Bayer Announces End To Monsanto Name After Merger

The mega merger between Bayer and Monsanto was approved last week by the U.S. Justice Department ending months of anti-trust scrutiny. Bayer will have to sell off an unprecedented $9 billion in industry assets in order to clear the regulatory hurdles and the deal is expected to close on Thursday.

The news on Monday was that Bayer will end the Monsanto name after the merger due to the negative public image it has with consumers. The news is not surprising given the backlash Monsanto has received for years from the American public and the farming industry.

The news that the merger was going to move forward is a surprise to many people, the companies are both huge and have very diverse product portfolios. However, those product portfolios are clustered in the same types of industries especially when comparing the agriculture products holdings of both companies.

Therefore, that necessitated the big sell-off of assets by Bayer to make this merger happen. The precedent for a merger this large to actually be approved will have a tremendous impact on future M&A activity.

The Bayer – Monsanto merger will clear the path for mega-mergers to take place in other industries in the future. This is a merger that makes Dow-DuPont look small and that is a frightening prospect.

In my view I think the “Big Pharma” industry and the major media companies are going to try to capitalize on this merger with attempting to push through M&A proposals of their own in similar scale. The biotech field could also use this merger as an example of precedent for their own consolidation activity.
Furthermore, this merger between two titans in the agricultural industry will have an impact on the Disney bidding war with Comcast over the remaining assets of 21st Century Fox. That is a big decision that federal regulators will eventually have to make which will have an impact on the consumer who spends time watching TV or movies.

The Bayer – Monsanto deal is far more significant because, even though the Monsanto name is being erased from history, the products they manufacture will remain. The brand names such as Roundup will remain active and the merger with Bayer will not change anything, it is business as usual. This is bad news for the consumers, the farmers, and just about everybody.

Monsanto has built a negative public perception and an even worse brand image on the unabashed manufacturing of pesticides, herbicides, weed killers, and GMO containing seeds for food crops. The company has continued to make products that have been linked to certain cancers, autoimmune diseases, asthma, autism, and a host of other maladies.

The perception of Bayer in the U.S. is one that largely is shaped by the eponymous brand name of aspirin that is very popular as well as Alka Seltzer and some other branded products in the drug store channel. Those brands enjoy a largely positive image in America, and in my conversations with many people about this topic another theme came to the surface.

That theme is that German companies have a perception of integrity and for producing goods of high quality. The people I spoke with had the impression that Bayer would “turn around” Monsanto and that European influence would be for them to start making organic, environmentally friendly, and non-GMO containing seeds.

Unfortunately, from all the public statements we have from Bayer in Germany that will not be the case in this merger. They plan on keeping the U.S. headquarters for the new conglomerate in St. Louis, and they plan to continue to make those same products that Monsanto is producing currently. This is not to imply either that Bayer lacks integrity or that European companies are losing that sense of common values because that would be an inaccurate generalization.

Bayer is a microcosm of society: it creates some things that make the world better and it creates some things that make the world worse. It is also a perception versus the reality, some people feel that GMOs are safe and that having a good-looking lawn is more important than not using chemicals on the grass.

That strategic direction may surprise some people, especially Americans, but it is to be expected. Bayer will inherit brands from Monsanto that make billions of dollars in revenue each year. The American consumer and the farmers lose out here because this merger creates less competition in the seed and other agricultural products areas. The American consumer loses because the GMO and genetically altered food fight just became more difficult to win.

In the end, Bayer might enjoy a positive public perception in America right now, but it remains to be seen how that might change in the months and years ahead. The name Monsanto might be retired from the ranks, and Twitter is going to take the place of Monsanto in the S&P 500 this week, but Bayer is now tied to the legacy that Monsanto has built, and it is a rather negative one at best.

Bayer has made statements that they plan to “engage the consumer in new ways” I have no idea what that means. I do know that it does not include the discontinuation of Roundup or any of the other harmful chemical products produced by Monsanto.

This merger will have a direct impact on the American food supply, on the prevalence of genetically engineered ingredients in food, and on the future of mega-mergers. The effects of this merger will be seismic and will be felt for a long time to come.

Monsanto Invests in Partnership with Pairwise Plants

In a follow up to another article done on genetic editing and CRISPR technology in modifying food products, Monsanto made an investment on Wednesday that made headlines.

The agricultural products giant, Monsanto, released a statement that it has made a $125 million investment in Pairwise Plants, a startup company specializing in genetic editing. Monsanto is banking on the technology, especially the method known as CRISPR, to produce fruit that lasts longer on store shelves and tastes sweeter.

