WASHINGTON, July 18, 2016 - The Dow-DuPont merger could result in both less – and more – competition in the seed industry, the National Corn Growers Association said in a letter to the Justice Department (DOJ).
Using an index that measures market concentration, NCGA President Chip Bowling said the pairing of Dow and DuPont could result in less competition in the seed business, which, using DOJ guidelines, “would already be considered to be highly concentrated.”
“This increase in market concentration does cause us significant concern that seed industry competition could be diminished as a result of this merger,” Bowling said. “We would ask the (Justice) Department to carefully evaluate the seed market impacts to determine whether remedies should be applied that could ensure healthy competition within the corn seed market.”
But at the same time, Bowling said the merger could boost competition in the seed market by creating a larger competitor to the two companies that currently dominate that market: Monsanto and DuPont Pioneer.
“By merging Dow’s trait development expertise with Pioneer’s germplasm — and by taking advantage of the existing dual system for delivering seeds to farmers — farmers could see greater access to a broader range of seed products coming from the new company,” Bowling said.
“While we are concerned about the loss of a competitive market player within the corn seed industry, at the same time, we acknowledge that true competition isn’t based solely upon the number of players within a given market,” Bowling said. “Strong competition can result from having two, evenly matched companies fighting for share within the seed, chemistry, and trait development markets.”
NCGA said it asked “experts” to analyze the impacts of the merger on its farmer-members. The association said it would not release the full analysis.
Regarding crop protection chemicals, Bowling said NCGA’s analysis “notes that the complementary product lines of Dow and DuPont . . . actually will create stronger competition.”
“Bayer and Syngenta dominate the global market today,” Bowling said. “A broader offering from a new Dow‐DuPont company could actually provide greater access to, and a broader portfolio delivered from, the domestic agrochemical retail market. This enhanced competition at the retail level could result in more favorable farmer pricing of crop protection chemical products.”
Using the DOJ market concentration index, NCGA said “we have few concerns that the merger will diminish market competition” in the corn herbicide and insecticide markets.
Bowling also addressed issues of innovation, product access, and pricing, which he said are more affected by government regulation than competition.
Specifically, “domestic regulatory hurdles for crop protection chemicals and delays in international approvals for new seed traits . . . have erected barriers to market entry, slowed down or stopped new innovations coming to market, and driven up the cost of seed and chemistry products,” Bowling said.
“For example, a recent estimate projects costs to launch a new seed trait at $136 million over 13 years, (and) recent industry estimates calculate the cost to register and launch a new crop protection chemical at almost $300 million.”
Dow and DuPont plan to split their new company into three separate corporate entities: an agriculture company, a material science company, and a specialty product company. Both firms are planning to hold special stockholder meetings on July 20 to gain approval of the proposed merger.
The Justice Department said it could not comment on its review.
Two other major mergers in the ag chemical and seed sector are being discussed, but neither is as far along as the Dow-DuPont union.
ChemChina, which has offered to buy Syngenta for $43 billion, has extended its offer, which was due to expire July 18, until Sept. 13 to allow regulatory reviews and other aspects of the deal to be completed.
“ChemChina continues to expect to conclude the transaction by the end of the year,” the company says on its website.
The other possible merger involves Bayer’s attempt to buy Monsanto. Bayer recently sweetened an earlier bid, raising its offer from $122 to $125 a share, a 40 percent premium over Monsanto’s May 9 share price.
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