The global population is expanding and if we consult the data provided by the United Nations, we can plot out various expansion paths for the planet’s population over the 21st century.
Source: United Nations
The US Census Bureau estimates the current global human population is approximately 8 billion. On a global scale, the growth rate has been declining since 1963 but the growth rate is highest in Sub-Saharan Africa and the Middle East.
Divergent fertility rates, when wedded to existing populations, imply that the concentration of global humanity will alter quite radically with Asia and Africa stretching well ahead of Europe and the Americas in terms of their share of the global head count.
Feed the world
The agriculture industry is one of great complexity and diversity. On one hand, the developed West, and particularly Europe, has opposed the use of genetically modified plant material for use in the food chain. In contrast, many parts of the developing world – especially where the fertility rate is highest – the issue is not one of choice but necessity, i.e. can a sufficient level of edible crops be grown?
Thus, agriculture is an activity that lies directly at the intersection of the laboratory sciences such as biology, chemistry, and genetics and the social sciences of economics, geography, and sociology. This amalgam of disciplines is commonly referred to as Agricultural Knowledge, Science, and Technology or AKST.
In the best outcome, this intersection/interaction can serve to reduce hunger and poverty, improve rural livelihoods, and facilitate equitable environmentally, socially, and economically sustainable development.
The Luddite luxury
The very idea of allowing a genetically modified organism into the field has met severe public opposition in Europe over the past 20 years. Many opponents hold the belief that GMOs will prove to be bad for the food chain and carry serious implications for the health of humans and other creatures. It has been claimed that will prove to be poisonous and create long-term damage the environment.
In short, GMOs are claimed to risk destroying the entire ecosystem.
This does seem rather fanciful, as since the days of Gregor Mendel the concept of selecting certain strains of crop and cross-fertilising them to produce hardier varieties has been common practice. Mendel, known as the "father of modern genetics", established the principle of dominant and recessive genetic inheritance. Who, for instance, does not prefer seedless grapes?
It seems quite odd that midway through the second decade of the 21st century, there is strident opposition in spite of overwhelming scientific evidence that proves that GMOs are safe to eat, and offer environmental benefits by making agriculture more sustainable.
It is all very well in the affluent world of Western Europe to be so choosy, but we have the luxury of regular rainfall and sunshine. That is not the case in many developing lands that are either too hot, too cold, too wet, or too dry. Crop failures lead to famine, maybe to war, but certainly to human suffering.
It appears that the same lobby that seeks a forgiveness of third world debt and cheaper medicines for the developing nations would deny the very same people access to sufficient homegrown food crops.
What causes the discrepancy between what science says about GMOs and what motivated public opinion thinks?
It is probably true that in during the 1960s and '70s, the concern over certain herbicides were too blithely dismissed and unfortunately the large multinationals have not always covered themselves in glory as bias and manipulation has been uncovered. However, these complaints are not specific to GMO’s.
On August 18, 2015, Stefaan Blancke wrote in Scientific American that the negative representation of GMOs had become widespread and was regarded as a compelling argument simply because it possessed a sense of being intuitively appealing.
Therefore, such a representation becomes easily established, even if it is untrue. Opinion falls victim to psychological essentialism in which there is a sense of the GMO having an “essence” that predetermines the GMO’s behaviour and determines its identity.
Is the GMOs argument a question of perception versus reality? Photo: iStock
Globally, agriculture is caught in a downward spiral. Wherever and whenever in the developed world farmers have produced too much grain or soft crop, in the main they have had to slash their prices, which has in turn cut into spending on seeds, pesticides, and fertiliser.
Therefore, the agribusiness operators have looked to protect themselves by consolidating so as to reduce the cost base. After all, we all know that profit equals revenue minus costs.
In some cases, the process of merger or acquisition can strip out costs, however in many examples where costs cannot be reduced, they are simply shipped out by charging farmers higher prices or placing a patent on GM seeds so that a farmer cannot save seeds from one season and use in the next. They have to buy seeds every season.
This practice of introducing higher costs for farmers, who are generally seen as price takers and not price setters, has created a level of concern for lawmakers and regulators in Washington.
