​IMG]© Provided by Business Insider Soybean farmer Illinois
    Todd Eney, a fourth-generation farmer in central Montana, previously told Business Insider that as suppliers of seeds and chemicals have become more consolidated, he hasn't seen many benefits.

    "These corporate bigwigs, are they really going to do what they say?" he said. "Our farm has been out here since 1935, and I'm 40 years old and I've watched a lot of small family farms in our area go under. They can't compete because they can't pay the price of input because of what these companies are wanting to charge for input now."

    Eney's farm grows wheat, malt barley, and field peas, and it uses Roundup, Monsanto's popular weed killer. Last year, he said, he and his father decided to use 50% less fertilizer to cut costs. The possibility of further consolidation has him on edge.

    Clay Govier has a similar feeling.

    "You know, it's almost like you shrug your shoulders and cross your fingers that your regulators are going to have a backbone and not let it happen,” he said last year.

    That scenario does not seem to be playing out as he'd hoped.
     
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  3. Olorun22

    Olorun22 Prominent Member

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    Is this the company that has pesticide in the seeds? They killed soil with that shit!
     
  4. Koltrain

    Koltrain Prominent Member

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    Sounds like an infinite increase in chemicals being put into the food supply..
     
  5. Focal Point

    Focal Point Negusa Negast

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    It's just business farmers... I'm sure those votes you had for those not in your best interest can still be counted on
     
  6. DOS_patos

    DOS_patos Unverified Legion of Trill member

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    yall know i know alot about monsanto.....and them and bayer are both terrible in their own right....now the merge...

    you niggas have no idea
     
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  7. Broddie

    Broddie Prominent Member

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    This merger is fucking frightening and more people should be alarmed by it instead of staying distracted by Trump shenanigans.
     
  8. Northside7

    Northside7 Prominent Member

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    If you haven't, start buying seeds and store them.
     
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  9. Goldie

    Goldie King of Spades Site Owner I Am Your O.G Bank Protection

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    There's a good netflix doc about this, I forget the name tho.
     
  10. DOS_patos

    DOS_patos Unverified Legion of Trill member

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    the world according to Monsanto
     
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  11. Goldie

    Goldie King of Spades Site Owner I Am Your O.G Bank Protection

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    I haven't checked that one out yet, I will tho.

    I think the one I was thinkin about is Food Inc or one of those other food docs
     
  12. OhMars

    OhMars MEH! Motherfucka Bank Protection

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    Drop the knowledge
     
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  13. Focal Point

    Focal Point Negusa Negast

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    Well something to consider for real
     
  14. DOS_patos

    DOS_patos Unverified Legion of Trill member

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    how many times do i have to tell you niggas i cant speak on it due to contractual shit.

    but i worked for monsanto in st louis...seen some shit and voided the contract and never wanted to work for them. i am all about the money but certain shit...i stand by my morals. i am sure you can find it on the netz
     
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