Mergers and Competition in Seed and Agricultural Chemical Markets

Mergers and Competition in Seed and Agricultural Chemical Markets April 10, 2017

Under recent merger proposals, the six global firms that dominate private agricultural chemical and seed research and production would be reduced to four. In the most recent edition of Amber Waves, a USDA Economic Research Service site, economic researchers examine possible effects of these changes in seed and ag chemical markets, including on prices and innovation.

The mergers are subject to antitrust review in both the United States and the European Union.

The “Big Six” — BASF, Bayer, Dow Chemical, DuPont, Monsanto, and Syngenta — emerged in the 1990s and early 2000s, arising from mergers among large chemical, pharmaceutical, and seed companies as well as from their acquisitions of many smaller seed and biotechnology companies. At the time, the future of integrated life sciences companies promised to use new developments in biotechnology to support work in human pharmaceuticals, seed genetics, and agricultural chemicals. That vision did not reach fruition, as the pharmaceutical businesses later separated from the seed and agricultural chemical businesses.

The present Big Six firms combine seeds with agricultural chemicals, and may benefit from linking research and marketing efforts for their seeds and chemicals. Genetically modified seeds, for example, affect chemical use—either by substituting seeds for chemicals (as in the case of insecticides) or by encouraging the use of specific herbicides (as in the case of genetically modified herbicide-tolerant seeds). This close relationship may encourage combination and linked pricing of seeds and chemicals.

Read more on the proposed mergers and industry competition, research investments, and innovation in Mergers and Competition in Seed and Agriucltural Chemical Markets by James M. MacDonald in the current Amber Waves (April 3, 2017).