In 2008 a perfect storm of economic forces came together and caused a near collapse of the world’s finance industry. The world’s biggest banks were caught in a money shuffling scheme that left some of them holding bags full of worthless paper when the housing bubble burst. We all bailed them out because they were “too big to fail.” If they had been allowed to go out of business, they would have taken a large swath of the world’s economy with them. One would have thought part of the solution would have been to limit how big a bank could be. That, however, doesn’t seem to have happened. Those big financiers may have been required to have a larger reserves to cover their risky investments. That’s an improvement, but instead of shrinking in size, the biggest have gotten bigger.
This week’s bigger is better story is taking place in agriculture. Three of the world’s six largest seed and agricultural chemical companies are seeking approval to buy out the other three biggest. Since February China National Chemical Corporation has made a deal to buy Syngenta, Dow and Dupont have merged, and Bayer has negotiated a deal to buy Monsanto which has been negotiating with BASF. According to market data cited by the National Farmers Union in it’s testimony before the Senate Judiciary Committee, these deals would result in a combined three companies controlling more than 80 percent market share of the U.S. corn seed sales and 70 percent of the global pesticide market.
Industry spokespeople cite the downturn in agricultural prices and declining markets as a rationalization for the mergers and acquisitions. The big six are worried that as farm prices drop, farmers will buy fewer inputs. Apparently they are concerned that some farmers will go out of business and there will be fewer customers for their products. The consolidation of the already huge corporations is also deemed necessary because of the mountain of regulation that keeps smaller companies from competing in the market for new agricultural technology. One pundit even stated that the bigger companies will be more agile and able to meet the world’s rapidly changing markets.
Since when has the biggest been able to be agile? It’s one of the laws of physics. The bigger you are the harder it is for you to stop, go or turn. It’s called momentum.
A free market really only works when there is competition. These mergers will cut the competition for agricultural seeds, chemicals and fertilizers nearly in half. Three companies are far more able to carve up the market and each become the sole provider of certain seeds, fertilizers and chemicals. They will have the political clout to avoid the seldom enforced antitrust laws that are already on the books. Seed availability can be orchestrated and prices driven up. Already we have seen a decline in the varieties of seeds available to farmers and gardeners as the number of companies selling seeds have declined. Only those seeds that will return the largest profits will be promoted and reproduced. Seeds for specialty crops and unusual growing conditions will soon be as hard to come by as are some medications for rare diseases and unprofitable vaccines. The other possibility will be that those unusual seeds will be very expensive. What will happen if these three big corporations start to fail? Will we bail them out because without them and their seeds there will be food shortages?
Of course the companies use the well-being of farmers as a rationalization for these mergers. They talk about the numbers of farmers facing tough times and their concerns about losing customers. The reality of farming is that when a farmer goes out of business, his or her farm is bought by someone else who farms it and buys seed, chemicals and fertilizers. The big six make their money on the number of acres on which their products are applied, not the number of farmers driving to the seed store. Fewer farmers means smaller marketing divisions and fewer people to be convinced to use a particular seed or chemical. One farmer who controlled all the acres would be the ideal market.
Of course, all of us think we will be that last farmer, sitting in our office controlling our “autonomous” tractors, monitoring our farms with drones and forming a cozy relationship with the big guys to buy our inputs in bulk and to sell our production by the trainload.
Sadly, only a few will ultimately survive the bigger is better movement. The rest of us will either work for the biggest or move on.
Copyright © 2016 Janet Jacobson and Sustaining the Northern Plains