Global grain prices keep falling, and agricultural giants have no choice but to band together for warmth

As global grain prices fall and profits are squeezed, agricultural giants are seeking powerful alliances to band together for warmth in theindustry's cold winter. This will be agriculture's first major transformation in more than a decade. Citing people familiar with the matter, multinational seed giant Syngenta is in talks with DuPont to merge DuPont's agriculture division.

Another person familiar with the matter said DuPont is also negotiating with Dow Chemical on the possibility of reaching an agricultural agreement to expand its seed and pesticide sales. However, these negotiations are all at the initial stage and may also end without result.

U.S. agricultural income is gradually declining and is touching its lowest point in nearly a decade. Agricultural companies are facing challenges: pests are gradually developing resistance to ordinary pesticides, and many consumers are worried about the use of pesticides and genetically modified seeds.

According to data from Morgan Stanley, if Syngenta and DuPont's agriculture division merge, they will control about 27% of global pesticide sales. Analysts say that because DuPont already controls 35% of the U.S. corn seed market and 33% of the soybean market respectively, in order to smoothly pass the antitrust investigation, this merger may require Syngenta's U.S. company to divest its seed business. A person familiar with the matter said Syngenta will retain its headquarters in Switzerland.

The merger of DuPont's and Dow's agriculture divisions will control 17% of the global pesticide market, second only to Syngenta and Bayer. In this merger, Dow's seed business may also need to divest assets.

However, agricultural groups worry that as the wave of agricultural mergers arrives, industry concentration will lead to greater pricing power over products. According to U.S. Department of Agriculture data, without considering inflation, since 1995 the average cost of seeds has already tripled, and pesticide prices have also risen by 13%.

Bob Young, chief economist of the American Farm Bureau Federation, said that so far he has not seen evidence showing that market concentration is driving prices up.

The global agricultural input market is controlled by six major companies, namely the U.S. companies Monsanto, DuPont and Dow Chemical, the Swiss company Syngenta, and the German companies BASF and Bayer.

In August this year, global genetically modified agriculture giant U.S. Monsanto made a second acquisition offer to Syngenta, valued at 47 billion U.S. dollars, but was once again rejected by Syngenta. However, Monsanto's repeated defeats have not changed the wave of mergers and acquisitions that the industry is about to usher in. In recent years, integration rumors have continually surrounded these six agricultural giants.