For an undisclosed sum, Monsanto’s Climate Corporation will sell its Precision Planting farm equipment business to Deere & Co in a move which proves how the turmoil in the agriculture sector paves way for business deals which try to save a dying multinational.
Though Monsanto is still the largest seed company in the world, it has experienced severe stock losses as of the last quarter.
Deere, the world’s largest farm equipment maker, hopes the deal will create a revenue stream in retrofitting older machinery to help offset slumping sales they are experiencing as well. Could this mean that the industrial agricultural, mono-cropping model might actually need to revisit its business plans?
There is currently an oversupply of used farm equipment on the market and most farmers are not excited about buying new machinery due to grain prices being at a five-year low. Monsanto and Deere are likely hoping this deal will tempt farmers into buying updated equipment and new farm-data services. This isn’t likely, though with farmer income expected to tumble 21 percent this year.
The Monsanto deal is Deere’s second push into the precision-planting equipment arena this week. Deere has also announced plans to acquire France-based Monosem. Monosem makes farm equipment known as “precision planters,” which allow farmers to specify seed planting depths by crop row.
Like Monsanto’s dominance of the seed market, Deere controls about 60% of the U.S. farm equipment market, according to industry analysts.
The American Farm Bureau Federation, the country’s largest farmer group, is monitoring possible consolidation and will raise any concerns with regulators if its members are impacted, its chief economist Bob Young told Reuters on Tuesday.
“We’re going into a phase where there will be a fair amount of consolidation at all levels: input suppliers, equipment makers,” Young said. “It won’t surprise me to see some of that go on within (equipment) dealerships as well. You may not like it, but I don’t know what you do to keep it from happening at this stage.”