Richard Brock says low commodity prices trouble him, but not near as much as China’s recent move to purchase Syngenta. This acquisition will be a game changer.
“Most people haven’t thought about this. And I got to thinking this may be the biggest thing to happen to farmers in years. For years, China has been trying to buy the technology from Monsanto and DuPont and couldn’t get it done. So, what do they do? They buy Syngenta. Folks this could be devastating. I don’t know where we are at with the approval process but if this thing goes through, this has unbelievable, long-term negative implications for both the price of corn and soybeans. This is scary,” said Brock, owner and president of Brock Associates, an agricultural marketing advisory service, speaking to more than 350 people at seminar during the MidSouth Farm and Gin Show in Memphis Feb. 27.
According to news reports, the state-owned China National Chemical Corp.’s proposed $43 billion purchase of Syngenta AG, one of the largest crop chemical and seed companies in the world, is closer to a reality as China looks to secure financing to finalize the deal.
According to Bloomberg news Feb. 29, “ChemChina agreed to buy Syngenta for $43 billion earlier this month in a deal that will transform it into the world’s largest supplier of pesticides and agrochemicals. The planned loan dwarfs Chinese companies’ previous overseas acquisition financing and may stoke concerns about the nation’s businesses piling up debt in a push to buy foreign technology.”
Monsanto last year tried to buy Syngenta for what was reported to be more than $40 billion. Syngenta declined the offer.
“A lot of farmers say they don’t care,” Brock said. “Well, damn it, you should. OK? This is going to have big implications for everybody. Monsanto should have bought Syngenta. That deal should have gone through. … It didn’t go through. I want go into that whole litany of why it didn’t, but it is a big mistake for almost every one of us in this room that that sale did not happen. We complain about prices. But let me tell you, every agribusiness is suffering through this whole downturn as well. All these companies are having big layoffs; they are cutting back.
People think it lasts forever
“I’ve been in this business 40 years, and everything is cyclical. But the most predictable thing in this business is people never change. … They think it is going to go on forever. It never goes on forever. This is a cyclical business; good times don’t last forever. Fortunately, the bad ones don’t either. We’ll get through this … But this thing with China scares me,” Brock said.
Brock pointed to China’s surge in corn consumption and production since 2004.
China produced 125 million metric tons of corn in 2004. With improved yields, it produced 225 million metric tons in 2015, a record production. China’s corn consumption for 2015 is just shy of that 225 million metric tons, a record consumption.
“Look at how their production has ramped up since ’04; their consumption has ramped up; their inventories have ramped up. And, again, sharing my concerns about them buying Syngenta, these corn yields are going to ramp up even more if this deal goes through … and they’ll keep ramping up their production to offset their usage needs," he said.
“China? They don’t really want to buy our corn. They’ll buy 2.5 million metric tons of corn this year. It’s a pimple on an elephant’s back,” he said.