A trader at the post where Monsanto Co. is traded on the floor of the New York Stock Exchange. Photo: Brendan McDermid/Reuters

As the global agricultural sector races to consolidate, Bayer AG’s $66 billion all-cash deal to acquire Monsanto Co., will test growing political and consumer unease in the US and abroad over the future of food production.

Bayer’s pesticide-focused agricultural business has few overlaps with Monsanto’s dominant seed franchise, according to the companies’ executives.

Still, marrying two of the world’s top farm suppliers at a time when rivals are also merging is fueling concern over reduced competition in the $100 billion global market.

Monsanto and Bayer “have chosen to do a deal in the year of merging dangerously”, said David Balto, a former policy director at the US Federal Trade Commission. “They are in for a tough time.”

US Senate Judiciary Committee Chairman Chuck Grassley has called a hearing next Tuesday to scrutinise the wave of consolidation. Farmers in Iowa, the Republican senator’s home state, are worried that seed and chemical costs are rising while grain prices are near their lowest levels in years. Farm incomes have plunged.

Senator Bernie Sanders, who recently ended a run for the Democratic presidential nomination, called the deal “a threat to all Americans”.

“These mergers boost the profits of huge corporations and leave Americans paying even higher prices,” he said.

Senators Mike Lee and Amy Klobuchar, the two top antitrust lawmakers, also expressed concern. “The transaction has the potential to result in a significant loss of competition and reduced incentives and ability to innovate, thereby raising prices,” said Lee, a Republican from Utah.

Monsanto agreed to sell itself to Bayer for $128 per share in cash, yet its shares hovered around $107 on Wednesday, reflecting investor uncertainty about regulators. Bayer has agreed to pay Monsanto a $2 billion breakup fee if the deal is thwarted.

The German company aims to create a one-stop shop for seeds, crop chemicals and computer-aided services to farmers.

That was the idea behind Monsanto’s swoop on Syngenta AG last year. The Swiss company fended off that offer only to agree later to a takeover by China’s state-owned ChemChina.

These mergers boost the profits of huge corporations and leave Americans paying even higher prices

US chemicals giants Dow Chemical Co and DuPont plan to merge and spin off their seeds and crop chemicals operations into a major agribusiness.

If all these deals close, three companies would control nearly 70 per cent of the world’s pesticide market and 80 per cent of the US corn-seed market. In addition, Canadian fertiliser producers Potash Corp of Saskatchewan Inc and Agrium Inc said on Monday they agreed to merge, sparking questions of whether regulators will sign off on the new company’s potential pricing power.

It has been a tough year for aggressive mega-deals. Antitrust authorities have challenged agreements ranging from oilfield services mergers to health insurance buyouts. Other regulators have cracked down on deals that aid tax avoidance or risk harming national security.

The Monsanto and Bayer deal, which would be the largest-ever all-cash acquisition, faces intense and lengthy regulatory processes in the US, the European Union and elsewhere, experts said.

“This merger is not a slam dunk,” said Diana Moss, president of the American Antitrust Institute.

Hugh Grant, Monsanto’s chief executive officer, told reporters the companies will need to file in about 30 jurisdictions.

Monsanto and Bayer have had “initial contacts with regulatory agencies describing what this combination would be about”, Bayer chief executive officer Werner Baumann said on an investor call, and “received encouraging feedback”.

The value of assets Bayer is willing to divest is to be revealed by next week, when details of the merger agreement become public, according to sources familiar with the deal.

Areas of potential overlap include some soybeans, canola and cotton seeds. Bayer’s share of the US cotton seed market sits at 38.5 per cent, while Monsanto is 31.2 per cent, according to data by the Konkurrenz Group.

“ The deals would leave farmers facing a duopoly in seed (Bayer/Monsanto and Dow) and two big firms in chemicals (Syngenta and Bayer/Monsanto),” Moss said.

In terms of the US corn seeds and traits market, according to Morgan Stanley Research, a merged Dow and DuPont would have about a 41 per cent market share, while a merged Monsanto-Bayer would have about 36 per cent. In soybean seeds and traits, the group estimated a merged Dow/DuPont would have about 38 per cent. Monsanto-Bayer would have 28 per cent.

The US political landscape after the November federal election also will influence these ag-related deals.