31 December 2016 - Mergers and Acquisitions

It is a topic I have discussed several times on Samuelson Sez - farmer concerns over the mergers and acquisitions of agri-business companies and what it does to competition and their bottom line.

I have talked about that concern from a producer‘s standpoint, but recently I had a conversation with a friend who is an executive with an agri-business corporation who shared with me a story from a recent edition of John Onken’s Agri-Dairy Business Letter and another side to the argument.

I quote John’s story - “Carlinville, Illinois-based Prairie Farms Dairy and Swiss Valley Farms, headquartered in Davenport, Iowa, have announced plans to merge their operations, with Prairie Farms Dairy as the surviving entity. According to Ed Mullins, Executive Vice President and CEO of Prairie Farms,
‘the merger with Swiss Valley was driven by a commitment to build value for our cooperative members and is consistent with our growth strategy.’ The merger of the nation’s #18 and #24 ranked dairy cooperatives will create the nation’s #12 largest dairy co-op when ranked by milk volume from farmer members. Both of the co-ops involved in the merger say it will help their members and it is a good move to become more efficient in providing the market and the service.”

So, my corporate agribusiness friend said “What’s the difference? Why should farmer co-operatives be able to come together in a merger or an acquisition while their farmer members heavily criticize agri-business companies for doing the same thing? Isn‘t what‘s good for the goose also good for gander?” I think he certainly has a point that deserves further discussion, but maybe this is a smaller point in a much bigger discussion

Since the beginning of agriculture in the United States, hasn’t everything gotten bigger? And I think I can count on one hand the number of beginning farmers who have told me they never want to get bigger. It is not just agriculture, it is the case in every segment of our economy. Ultimately, success or failure of the enterprise will determine if big is better.

I still hear from people who say we should go back to farming the way we did when Grandpa was alive. That simply would not work in today’s age because change is constant and we could never feed ourselves, let alone millions of hungry people on the planet. I guess it is an on-going discussion that will probably never end, so I will leave that to you.

Happy New Year!

My thoughts on Samuelson Sez.