Why did the EU quietly approve a Big Agri mega-merger this summer?

Now that the post EU-election dust has whirled down, politicians are returning back to Brussels from a well-earned holiday, it might be a good moment to highlight a mega business merger in the agricultural sector.

While most people were on their summer holidays, the merger between two Big Agri giants, Bunge and Viterra, received a green light from the European Commission, an important step in what is always a carefully-planned process towards global approval.

First of all, this not just nerdy competition stuff. This is about one of the single most important topics that dominate EU-politics: farmers’ protests, food prices, inflation and even migration.

Because after all, the fate of European farmers defined the course of the EU politics: EU elections, the positioning of Ursula von der Leyen’s European People's Party (EPP) against anything sustainable and green, and subsequently also the not so soft killing of large chunks of the EU Green Deal by that same EPP.

On 13 June 2023, Bunge announced that it wants to buy up Viterra: Canada’s largest grain company with headquarters in the Netherlands.

Currently, Bunge is already the world’s fifth-largest grain trading company and one of those handful of global food corporations that most people do not know by name, but only through its consequences.

It is difficult to overstate the power of the so-called 'ABCCD's - ADM, Bunge, COFCO, Cargill, and Louis Dreyfuss: they control 70 to 90 percent of the global grain trade. As it is enshrined in EU Regulation 139/2004, are not supposed to reduce competition in the single market.

Mega-mergers, just like international free trade agreements, have shown to have profound and long-lasting impacts on farmers and their livelihoods.

Recently, the European Commission published a report wherein it admits how much market concentration has increased during the last 25 years. This deal is unprecedented in size within the global agriculture sector and will result in further accelerated concentration in markets where economic power is already very concentrated.

But somehow rightwing politicians choose to attack environmental legislation (Farm to Fork) or engage in cultural wars on lab-meat.

In Canada, the alarm was set off. The risks to farmers were noted in the assessment of the Competition Bureau Canada which stated: “The proposed transaction is likely to result in a substantial lessening of competition in certain relevant markets, such as decreased prices paid to farmers and reduced choice through the elimination of rivalry between Bunge and Viterra”. 

A first in-depth study of this merger’s impacts on Canadian farmers by several economists concluded that it would reduce farmers’ incomes by $770m [€694m] per year.

The European Coordination Via Campesina (ECVC), an umbrella organisation representing small and medium-scale European farmers, notes that "the increased market dominance will enable to eliminate smaller competitors that are currently operating in the EU marketplace, reducing choices at all levels of the value chain". 

Sellers inflation in food prices?

Food commodity traders like Bunge have the power, as evidence from IPES Food shows, to influence prices of global food stuffs. Researchers Isabella Weber and Merle Schulken explained this as "sellers inflation" in a recently published study

With in-house intelligence on global agricultural markets that exceeds that of states, the ABCCD cartel plays a crucial role in the financialisation of food markets.

As a result, the ABCCD are known to benefit from crises and volatility.

In 2022, roughly one-in-ten people went to bed hungry and the absolute number of people with hunger increased by 40 million. According to the UN, the main drivers for this increase were conflict, the related disruption of global food supply chains and food price shocks.

In the same period, the profits of the ABCCD cartel notified the most profitable year in the agricultural commodity traders’ history: 2021 net profits rose between 75 per cent and 260 per cent for all five agricultural commodity traders. 

Merger review, as boring as it sounds, is a matter of public interest and should not be left to bureaucrats.

A report of competition experts concluded that Bunge/Viterra deserved further investigation. Otherwise, ever increasing market concentration in the food sector will further hamper democratic involvement of EU. It questions European societies’ capacity to be sovereign in food systems. This 'sovereignty' is a favourite (though hollow) rhetoric of rightwing politicians. 

In January 2024, the European Parliament already expressed its concern over concentration in the food supply chain. After the holidays, it is now time for something stronger: a more comprehensive view on merger control and maybe a break up?