…Most of the productivity gains in the last decades have come from making existing land more efficient, through genetics that increase the number of crops per year, and from fertilizers and pesticides that increase the yield per acre. That push for efficiency has given rise to the modern agricultural industry, dominated by food giants like Cargill and Archer-Daniels-Midland, and crop science companies like Monsanto and Bayer. Monsanto, a $42 billion seed producer, acknowledged today (May 19) it received a takeover offer bid from Bayer.
As agricultural productivity increases, efficiency grows and, as in all mature industries, margins contract. (Cargill, for example, reported profits of just $1.6 billion on sales of $120 billion last year). With gains from technology diminishing, consolidation is one of the few area left for the ag industry to wring future growth. Just as family concerns have been snapped up to form mega farms, the crop science business is ripe for mergers.
Along with Bayer’s proposed acquisition of Monsanto, Dow and DuPont are in discussions to merge and spin out a new agricultural company and China National Chemical Corp. is attempting to buy Switzerland’s Syngenta. If the deals all proceed, it would leave 75% of the global crop market in the hands of three companies, according to Bloomberg.
Agricultural growth may be slowing, but it’s one industry guaranteed to have a future. With the earth’s population expected to reach almost 10 billion by 2050, there will be a lot of mouths to feed.
On one hand, I think the numbers predicting 8-10 billion world population by whatever mid-century date aren’t taking into account combination of advancing 3rd world education and sustainable standards of living. Which should serve to reduce a “normal” birthrate founded in scarcity and lifespan. OTOH, Industrialized Western nations continue to follow 19th Century ideology justifying pretty much any oligopoly.
Any formation of Green/Progressive activism which ignores this is seriously short-sighted.