The initial testing, according to published reports, in this Monsanto – Pairwise Plants venture will be on the strawberry. The process of genetic editing of food is different than that of genetically modifying (GMO) because it acts as one scientist explained, like a pair of “molecular scissors” which will cut out certain parts of the DNA strand to enhance other attributes.

The method allows for manipulation of the DNA of apples or strawberries, or soybeans to make them either taste better or stay fresh for a longer duration of time. The ethical implications are significant with many questioning whether science should be changing something that God created.

Furthermore, the boundaries of the gene-editing process are also in question in the context of what they could look to use the CRISPR method with in the future. The questions surrounding the use of the method on livestock to prolong or change the shelf life of meat or fish is a huge potential dilemma.

Some fine journalists have compiled some excellent content on the topic of gene-editing. I am more concerned with the implications this presents from the perspective of man playing God with our food supply.

The research shows that GMO is a dirty word, associated with all sorts of problems and issues. I have written several pieces on the GMO debate and the negative impact that genetic modification has had relative to certain health problems and disease states.

The process of genetic editing is one that Monsanto and the other agriculture products manufacturers are pinning their hopes on being more acceptable to the general public. They have pinned those hopes to the messaging around the process of genetic editing being more of a subtle procedure than the GMO scenario.

They also hope to confuse the customer with the science involved and talk about how the process is “more natural” than the GMO process. The whole situation is one of twisted logic. The core of the process still involves altering the way the fruit or vegetable is currently constituted.

The farmers and grocery industry will be whole heartedly behind this new process because it will yield them better profits. However, our society has to ask itself: at what expense?

This is also not the first strategic business move that Monsanto has made with regard to genetic editing, about a week ago they entered into an agreement with a firm called TargetGene to explore what are known as multiple gene edits. They also plan to use this partnership to expand the gene editing process into more potential product categories.

The fact that this activity has gone mostly unnoticed by the public and mostly unchecked by the federal government is also an issue which compelled me to put this piece out. The process changes the genomes of certain crops in our food supply. The results of which have potentially serious consequences.

The proponents will point to the assumption that genetic editing will reduce the amount of GMO seeds being produced (see my previous post to this one) especially in the case of certain crops. The detractors will bring up that the seeds and the process of CRISPR will not happen overnight and may not have that widespread impact on the GMO seed issue.

In a world where autoimmune disease rates are increasingly on the rise as are rates of autism and Parkinson’s disease all being linked to the food we eat, we do not need any more altered food products.

The potential for Monsanto to merge with Bayer to become an even larger entity could provide even further potential investment into genetic editing. The potential for use of genome editing in animals and in humans also hangs in the balance.

The question remains: should scientists have the ability to play God? Should this process be used in human embryos to alter what God created?

My answer to both of those questions is a resounding: No.
It is my hope and prayer that your answer is the same.

Tip Of The Iceberg: Syngenta Settlement With Corn Farmers

The settlement that was announced last week and awaits the approval of the court system involving a class action lawsuit by corn farmers against the agricultural chemical juggernaut, Syngenta, is just the tip of the iceberg involving international concerns over genetically modified crops.

The suit dealt with a strain of modified corn that Syngenta sold to the farmers under the guise that it was going to be grown for export to China. However, the big issue was that China had not approved that strain of GMO corn and Syngenta did not get approval prior to negotiating the deal with the farmers.

Ultimately, China rejected the import of millions of tons of the genetically modified strain of corn called Agrisure Viptera. This tremendous amount is what caused the settlement numbers in this case to multiply significantly.

The settlement is over $1.5 billion and, according to Reuters, would be the largest class action settlement for an agriculture case in American history. This whole case represents a larger problem with the conglomerates running the seed industry, with GMO containing products, and with the import and export of certain staple crops within the food supply.

Syngenta is now owned by ChemChina, in a merger that was well publicized recently and heavily debated because of the implications of Chinese ownership of a company which supplies products which are integral to the American food supply.

It should be noted that ninety percent of the U.S. corn crop supply is genetically modified.

This sadly, is one piece of a giant patchwork of international export deals involving GMO staple food sources, not only corn. It includes wheat, soybean, and sugar beet crops as well. It is nearly impossible to find a mainstream food product without the “made with genetic engineering” disclaimer on the label.

The international laws around GMO food products make for even more unknown variables. There are certain countries that do not require the disclosure of ingredients that are GMO containing and do not label crop sources that are genetically engineered.

The push for organic foods and organic staple crops is making a resurgence in some parts of the world but the main issue is that the farmland is already tainted from GMO seeds that it is very difficult to impossible to use that land for organic crops.

