Farmers Head to D.C. to Protest Agribusiness Consolidation

(Bloomberg) -- Farmers are descending on Washington.

Far from the pitchfork-wielding mobs of old, these independent farmers are coming to the nation’s capital to voice opposition to a slate of pending agribusiness mergers. 

Some 250 members of the National Farmers Union, the second-biggest U.S. farmer group, will meet with more than 30 members of Congress and Agriculture Secretary Tom Vilsack on Monday to argue that the spate of deals will reduce competition, raising the cost of seeds and chemicals used to protect crops while farmers are already being squeezed by weak commodity markets.

The farmers argue that they must speak up to prevent their suppliers from becoming even more dominant. Their vocal opposition is unusual in the farm business, where farmers have tended not to make waves with the big companies that sell to them.

"They’re going to get stuck with high prices and no competitors," said Harwood Schaffer, an agricultural economist at the University of Tennessee. "At some point there needs to be a shift in government policy toward these mergers."

Record Volume

Companies have announced a record volume of agriculture-related acquisitions this year. Canada’s two largest fertilizer companies, Agrium Inc. and Potash Corp. of Saskatchewan Inc. last week disclosed they’re in merger talks, boosting the value of deals announced in 2016 in the agricultural-chemicals sector to about $125 billion, according to data compiled by Bloomberg. 

Other pending deals include Dow Chemical Co.’s plans to merge with DuPont Co. to create a global chemicals giant, China National Chemical Corp.’s proposed bid for Syngenta AG and Bayer AG’s offer to buy Monsanto Co. to become the world’s biggest producer of seeds and pesticides.

Negotiations between Bayer AG and Monsanto Co. are entering the final stretch and the German company could reach a deal to acquire its U.S. competitor as early as next week, according to people familiar with the matter. Bayer’s supervisory board is scheduled to discuss the deal on Wednesday and Monsanto’s management board is set to gather next week, said the people, who asked not to be identified because deliberations are private. Negotiations are ongoing and could still fall apart.

All the proposed consolidation has raised concerns on Capitol Hill, where the Senate Judiciary Committee is planning a hearing later this month to examine how the rash of deals would affect competition.

Farmers Head to D.C. to Protest Agribusiness Consolidation

The deals have the potential to transform the industry, said Senator Mike Lee, a Utah Republican who heads the committee’s antitrust panel. Although lawmakers don’t have the authority to block mergers, they can put pressure on antitrust officials at the Justice Department and the Federal Trade Commission to challenge deals.

“To safeguard the future of food and agriculture in America, we must thoroughly consider the potential consequences of consolidation in this important market," Lee said in a statement Wednesday.

Syngenta, Dow and DuPont said their mergers would ensure choice for farmers and lead to more innovative products. Monsanto declined to comment.

Farmers Union is more active than other farmer groups in criticizing the mergers. Its members are strongest in Great Plains states and tend to include people with smaller farms than those prominent in the American Farm Bureau Federation, the largest farmer group, whose members are more numerous in the Midwestern Corn Belt and nationwide.

“Farmers today see themselves as businessmen,” said Schaffer. "They want to get bigger too, so they’re more sympathetic toward agribusiness than perhaps they should be."

‘Real Trepidation’

Roger Johnson, president of the Farmers Union and former agricultural commissioner for North Dakota, said some farmers may not want to bite the hands that feed them by opposing the mergers.

“There’s a real trepidation,” he said. “If you’re a farmer who’s a seed dealer, and you’re marketing whatever brand, and you’re quoted as saying something about that company, maybe you’re no longer a seed dealer anymore. I can’t tell you that that’s happening, but that’s the fear.”

Johnson didn’t name names. Monsanto, which has sued farmers in the past for patent infringement, declined to comment.

Monsanto and other big companies have aligned with farmer groups such as the Farm Bureau to defend agricultural subsidies and boost free trade. They also work together to pass twice-a-decade farm bills, considered one of Washington’s masterpieces of special-interest politics.

Washington Heavyweight

Farmers and food companies have spent more than $74.2 million in campaign financing this year, making it a Washington heavyweight against a backdrop of lower prosperity in their sector. The amount is slightly more than that spent by the construction, transportation or defense industries. Farm profits this year may be $71.5 billion this year on falling commodity and livestock prices, a plunge from the $123.8 billion peak in their sector three years ago.

Farmers Head to D.C. to Protest Agribusiness Consolidation

Every farm group is balancing different interests and multiple mergers happening at once increases the unknowns for the industry, said Bob Young, chief economist for the Farm Bureau.

“Any one of these mergers, you’d say OK. But four? Wow,” he said.

Formidable Competitor

The National Corn Growers Association, which represents producers of the most-valuable U.S. crop, commissioned a study of the impact of Dow’s proposed merger with DuPont, which it released in July as part of a letter to the Justice Department’s antitrust division.

The group said that while it’s concerned about the loss of competition in the seed industry from the Dow-Dupont deal, the two together would make a formidable competitor to industry leader Monsanto. Having two evenly matched companies fighting for market share would benefit farmers, according to the letter.

“You hate to see the loss of competitors, but once you look at the data and get beyond the emotional reaction, not all mergers are created equal,” said Chris Novak, NCGA’s chief executive officer.