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What agriculture loses with the Bayer settlement

Bayer will pay the bill today, but farmers will pay through lost innovation and accelerated market consolidation.

Bayer agreed to a $10 billion settlement regarding their Round-up lawsuit last week.  The company’s market value has dropped by roughly $30 billion since last year.  Therefore, it made financial sense to do this. 

While Bayer will pay the bill today, the cost will be passed on to farmers in one way or another, mostly through lost innovation and accelerated market consolidation. Leadership at chemical companies are seeing what is happening to Bayer and thinking if it can happen to Bayer, it can happen to anyone. 

This will increase the cost and risk of bringing a new product to market. Their appetite for research and development will sour. 

What this has proven is you can spend billions on product development, you can get approval from the EPA, you can get approval from countries across the world, you can have years or even decades of successful trials -- but none of that will matter if the lawyers smell blood.

A victim of success

Bayer, who purchased Roundup Ready creator Monsanto, was a victim of their own success.  Round-up is the most widely used herbicide in the world.  It has been used for over 45 years. 

I remember how crazy farmers in Brazil were to get their hands on seed carrying the Round-up Ready trait.  As late as 2004, Brazil had still not approved Round-up Ready soybeans.  That did not stop Brazilian farmers from smuggling it across the Argentinian border on the black market.

This was all uncertified seed, but that didn’t matter.  They were still willing to take seed from unknown vendors that had the RR gene. 

By the time Brazil approved RR two years later, it had already been planted across the country.       

Lawsuit lightning rod

So how has a chemical that has been exhaustedly reviewed by regulatory agencies all over the world suddenly become a lightning rod of lawsuits?  It all started at a Las Vegas trade show in 2015 where lawyers come together to discuss legal loopholes that they can exploit.  At this conference they discovered that the International Agency for Research on Cancer determined that Round-up could be a probable carcinogen, along with peanut butter and other everyday household items. 

That is all the lawyers needed.  Within days a domain name was established before they had a single client.

There is a negative connotation related to monopolies, and for good reason. Monopolies can stifle innovation and reduce competition. This is prevalent in the seed business. But cases like this will only further accelerate the appeal by companies to merge or consolidate. 

Whether it was blind luck or strategy, Monsanto dodged a bullet by choosing to merge with Bayer, a much bigger company. 

While Bayer is expected to bounce back from this, Monsanto would have likely had a much harder time. Any company that has similar liability will want to evaluate whether they are better off merging with a larger company to reduce risk. 

This is not good for farmers or the ag input industry.    

The great irony

There is great irony in all of this. While environmental advocates push for fewer chemicals like Roundup, I would argue these products have actually benefited the environment.  Roundup has reduced the need for tillage, which can create more erosion, which increases the likelihood of it drifting into our rivers.  Roundup also replaced much more toxic chemicals, therefore, reducing the level of toxicity in our soils. 

I don’t see Roundup going away, but it is likely that it could become more expensive as Bayer looks to offset some of their risk and help pay their $10 billion fine.

Reach Matthew Kruse at matthewdk@commstock.com or 712-227-1110.
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The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 
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