The seeds are already genetically altered for so many crops that even if a farmer used organic products to preserve and sustain the crops they would inherently contain GMOs. The most effective way to deal with GMOs is at the seed level and growing less crops of corn for ethanol use.

However, this also is easier stated than put into tangible action. The agricultural seed industry is dominated by a few conglomerates: Monsanto, DuPont, and Syngenta. Monsanto controls over one quarter of the entire seed industry globally, and those three companies account for almost half of the entire global seed industry, which is a staggering figure.

That level of control into the hands of so few companies is a setback to any substantive progress being made with non-GM seeds. Then, consider further that all three of those enormous companies are in transition: Monsanto is in merger talks with Bayer, DuPont has merged with Dow, and Syngenta was merged with ChemChina in a $43 billion deal.

Some companies have taken the “Safe Seed Pledge” promising to not use GMO ingredients in their seeds, but they are used in smaller scale amounts for gardening and not for mass production. The scale up for the demands of the food supply make the reductions in GMO crops problematic.

The genetically modified trend is growing to impact fish and other livestock as well. It is presenting some moral and ethical questions along the way.

In a time period where social media and the internet has made for increased transparency, the international trade deals and ambiguous labeling laws for genetically engineered or modified foods make it incredibly difficult for people to know what they are eating.

The import of genetically modified ingredients is a whole other avenue where food products could become infiltrated with GMOs. The link between certain ingredients and genetic modification has been well established and internationally it is difficult to find alternate sources.

The United States got into the GMO crop scenario so deeply it is going to be hard to reverse course at this point. The European Union, by contrast, does not allow the sale of GMO food and produces it on a small percentage of their farmland for export purposes only.

The settlement by Syngenta over the failed exports to China is just one trade deal gone wrong. It is just one piece to the puzzle, it is the tip of the iceberg in a maze of deals centered on GMO products. The rest of those pieces will fall in future and the public questions about GMOs will continue and sadly the answers are not very promising.

Organic Fertilizer Development Gains Steam

Several companies are either developing, or partnering with other groups to develop, an organic fertilizer that can handle a larger quantity of crop yields. This is in response to the anti-GMO, anti-genetic engineering sentiment that has been rapidly growing within the consumers in both America and Europe in recent years.

The push to develop an organic fertilizer that is capable of this production yield stems from other scientific studies of soil. Those studies demonstrated that farmland treated with organic materials for fertilization was in more favorable growing conditions (soil microbial abundance is the official metric) than the farmland treated with nitrogen based fertilizer products.

In a report from CNBC one such company, Abundant Farms, recently hired a new director of technology who has a background in developing prototypes of organic fertilizers. The plan is for the company to test some of these products in a “scaled up” prototype scenario in test market farms in designated areas in the United States as well as in Romania in Eastern Europe.

Romania is one of the top producers of corn and some other crops in the world and will provide an excellent test market for this new organic product for crop treatment. The country distributes their crop production throughout the European Union and the world.

Abundant Farms partners with governments and farmers to provide solutions that are environmentally friendly. This is a time period of increased consumer scrutiny of food ingredients and where as well as how food is sourced and produced; the timing of these developments in organic farming is highly relevant.

Melior Resources, a company with an international presence just announced a strategic partnership with an Australian based organic products company, SOFT. The terms of the agreement essentially translate to Melior buying and distributing organic fertilizer products which SOFT will create and scale up.

The first organic fertilizer product in the pipeline for this new strategic arrangement is derived from a substance called apatite, which is a mineral sourced in Australia, among other places. The apatite from a specific mine in Australia has different properties that are not found in other versions of the mineral from other parts of the world.

The apatite that Melior/SOFT will be utilizing has no cadmium and no lead which lends itself well for use in fertilizer. SOFT has a unique technology to refine raw apatite into organic fertilizer.

In addition, according to the joint press release, this particular apatite from the Goondicum mine in Australia has a slow release phosphate effect. This slow release characteristic makes it ideal for organic fertilizer because it is not harmful to waterways or areas surrounding where it would be utilized.

The joint venture between the two companies is for ten years and the results of the combined strengths of the two partners should yield beneficial products for the consumer relative to the pushback being given to GMO containing and genetically engineered products.

The subsequent increase in organic farming necessitates the demand for more options with organic fertilizers, especially products which can handle higher yields. The expansion in supply of organic corn, soybean, and sugar beet are critical to the future of organic farming.

The LA Times produced an insightful report on the future of organic farming by taking a different perspective. The report states that the world could grow and sustain more widespread organic crop yields if our global society embraced two very important concepts: reduce food waste, and consume less meat.

