A new agri mega merger, where are political rightwingers when farmers need them?

First of all, this not just about some nerdy competition stuff. This is about one of the single most important topics that dominate EU-politics: farmers’ protests, food prices, inflation and...even migration. Because after all , didn’t the fate of European farmers determine to a large extend the course of the EU politics: EU elections, the positioning of Ursula von der Leyen’s EPP against anything sustainable and green, and subsequently also the not so soft killing of large chunks of the EU Green Deal by that same EPP?

But, first the basics. On June 13 2023, Bunge announced that it wants to buy up Viterra: Canada’s largest grain company with headquarters in the Netherlands. Currently, Bunge is already the world’s fifth-largest grain trading company. As it is enshrined in EU Regulation 139/2004, takeovers of this kind are prohibited if they contribute to significantly reduced competition in the single market by strengthening a dominant position.

Due to the size of both companies, you would expect that this merger will indeed significantly 'increase market domination', harm competition,negatively impact the livelihood of farmers and contribute to inflation of food prices for consumers. Due to the international size and modus operandi including price setting of the grain trading company, the impact of the merger will indeed be felt on European markets too.

While mega-mergers, just like international free trade agreements, have shown to have profound and long lasting impacts on farmers and their livelihoods, right wing politicians seem to have no problem with them. For example, when Bayer announced in 2016 it would buy Monsanto for roughly 60 billion euro, the European Commission also approved the merger (with mild conditions) and right wing European politicians never expressed any remark out of concern for their beloved farmers. 

Back then the combined global turnover of Monsanto and Bayer was 23 billion euro and far beyond the threshold of 5 billion euros foreseen in the Regulation 139/2004, that allows the Commission to trigger an thorough investigation; Justified, also given that these two firms are operating in the same markets like seeds and pesticides. The report Seed Giants vs US Farmers by the Center for Food Safety showed that the increase in seed prices resulted from this kind of seed industry concentration. The merger of Bayer and Monsanto made things worse, and led to more mergers in the same sector (Syngenta int Sinochem and Dow and Dupont into Corteva). These surge in market concentration led to the four multinationals controlling at least 51% in global seed trade and over 60% of agrochemical sales. If these are not ‘dominant positions’ then why do we have competition authorities in the first place?

Instead, of looking at this economic realities , right wing politicians choose to attack environmental legislation (Farm to Fork) or engage in cultural wars on lab-meat. At the same time, the European Commission recently published a report wherein it admits that market concentration has increased during the last 25 years with increased profits and static markets as a result. 

However in Canada itself the alarm bells are ringing. Any merger that results in market concentration of 35% or more within a sector, triggers a thorough review by Canada’s regulatory authorities. The risks to farmers were noted in the assessment of the Competition Bureau Canada which stated: “The Proposed Transaction is likely to result in a substantial lessening of competition in certain relevant markets, such as decreased prices paid to farmers and reduced choice through the elimination of rivalry between Bunge and Viterra”.

As Cathy Holtslander, Director of Research and Policy at the Canadian farmers organization NFU's, recently pointed out: “Bunge operates in 40 countries, with annual revenues over $57 billion and is the world’s largest oilseed processor, globally dominant in soybeans, canola and corn”. On the other hand Viterra - co-owned by the Canada Pension Plan Investment Board, the British Columbia Investment Management Corporation and mining multinational Glencore.- operates in 38 countries, being dominant in wheat markets. with revenues of $53 billion in 2023.

How mega-mergers impact farmers

[IK1] A first in-depth study of this merger’s impacts on Canadian farmers by several economists concluded that it would reduce farmers’ incomes by $770 million per year. The European Coordination Via Campesina (ECVC) an umbrella organisation representing small and medium-scale European farmers notes that “the new company will be one of the top three largest companies. Their size will allow them to have a major impact on international markets through their dominance in key exporting nations (including EU countries, Ukraine, Canada, USA, Brazil, China, India, Argentina and Australia). ECVC expressed the merger “would have a negative effect on price competition, and would significantly harm farmers in Europe and globally, and impair EU’s efforts to develop an agricultural model that is socially and environmentally sustainable.” 

ECVC” 

This level of market power by combining the world’s largest oil-seed processor with one of the world’s largest traders in wheat, will allow them to influence prices. By concentrating their market power, they will be able to limit marketing opportunities for farmers in many countries that export to the EU. This will drive down the price for farmers in exporting countries and create more opportunities for the merged company to provide commodities to European food processors, feed mills etc., at lower prices than what European farmers currently obtain. This would reduce incomes for farmers in the EU.

According to ECVC “the increased market dominance will enable to eliminate smaller competitors that are currently operating in the EU marketplace, reducing choices at all levels of the value chain” and “will likely expand its market penetration in Europe (with direct impacts on EU farmers by displacing them from domestic markets) and in export markets currently served by EU sellers (with indirect impacts on EU farmers by reducing access to foreign markets and thus putting downward pressure on domestic prices).”

