Winnipeg/Chicago | Reuters — North American farmers will pressure regulators to protect their negotiating leverage with fertilizer suppliers if PotashCorp and Agrium agree to merge, major farm groups said on Wednesday.
The potential deal revealed on Tuesday would combine the world’s largest fertilizer producer by capacity, with the continent’s biggest network of farm retail dealers, and consolidate 60 per cent of North America’s potash production with one company.
The tie-up would face regulatory scrutiny in both the U.S. and Canada.
For farmers, already facing the prospect of fewer buying choices for seed and chemicals, the potential merger raises fears they will lose pricing power. Independent retailers in the U.S. and Canada worry about competing against a fertilizer Goliath that may stock its stores at preferential rates.
“It’s like the movie ‘Mad Max’ — one company owns everything,” said Norm Hall, president of Agricultural Producers Association of Saskatchewan. “There’s less and less competition out there. We’re being painted into a box because of corporate greed.”
The group, based in Canada’s largest crop-growing province, will raise concerns with the federal Competition Bureau if the merger proceeds, Hall said.
Likewise, Manitoba’s Keystone Agricultural Producers will ask the bureau to weigh the risk of higher farm costs, said president Dan Mazier.
The Competition Bureau routinely contacts industry groups when it reviews proposed mergers, said spokeswoman Sophie Paluck-Bastien.
The American Soybean Association, which represents 21,000 U.S. farmers, might complain to U.S. regulators if the merger advances. It opposes deals that limit competition and drive up prices, said spokesman Patrick Delaney, noting that the combined company would be “dominant” in North America.
PotashCorp declined to comment and Agrium did not respond.
Farm incomes suffering
Potash prices fell to decade lows this year, pressured by excess capacity and weak demand, but North American farm incomes have also suffered as corn and wheat prices tumbled to multiyear lows.
Proposed tie-ups between big seed companies Monsanto and Bayer, and ChemChina and Syngenta, have raised alarm among farmers, and the U.S. Justice Department is suing to stop Deere and Co. from buying Monsanto’s Precision Planting farm equipment business.
Fertilizer accounts for as much as one-third of input costs for U.S. corn farmers, according to the National Corn Growers Association.
“The cost of farm inputs is a major concern to corn growers right now,” said Cathryn Wojcicki, spokeswoman for the association. It will scrutinize the PotashCorp-Agrium merger if it proceeds, she said.
Agrium’s farm retail rivals, which include small co-operatives and independent dealers, are also wary.
Regulators should ensure that the merged company supplies retailers under similar terms as before, said Randy Stephens, president of SureGrow Ag Products, which has three retail stores in Texas.
“They’ll always be selling to (their own stores) at a discount to anyone else,” Stephens said.
Kevin Blair, chief executive of a family-owned chain of eight farm retail stores in Saskatchewan, said he would be shocked if the merger is approved in Canada.
“Does it put us at a competitive disadvantage? Absolutely. But more important, it puts the grower at a disadvantage,” Blair said.
But Charles Neivert, analyst for Cowen Securities, said there is little reason to worry about competition.
If the new company hikes fertilizer prices in the U.S., lower-cost offshore producers would increase shipments, he said. Agrium’s retail stores are already stocked mostly with its own fertilizer, leaving little room for additional supplies from PotashCorp, he added.
Canadian Economic Development Minister Navdeep Bains told reporters that his government was “definitely keeping an eye on” the possible merger, but added that Ottawa wants Canadian companies to have global success.
— Rod Nickel and Michael Hirtzer report for Reuters from Winnipeg and Chicago respectively. Additional reporting for Reuters by Alastair Sharp and John Tilak in Toronto.