Market News & Headlines >> Brock Consultant Katie Hancock's Blog: Will a Bayer/Monsanto Merger Help Farmers?
Insights from Brock Associates Consultant Katie Hancock
Previously, I pointed out everyone in agriculture is affected by lower profits among farmers. All ag businesses depend on farmers, so when the farmers struggle, everyone else does too. Monsanto, for example, has cut profit projections and as a result cut employment. The recent Bayer-Monsanto consideration for merger has added to the negative opinions. I am concerned, but think it’s important to look at the pros of such a merger.
We have seen farms consolidate and expect them to continue. In the same sense, larger businesses will do the same. No one chooses change without purpose. Monsanto may or may not WANT to merge with Bayer, but rather is wise to consider the benefit and need of doing so.
As farmers, we embrace many of the same thought-processes and planning. Overall, we look to improve through growth opportunities. Consider economies of scale in hopes of diversification, competitiveness, and risk-management. Growth is not the only way to improve, but is the most common attempt to do so. In this sense, is a multi-billion dollar company any different?
The biggest concern being voiced is the potential for price increases. Of course, there are those that will hate large companies like Monsanto no matter what, but rational individuals are able to look at this situation with understanding. If mergers improve a business, does that mean increased prices? Not necessarily. We assume less competition will cause higher prices, but couldn’t reducing inefficiencies result in lower prices? Ideally it would be a win-win for everyone. For example, offering the same products and services at similar (or lower) prices for farm inputs, and also enjoy a greater profit because of merged efficiencies.
Like it or not, we need Monsanto and Bayer and the products they offer. We can’t have the best technology and products without expecting them to optimize competitiveness. After all, I see no reason merger-efficiencies couldn’t be passed down to the farm in the form of lower input costs.
This will not be an easy decision, nor will it be quickly embraced. Change is always scary. Remember, they are in the business of making us better producers--it’s that simple. If research and products do not continue improving, the farming community is ultimately at a greater disadvantage. So relax, take an Aspirin and consider the positives.
Email Katie at [email protected]