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Grain seed prices will jump if takeover allowed

Domestic grain seed prices will jump‚ putting further upward pressure on food prices‚ if a proposed takeover of local firm Pannar Seed by US giant Pioneer Hi-Bred goes ahead‚ a leading independent economist said on Friday, 10 August 2012.
The acquisition would mean that South African farmers faced a duopoly of seed prices‚ leading to market coordination of seed providers‚ Mike Schussler told reporters.

The other member of the duopoly would be Monsanto‚ also an American firm‚ and the two entities would dominate about 90% of the local seed market.

Schussler said the companies had admitted that the planned merger would create a once-off jump of 12% in seed prices‚ raising farming input costs by between R189 and R300 million.

This additional expense would be passed on to consumers thorough higher maize meal‚ cereal and bread prices‚ he said.

"Within months SA will see double digit food price rises in grains‚ cereals and probably meat prices‚" he added.

There has been growing concern over the effect which soaring global maize prices will have on food prices and inflation in SA."

The cost of white maize‚ a food staple‚ has climbed by 44.4% in the first seven months of this year compared with the same period last year.

Research by Schussler showed that seed accounted for more than 10% of input costs for grain farmers‚ roughly the same contribution as fuel and second only to fertiliser and lime.

Since 1999‚ seed prices have risen by an average rate of 17.7% a year‚ he said. "If the merger adds a further 12% on to that‚ the price increase over next year could quite easily be in the region of 30%".

The takeover was blocked by the Competition Tribunal and the Competition Commission‚ before their decisions were overturned by the Competition Appeal Court‚ Mr. Schussler said.

"The Commission is now seeking leave to appeal at the Supreme Court against the June CAD ruling‚" he said.

Nick Altini‚ a director at legal company DLA Cliffe Dekker Hofmeyr‚ said the Supreme Court of Appeal would make a decision in the next 6-12 weeks.


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