Bungee jumping and food inflation?

So no, Bunge has nothing to do with the activity called Bungee jumping - an activity that involves a person jumping from a great height while connected to an elastic cord. Bunge is one of those handful of global food corporations that few people know, but which have incredible market and political power ( the so-called ABCCDs - ADM, Bunge, COFCO, Cargill, and Louis Dreyfuss, control 70 to 90 percent of the global grain trade). These five companies dominate global trade in food commodities and have the power to influence prices of global food stuffs, which go up and down like if they were, eehm bungee jumping, without a necessary link between offer and demand.

Price volatility through commercial and financial speculation is dominant in global grain markets. Studies like those by experts from IPES Food show that no more than five companies, control the world market.

The merger could also contribute to inflation via rising food prices. In a recent published study, authors Isabella Weber and Merle Schulken demonstrate that food prices rose historically sharp in the period 2018-2023 in both OECD and non-OECD countries. 

The economists argue that “due to the price-setting power of industrial firms, a primary sector cost shock unleashes in industrial countries a process recently reintroduced as “sellers’ inflation”: the cost increase is “passed through the various stages of production into the final price with an exaggerated effect – it gets ‘blown up’ on the way by a succession of percentage additions to prime costs which mean, in effect, an increase in cash margins at each stage.”

According to the authors, global food price increases translate into rising domestic food inflation as high levels of concentration along the value chain enable a pass through of costs: “As a result of trade liberalization, domestic prices are coupled with international prices. In Germany, for example, there was at no time any threat of a domestic shortage in 2022- 2023, but since domestic grain prices follow the Paris grain exchange, they shot up..

The study shows how after low and stable food prices in the 1980s and 1990s, food prices and volatility have increased since the beginning of the century. A process which culminated in the 2007-2008, 2010-2012 and the 2020-2023 food price crises. It has become common knowledge that food prices became too volatile. The International Panel of Experts on Sustainable Food Systems (IPES-Food) warned that the agricultural grain traders have incentives to “hold stocks back until prices are perceived to have peaked”.

The ABCCD cartel also plays a crucial role in the speculation with these commodities. So the issue here is not only the mere size of these food multinationals and their combined market power, but also the fact that companies like Bunge play a pivotal role in the financialisation of food markets.

Hungry for Profit 

A SOMO report Hungry for Profit showed clear links between the market power and concentration of the ABCCD companies and inflation of food prices. 

In 2022, roughly one in ten people went to bed hungry. Compared to 2021, the absolute number of people with hunger increased by 40 million. According to the UN, the main drivers for this increase were conflict, and the related disruption of global food supply chains and food price shocks. 

In the same period, 2021-2022, the profits of the ABCCD cartel notified their stakeholders that 2021 had been the most profitable year in the agricultural commodity traders’ history. Compared to the 2016-2020 period, 2021 net profits rose between 75 per cent and 260 per cent for all five agricultural commodity traders. In 2022 net profits doubled or even tripled compared to the 2016-2020 period. Based on the publicly available quarterly finance reports, the net profits of the agricultural commodity traders remained excessively high during the first 9 months of 2023.

These kind of global developments can become push-factors for migration. While migration is of the favorite topics of right wing and populist politicians, addressing root causes like monopoly power of corporations doesn’t make it to their agenda.

Probably to difficult to explain in populistic language? 

Economists Weber and Schulken point out that “these gigantic conglomerates with hundreds of subsidiaries spanning the whole supply chain include sizable financial arms not regulated as banks. They have built up inhouse intelligence on global agricultural markets that exceeds that of states”. As a result, the ABCCD conglomerate according to UNCTAD had historic profits and are known to benefit from crises and volatility.

Jennifer Clapp, IPES-Food expert wrote that “Evidence suggests financial speculators are

jumping into commodity investments and gambling on rising food prices, and this is pushing

the world’s poorest people deeper into hunger. Governments have failed to curb excessive

speculation and ensure transparency of food stocks and commodity markets – this must be

urgently addressed.”

This deal is unprecedented in size within the global agriculture sector and will result in further accelerated concentration in markets where economic power is already very concentrated. 

Farmer’s organization NFU has said rightfully in it’s submission to the public consultation on Canada’s competition policy, that “a central challenge for decision-makers is to recognize the difference between competition and competitiveness, and to manage their dynamics in the public interest”.

In the end, ever increasing market concentration in the food sector will further hamper democratic involvement of EU citizens and policy makers in the decisions of global food giants. It questions European societies’ capacity to be sovereign in food systems. And rightfully so, since fair competition should not be left to nerds and bureaucrats. Instead, it is a matter of public interest which deserves severe scrutiny (Phase II investigation for nerds) instead of a tick-box approval during the summer. In January 2024, the European Parliament already expressed its concern over concentration in the food supply chain. It is now time for something stronger.