Every industry goes through periods of change and realignment in a free and open market. These changes are necessitated by mounting competition both here and abroad, forcing companies to either innovate or risk getting left behind. Agriculture is popularized in the American imagination as a traditional enterprise, seemingly unchanged as the world has rapidly digitized. The truth is that today’s global ag-economy demands the same dynamism as the high-tech and manufacturing sectors. And it has evolved accordingly.
{mosads}Because agriculture touches nearly every facet of our modern economy, our financial markets are inextricably tied to the continuation of the agricultural industry’s health and wellbeing. As the rest of the world rapidly adopts innovations aimed at increasing crop yields and farm efficiencies, American agriculture stakeholders can and must fight to remain competitive in this environment. And we are now witnessing the beginning of another global shift to accelerate agricultural innovation as a means to increase agricultural outputs for U.S. farmers and ranchers.
Both the Dow-DuPont and Bayer-Monsanto mergers, as well as last year’s acquisition of Syngenta by ChemChina, are representative of these natural market forces at work. To be sure, any perceived consolidation in industries will have its critics, especially at a time of low commodity prices and high operational costs. Yet, too often such critics ignore the logic and opportunities that come about when two innovative leaders can combine their complementary technologies, along with their R&D talent and budgets.
For example, both Bayer and Monsanto invest heavily in new technologies aimed at making the daily operations of the American farm more streamlined and efficient. From Bayer’s “smart spraying” technology that identifies weeds and selectively applies sophisticated crop protection solutions, to Monsanto’s research on soil management best practices, the combined R&D capabilities of these companies may ultimately discover game changing breakthroughs that potentially raise yields while cutting input costs.
To this end, last week the CEO of Bayer reiterated the company’s commitment to deploy more than half of their R&D spending on new crop science solutions in the U.S. This supports prior commitments to increase by “several thousand” the number of associated jobs after the two companies are complete integration.
Some critics point to an outdated 2016 Texas A&M study that evaluated the Bayer-Monsanto merger before both international and domestic antitrust review processes began in earnest, as reasoning for their opposition. Continuing to do so is shortsighted. It overlooks the rigorous examination the deal has sustained from regulatory authorities which has resulted in significant concessions from the companies.
Anticipating these concerns, Bayer took the proactive step of striking an agreement with rival ag-company BASF to sell the company’s cotton, canola and soybean seeds businesses as well as its LibertyLink herbicide and trait technology when the acquisition of Monsanto is completed. Not only does this address the concerns raised in the Texas A&M study, it will all so instantly make BASF a global player able to compete with the ChemChina-Syngenta, Dow-DuPont and, of course, Bayer.
Free market innovation requires the correct mixture of oversight, with the confidence that an open and evenly matched marketplace will produce beneficial competition for all. As we watch the modernization of our nation’s agricultural sector, that confidence will be essential to recognizing these industry wide transformations for their potentially ground-breaking results.
When our farmers and rural communities prosper, that economic success reverberates across the country. Innovative technologies will help them prosper, ensuring our most recent stretch of economic growth continues. As Americans we shouldn’t fear the free market but rather embrace it. If we don’t, others will take advantage of that fear and challenge our leadership positions in the agriculture and life sciences arenas.
To this end, mergers, divestitures and industry realignments are necessary and illustrative of our system at work. President Trump has been diligent and successful in securing major private investments to boost the U.S. economy and increase jobs. Let’s not get in the way of such commitments, but rather make them a reality.
Steve Forbes is chairman and editor-in-chief of Forbes Media.