The Spurning of Monsanto: Tip of the iceberg?

Early this month the Syngenta corporation made history by accepting a buyout bid from the Chinese state-owned company ChemChina. The two corporations together control a quarter of the global pesticide market and hold top positions in the global seed market. It is the largest foreign corporation ever bought by China.

“In making this offer, ChemChina is recognizing the quality and potential of Syngenta’s business,” said Syngenta chairman Michael Demaré upon announcing the merger, “This includes industry-leading R&D and manufacturing and the quality of our people worldwide. The transaction minimizes operational disruption; it is focused on growth globally, specifically in China and other emerging markets, and enables long-term investment in innovation. Syngenta will remain Syngenta and will continue to be headquartered in Switzerland.” (1)

“We will continue to work alongside the management and employees of Syngenta to maintain the company’s leading competitive edge in the global agricultural technology field,” said ChemChina chairman Ren Jianxin. He added, “Our vision is not confined to our mutual interests, but will also respond to and maximize the interests of farmers and consumers around the world. We look forward to… [delivering] safe and reliable solutions for the continued growth in global food demand.”

This sale is a landmark for Chinese foreign policy and a landmark also for Europe-China relations.

It is also bad news for Monsanto.

It is also bad news for Monsanto.

The US-based agrochemical corporation, a world leader in the plant biotechnology and seed sectors, had pinned its hopes on buying Syngenta and was not counting on the Chinese government stepping in with a higher bid. It is no secret that Monsanto is having a hard time. At the end of 2015 it fired 2,600 employees and announced 1,000 more layoffs this year—16% of the company’s workforce. (2)

Since 2000, Monsanto has based its business model on an extremely simple product line, selling genetically modified (GM) seeds (mostly corn and soy) that have been engineered to tolerate their trademark Roundup herbicide. These seeds, known as Roundup Ready, sold along with the herbicide, became one of the biggest agribusiness success stories of all time. But this business model is fast becoming more of a liability than an asset. Quite predictably, weeds are developing resistance (3), and evidence of Roundup’s toxicity is becoming ever harder to discredit and deny.(4) Monsanto is trying to extricate itself from the Roundup Ready wreckage.

Instead of rethinking its foolhardy business strategy of “betting the farm” on a single chemical product, the corporation is now seeking new herbicides and new GM herbicide-tolerant crops to sell along with them. However, the cost of developing new agrochemicals is astronomical—even without adding the expense and time it takes to obtain regulatory approval, a political-bureaucratic process that takes years.

Like Microsoft and Google, Monsanto decided years ago that innovating is just too costly and risky and that it is cheaper and safer to buy out the competitors and acquire their product lines. But after more than twenty years of mergers, acquisitions and vertical integration in the agrochemical, seed and agricultural biotechnology sectors, there aren’t that many fish left in the pond. As of 2015 Monsanto had only five competitors.  Together with Monsanto the “Big Six” comprised a de facto cartel that controlled 63% of the world seed market and 75% of the world agrochemical market.(5) In November, two of these corporations—US-based Dow Chemical and Dupont—agreed to merge, reducing the Big Six to five.

Of the remaining four competitors, Switzerland-based Syngenta was Monsanto’s most appetizing choice, being the world’s largest pesticide company (with some 20% of the global market) and owner of substantial assets in the growing and promising field of precision farming. But the Chinese came over and walked away with the prize.

The story, however, does not end there. The Syngenta-ChemChina merger needs the blessing of the US government if it is to proceed. But how can Washington have any say in a deal that concerns only China and Europe? If this new corporate combination is to do any business in the USA, it has to convince the Department of Justice’s Antitrust Division that it does not represent undue market concentration. If Antitrust emits an unfavorable opinion the merger may have to be called off. Given that the United States is the world’s second largest market for pesticides (after Brazil), any agrochemical monopoly that cannot do business there will quickly be driven bankrupt by the others in the “Big Five.”

Farmers’ organizations are not thrilled by the deal. “Today’s announcement is cause for concern among everyone in U.S. agriculture, especially farmers,” said the US National Farmers Union. “NFU will pay particularly close attention to the alarming trend of Chinese government-owned entities purchasing U.S. and other agricultural companies.”

Farmers’ organizations are not thrilled by the deal.

“In this case, Syngenta would be owned by a company controlled by the Chinese government. For an increasingly consolidated sector of agriculture, this is of particular concern since state-owned businesses frequently do not act in economically rational or predictable ways. As a result, more uncertainty often surrounds their businesses, and consequently, other competing businesses may be adversely affected.”(6)

The Syngenta-ChemChina merger will also be investigated by the Committee on Foreign Investment (CFIUS), an interagency body that includes the departments of Defense and Homeland Security, which will examine the transaction from the perspective of national security. According to reports by Reuters and Bloomberg News, the committee will look into the merger’s food security implications.(7)

The Syngenta-ChemChina merger will also be investigated by the Committee on Foreign Investment (CFIUS), an interagency body that includes the departments of Defense and Homeland Security, which will examine the transaction from the perspective of national security.

Asian investors have been stopped from snatching U.S. companies before. In 2015 the Justice Department stopped Thai Union Group from buying Bumble Bee Seafoods.

