It has been quite a week. First of all we had the Potash Corporation of Saskatchewan and Agrium Inc of Calgary agree to merge. Then, we had the mother of all agricultural supplier deals with Bayer agreeing to buy Monsanto. I’ll just say, if you are farmer, hang on to your wallet.
Oh, I’m just kidding. I’m a pragmatist. Somehow as farmers we will survive this although it looks to me as a classic move by competing oligopolies to control a farm input market even tighter. I never like these kinds of things. However, I do not control the world of finance and this is simply the free market at work. Hopefully innovation won’t die because of it.
The Potash Corporation and Agrium brought together a retail network with the fertilizer mines in Saskatchewan and other places. According to a CBC report, the new firm would be the world’s number one producer potash and number two producer of nitrogen fertilizer with operations in 18 countries and more than 20,000 employees worldwide.
The Bayer buyout of Monsanto brings to an end a company that has redefined much of global agriculture. Simply put, we won’t have Monsanto to kick around anymore. The two companies together will now have the capacity to reshape the $100 billion seed and pesticide sector. Sorting out what happens next will be certainly intriguing. We once had Bayer’s Liberty Link technology to fight off glyphosate resistant weeds. Then Monsanto created the Xtend system to fight off the Liberty Link challenge. Now, they are going to be one big family. However, I don’t know if I hear “Kum Ba Yah” being sung in farm country.
In the case of Monsanto it never ever did make sense to me. Sure, I liked using Roundup but when it was first released back in the 1970s it cost $50 an acre to spray it, so we did it sparingly. With the advent of biotechnology, Roundup ready crops came into vogue in a big way all in the name of selling more herbicide. They sold a lot Roundup thru the years, but along the way they were helped by a regulatory environment never seen before. Farmers needed to sign technology use agreements, before they could buy the seed. Monsanto representatives said Roundup was all you’d ever need. Years later we have all kinds of glyphosate super weeds. Spraying crops “conventionally” with several modes of action is back in a big way.
Interestingly enough I got the weirdest letter last June 27th from a Micheil De Jongh, President and General Manager of Monsanto Canada. In the letter De Jongh writes, “We’ve been hearing a lot of fear-based rhetoric floating around, about farming practices and resistance in Canada. When it started, we should have spoken up. When you (farmers) began to battle herbicide resistance, we should have stood beside you. Instead, fear spread.
It was one of the strangest letters I had ever received from a big company that did not need to explain anything. It was especially strange to be admitting your weaknesses in front of an impending Bayer buyout. Simply put Monsanto was spent, their model had been rejected. As my twitter friend Dr. Sylvain Charlebois, the Dean of the Faculty of Management at Dalhousie University in Halifax said in his Globe and Mail piece “With Monsanto’s Demise, Its Time for a Rational Conversation About Biotech. He wrote, “The Company thought that by having science on its side, there was no need to tackle concerns originating from what it considered flawed studies. Yet adversaries of Monsanto’s business model have successfully exploited the fact that trust, the golden rule in risk communications actually has more currency than science”.
That ultimately cost Monsanto its existence and now having been swallowed up; the new business entity will join the exclusive oligopoly club with the Potash Corp/Agrium entity to service the agricultural industry. Will it be about value and profits for agriculture or will it be about value and profits for the new oligopolies? Well, its not done yet. There are some regulatory hurdles yet. You can bet, they will be asked those questions.