Industry Consolidation

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The face of the many large agri-business companies in Canada is changing. Dow and DuPont recently concluded their merger, ChemChina is currently finalizing their purchase of Syngenta and Bayer is working through the regulatory hurdles as part of their acquisition of Monsanto.

With fewer chemical and seed companies on the horizon, it’s expected growers will benefit from the kind of high dollar investment in research and development that other big technology industries have seen in recent years.

Marcus Weidler

“Consolidation can be good thing, but we need to explain and demonstrate the benefits to our customers,” says Marcus Weidler, head of seeds with Bayer Canada. “It is becoming more and more challenging to bring innovation to market, and companies have to invest heavily to bring new technologies to customers.”

The costs to introduce new technologies are often so high due to the amount of time it takes to bring products to market. Bayer’s successful pod shatter reduction technology was launched in 2014, but the company first started work on the technology in the late 1990s. And as a non-GM trait, this technology wasn’t as complex as much of current seed trait research.

“We have invested billions in research and development, but not only is science becoming more complex, the regulatory environment can be unpredictable, and that also means more time and more investment,” says Weidler. “We sell to many countries that have different rules and regulations and those rules are constantly evolving. Once a product has been developed, it then requires more money to conduct the number of studies necessary to satisfy the needs of the grower [and] the consumer, and also meet government requirements.”

Jeff Nielsen, president of the Grain Growers of Canada, doesn’t see that there will be much change from a seed grower or a farmer perspective following this round of consolidation.

“These combined companies will need good local seed growers, and as they bring new seed products to market they will be relying on local seed production to even greater levels,” he says. “Most growers already have established strong connections with all of these companies and even with consolidation, I don’t see them reducing their levels of service. It wouldn’t make business sense.”

Jeff Nielsen

He says the agriculture industry has been consolidating for the past two decades, and so far, the strong public breeding programs have remained intact, and heavy regulation has meant that competition remains strong. He says he hopes these larger entities could also have increased power in lobbying for increasing government funding for research.

“More research is needed to find solutions to problems that we are currently struggling with in Canadian farming, such as Fusarium in wheat,” he says. “We don’t have a solution to Fusarium right now and it is possible that solution will come from seed. We hope that these merged companies will have the means to invest in research at a more intense level.”

Trish Jordan, public and industry affairs director with Monsanto, agrees. “The merger between Monsanto and Bayer is driven by the need for investment, and to continue to drive research and development on both the seed and the chemical sides of the business,” she says. “This industry has always balanced competition with collaboration. Agriculture still has more than 3,500 companies across North America that provide goods and services, and the change from six to three big life sciences companies is really just allowing for greater investment into the industry.”

Jordan says Bayer and Monsanto have very little overlap, and any duplication will be addressed through global regulatory networks in advance of finalizing the deal. She admits growers worry about having fewer choices – but in fact they could have more choice as the combined products and services offer a larger combination of solutions.

“New entrants into the business are continuing to change the way the business of agriculture works,” she says. “There are countless startups in the business of digital farming and analytics that will enhance some of the products we offer to help improve farming. While there is a lot of change right now, the agriculture businessplace is not shrinking.”

Trish Jordan

Jordan adds it would not be in any business’s best interest to alienate their customers, and their research is completed with the end customer in mind.

“If we create $1 of a benefit on a new product innovation, then a farmer needs to see a portion of it, the retailer needs to have their share, we need to secure a percentage and then we reinvest it into bringing the next innovation to the market,” she says. “If we aren’t offering the options that growers are asking for, then we won’t be successful as a business.”

For growers concerned about competition, Jordan stresses the global competition process is very demanding, and that each country’s regulatory body looks at individual pieces of the combined business and it decides if it is adding or detracting to competition in the marketplace. “If they see that a company has too much impact in a certain area, they may ask them to divest that interest,” she says.

Weidler says for Bayer and Monsanto, in the short-term growers won’t really see any change as the new business’s number one focus will be on serving their customer.

“At the end of the day, we have to make sure that our business relationships are intact and that we are able to provide the same level of service as we have in the past,” he says. “Our number one principle going forward is no interruption in service. It will then be up to us to prove to the grower and to consumers how these combined companies will be better for them in the long term.”

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