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Agricultural Mergers: Implications On Innovation, Farming, and Politics

Austin Wang

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agriculture

Agricultural mergers have turned the so-called big agriculture into giant agriculture. In the past four years, six of the world’s largest agricultural companies have participated in mergers. As the chemical and seed providers consolidate, their pricing power increases while small farmers lose control over their supply prices. On the other hand, increased consolidation can improve companies’ efficiency and ability to innovate.

Merger Timeline

  • December 2015: Dow Chemical and DuPont complete a merger before splitting into three smaller, specialized agriculture and chemical firms, per Fortune‘s reporting.
  • February 2016: State-owned China National Chemical Corporation acquires Switzerland-based Syngenta for 43 billion dollars, according to Reuters.
  • June 2018: According to reports by CNBC, German pharmaceutical and life sciences Bayer completed a $60 billion deal to acquire pharmaceutical giant Monsanto.

A Bad Deal for Farmers

One of the largest potential consequences of these mergers is a decrease in competition. Four firms now control over 80% of the agricultural market. With fewer providers of seeds, pesticides, and other agricultural essentials, each large firm is able to charge higher prices. Small farmers have little to no negotiating power and end up facing higher prices.

Over 200 farm, food, and rural groups have supported a bill in Congress that would halt agricultural and grocery mergers. Several organizations have claimed that farmers will pass on some of their supply costs to consumers as well. Decreasing farmer salaries and high consumer food prices could also threaten food security against the backdrop of a growing population.

Rising input prices are especially problematic for small scale farmers with low margins. If large firms exercise their pricing power while the trade war is already diminishing farmers’ profits, many farmers could be forced out of their livelihoods. While firms have little incentive to raise prices enough to drive out farmers, it’s clear that farmers have lost even more of their already minimal autonomy in the market.

Furthermore, large agricultural firms have historically participated in unethical practices. For example, Bayer-Monsanto has been hit with almost 11,000 lawsuits for its weed-killer Roundup which has been accused of causing cancer. Problematically, with fewer firms in the agricultural market, most farmers end up using the same product. Despite earlier rumors of Roundup causing cancer, millions of farmers had no choice but to continue using it.

Motivating Political Platforms

Politicians have taken notice of farmers’ concerns. To address decreasing competition in agricultural markets, presidential candidate Bernie Sanders has announced a platform for revitalizing rural America. He plans to strengthen anti-trust legislation to prevent further consolidation in the agricultural markets.

Implications on Innovation

Supporters of large agricultural mergers primarily focus on the potential innovation these new firms could bring. Theoretically, these mergers will create companies with enormous amounts of capital and intellectual property for further innovations. In the past, large agricultural firms have been responsible for creating incredibly efficient GMO crops and pesticides that have improved agricultural yields.

As our world’s food needs increase, we may need giant firms to further innovate and increase yields. Yet these innovations often result in significant environmental harms. Pesticides can adversely affect local flora and fauna as well as introduce toxic chemicals into the soil. In the long run, it is difficult to say whether efficient, industrial farming will ensure our food security better than smaller-scale, more environmentally friendly farming practices.

The Role of Anti-Trust Review Boards

Despite concerns over pricing power, these mergers were ultimately approved by anti-trust review boards. Furthermore, many of these mergers were accompanied by divestitures of smaller branches or specific products. It is possible that these mergers have not actually affected competition in agricultural markets much. After all, many companies already have enormous market shares in their particular pesticide or seed products. Mergers may not make the already oligopoly-like climate on the agricultural industry much worse.

Conclusions

Altogether, it’s difficult to say whether agricultural mergers will actually increase innovation. Firms are incentivized to innovate in order to compete with other firms’ products. With fewer firms in the market, there may actually be a decrease in innovation since there are fewer products to compete with.

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Sustainability

Nine countries in Latin America make a major push for renewable energy

Chris Chen

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Latin America

Latin America has seen a promising rise in climate leadership. This week, nine countries collectively announced an ambitious goal: by 2030, renewable energy should account for at least 70% of all energy sources. Comparatively, that is double the EU’s target of 32%.

