Fin24

Companies reject food price warning

2012-08-03 19:31

Johannesburg - American seed company DuPont Pioneer and South Africa's Pannar Seed on Friday rejected an economist's view that their proposed merger would increase seed prices in South Africa.

The merger would benefit the country's agricultural sector, they said in a statement.

"Recent statements by the commission and others that... the transaction will result in a 12% increase in the price of hybrid maize seed are patently incorrect.

"(They are) misleading and do not reflect the evidence in the proceedings before the Competition Tribunal or the Competition Appeal Court (CAC)."

In the short-term prices could increase by 1.6%, they said, basing this on "the most conservative assumptions".

"Importantly, the appeal court found that even when assuming this 'worst-case scenario' the benefits of the merger swamp any potential short-term price effects."

The companies said the CAC held that the innovation benefits of the merger would create a more competitive adversary for Monsanto, the dominant firm in South African maize seed markets.

Earlier, economist Mike Schussler said droughts, input costs, and the merger of these two companies could push food prices higher.

Schussler said the merger could push up domestic seed prices, which were already climbing at an average of 18% a year.

"The fact that two multinational firms are likely to benefit by between R189m and up to R300m at the expense of the South African consumer, makes this a perfect storm."

Schussler was briefing media on the current state of food prices and threats to the food sector.

He said input costs such as electricity, fuel and labour would still cause high food prices in South Africa, even when the drought in the US ended.

DuPont Pioneer and Pannar Seed had filed an answering affidavit with the Supreme Court of Appeal, in response to the Competition Commission's application for leave to appeal the CAC's approval of their merger.

The merger has been the subject of litigation involving the Competition Tribunal and Competition Commission, which blocked the merger before the CAC overturned their decision.