This is due to the amount of land and resources required to maintain livestock for the consumption of meat. The rise in organic farming would have an environmental safety benefit because of the reduction in the use of chemical fertilizers, but organic farming is plagued by the “yield gap”.

The “yield gap” is the amount of land required to farm within organic standards. The practice of organic farming need more land because the yield level on an organic crop is smaller than a standard crop which uses nitrogen based fertilizer products. The rise in organic farming could have a potentially negative side effect when you consider the impact of deforestation to narrow the “yield gap”.

The concept of food waste is a “first world problem” but it is a significant contributor to the current food supply situation as well as a challenge to the future growth of organic crop production. The reduction in food waste can be achieved through greater awareness, through adjustments in food consumption, through more conscious food purchasing decisions, and by consistently checking your refrigerator by rotating food by expiration dates.

The ability to slash food waste is a grass roots approach, it is done at the family level which will extend to whole communities. The scientists in the LA Times feature are conducting multiple studies which examine the amount of crops and acreage are used for growing feed stock, compared to land used for growing food for human consumption. The analysis is then done to determine the conditions needed for organic farming yield targets to be attained considering demographic factors such as population growth.

One study concluded that the food waste globally would need to be cut in half from current levels, and that all the land used for feed stock would be needed for organic farming. The reduction of meat consumption to zero is an unrealistic outcome, so there are other studies targeting a 50% reduction in meat consumption by 2050.

Those are macro level changes over the long term, the micro level changes occur through more locally grown produce. The community farmers market approach is another viable method of expanding the organic foods approach.

Finally, the growth of organic fertilizers, and the commitment from the agriculture products industry to the development and scaled up production of high yield options for farmers will be a key in the movement toward more organic food in our global supply chain.

Follow Up: The GMO Labeling Debate Continues

The GMO labeling debate continues on, now almost eighteen months after the 2016 bill was signed to require food producers to disclose genetically engineered or genetically modified ingredients on the labels of consumer products.

The debate at this point centers around new legislation in Congress that the big lobbying groups, such as GMA (Grocery Manufacturers of America), are advocating for which will allow some loopholes to the disclosure of genetically altered ingredients.

This week in the news, the GMA suffered a setback when Nestle decided to join The Campbell Soup Company and withdraw from the GMA over the issue. Nestle and Campbell Soup disbanded their membership in the group over this contentious issue of GMO labeling.

Both Nestle and Campbell Soup favor more transparent disclosure of genetically modified or engineered ingredients. In a previous article I produced, the decision by The Campbell Soup Company to make a full disclosure of GMO ingredients before it was required by law brought significant traction and attention to the legislation that eventually gained passage in 2016.

The GMA group wants less transparency in the process, and the opinion of the Nestle and Campbell Soup is that direction will damage the relationship with the consumer more than just disclosing the presence of GMO ingredients up front. The average consumer today has far more information available to them and many shoppers are significantly more health conscious than in prior generations.

However, at the same time, some consumers do not care about GMO or genetically engineered ingredients in their food. Some consumers have a favorable view of GMO ingredients and feel they are safe. Many consumers are making purchasing decisions strictly based on price, and they cannot afford to stretch their budget to buy products that do not contain genetically engineered ingredients.

The other force at play here is that depending on the type of grocery item on the list, the non-GMO versions are either difficult to find or do not exist. The second most important attribute to shoppers in grocery channel surveys after price/value is time/convenience. The average shopper has a very busy lifestyle and most people have what they would term “time sensitivity” and that is a huge component in some shoppers just doing the “grab and go” without reading labels.

It should be noted that the majority of Americans have a negative opinion of GMO and genetically altered or engineered ingredients in food products. It has become an issue where the consumer is making purchasing decisions based on that one factor, which makes the labeling transparency crucial.

Some food companies have noted sluggish sales of certain product categories and are rapidly designing alternative versions that are either organic, gluten free, soy free, or GMO-free.

The current legislation regarding GMO labeling has a few different options for the food producing company with regard to the design of their label deck. The first option is to highlight the ingredient(s) that are genetically modified and then put a disclaimer below the ingredients list that the highlighted items are made with genetic engineering.

The second option is to place an asterisk next to the ingredient(s) that are modified or genetically altered and then below the ingredient list have a similar disclaimer as option one: made with genetic engineering/modification.

The third option is to not highlight or asterisk any individual ingredients on the label and put some type of bold or highlighted statement reading: this product contains ingredients made with genetic engineering.

