Letter from Langdon: Down to the Bone

Ag corporations appear to be growing everything – except more competition. With fewer and fewer choices about where to buy seeds and chemicals, farmers are getting picked clean.

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Monsanto, the patented seed and pesticide agriculture behemoth, was under scrutiny due to their failed offer to buy Syngenta, the Swiss agricultural chemicals and seed company.

Now Monsanto itself is the target of a buyout. German drug corporation Bayer has offered Monsanto stock holders a $122 per share.

Big business history reads a little like the spiritual hymn “Them Dry Bones.” From the toe bone all the way up to the head bone, everything is connected.

Take Monsanto for instance.

The chemical company Monsanto was founded in 1901. One of its first products was calorie-free sweetener made from coal tar — saccharin. Through its steady acquisitions of other companies, Monsanto has also manufactured chemicals like PCBs, DDT, Agent Orange, and salicylic acid–the primary ingredient in Bayer aspirin. They ran the Dayton Project doing research for the Manhattan Project, which developed the atomic bomb.

Monsanto also patented a boiler pipe cleaning compound called glyphosate to be used as a nonselective herbicide named Roundup, netting billions in profits over the patent’s 20-year lifespan. By the time that patent ran out, Monsanto was well on its way to patented genes that made crops like corn, soybeans, cotton, and canola impervious to Roundup.

See how “Them Bones” are connected?

For as long as agriculture has relied on chemical pesticides and fertilizers, we’ve been equally dependent on chemical companies to supply those needs. But competition among a number of chemical companies traditionally has been reduced or eliminated over the years as one consolidated company hooks up with another.

Then, thanks to laws that allowed them to patent genes, Monsanto got into one of the most disjointed, independent agricultural industries: seeds. There were once hundreds of small seed companies across the Midwest that sprang up to serve the needs of farmers for public varieties of everything from corn, wheat, and soybeans, to alfalfa. These small companies were easy picking for a patent-wielding pro like Monsanto. Monsanto is now the largest seed-selling corporation in the world.

seedindustry
Seed Industry Structure, 1996-2013. Click graphic for full-sized version.

After merging with drug companies like Pharmacia and Upjohn, Monsanto spun off its Ag seed and pesticide business and named Monsanto Ag. That company is now the owner of many formerly small seed companies that had been crippled financially by Monsanto’s genetically modified seed business.

The reason Monsanto’s Ag division was spun off was similar to the reason Monsanto spun off its chemical division named Solutia, when low profits and lawsuits spawned by liability from chemical contamination endangered earnings. Likewise the cost of acquiring so many small seed companies amid continued competition from big companies (like DuPont’s Pioneer Hi-Bred now in talks with Dow, and Syngenta that had acquired several seed companies of its own), made profits in the seed and pesticide business look like a bridge too far. That’s why Monsanto once wanted to buy Syngenta, which has since been acquired by a Chinese corporation at a cost of about $42 billion.

If Monsanto had succeeded with Syngenta it would have eliminated them as a competitor.

Now the chemical/pharmaceutical corporation Bayer wants to buy Monsanto for all the reasons Monsanto used when it bought out its own competition — because they say the world needs a more productive agriculture to meet the needs of a growing population. In truth, the real reason is most likely that corporations see a clear path to higher profits through acquisition. But their recurring problem with that strategy is always the price they have to pay for their competitors in marketing and R&D.

Those are dry bones indeed.

After a few good years, farmers of all persuasions are seeing profitability return to zero or worse. One of the reasons isn’t so much low prices of the commodities we grow as it is the failure of inputs, things we buy, like seeds and pesticides, to fall in price as well. Nothing seems to connect the head bone to the toe bone and everything in between — in other words commodity prices to input costs. Those big companies at the head of the problem won’t reduce prices because they don’t have to. They control access and the markets where those inputs are sold. Even though seeds are really just grain, and pesticides and fertilizer are many times just petroleum related products. Lower grain and oil prices don’t translate into savings for farmers.

The only way these companies will reduce their prices is if farmers stop buying from them. And the only way that would happen is if farmers had the choice to purchase from a competitor. Or because the farmers went broke.

Antitrust regulators in the U.S. have never said “no” to bigger seed and chemical companies, or meat packers either, for that matter. Modern government antitrust enforcement of all things Ag-related is barely a skeleton of the body it once was. Today’s farmers have few choices other than following the super-sized corporate model. That’s one of the reasons why farms are consolidating too.

Our bones are being picked clean and government just can’t see the connection.

Richard Oswald, president the Missouri Farmers Union, is a fifth-generation farmer from Langdon, Missouri. “Letter from Langdon” is a regular feature of The Daily Yonder.

 

Topics: Ag and Trade
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