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Q&A: Ag Mergers

October 14, 2016
Senator Chuck Grassley , Traer Star-Clipper

Q: Why did you call a congressional hearing to examine ag mergers?

A: Recent announcements of mergers and acquisitions among seed and agrochemical companies are raising a lot of eyebrows among Iowa farmers. With a three-year downturn in the farm economy, producers and growers are even more concerned that less competition will lead to higher input costs on the front end while they receive lower commodity prices on the back end. In most cases, less competition typically means prices go up, not down. Whether airfare, health insurance or the seeds and farm chemical markets, less competition typically means consumers pay more. We're looking at a situation right now that would significantly alter the economic landscape for farmers. As chairman of the Senate Judiciary Committee, I am working to make sure proposed agribusiness deals are scrubbed properly so that federal anti-trust laws are enforced.

As an outspoken advocate for Rural America, I called for anti-trust regulators at the Federal Trade Commission and the Department of Justice to collaborate with each other and the Department of Agriculture where they can to assess the state of the seed and agrochemical sectors. It's important to analyze the impact that these contemporaneous deals will have on farmers and consumers. Robust competition drives up innovation and drives down consumer prices. So it's important for policymakers to raise questions now before it's too late. It doesn't do any good to lock the barn door after the horse gets out. We need to vet valid concerns about market access and concentration. Will the loss of head-to-head competition reduce incentives to invest in research and development? Will exclusionary practices prevent start-ups from gaining access to traits and germplasm? We're talking about tremendous changes in an industry that would affect the farm-based economy in Iowa and the vitality of our rural communities. And not just for one harvest season. Trending concentration among five of the "Big Six" biotech seed companies arguably would have a long-term impact on America's food security, affect the ability for family farmers to earn a living and even restructure a way of life in rural America.

Q: What did you learn from the witness testimony?

A: The antitrust review process must take into account whether the latest string in mergers and acquisitions will substantially reduce competition or curb market access. The committee received strong points of view from the company executives, as well as witnesses representing grass roots organizations for farmers and consumers. Testimony from the agribusiness witnesses reflected their views that consolidation would create efficiencies, build more effective research and development projects and boost growth and innovation. Representatives from the American Antitrust Institute, National Farmers Union, American Farm Bureau, the National Corn Growers and American Soybean Association acknowledged that there could be efficiencies, but also presented concerns that rapid consolidation in these sectors of the farm economy could reduce competition, raise input costs and stymie innovation. In the context of a lagging farm economy, deep-seated concerns are rising among farmers in Iowa. Many feel they will be squeezed out, unable to afford the rising cost of production and keep or obtain lines of credit to get started or stay in business. For the last 20 years, production costs have continued to climb, rising more than 94 percent to plant and fertilize one acre of soybeans, for example. Considering that net farm income is falling (42 percent in the last three years) and farm-to-asset ratios are climbing, the heartburn is real in the heart of America. Layoffs in farm equipment sector and job losses up and down Main Street directly correlate to a drop in the farm economy. I called the committee hearing to conduct oversight of these deals so that these concerns would be made part of the public record. The bottom line for my constituents is clear. Farmers, employees of the agribusiness companies and consumers have a vested interest in the consolidation trend because it will impact price, choice and jobs. From that perspective, I'm keeping close watch over this tsunami of agribusiness mergers so that the interests of farmers, workers and consumers don't get swept away.

 
 

 

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