I remember when there were more than 20 major crop protection companies or ag chemical companies, as we called them in the old days—30 years ago—doing branded product sales in the United States. The market has gone through two waves of business consolidation since then, and it looks like we are on the cusp of another wave.

Monsanto tried to take over Syngenta, and now there are all the rumors about DuPont talking to Dow AgroSciences and Syngenta. When those “big boys” start looking to combine, then the smaller companies down the line usually think about merging to keep pace.

It isn’t like the bigger companies have rested on their laurels in recent years. They have been gobbling up “start-up” biotech and research outfits around the world. But now the biggest want to get even bigger to make more money.

A lower commodity market for growers isn’t translating into a horrible agricultural situation. There is still plenty of money ready to invest in agricultural operations from farmland to food processing because nearly all sizes of ag businesses have a long-term history of making a profit.

A prime example of investment is how AGR Partners has invested $150 million during the last two years to ag and food industry sector companies and has another $200 million per year available with up to $1 billion available in the next five years for the right agricultural sector investment. This came directly from Ejnar Knudsen, AGR Partners managing partner, the day before the California-based company opened a Midwest office in Chicago.

So, I contend merger talks by the biggest crop protection companies are not being triggered by any long-term outlook of a downturn in agriculture as a profit center. It is simply the big wanting to get bigger and dominate their competition for the largest possible return to their stockholders.

Having sat in on decisions made about bringing new products onto the market and investment into research and development, there was always that discussion about how would a decision ultimately affect stock prices. And there has always been that antagonist stockholder group that claims they should be making millions more than they are from ownership in a crop protection company—if the company management would do what is right for them.

But ultimately, there haven’t been many places those stockholders could turn to make bigger returns on their stock portfolio than agricultural companies during recent years, especially since the stock crash of 2008.

On a worldwide basis, the top six crop protection companies have total sales accounting for about 70 percent market share of the total agricultural sales, which isn’t solely crop protection products but includes seed and miscellaneous other endeavors. Those companies are Syngenta, Bayer CropScience, BASF, Dow AgroSciences, Monsanto and DuPont.

Rounding out the top 12 agrochemical companies, according to the latest numbers available to AgroNews, are FMC, Adama (formerly Makhteshim-Agan Industries), Nufarm, Sumitomo Chemical, UPL (formerly United Phosphorus) and Arysta LifeScience. 

There is a big break between the top 12, which have names commonly known in the U.S., and the rest of the top 20 still doing business worldwide, but with less prominent names or not even selling products in the U.S.

Sales of the top 20 global agrochemical companies combined is approximately $60 billion and to make that twentieth spot on the list, the company had to achieve sales of $500 million, which is a pittance compared to the top companies on the list with sales reaching more than $10 billion each.

Obviously, we need the big to get bigger so they can invest more to research and develop new products, produce products in volume more economically and pass the savings on to the retailer and farmer.

Don’t expect the pass along of savings. As I already noted, those stockholders are squealing for more return on investment.

It is going to be interesting to see what I think will be another wave of mergers and acquisitions like a domino effect. I hope it doesn’t happen.