Then what is known in the industry as “option four” which is going to become more prevalent on packaging and label decks for companies who want to be less transparent about their ingredient statement. This option allows the food producer to put the disclaimer of the genetically altered or engineered ingredients on a document that can only be found if the consumer scans the QR code on the package.

The lobbying and special interest groups for the GMO free or those against the use of genetically engineered ingredients in our food products have several issues with this option for disclosure.

The first point of contention being the obvious one, the consumer has limited time and yet they are going to have to scan a QR code on individual packages and then read the disclosure statement to determine whether or not it is genetically modified, that is an unrealistic expectation.

The other major point of concern is the elderly, the economically disadvantaged, and those with other physical handicaps do not have access to the technology needed to scan the QR code to find this information.

The option four labeling is also being used on items that the average consumer would not anticipate being genetically engineered: such as grapes, certain types of juice products, and bottled spices. This option, just at face value, seems dishonest to the consumer as well.

The role of the QR codes in the labeling of food products and disclosures in any future legislation remains to be determined. It is definitely going to be one point of contention moving forward.

The labeling of food products and GMOs took another on another aspect in the news this week, with a major news organization publishing a story based on the results of a study published in JAMA where scientists analyzed the effects of the pesticide called Roundup.

The study found that people living in Southern California in recent years have had an increased level of glyphosate in their system which is the active ingredient in that pesticide product (see my earlier article on the effects of this product and the food supply) it is increased about 500%.

The study in Great Britain of the effects of glyphosate on rats demonstrated an increased level of liver disease and liver cancer. This is something that the scientists will monitor in California with their study participants. In fair balance, it is not known whether the increased levels in Southern California are due to the ingestion of foods with higher levels of GMOs, or if the participants breathed in particles of the pesticide from nearby farms.

The use of pesticides, herbicides, and genetic engineering has altered our food and our crops. It is trending in lockstep with an increased rate of illness in Americans from higher rates of cancer, to autoimmune diseases, autism, Parkinson’s disease, and dementia.
The American public should have the right to know if the products they buy to feed themselves and their families contain ingredients that are genetically modified or altered. It should be up to the consumer to make their own choices based on having all the facts in front of them.

The debate on GMO labeling and whether or not genetically modified foods are safe will continue on, and what is left is for you to decide which side you will be on.

Follow Up: Honeybee Population Decreases In U.S.

In a follow up to a previous article, the news on Friday is not good regarding the honeybee population. In a report by USA Today about one third of the honeybee population in the United States died in the past year. This decline in the population levels can have far-reaching consequences for our domestic food supply.

The honeybee is responsible for an estimated one out of every three bites of food that the average American consumes each day. The combination of pesticides, environmental changes, and parasites have triggered a dramatic decrease in the population of this crucially important insect.

This survey does report that the winter seasonal losses were the lowest for American bees in a decade. The winter is a characteristically a period where honeybees will die in larger numbers due to the climate conditions. The experts analyzing this report stopped short of saying that the winter loss number was good news because the overall population numbers have declined so precipitously in recent years.

Some crops are almost completely dependent on the honeybee, and those shortages in supply levels are going to result in higher demand. This higher demand with smaller supply levels will result in higher prices that will passed along to the consumer. This includes items such as almonds, raspberries, and other fresh fruits or produce.

The rise in the growth of the organic and farm-to-table movements put a premium on beekeeping and balancing the protection of the bees from parasites against the utilization of harsh chemicals or pesticides. There are certain pesticides and herbicides that are widely used in agriculture that attack the central nervous system of bees causing them to die.

The greater emphasis should be placed on decreasing the chemicals and pesticides used in the production of certain crops. Some states have already initiated areas for honeybee preservation as well, so those areas have many restrictions as far as the use of pesticides and other airborne agents.

The honeybee is vitally important to our food supply and while the winter losses in 2016 were better than recent annual findings, the population is still depleted by one third. It is clear that steps need to be taken to preserve the honeybee colonies in the United States. It is unclear at this point what those steps will be moving forward.

Follow Up: Lower Food Costs and the Impact on the Restaurant Industry

In a follow up to my most recent piece on the lower cost of food commodities and the impact on the retail grocery channel; the Chicago Tribune published an interesting article on the relationship to those lower costs and the impact on the restaurant industry.

The article describes the fact that the falling food prices for staple items such as beef, eggs, and other commodity products has not translated into lower prices at restaurants. In fact, dining out is more expensive than it has been when compared to eating at home, that ratio is at the highest difference in three decades in the United States.

I was thinking about this connection myself last week when I was working on the piece on food commodities. It came about at a couple of different points last week: I had picked up some mail and the menus for some restaurants in my area were included in the ads and coupons. The prices on some of the menu items really jumped out at me for being expensive. Then, I stopped one day last week in a time crunch to pick up lunch and it was pretty expensive compared to the servings of what I had ordered.

