WASHINGTON, Sept. 28, 2016 - Economists at Texas A&M University say the Bayer-Monsanto merger would boost cottonseed prices by more than 18 percent while the pending combination of Dow and DuPont would lead to far more modest increases in the prices of corn and soybean seed.
The Bayer-Monsanto merger would give the company about 70 percent of the cottonseed market, while Dow-DuPont would control 41 percent of the corn seed market and 38 percent of soybean seed sales, according to a report the economists prepared for the journal Choices. The report did not look at other crops, like canola, where Bayer and Monsanto have dominant positions in seeds and traits. Canadian canola grower associations have already expressed concerns about the possible merger, and last week called for a “timely and rigorous review” by regulators.
The Texas A&M economists estimate that seed prices would rise by 2.3 percent for corn and 1.9 percent for soybeans.
The cost of seed accounts for just over 30 percent of the variable cost (excluding fixed costs such as land) of producing corn and soybeans, and 10 percent or 17 percent of the cost of growing cotton, depending on whether it is irrigated on dryland, respectively.
The results appear to support concerns among cotton growers about the Bayer-Monsanto combination as well as a conclusion by the National Corn Growers Association that the Dow-DuPont merger wouldn’t undermine the corn seed market.
‘We do not make policy prescriptions regarding regulatory approval of the proposed mergers,” the economists write. “However, our results suggest that these proposals warrant careful scrutiny by regulators, including careful considerations of the potential effects on crop production costs and, ultimately, consumer prices for food and fiber.”
Executives with the companies were questioned sharply at a Senate Judiciary Committee hearing last week about the possibility of divesting some of their seed assets, including cotton in the case of Bayer-Monsanto and canola in the case of Dow-DuPont.
Jim Blome, president and CEO of Bayer CropScience, told the senators there were several companies that would be interested in the Bayer-Monsanto cottonseed holdings. Executives of Dow and DuPont are already in talks with the Justice Department, but the companies have not said what they might be required to sell.
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