Bayer’s announcement that it is selling its Liberty line of products has provided relief for Canada’s canola growers and created anxiety for independent retailers.
Regulators in South Africa said one condition of their approval of Bayer’s acquisition of Monsanto was that it had to sell off its Liberty Link technology and associated Liberty branded chemical business. Bayer agreed to those terms.
Janice Tranberg, executive director of the Saskatchewan Canola Development Commission, said that is a relief because Bayer would have owned 95 percent of the canola traits and accounted for 75 percent of canola seed sales in Canada.
“A merger would give the control of that to one single entity as well as the two most common pesticides that farmers use on canola,” she said.
Renn Breitkreuz, vice-chair of the Alberta Canola Producers Commission, said that is way too much concentration of power.
“You need more than one player in the market to have it function,” he said.
Both groups made presentations to the Competition Bureau contending Bayer would have a virtual monopoly over the Canadian canola industry.
Greg McDonald, general manager of crop protection and seed with United Suppliers Canada, worries that the sale of Bayer’s Liberty assets could result in market concentration of a different kind.
Liberty products are distributed widely through most retail outlets in Western Canada, including the independents that comprise United Suppliers Canada.
That could change, depending on who buys the product line.
“Any time there’s change and you’re not sure what the change will be, you just wonder if you’ll have access to that product line in the future,” said McDonald.
The four companies being bandied about in the rumour mill as potential suitors for the Liberty Link system and Liberty chemistries are BASF, Syngenta, Nufarm and Agrium’s Crop Production Services (CPS) division.
The first three are seed and chemical manufacturers. CPS is a retail distribution company with more than 220 outlets across Western Canada, and that is the potential owner the independents fear.
“Then it’s in the hands of a competitor,” said McDonald.
He said canola is an extremely important crop for retailers, and the Liberty Link system accounts for more than 50 percent of Canada’s canola acres, so it is vital that independents still get an adequate supply of the product at a reasonable cost no matter who owns the system.
BASF is seen by some as the logical fit. It is the only one of the big six seed and chemical companies that is not part of a proposed takeover or merger deal. ChemChina is attempting to acquire Syngenta, Dow is merging with DuPont and Bayer is buying Monsanto.
McDonald said there has long been speculation in the crop input industry that BASF needs to bolster the seed side of its business.
“They have such a strong crop protection position that I’m sure they’re looking to have more of a broad portfolio, and seed is important,” he said.
McDonald isn’t surprised that Bayer chose to sell off the Liberty line rather than Monsanto’s Roundup Ready line to appease regulators. He said it is a strong performer with good market share and high valuation.
“Selling something that is probably at its peak isn’t necessarily always a bad thing,” he said.
Plus, while Liberty is the market leader in canola, Roundup is the leader in corn and soybeans, and the merger of Bayer and Mon-santo was predominantly a corn and soybean decision.
McDonald said it is possible Bayer will sell the canola business to one buyer and corn and soybeans to another.
“Anything could happen, but the more that could be sold to one possible buyer, probably the easier it is,” he said.
Breitkruez said while he is pleased that one company won’t be in control of the canola industry, he is not happy that Bayer and Monsanto will no longer be in direct competition with one another.
“They were trying to out-compete each other, out-innovate each other for market share,” he said. “That market force is no longer compelling them.”
Adrian Percy, global head of research and development with Bayer, contends the merger will result in more new products rather than less.
“This deal between Monsanto and Bayer is all about innovation. It’s all about accelerating innovation and about growth,” he told reporters attending a news conference at the 2017 Commodity Classic earlier this year.
Percy provided an example of how the merger will get new products to market faster. He said chemical companies introduce new herbicides and then it might take a decade before a seed technology company comes up with a herbicide tolerant trait to pair with the chemistry.
“With this combination, we have the opportunity to co-develop,” he said.