business news in context, analysis with attitude

The Wall Street Journal reports that even as Bayer has agreed to buy biotech giant Monsanto for $57 billion, farmers today "are finding it harder to justify the high and often rising prices for modified, or GMO, seed, given the measly returns of the current farm economy. Spending on crop seeds has nearly quadrupled since 1996, when Monsanto Co. became the first of the companies to launch biotech varieties. Yet major crop prices have skidded lower for three years, and this year, many farmers stand to lose money."

At the same time, "Biotech farming has also shown limitations, given how certain weeds are evolving to resist sprays, forcing farmers to fork out for a broader array of chemicals. Some are starting to seek out old-fashioned seed, citing diminished returns from biotech bells and whistles."

While this squeeze seems to be leading to a merger-and-acquisition trend in the category as companies look to achieve scale and savings, Monsanto has been maintaining that farmers will continue to use its seeds because they will save money on things like pesticides.

The Journal notes that the Bayer-Monsanto deal isn;t taking place in a vacuum: "DuPont Co. and Dow Chemical Co. are pursuing a merger that would eventually spin off a combined agricultural business, along with two other units. Syngenta AG agreed in February to a $43 billion sale to China National Chemical Corp., after turning down a takeover proposal from Monsanto."

And here's the other trend that is part of the broader equation: "Following a string of bin-busting harvests, prices for the two main U.S. agricultural crops have plummeted," the Journal writes. "U.S. farmers this year will collectively earn $9.2 billion less than they did in 2015, and 42% less than they did in 2013, according to the USDA. The USDA projects corn, soybean and wheat prices holding near their current low levels over the next decade..."
KC's View:
Wow. It ends up that all anti-GMO activists had to do was wait for the farm, economy to go into a tailspin.

Who knew?