Currently, there are six major companies in the biotech seed industry: Monsanto, DuPont, Syngenta, Bayer, Dow and BASF. They all compete for market share with one another, while at the same time working with each other through cross-licensing agreements.

Now, five of the Big 6 — BASF excluded — are engaged in merger and acquisition discussions. In 2014, the ranking of the Big 6 in total global ag-related revenue was Monsanto ($16 billion), Syngenta ($14 billion), Bayer ($12 billion), DuPont ($11 billion), Dow ($7 billion) and BASF ($7 billion).

What will mergers of the big players in the agricultural seed and chemical market mean for farmers? (BsWei/Thinkstock)

The proposed merger of Dow and DuPont would combine the fourth- and fifth-largest rivals. A Monsanto-Bayer merger would combine the first- and third-largest firms. The two mergers together would, therefore, create a Big 4, dominated by a Monsanto-Bayer and Dow-DuPont “duopoly,” with almost 70% of the global market.

For farmers, Bob Young, chief economist at the American Farm Bureau Federation, explains that the unique scenario of multiple mergers creates a situation where if one firm emerges, it probably puts the rest of the industry at a disadvantage until and unless another similarly structured firm is created.

“We are better served as an industry with at least two of these chemical-genetics firms than would be the case with only one,” Young says.

“The challenge to those involved in the agricultural space, from a farmer’s perspective, is the sheer number and scale of this activity in such a short period of time,” Young notes, adding in the recently announced proposed merger of Potash Corp. of Saskatchewan Inc. and Agrium in the fertilizer segment. “Everyone’s knee-jerk reaction is to think that increased concentration will lead to higher prices for these inputs,” Young states. “Knees tend to jerk reflexively, but sometimes, they jerk with reason.”

In the case of the proposed merger between Dow and DuPont, Chris Novak, president and CEO of the National Corn Growers Association, says an NCGA and American Soybean Association third-party analysis of the Dow-DuPont deal found that corn seed industry competition could be diminished as a result of the merger. Their greatest competition concerns lie within the corn herbicide and insecticide markets.

However, the domestic corn and soybean herbicide and insecticide sectors and soybean seed sector remain below the level classified as highly concentrated. Overall, he says the groups are not opposed to the merger, but he noted that they asked the U.S. Department of Justice to determine whether any remedies were needed to ensure market competitiveness.

Their analysis notes that the complementary product lines of Dow and DuPont within the crop protection chemical market actually will create stronger competition within this market.

Bayer and Syngenta dominate the global market today. A broader offering from a new Dow-DuPont company could provide greater access to, and a broader portfolio delivered from, the domestic agrochemical retail market, they found. “This enhanced competition at the retail level could result in more favorable farmer pricing of crop protection chemical products.”

Texas A&M University found the proposed Dow-DuPont merger would cause an increase in seed prices of 2.3% for corn, 1.9% for soybeans and 18.2% for cotton. It also found that changes in market concentration would likely meet DOJ and Federal Trade Commission criteria as being “likely to enhance market power” in the seed markets for corn and cotton.

It is too soon for any economic analysis of the Monsanto-Bayer merger, although company officials assure there is little crossover. Monsanto leads in seeds and traits, whereas Bayer’s strength is in crop protection products. The cotton business poses the most significant issues. The merger would give Monsanto-Bayer about 70% of the market for cotton. The proposed merger would recombine the very cotton seed asset (Stoneville) that the DOJ required Monsanto to divest as part of its merger with Delta & Pine Land in 2007, which Bayer purchased.