The Challenge for Ag Producers After Bayer-Monsanto
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The Bayer-Monsanto merger, which the Justice Department approved on May 29, follows on the heels of two other major agricultural input deals—ChemChina’s $43 billion purchase of Swiss ag-tech giant Syngenta, and the $130 billion Dow Chemical-DuPont merger, subsequently forming Corteva Agriscience. All this activity would seem to point to both the promising future in this space as well as the need for many large players to grow through consolidation.
Not surprisingly, farmers are both encouraged and cautiously concerned by these new business formations, and by the changes they represent. Agricultural producers welcome the investment in technology, and the expectations that larger companies will continue to invest in promising production and environmental technologies is both encouraging and exciting. On the other hand, the traditional fear that these mergers will narrow the options for the purchase of seed and crop chemistry products exists.
Farmers are taking a wait-and-see attitude on these mergers, but given their concern about their ability to manage expenses in a tight margin environment, as well as the choice of what to plant as the major genetic and crop trait providers continue to consolidate, they remain anxious.
The challenge of constant change
The agricultural landscape is changing and the pace feels like it is accelerating. The technological advancements in genetics, equipment and information—and the integration of all of these areas—creates many opportunities, but they can also be overwhelming. The ability to make investment decisions based on the new technologies and adaptation of new systems into the tried-and-true processes of growing crops or livestock is a challenge for producers and bankers alike.
While large companies like Bayer and Monsanto combine (the companies expect to complete the deal this week), new entrants are entering the market to introduce precision planting, unmanned aerial technology, driverless implements, pricing transparency, data analytics and many more technologies. Will these emerging companies be the next acquisition targets as the larger companies seek to buy some of their innovation?
Along with many of the traditional drivers, the merger activity in the seed and crop input business is also a result of the worldwide adoption of disruptive technologies. Investment in these technologies requires the size and scale afforded by such large deals. Whether these technologies ultimately deliver on their promise remains to be seen, but the pace of change will likely only accelerate.
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Sam Miller
Managing Director, Head of Agriculture
Sam Miller is Managing Director of Agriculture Banking at BMO Commercial Bank. Sam coordinates and leads production agriculture and agribusiness-related banking act…(..)
View Full Profile >The Bayer-Monsanto merger, which the Justice Department approved on May 29, follows on the heels of two other major agricultural input deals—ChemChina’s $43 billion purchase of Swiss ag-tech giant Syngenta, and the $130 billion Dow Chemical-DuPont merger, subsequently forming Corteva Agriscience. All this activity would seem to point to both the promising future in this space as well as the need for many large players to grow through consolidation.
Not surprisingly, farmers are both encouraged and cautiously concerned by these new business formations, and by the changes they represent. Agricultural producers welcome the investment in technology, and the expectations that larger companies will continue to invest in promising production and environmental technologies is both encouraging and exciting. On the other hand, the traditional fear that these mergers will narrow the options for the purchase of seed and crop chemistry products exists.
Farmers are taking a wait-and-see attitude on these mergers, but given their concern about their ability to manage expenses in a tight margin environment, as well as the choice of what to plant as the major genetic and crop trait providers continue to consolidate, they remain anxious.
The challenge of constant change
The agricultural landscape is changing and the pace feels like it is accelerating. The technological advancements in genetics, equipment and information—and the integration of all of these areas—creates many opportunities, but they can also be overwhelming. The ability to make investment decisions based on the new technologies and adaptation of new systems into the tried-and-true processes of growing crops or livestock is a challenge for producers and bankers alike.
While large companies like Bayer and Monsanto combine (the companies expect to complete the deal this week), new entrants are entering the market to introduce precision planting, unmanned aerial technology, driverless implements, pricing transparency, data analytics and many more technologies. Will these emerging companies be the next acquisition targets as the larger companies seek to buy some of their innovation?
Along with many of the traditional drivers, the merger activity in the seed and crop input business is also a result of the worldwide adoption of disruptive technologies. Investment in these technologies requires the size and scale afforded by such large deals. Whether these technologies ultimately deliver on their promise remains to be seen, but the pace of change will likely only accelerate.
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