The pace of agrisupply industry consolidation is set to increase further in 2016.
AgriTrade News’ mergers and acquisitions table for 2015 shows that more deals took place than in the previous year. This month alone there have been two major merger announcements - Dow and DuPont, with the combined Agriculture assets to be floated off into the world’s biggest agrochemical and seed business with revenues of $19 billion, and Boehringer Ingelheim and Merial.
The catalyst for much of this change can be traced to the animal health sector. In 2012, Pfizer floated off its Animal Health division – now Zoetis – and Zoetis executives spent time convincing major investors that animal health was a good long term bet, with a growing world population requiring more and higher protein food. Since then, Novartis Animal Health has been acquired by expansionist Elanco Animal Health, while Sanofi has now found a buyer for its Merial veterinary medicines division in Boehringer.
This has prompted investors to look for better value from the seed and crop protection businesses in their portfolios - a sector which has been reasonably stable since the millennium after a rapid period of change in the late 1990s. Monsanto continues to eye Syngenta, while other major players fear being left behind.
While the global scene may seem remote from the national market, these changes will have an effect domestically, as changed business structures make new relationships with suppliers and distributors, consolidate their premises and invest to raise awareness of the new profile.
Of course, the consolidation trend has been relentless for some decades, but it is a step, rather than a linear process. The current couple of years, with a background of poor farm commodity prices, are likely to be a bumpy ride.
ATN will be here throughout 2016 to report on the industry changes as they happen, with this website adding to the service provided to our subscribers.