The undertaking was presented by Colombian energy minister Maria Fernanda Suarez during this past week’s UN Climate Action Summit, with Colombian President Iván Duque also present. 

“We’ve brought meetings forward and coordinated with countries including Chile, Peru, Honduras, Costa Rica, El Salvador, Ecuador, Guatemala, the Dominican Republic and Haiti,” Duque said.

Colombia is one of the world’s leading coal exporters, but in recent years, it has taken large strides to implement wind and solar technology in an attempt to diversify its energy sector. More than a third of the nation’s energy already comes from renewable sources like hydroelectric power. Not to mention, a massive solar project—which could help save Colombia two hundred million tons of carbon emissions—was recently approved by a government agency. 

The pledge is part of a growing trend on the continent to push for renewable alternatives, though countries like Panama and Brazil are still considering whether to commit to the ambitious plan. Public bids for renewable sources are on the table for several Latin countries.

All of this is ahead of the upcoming annual UN Climate Change Conference which will be hosted by Chile in December. 

Chile has also been at the forefront of combating climate change. Since the start of his second term in December 2017, President Sebastián Piñera has placed climate change at the top of his agenda. Significant legislative actions have taken place and dozens of coal factories are expected to close. In the big picture, Chile is aiming to reach carbon neutrality by 2050. 

At a time where firm global leadership has largely been stalled, leaders in Colombia and Chile are spurring initiatives in the rest of Latin America, which, in turn, is creating a model for the rest of the world. 



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Greta Thunberg and fellow youth climate activists testify to Congress

Ari Kelo

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greta thunberg

This week, Greta Thunberg is making a case on Capitol Hill.

On Tuesday, the 16-year old climate activist met with the Senate climate crisis task force, where she testified alongside young climate activists from across the U.S.

And on Wednesday morning, the group testified before Congress again. This time, they spoke at a hearing on Climate Change Leadership, organized by the House Climate Crisis Committee and a Foreign Affairs subcommittee.

Their goal? To demand the U.S. government finally stand up against the climate crisis.

Greta Thunberg and Jamie Margolin urge politicians to unite behind science

Rather than giving prepared remarks, Thunberg kept her statement short and sweet. In under a minute, she submitted the IPCC Special Report on Global Warming to serve as her testimony.

“I don’t want you to listen to me,” she explained. “I want you to listen to the scientists.”

The report, issued by the Intergovernmental Panel on Climate Change, discusses the increasing threats of global warming. It warns that, without drastic change, the global temperature will rise 2.7 degrees Fahrenheit by 2030. And the consequences of that rise in temperature are dire.

By submitting the report to Congress, Thunberg made a simple statement ⁠— there’s no time to waste. “I want you to unite behind science, and then I want you to take real action.”

At her meeting on Tuesday with the Senate climate crisis task force, Thunberg made a similar demand. Speaking to Congress as a whole, she said, “I know you are trying but just not hard enough. Sorry.”

Her fellow activists agree.

Jamie Margolin, the 17-year-old co-founder of the Zero Hour movement, urged Congress to forge a path to climate recovery. To her, there’s still a chance to solve the climate crisis. “But this must start today,” she said. “In fact, it should’ve started yesterday.”

And Vic Barrett, the 20-year-old member of the Alliance of Climate Education, continued the call to action. He pointed out his greatest fears about imminent climate change. How marginalized communities are the most at risk. How, for him and his friends, climate change has become a source of serious mental and physical stress.

“My culture and inheritance are slipping into the sea,” he went on, discussing the threat of rising water levels on the Caribbeans. “My people are going extinct.”

Youth take charge in climate movement

Following their statements, House Speakers commended the young activists for their leadership in the movement against climate change.

But recognition is not what they need from Congress. “We need your leadership,” said the 21-year-old conservationist Benji Backer. “You have remarkable power.”

“The fact that you are staring at a panel of young people testifying before you today pleading for a livable earth should not fill you with pride. It should fill you with shame,” said Margolin.

These testimonials are part of a greater movement initiated by young people across the globe to combat climate change.  The face of the movement, Greta Thunberg will continue her efforts to incite policy change this Saturday at the first ever UN Youth Climate Summit in New York.

