Two of the world's largest agricultural firms plan to merge, and some Texas farmers fear the move will diminish competition in an already shrinking market and cause prices for seeds and other essential products to spike.
German conglomerate Bayer, a global distributer of seeds best known for its pharmaceuticals like aspirin, hopes to buy Missouri-based agricultural firm Monsanto, which sells agricultural chemicals. But the merger must first gain approval from European antitrust regulators.
The market for seeds and other agricultural materials has been dominated by six firms, including Bayer and Monsanto. Recent mergers — one between Dow and DuPont, and another joining ChinaChem and Syngenta — dropped that number to four, and a Bayer-Monsanto merger would leave just three giant companies in the sector.
A Texas A&M University study released in September 2016 — before the most recent mergers — said the mergers would lead to higher crop prices due to lower competition. The study predicted the price of cottonseed would increase by about 20 percent if the mergers happened — a dramatic increase for farmers in a state that dominates national cotton production.
Ultimately, farmers may be priced out of the profession, he said.
"We have to buy seeds; they have us in a situation where we have to buy their product," Vaughan said. "But they still have the ability to go even higher on their prices."
Bayer spokesman Chris Loder said in a written statement that the market will remain competitive after the buyout and that the merger will increase research and development opportunities by consolidating the firms' resources. The statement said Bayer has cooperated with regulators and is confident the merger will go forward.