Tuesday, November 21, 2017
Merger Activity in the Factors of Production Segments of the Food Value Chain: - A Critical Assessment of the Bayer/Monsanto merger
Ioannis Lianos and Dmitry Katalevsky have published a policy paper on Merger Activity in the Factors of Production Segments of the Food Value Chain: - A Critical Assessment of the Bayer/Monsanto merger.
ABSTRACT: The Bayer/Monsanto merger forms part of the recent wave of mega-mergers that has transformed the structure of the factors of production segments of the global food value chain in recent decades. If it is approved, it will lead to the creation of a tight oligopoly of three multinationals that will control almost 2/3 of the global production in seeds and agro-chems, as well as the valuable Big Data and IT platforms that are crucial for “smart farming”. This high level of concentration will undoubtedly lead to price rises for seeds and pesticides, the increase of the technological and economic dependence of farmers on a few global integrated one-stop shop platforms, the reduction of independent centres of innovation activity in the industry and consequently of innovation, due to reduced competition. More importantly, this merger is about control of the global food value chains as well as of the direction of the innovative effort in this industry in the next few decades. Recent technological advances enable us to envision a future away from the agro-chem model of agricultural production, with the adoption of a production model that is respectful of the environment and biodiversity, and also providing smallholders more opportunities to increase their revenue and the independence to invest in innovative ways of farming. By ensuring that the global food value chain remains tightly controlled by three mega-corporations (and their integrated platforms), the recent merger wave in this industry will lead to entrench the market power of the dominant players for the decades to come and to freeze the innovative effort to R&D that is compatible with the business model of the incumbents.