Crop consultant Kyle Anderson monitors Monsanto Co. Asgrow soybeans traveling along a conveyor during a delivery at the Crop Protection Services (CPS) facility in Manlius, Illinois, U.S., on Friday, March 20, 2015. Monsanto Co. is scheduled to release earnings on April 1. Photographer: Daniel Acker/Bloomberg *** Local Caption *** Kyle Anderson

Why does Monsanto, the agricultural seeds and chemicals group, want to buy rival Syngenta? One of the main answers is Roundup.

The chemical, whose generic name is glyphosate, is one of the most widely used herbicides in agriculture, especially in countries growing soyabean and corn.

Roundup accounted for just under a third of Monsanto’s earnings before interest and tax last year, and underpins its seeds business, where genetically modified glyphosate-tolerant Roundup Ready seeds also account for a chunky part of the company’s profits.

But increasing weed resistance to Roundup has been threatening the US agrigroup’s revenues for its two main products.

That’s where Syngenta comes in. The Swiss company is the world’s largest agrochemical maker by market share. While it last month rejected Monsanto’s SFr449 a share offer, which valued the company at $45bn, industry watchers expect the US company to come back with an improved offer.

Syngenta offers Monsanto the geographical and crop diversity it now lacks, with about 50 per cent of the Swiss company’s revenues coming from fast-growing emerging markets, and its business more heavily weighted towards chemicals.

The combined company would be a truly global agribusiness, even if Monsanto sticks with its pledge to sell Syngenta’s seed business to avoid antitrust issues.

The latest evidence suggests Monsanto may want to move quickly.

Herbicide sales data shows farmers are already reducing their glyphosate use for other herbicides, even if they are more expensive.

According to a recent paper on glyphosate resistance, The Economics of Glyphosate Resistance Management in Corn and Soybean Production, on the US Department of Agriculture’s website, 14 glyphosate resistant weed species have been documented in the US.

The answer is to rotate different herbicides as “managing glyphosate resistance is more cost effective than ignoring resistance”, the paper says.

Earlier this year the World Health Organisation said that glyphosate was “classified as probably carcinogenic to humans” — a claim Monsanto rejects.

Acquiring Syngenta, the world’s largest crop chemical producer with about a 20 per cent share of the market, would give Monsanto control of almost a third of that global business, according to analyst estimates.

That would more closely align Monsanto’s share of the crop chemical market with its share of the global seeds business, where it controls almost 25 per cent.

Berstein Research analyst Jeremy Redenius suggests a combined Monsanto/Syngenta company would be well positioned as seed growers look for alternatives to use alongside Roundup.

“To combat glyphosate resistance, farmers have turned to alternatives, generally with a price premium,” says Mr Redenius.

If the choice for Monsanto is between holding a dominant position in both seeds and agrochemicals or to risk watching its market share being eroded, it becomes clearer why Syngenta’s shareholders should hold out for a better offer.

The Commodities Note is online commentary on the industry from the Financial Times

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