And on Friday, she will join thousands of other concerned young people as they march against climate change during the Global Climate Strike.



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An Environmental Crisis is Looming Over the Horizon in Yemen

Chris Chen

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The civil war in Yemen has been raging on, with the UN calling it the world’s worst humanitarian crisis. 

The conflict between the internationally-recognized government of Yemen and Iranian-backed Houthi rebels has led to disease outbreaks, widespread famine, and water scarcity, all of which threaten the livelihoods of millions across the country. On top of this, it now seems to be in a time of environmental crisis.

A large portion of the death toll, which has exceeded 91,600 fatalities since fighting broke out in 2015, can be attributed to civilian deaths from extensive bombing campaigns. Countless bombs have left chemical residue which can attach to particles in the air, seep into the soil, and traverse across vast distances via wind and rain.

In the coming years, climate change and sea level rise will strike Yemen hard. This has been illustrated in the past decade by an unprecedented amount of hurricanes and back-to-back cyclones in a region where tropical storms rarely occur. 

Extreme heat is affecting most of the country and will enable tropical diseases like malaria to easily spread. Biodiversity loss is also accelerating across many ecosystems.

The war has undermined critical action in few ways. First, issues like the environment have not received proper attention due to humanitarian aid being the number one priority for most international organizations. 

Second, the government has been caught in a fiscal bind in recent years. It has poured all of its resources into pushing back the Houthi resistance. In August, for example, violence escalated when separatists took over the port city of Aden. Mainstream coverage of the war hasn’t helped either; despite the toll the environment is taking, it has largely ignored these issues.

“It’s certain that Yemen is one of the countries most affected by climate change,” Tawfeeq al-Sharjabi, the Yemeni Deputy Water and Environment Minister.

Solar power could help mitigate the environmental crisis

One solution that could alleviate some of Yemen’s problems is solar power. Countries that support the Yemeni government’s efforts, specifically Saudi Arabia and the UAE, have been developing alternative energy which could prop up Yemen’s energy sector and save billions of dollars in the process.

International organizations have also stepped up. The World Bank is working with local communities to install solar applications in schools and other public facilities. It aims to bring electricity into the lives of over 1.3 million people while also helping Yemen meet its Paris Agreement goals by reducing carbon emissions by as much as 430,000 tons.

On the other hand, as The Cairo Review points out, the drawbacks of solar alternatives may also just push civilians back to traditional fuel sources once they are available again. 

A ticking time bomb with global implications

Though many problems manifest on land, issues could soon arise in the seas. In July, the UN warned that the Safer FSO, an oil tanker abandoned in 2015, could explode from a buildup of volatile gases and leak over 1 million barrels of oil. 

Safer FSO anchored 30 miles off the coast of Al Hudaydah. Photo: SEPOC

To put that into perspective, experts warn that it could result in a spill four times greater than the 1989 Exxon Valdez oil spill in Prince William Sound, Alaska. It would devastate the Red Sea and surrounding bodies of water, reaching as far as Eritrea, Saudi Arabia, Sudan, and even the coast of Egypt.

A spill of this magnitude would effectively block commerce from reaching international destinations through the Red Sea, which accounts for 10% of global trade. Furthermore, it would wreak havoc on marine life for hundreds of miles around and further exacerbate Yemen’s water crisis. 

The trouble stems from Houthi control over the tanker, which has prevented maintenance from outside groups. Fortunately, a UN team was recently dispatched to assess the situation after complicated negotiations with the rebel group. Other than that, not much progress has been made.

“The danger increases with every day that goes by,” Doug Weir, policy director of the Conflict and Environment Observatory, told CNBC.

Conclusions

Yemen’s environmental crisis is quickly deteriorating but the country’s conflict has halted important preventative measures from being enacted—the government faces countless issues of its own. Its lack of financial flexibility means that these problems will likely persist into the near future.

Bringing solar technology into the country is a worthy initiative, but it is only one piece of the larger puzzle. Securing the Safer FSO will also require substantial effort. 

Yemen needs a coordinated global response to tackle this dilemma. However, given the complexities of international diplomacy, its environmental pleas will likely yield little to no response.



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