Senator Charles E. Grassley of Iowa, chairman of the Judiciary Committee, has scheduled hearings for next week to discuss the merger of Bayer and Monsanto in the $66 billion acquisition.
One key concern is the impact on the level of competition and the risk of monopoly power developing for a seed provider.
Senator Grassley said:
“...It seems to be catching fire and happening so fast with so many... when you have less competition, prices go up...”
Monsanto chief executive Hugh Grant naturally said that there were “minimal” antitrust issues with Bayer’s purchase,but that did not prevent him for insisting that a $2bn insurance policy be set aside for protection against just such a claim or class action.
That $2bn would prove to be the breakup fee that Bayer would be required to pay if DC regulators decide to prohibit the $66bn deal in its current form. The failure of Bayer to agree to such a sum was one reason why Monsanto rejected Bayer’s first approach in May, and a secondary proposal that allocated just $1bn for such an eventuality.
One clear area of concern is the degree of overlap in cotton seed. Here, the concentration of global market share controlled by a combined Monsanto and Bayer is just shy of 70%. Similarly, such levels of industrial dominance will be unearthed in the areas of vegetable seeds, corn, soybeans, and canola.
This is the industrial trend
It looks as though the agricultural business is the current flavour-of-the-month in the world of mergers and acquisitions as DuPont and Dow Chemical have agreed to merge. However, in August European antitrust officials decided to launch a rigourous investigation into the companies’ proposed merger. They could decide to approve it only if the two companies to divest more operations or make concessions that will prevent any perceived limitation on market competition.
The merger would create the world’s second largest agricultural products company, the second-largest seed company, and the third-largest crop-chemicals company, as well as the largest US seller of corn and soybean seeds.
DuPont’s agriculture business has $11bn in annual sales and employs 12,000 workers, while Dow Agro has $7bn in sales and employs 9,000.
The chemicals industry is in focus as a series of high-flying merger proposals animate both investors and critics of "corporate agriculture". Photo: iStock
In a similar move, China National Chemical Corp. has secured commitments from lenders on a $12.7bn loan for its purchase of the Swiss pesticides producer Syngenta AG.
The Beijing-based group that is known as ChemChina has attracted 17 banks for the financing of a $12.5bn term loan and a $200m revolving credit facility.
ChemChina agreed to buy Syngenta for $43bn earlier this year. This would create the world’s largest supplier of pesticides and agrochemicals and be the largest acquisition by a Chinese firm outside of the nation.
ChemChina received approval from US national security officials for the takeover last month, though the deal is still subject to antitrust review by regulators worldwide.
What do such deals mean for farmers?
The management of the newer, bigger companies peddle the line that mergers will make their own research more effective. For example, the combination of Monsanto’s genetics expertise with Bayer’s chemistry knowledge will increase farmers’ yields while saving them money.
That may play well in the US, but it will have a hard time winning wide scale support in Western Europe.
I sense, however, that as the global economy is growing quite slowly it is no bad thing for all industries to be seeking greater efficiencies and competitive edges.
The worry is that the farmer will be squeezed even more as before these mergers two-thirds of the global commercial seed market was controlled by just 10 companies. Now that will be down to just seven operators holding the majority of the market.
Perhaps economics has to reconsider classifying farming as an example of “perfect completion”. Instead it is “perfect pressure” – pressure on input costs from seed and fertiliser producers and pressure from food retailers. Forget “normal profit”, i.e. just enough to keep going.
More and more small farms will close as marginal costs exceed marginal revenues, or they will merge into mass industrial concerns.
The risk is that the new "Super Agri" companies are using their dominance to control what farmers can cultivate, how they have to cultivate it, and how much they have to pay for it. When the seeds and agricultural chemicals are provided by a just a handful of companys, farmers are sold the whole package: seeds plus fertiliser plus pesticide. That does raise serious price manipulation concerns, especially as patents are now being extended from genetically modified plants to the conventional varieties.
Patents protect nationally supported monopoly rights over the seeds, which the companies assert both over farmers and over downstream processing companies. From planting to plate, there are serious questions that need to be addressed if we are all to be well-fed at a reasonable price.
Centralisation in the agriculture industry is a risk, but a swelling population
means efficiencies must be pursued. Photo: iStock
— Edited by Michael McKenna