Food industry consolidation

Agricultural input markets tend to be fairly consolidated. The seeds market, for example, is dominated by 4 big players. 6 companies control >75% of the crop protection market. Fertilizer saw the CF/Terra/Agrium takeover drama unfold over the past year, and PotashCorp controls something like 60% of the world's potassium supply.

Farming itself is incredibly fragmented (part of the reason farmers are generally not hugely profitable, heavily-subsidized ones in the U.S. and Europe excepted). Downstream of farming has the ABCDs of food trading (ADM, Bunge, Cargill, Dreyfus), and increasing consolidation among food processors as well. The latest example is Brazilian meatpacker JBS's $2.5bn bid for bankrupt Pilgrim's Pride. $2.5bn is a lot of money for a bankrupt company, and unsurprisingly the combined entity would be huge:
Combined, Pilgrim's Pride and JBS's U.S. unit -- which includes sales at the JBS business in Australia -- would have posted about $20 billion in revenue last year. Tyson's fiscal 2008 revenue was $27 billion.
I predict this is not the last consolidating move in the food sector.

Consolidation generally means two things - economies of scale, and margin pressure on the more fragmented steps of the value chain. In this case, that is farmers, which is concerning because the majority of yield upside in the world is for poor smallholder farms in South Asia and Africa, and the majority of the world's very poor and undernourished people live in rural areas and have livelihoods connected directly or indirectly to farming.

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