Tuesday, February 9, 2016

Why The Current Round Of Ag-Chem Consolidations Worries This Agricultural Scientist

This no-till field is good for the environment and the food supply.
Such innovations involve many expert contributions

I am concerned that we may be on the verge of a major loss of knowledge and experience in the agricultural sector. In the 40 years I have worked with agricultural technology companies I have witnessed many changes. There was a major round of consolidation in the late 1990s and that is happening again today. There are reasons that these trends can make business sense and can be good for shareholders. There can also be problematic aspects of consolidation. Many expressed concerns with antitrust issues in the Monsanto-Syngenta connection, which didn't end up happening, and now with the Dupont-Dow merger, which looks like it will.

That isn't what worries me -- it will still be a competitive sector. I'm concerned about a likely loss of expert knowledge about agriculture.

When companies merge there is a seemingly irresistible financial incentive to get the most experienced (and thus highly paid) employees to take early retirement as a way to deal with "redundancies." Perhaps this won't be as much of an issue with Syngenta, a chemical discovery and biotech company that agreed Wednesday to be bought by ChemChina, a generics player. However, if the retirement strategy is employed in this or the rest of the current wave of consolidations, it will lead to a loss of deep knowledge and experience that could not come at a worse juncture in the history of the food supply.  (Let me be clear that I have no insider information about any of the pending deals or corporate employment plans.  I have consulted across the industry since 1996, but at the mid-level technology level, not in corporate strategy or financial circles).
Between 1960 and 2010, agricultural output increased mainly through higher yields.
That required a great deal of technical and farmer innovation driven by knowledge
(based on FAOStats data)

Global agriculture is a diverse and complex phenomenon that involves unique challenges and unpredictable risks. The extraordinary success of this industry in meeting food demand while improving sustainability relies on a combination of business understanding and technical knowledge that is not easily learned. People with decades of experience on either the business or science side (or often both) are critical to negotiating the threats and opportunities before us. It will be far from trivial to meet the food demand of the growing population and the consumption desires of the expanding middle classes in previously poor regions. To do this without needing to expand the base of farmed land will require talent and expertise. This increased demand is happening with the added uncertainty of climate change and the spread of "exotic" pests in an ever more connected world. A major wave of retirements could seriously compromise our resources of skill, experience and wisdom needed to meet these challenges.

This likely retirement scenario is even more concerning because of the lack of new, skilled talent coming into the agricultural industry. Ag technology companies have been having an extraordinarily difficult time finding qualified new hires because very few young people today are interested in the scientific fields that are critical for agriculture (entomology, agronomy, soil science, plant pathology, plant breeding...).  I don't know the reasons, but I suspect that the widespread demonization of "industrial agriculture" has much to do with this phenomenon. As it is, companies are having to hire people with other degrees (e.g. environmental sciences or even the humanities) and train them from scratch. That isn't impossible with bright and willing people, but if many of their best potential mentors are departing, it becomes far more difficult.

I don't want to imply that the sky is falling. There are still a great many talented people who will be involved in advancing agricultural technology.  However, I do think that the industry and/or society needs to consider some creative ways to allow continued access to the collective experience of those who may soon "retire".  Consulting or some sort of part time "emeritus" status might be possibilities, but those can have tax and retirement income problems. For many industries we would be wise to fix our system so we don't dis-incentivize a graceful wind-down of careers. Perhaps some of the retirees can be hired by other AgChem companies who need their expertise. With modern life expectancies, retirement in one's 60s can easily mean 20 years of lost contribution potential.  It's not that I begrudge my slightly older colleagues a well deserved rest or the chance to start a new chapter in their lives. I just don't want society to lose the unique aspects of what they know.

Your thoughts and comments are welcome here and/or via email (savage.sd@gmail.com)

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