I kept thinking about people that eat lunch out every day and how that cost will definitely add up over time. In keeping along that line, just take an example of ten dollars a day for lunch during the work week. That ends up being fifty bucks per week and two hundred dollars per month for lunch which will end up being close to two thousand four hundred dollars per year, give or take. That is for one person, for lunch, and an average cost of ten dollars. That is a lot of money for the average family.

The lower cost of food has had the reverse effect on restaurants because the cost of running and maintaining the business has not decreased. The restaurant has to be staffed and it has significant overhead costs with insurance, energy, and other costs associated with running that business.

In order to maintain profitability amid an increasingly competitive market, most restaurants have had to increase their menu prices. The other pressure point for restaurants, especially the traditional sit down places and the fast casual chains, is that the grocery store channel has become increasingly more relevant in the prepared foods area.

The local grocery store in your neighborhood and mine now has expanded upon the offerings for prepared meals to go which suit our active lives and are at a lower price point than going out to eat. I think we all can attest to a recent shopping trip where we have grabbed a cooked rotisserie chicken for dinner or put together a meal on the go from a huge selection of choices at a Whole Foods or a Shop Rite.

The numerous alternatives at the grocery store and the emergence of fast casual dining options such as Chipotle, Salad Works, and a few others have impacted the margins of the traditional restaurant channel as well. The Tribune article cites the troubles of Chili’s and a few other regional Midwestern chain restaurants in surviving this trend. The article as well as other industry resources mentions the higher minimum wage in certain states as another mitigating factor in the demise of certain restaurants in this climate.

The fast casual or traditional fast food options have lower overhead because the employees are members of a “crew” where each person is cross-trained and can complete a variety of job functions. This approach has helped them sustain profitability more than a traditional sit down restaurant but even the fast casual and fast food operators are encountering issues with falling food prices and an uncertain economy.

Many consumers are opting to save money in their budget and eliminate eating out and they are staying home. The more health conscious consumer prefers to make their own food at home with ingredients which they select, which is becoming a larger trend resulting in eroding profits in the restaurant sector.

The fast food channel has displayed several indications that they are at an oversaturation point. The industry is focused on rolling out new product offerings or seasonal products to attract new customers. The major players in the industry are putting together special promotions and full meal deals such as “4 for $4” or a “McPick Two”, to drive the value to the customer.

However, even with all of those efforts in marketing, the channel is hitting a point where it cannot grow profits. Therefore, they all made a push for breakfast and that is the final frontier, so to speak, for the fast food industry to grow profits. It is the last untapped revenue stream available to them where they can maximize the lower commodity prices for eggs and other staple items to put together a profitable set of menu offerings. The demand for a fast breakfast is also very robust for the American consumer that is seemingly always rushing around in the morning to start a very hectic day.

The traditional restaurants are going to struggle in this scenario because it is hard to compete on cost with other establishments and the fast casual/fast food/grocery prepared foods channels while maintaining their profits. It is a situation to bear in mind as the commodity pricing on food overall, and certain products such as beef and eggs in particular, will remain at a point where the restaurants and the grocery stores will feel the squeeze for the foreseeable future.

Food Commodity Prices Drop

The average shopper in America has probably noticed the changes in price for several commodity items in recent months. The falling prices are due to a combination of factors such as decreased costs of fuel and product packaging materials. Some other areas such as with meat and eggs, those commodities are in a cost reduction due to some external factors surrounding supply and demand.

The egg market segment has seen prices drop about 50% according to industry sources. The price of eggs, as many consumers will recall, increased sharply due to the avian flu epidemic. I recall going to my local grocery store and the signs that were hung just about everywhere in the cases surrounding the eggs and dairy products regarding the shortage of eggs due to the rampant spread of that illness.

The price of eggs had to adjust and correct itself when the supply levels returned back to normal levels with the increased number of hens into the system. That is the rationale behind the drop in prices for eggs as well as the shift in overall global demand for the product. The demand curve surrounding eggs in China and other parts of Asia has flattened, it has decreased over the past several months which creates a supply abundance and consequently lower prices.

The pricing shift on meat is a similar scenario. The cattle population in the U.S. had some issues between disease and other factors which impacted the population and created a supply issue. This lead to an increase in beef prices that many of us remember between the grocery store butcher department and the menus of our local restaurants.

