As Treasurer Joe Hockey weighs the arguments over the takeover bid of GrainCorp, one of the oldest farm organisations in the US has warned that increased concentration in the industry will be bad news for Australian farmers.
The National Farmers Union says it has watched the negative impact of foreign takeovers in its own country, and says Australia should reject the deal offered by Archer Daniels Midland (ADM).
But the American growers who deal daily with the company say it is the only way to make the most of a booming global demand.
In Decatur, Illinois, the presence of ADM in grain-producing areas is hard to to miss. The company’s name can be seen for kilometres on silos across the rural landscape.
Its processing plant at its global headquarters in Decatur operates 24 hours a day, seven days a week.
Local grower David Brown’s family has been selling grain to ADM for generations.
“They have grown undoubtedly in our area and we’ve seen them gobble up some things around here,” he said.
“I like our independence. I like our ability to deal with several different people, I like the competition.
“But I also like the assurance that there’s going to be a large player in the area that’s going to be giving me a good baseline for my prices.”
He believes Australian producers will be better off if the deal goes through.
“Every year we produce more and more and they keep asking for more and more,” he said.
“And these products go worldwide. I think ADM would probably be able to get them the exposure, even further exposure to the China area or some of these other large growing areas.”
Farming group warns about competition impact
In this part of the US, people are well aware of ADM’s bid for GrainCorp.
Chandler Goule from the National Farmers Union, which includes small and medium-sized farmers among its members, thinks the Australian Government should think twice before approving the takeover bid.
David Brown’s family has been selling grain to ADM for generations. He believes Australia will be better off if the ADM deal goes through.
“Any time a group of companies, or one or two companies, corner a market and infiltrate it by 40 to 60 per cent, economists will tell you you’ve lost competition,” he said.
“And as you lose competition, then what happens to your producers is they’re limited on who they can sell to, therefore they get a lower price and your end users are limited on who they can purchase from.
Mr Goule predicts ADM will be the only winner out of the deal.
“You don’t want the increased concentration,” he said.
“ADM is a very legitimate, successful company. Really what we’re looking at here is the economic factors that are associated with increased concentration and with increased vertical integration in your agriculture industry.
“We’re not focused on the company, but on the economic factors and the negative consequences associated with increased concentration.”
Patrick Woodall from the Washington-based lobby group Food and Water Watch says farmers in Australia will be played off against farmers in South America, where ADM also has a presence.
“The global sourcing of commodities allows them to exert downward pressure on prices worldwide because they can pit farmers against one another,” he said.
“They’re going to buy a certain amount of wheat. Now they’re in more places where wheat is grown and they can just push down on prices.”