Agricultural merger mania fuels fears among small seed sellers


Chicago | Reuters — The U.S. Justice Department is looking into concerns that global consolidation among major seed and agricultural chemical companies may squeeze supplies of the building blocks for widely used genetically modified seeds, a farm group told Reuters.

The department has asked the American Soybean Association for details about how small and independent seed companies license seed traits from developers, said Steve Censky, chief executive of the association.

The federal inquiries started after Dow Chemical said in December that it would seek to merge with DuPont in a US$130 billion deal. In recent months, department officials have also asked how farmers select seeds, Censky said.

Such questions are common in antitrust reviews, as regulators try to decide whether to approve, reject or place conditions on a merger.

The Justice Department did not respond to a request for comment.

Smaller companies need to license corn and soybean traits, which can protect against insects and other threats, because they cannot afford the more than US$100 million it costs to develop them.

Major seed makers often license traits and other genetic material to smaller dealers that have close relationships with farmers and can help place products on more acres.

Independent seed sellers said the proposed Dow-Dupont merger could hurt them if the companies decide to hike licensing fees or to keep their best traits for themselves. They have similar concerns about subsequent announcements that Bayer would seek to buy Monsanto and that Chinese state-owned ChemChina aimed to acquire Syngenta. All three deals are still pending.

“It’s the big question that everybody is looking at right now,” said Todd Martin, CEO of the Independent Professional Seed Association, about the future of licensing. “Anything that does not support the expansion of the licensing market, we are against.”

The association has asked Dow and DuPont to expand licensing as part of their merger. The soybean association, which represents more than 20,000 U.S. farmers, told the Justice Department that trait licensing by major companies needs to be preserved, Censky said.

Licensing plans uncertain

Unlike Dow, Monsanto, Bayer and Syngenta, DuPont has not been active in licensing traits.

That has raised concerns among small seed companies that a combined Dow-DuPont could pull back on licensing the technology, a prospect Martin said would be “incredibly negative” for independent sellers.

Independent companies supply about 20 per cent of corn and soybeans seeds in North America, giving farmers choices as they work to boost harvests in a downturn. Without licensing, the number of brands of corn seed would probably drop to less than a dozen from about 200 currently, Martin said.

Dow told Reuters it has not made decisions on trait licensing because its deal with DuPont has not been finalized. Monsanto said it was “too soon to have any of those answers” about whether its US$66 billion acquisition by Bayer would affect licensing.

Syngenta said its US$43 billion acquisition by ChemChina will not change its licensing conditions.

DuPont and ChemChina did not immediately respond to requests for comment.

Trait licensing was on the agenda at a U.S. Senate judiciary committee hearing on Tuesday, where executives of top companies defended their planned mergers and acquisitions. Bayer CropSciences’ CEO told senators it had “no plans to discontinue” trait licensing.

But Senator Charles Grassley, a Republican from Iowa and the committee chair, was one of several lawmakers who worried the deals would slow innovation in seeds and pest control.

Sonny Beck, CEO of Beck’s Hybrids, the largest family-owned U.S. seed company, told Reuters the company pays to license nearly all its traits from larger companies, including Dow and Monsanto.

“If they say, ‘We’re going to keep it all for ourselves,'” he said, “that would hurt us.”

Tom Polansek reports on agriculture and ag commodity markets for Reuters from Chicago.

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