The supply of cattle has increased over time and the supply for beef as a commodity is oversaturated due to current market demand factors. Some of this is driven by the healthier eating trends of Americans where red meat is more limited than at other points. The industry experts have reported that the supply levels of beef are so high compared to the demand that the prices will remain low until 2019.

The price points of other food products have come down in relation to supply, lower delivery costs, and a host of other scenarios. The timing on the price changes as we head into the Thanksgiving/Christmas/ Holiday Season is fortuitous for the food product suppliers, the distributors, and the retail grocery as well as club store channels.

The retail grocery channel is a low margin business structure to begin with and these price fluctuations over the past few years on certain commodities have cut into those profit margins even further. The ability for them to turn around and sell these products at the holidays is going to help their revenue forecast to close out the year.

The price points on so many other products and services are going up, I thought it would be comforting to note that our food prices are coming down, and considering the necessity of food, that is some welcome good news heading into the holiday season.

Bayer Beware: The Monsanto – Bayer Merger

I write often about mergers and corporate takeovers here on Frank’s Forum so the opportunity to offer some commentary on the largest merger of the year was an opportunity I could not miss.

In between research and drafting of other pieces I have in the pipeline, and a final draft submitted for editorial review, I was reading the mainstream coverage of this gigantic transaction on Forbes and CNN Money among others.

I am not sure what I am more surprised about: the fact that Bayer made a third attempt which was more outrageous than the first two attempts to get this deal done, or that I knew that this merger deal was going to be announced before the end of the 2016 calendar year.

I thought the Dow and DuPont proposed deal was huge and scary (which it still is) especially given the implications for the seed market. However, this move by Bayer is also very large and bold with the valuation they put on Monsanto stock ($128 per share) and the clause if the deal does not meet regulatory approval (Bayer would pay Monsanto $2 billion). All of these factors and many more make this deal the most influential merger of the year.

The total valuation when this deal is broken down means that Bayer put a value on Monsanto of $66 billion. The deal, if approved, would do two things right away: have a huge impact on the U.S. seed market where Monsanto is the top player in that marketplace and dramatically expand Bayer’s North American footprint.

American Dream or Nightmare?

The value to Bayer is undoubtedly the opportunity to enter the North American market in a top strategic position and expand upon that through other product areas and industry segments in the future. Bayer is much more recognizable in Europe and Asia than in any other areas of the world, so growth into an essential and largely untapped marketplace for some of their products was the main impetus.

In the case of Monsanto, which has been dealing with an endless onslaught of negative publicity regarding their products and GMOs, the deal makes a lot of sense when you consider that the Dow-DuPont merger looks like it is gaining traction toward approval by regulators throughout the world. That deal did hit a snag in Europe recently, but if you are Monsanto, you proceed thinking it will eventually get done and they will be a tough combined duo to compete against.

The premarket trading of Monsanto stock, as noted by CNN Money, was $104 per share and that sort of gap between that number and the merger valuation of $128, in my time of covering M&A activity usually means that Wall Street is anticipating this deal to not be approved through regulatory channels.

Bayer is thought of in America as the company that makes aspirin and Claritin, but the reality is that they are a major player in other parts of the world in petrochemicals and agricultural chemical products. They have a position in the agricultural seeds marketplace in other regions of the world as well, and from that perspective this deal makes sense.

Why Monsanto?

Although I had a strong feeling that this outcome was going to take place with regard to this merger, I still keep coming back to the question: why would Bayer want to purchase Monsanto? I understand that Bayer swung and missed at a deal for Syngenta, another major American seed manufacturer (which is in the process of being purchased by a Chinese company, ChemChina).

Monsanto has so much baggage with the P.R. nightmare over the perception of their products in the marketplace, the potential links to their products and certain cancers, and the inevitable GMO questions. It is also no secret that I hold Monsanto responsible for putting greed ahead of the health and wellbeing of people. I have read enough data and reviewed enough clinical trials to understand the effect of pesticides and herbicides on both humans and wildlife to know that my opinion of Monsanto is not very favorable, to put it diplomatically.

Bayer top executives may have felt that the Monsanto acquisition was the best pathway to getting the market share they desired in the product areas where they have synergy in order to compete with Dow-DuPont in both the North American market and the global marketplace.

Heavy Scrutiny

This deal, make no mistake about it, will be scrutinized heavily by the political powers at play here; other online news sources are already running separate stories about that aspect of this proposed merger. Bloomberg featured a story on the merger’s impact on the cottonseed industry which if the two companies joined forces they would control a staggering 70% of the market. What further complicates the deregulation of this particular market is that Monsanto sold a piece of their cottonseed business portfolio to Bayer recently to make another acquisition themselves. I am not sure who would be to purchase assets from either company in order to satisfy regulators.

