EU investigates mega-merger in international raw materials market

The European Union's Competition Authorities will soon have to decide on a major merger in the world of international commodity trading. One of the world's largest commodity traders, the United States-based Bunge, wants to acquire Canadian peer Viterra. 

Going through with that merger will bring that new company even closer to the size of the two largest commodity traders, ADM and Cargill. The European Commission has yet to investigate this merger, which has already been approved by Bunge and Viterra shareholders.

The international market for food commodities has become increasingly concentrated in recent years. Since 1990, the EU Competition Authorities have investigated a total of sixty mergers and acquisitions involving the world's five largest multinationals. With one exception, all were approved. 

The largest five (ADM, Bunge, Cargill, COFCO and the Louis Dreyfuss Company) together have a monopoly on the world market for basic foodstuffs such as grain, corn, soy and sugar. They have tripled their profits in the past three years. This is evident from a new study (Hungry for Profits) by Amsterdam-based SOMO, a private foundation that conducts research into multinational companies.

By 2022, the profits of the five global players would have tripled compared to 2016 to 2020. According to SOMO, these 'Big Five' control between 70 and 90 percent of the world trade in commercial grains. Moreover, they have a lot of control over the most important soy export markets (Brazil, the US, Paraguay and Argentina). 

The SOMO research says that the European Commission can put a stop to the trend of further monopolization. According to SOMO, EU research could focus on price formation and the market power that can be exercised by a new mega player in the food industry. 

Somo researchers say it is disturbing that companies have been able to triple their profits during times of hunger and crisis by raising food prices.