Market concentration in agricultural input and processing sectors is an ongoing concern for many producers. They worry large suppliers or processors can leverage market power to manipulate prices. A paper released in June by James M. MacDonald, XIAO Dong, and Keith O. Fuglie of the USDA Economic Research Service (ERS) entitled Concentration and Competition in U.S. Agribusiness explores concentration and competition trends in agriculture. The paper examines three agribusiness sectors—seeds, meatpacking, and food retailing—and highlights the complexity of examining economic impacts, both pro and con, of concentration and market power.
MacDonald et al. write that concentration has increased markedly over the last four decades in the seed industry. During 2018-20, two seed companies accounted for 72 percent of planted corn acres and 66 percent of the planted soybean acres in the United States. The four-firm concentration ratio, the proportion of sales accounted for by the four largest firms, was 80 percent for corn and 75 percent for soybeans in 2016–17. And this does not account for the mergers which have occurred between Dow Chemical–Dupont and Bayer–Monsanto since then.
At the same time seed prices paid by farmers rose notably too. Between 1990 and 2020, the average price paid for seed rose 270 percent with prices for genetically modified (GM) seed rising a remarkable 463 percent. But, while there is a correlation between concentration and seed prices, it does not mean there is causation. According to MacDonald et al., higher development costs for GM seed and increased productivity for farmers from using GM seed could account for the higher prices. The authors write that research has shown “productivity gains more than paid for the higher cost of seed” and comment “the rise in seed prices for GM crops is not unlike what happened to seed prices when hybrid corn was introduced in the 1940s and 1950s. Both innovations significantly raised farm productivity and profitability, and despite the higher seed cost, farmers quickly adopted them.”
Source: nefb.org
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Categories: Nebraska, Business, Crops, Corn