The overall picture for Bayer and Monsanto joining forces is made even further complicated because they will have limited pathways to sell off assets overall because Dow-DuPont and the ChemChina deal I mentioned earlier puts all of those companies in a holding pattern as well. Those companies are not going to be undertaking any large transactions while under regulatory review themselves.

A merged Bayer and Monsanto would control an alarming amount of agricultural products and products directly related to our food supply. They would have enormous influence and power over the pricing that all of those markets are set within. In addition, they would be able to exert enormous price pressure, which could translate to cost increases that are passed along to the consumer.

The potential combined behemoth would also have a tremendous impact on the global environment through an increased number of synergies in the pesticide, herbicide, and other agro-chemical products which will have negative effects on the soil, water, and wildlife.

The potential merger of Bayer and Monsanto is, in short, bad for the consumer, bad for the environment, bad for ingredient suppliers, and bad for farmers. I hope that the analysts on Wall Street are right, and that this merger fails to meet regulatory approval.

It is a proposal with tremendous consequences on a multitude of levels which could have a detrimental impact to our society. This proposal represents greed and the unbridled pursuit of power. I am very concerned over the outcome, and I hope I have proven to all of you that you should feel the same.

Follow Up: Dow – DuPont Merger Hits Snag

The proposed merger between two global industrial chemical giants, Dow and DuPont, has reportedly hit a snag with the top European regulatory board. In a follow up to my prior article on this topic, this proposed merger had some issues from the outset, which is to be expected whenever two companies of that size are in the mix.

The European regulatory board has some significant concerns regarding the agricultural product lines particularly the seed products for crops involved in this proposal. The combined Dow-DuPont would be a major rival to the market leader, Monsanto, and if the deal was approved it would consolidate a huge majority of the seed industry into the hands of two companies.

I had mentioned this area in my prior work on this merger as being an area that should be of huge interest to the majority of the general public regarding this deal because it would place a monopoly on the seeds used to grow the global food supply. This will inevitably cause some very dangerous potential ramifications regarding the cost to grow and manufacture food and agricultural products.

The European regulators were correct in raising this concern at this point and to investigating this situation further. They also raised concerns about certain petrochemical products and the overall impact that this merger could have on innovation. The regulators explained to the media that the farmers have a reliance on the capability of being able to obtain seeds at a competitive price in order to maintain their livelihood. The statement essentially indicates that this proposed merger could leave the farmers in a situation where that cost competiveness is gone, forcing them to buy the seeds at whatever price the two top companies on the supply side dictate that price to be.

The anti-trust laws were established both in the U.S., in Europe, and in other parts of the world to provide safeguards against the very type of situations that this proposed merger presents in the context of competitive balance. The control of any commodity into the hands of the few is a problematic situation given the predisposition toward greed displayed by the large majority of publicly traded corporations.

The likely defense from Dow-DuPont is, as they alluded to when the CEOs made the rounds on the financial news networks back at the start of this circus, that they plan to split the company into three separate companies. In the reports I have read regarding the European regulatory decision today, it appears that will not be enough to satisfy their concerns because that accounting split into three companies does not change the controlling market share in seeds or petrochemicals that Dow-DuPont would maintain.

It remains to be seen what the investigation will yield, it could result in the European board “recommendation” that the proposed merged entity must divest their holdings in the seed industry segment and potential other industry segments. This would deal strictly with the European divisions of the proposed new Dow-DuPont and would be required of them to clear the hurdles to that M&A proposal in Europe.

The impact of that recommendation or the finding of this investigation could have an impact on the regulatory process in the United States. However, there is a chance that the regulators here view this as a European issue and they may have other concerns about this gigantic merger proposal.

The agricultural lobbies, both those who have interests in lobbying for farmers in the US and those who lobby for the petrochemical and agricultural supply companies, will certainly be active in the run up to the regulatory review process here in America.
This new emphasis on “clean” eating and healthy food will have interest groups from the GMO free side of the food industry certainly weighing in on this proposal as well. The renewed focus on GMO seed that companies such as Monsanto, Dow, and DuPont push for all the main staple crops in America is something that all of us should be concerned about, and the implications for the consolidation of that seed industry could deal a crushing blow to the GMO free lobby.

This investigation by European regulators could set the bar for American regulators to follow suit, which could very well lead to the breakup of the existing brand lines controlled by Dow- DuPont and lead to some significant changes to the agricultural industrial marketplace and the petrochemical marketplace globally. This matter is far from over, in fact, it looks like the process has finally started to feel like it has actually begun.