ROCKVILLE, Md. (DTN) — Each year, DTN publishes our choices for the top 10 ag news stories of the year. Today we continue our rundown with No. 6 on proposed mergers and acquisitions in the chemical, seed, fertilizer and equipment industries that have dominated ag news and will continue to do so in 2017.
For the past year, the fault lines that once defined the major chemical, seed, fertilizer and equipment companies have been shifting and realigning, as multiple mergers and acquisitions work their way through global and domestic regulatory systems.
The wave of consolidation resulted from a slowing farm economy that sent industry executives scrambling to boost shareholder prices by combining forces with former competitors.
Dow AgroSciences' proposed merger with DuPont Pioneer actually began in December 2015, but continued scrutiny from regulatory agencies in Europe, Australia and North and South America will almost certainly push the process into 2017. After the merger — valued at $130 billion — the combined companies plan to break into three separate entities, one of which would become a new agricultural giant.
China National Chemical Corporation (ChemChina) cleared a significant hurdle in August, when the Committee on Foreign Investment in the U.S. signaled no objection to the Chinese company's $43 billion purchase of Syngenta. The deal has raised concerns about Syngenta's ability to operate fairly in the global market, since China's biotech trait approval process has proved to be a major factor in the timeline and profitability of seed company products.
When Bayer announced a $66 billion acquisition of Monsanto in early September, industry concerns about anti-trust violations heightened. Sen. Charles Grassley, R-Iowa, called a Senate Judiciary Committee hearing later in the month on ag consolidation, where every seed and chemical company involved showed up — except ChemChina — to answer questions about the proposed mergers and acquisitions.
Critics such as the National Farmers Union and American Antitrust Institute have questioned the effects of six major seed and chemical giants shrinking to four on farmer profits and options, as well as research innovation.
According to the most recent industry analyses, Dow-DuPont, Bayer-Monsanto, and ChemChina-Syngenta would control 80{e1c719bd29d6bb84a792d8ffcb03a61a093900316f2da3efbd39b86f03d248b8} of U.S. corn seed sales and 70{e1c719bd29d6bb84a792d8ffcb03a61a093900316f2da3efbd39b86f03d248b8} of the global pesticide market. Smaller companies may stand to gain new assets in 2017 if, as expected, Dow, DuPont, Monsanto and Bayer use divestitures to allay antitrust concerns from the Department of Justice.
In any year, three major mergers and acquisitions within an industry would be noteworthy. But these seed and agri-chemical deals occurred as other agricultural industries, namely fertilizer and equipment companies, made dramatic moves in the same direction.
In early September, Canadian fertilizer giants Agrium and Potash Corporation announced their intention to merge and create the world's largest fertilizer company, valued at $27 billion. Market analysts have estimated that the resulting company would control 23{e1c719bd29d6bb84a792d8ffcb03a61a093900316f2da3efbd39b86f03d248b8} of potash production capacity globally and more than 60{e1c719bd29d6bb84a792d8ffcb03a61a093900316f2da3efbd39b86f03d248b8} in North America alone.
John Deere has proposed a purchase of Precision Planting from Monsanto in a move that would consolidate high-speed planting technology under the equipment company. The deal so alarmed the Department of Justice that it announced a lawsuit against Deere, Monsanto and Precision Planting in August to block the deal.
That lawsuit marks the only clearly defined response by the DOJ to the industry's cresting wave of consolidation. The completion or dismissal of the rest of the mergers and acquisitions lay in wait in 2017, and it will likely be several years beyond that before farmers feel their full effects.
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