According to CNBC, “The deal would have given Thai Union control of some of North America’s best-known seafood lines, including two of the three biggest canned tuna brands in the United States.”(8)

According to the ETC Group, a Canada-based non-profit think tank, the future is unclear:

“If regulators allow these two mergers to go through – and that’s by no means certain – then the Big Six will become a Fat Five: Dow-DuPont’s agribusiness spinoff will lead the pack, followed by ChemChina – already #7 in global pesticides – and Syngenta, which is #1 in pesticides and #3 in seeds. That leaves Monsanto in third position trailed by Bayer and BASF. Monsanto was repeatedly rebuffed by Syngenta, but it desperately needs to step up its pesticides game. Either one or both of Bayer and BASF could spin off their agricultural interests to Monsanto or one of the German Giants might put Monsanto out of its misery with a takeover. Another possibility is that one of the three huge farm machinery companies – most likely John Deere & Company – rolls in and digs Monsanto out of its hole because of synergies in their Big Data agricultural technologies. Business as usual is not an option.”(9)

Will the Syngenta-ChemChina merger get the green light? What will happen if it doesn’t? If it does get the go-ahead, what will happen to Monsanto? Will it be crushed by Dow-Dupont and the Chinese-European giant?  Is a Monsanto loss an unexpected win for the global food sovereignty movement?

Is a Monsanto loss an unexpected win for the global food sovereignty movement?

To word the question differently: is the enemy of my enemy my friend?

Greenpeace, a group long opposed to GM crops and corporate toxic agrochemicals and one of Monsanto’s leading antagonists, sees no reason to celebrate. According to a statement by the organization, “The proposed takeover of Syngenta by ChemChina is another indication that Big Agribusiness is in turmoil… The continuing concentration of corporate power in the agricultural sector will lead to increased dependencies of farmers on just a handful of global players. The current system of industrial agriculture, promoted by big corporations puts profit over people and undermines the farmers’ freedom to choose what they grow and how.”(10)

Monsanto’s travails may be welcomed by millions of farmers and food sovereignty activists who have fought the corporation for years. The giant’s problems, however, are just the tip of the corporate iceberg poised to roll over the global food system.

*Carmelo Ruiz is a Puerto Rican author and journalist. He is a research associate of the Institute for Social Ecology and a senior fellow of the Environmental Leadership Program, and directs a number of bilingual online projects, including the Biosafety Blog and The World According to Carmelo. His latest book is El Gran Juego de Ajedrez Botánico (Editorial Tiempo Nuevo, 2015) and his Twitter account is @carmeloruiz.

1) Syngenta. “ChemChina cash offer to acquire Syngenta at a value of over US$ 43 billion.” February 3, 2016. http://www.syngenta.com/global/corporate/en/news-center/news-releases/Pages/160203-1.aspx

2) Reuters. “Monsanto Layoffs: Seed-Maker Just Said It’s Going To Cut A Lot More Jobs.” January 6, 2016. http://www.ibtimes.com/monsanto-layoffs-seed-maker-just-said-its-going-cut-lot-more-jobs-2252250

3) Nature. “A growing problem.” June 11, 2014. http://www.nature.com/news/a-growing-problem-1.15382?WT.ec_id=NATURE-20140612. For more information: http://bioseguridad.blogspot.com/search/label/Weeds.

4) GM Watch. “Monsanto’s secret studies reveal glyphosate link to cancer.” November 6, 2015. http://www.gmwatch.org/news/latest-news/16515-monsanto-s-secret-studies-reveal-glyphosate-link-to-cancer; GM-Free Cymru. “More Monsanto scientific fraud in early glyphosate ‘safety studies.” http://www.gmfreecymru.org/news/Press_Notice07Nov2015.html; For more information: http://bioseguridad.blogspot.com/search/label/Glyphosate , http://bioseguridad.blogspot.com/search/label/Roundup.

5) ETC Group. “Breaking Bad: Big Ag Mega Mergers in Play.” December 15, 2015. http://www.etcgroup.org/content/breaking-bad-big-ag-mega-mergers-play

6) U.S. National Farmers Union. “Statement on Syngenta Merger.” February 3, 2016. http://www.nfu.org/nfu-statement-on-syngenta-merger/4140

7) Bartz, Diane. “ChemChina, Syngenta to move quickly on U.S. national secutiry review.” Reuters.com. February 4, 2016. http://www.reuters.com/article/us-syngenta-m-a-cfius-idUSKCN0VD03C; Mc Laughlin, David. “U.S. Security Concerns Could Stand in the Way of Chem-China’s Syngenta Bid.” Bloomberg.com. February 3, 2016. http://www.bloomberg.com/news/articles/2016-02-02/chemchina-seen-facing-u-s-security-hurdle-to-win-syngenta-bid.

8) Reuters. “Thai Union Group scraps $1.5 bln plan to buy Bumble Bee.” December 4, 2015. http://www.cnbc.com/2015/12/04/chicken-of-the-sea-and-bumble-bee-foods-ditch-merger-on-doj-concerns.html

9)  ETC Group. “Sino-Genta? And soon there will be three. Joy of six heads towards a “ménage à trois.”” February 4, 2016. http://etcgroup.org/content/sino-genta

10) Greenpeace. “ChinaChem to takeover Syngenta – Greenpeace statement.” February 4, 2016. http://www.greenpeace.org/eastasia/press/releases/food-agriculture/2016/ChinaChem-to-takeover-Syngenta—Greenpeace-statement/.