Monopolistic Inertia in Agribusiness: An Overview
The agrifood value chain is highly consolidated upstream and downstream with farmers sandwiched in between.
Ariel Patton at Topsoil shared an image in Get the lay of the land with the Ag Value Chain that conveys it well, specifically in the furthest right column:
The most accurate way to describe various points in the value chain is oligopolistic in nature.
When this occurs in a value chain, incentives to drive change or evolve tend to decrease and the mindset shifts to a scarcity mindset, which emphasizes not losing vs. trying to win by being different.
That creates inertia to resist change because incentives at all points of the value chain reinforce the status quo— when all segments have little incentive to evolve, there is a risk of getting stuck between a rock and a hard place.
Monopolistic Inertia
Monopolistic Inertia refers to the phenomenon where oligopolistic firms, dominating sequential points in a value chain, develop a mutual reliance, reinforcement and benefit of their established roles, behaviors, and practices. This interconnected dependence discourages innovation or evolution within an industry, leading to only incremental improvements instead.
Economically, monopolistic inertia can be understood as a byproduct of market power combined with the "innovator’s dilemma," where dominant firms prioritize protecting a market position and existing revenue streams over pursuing change.
Oligopolies occur in many industries, but when they occur at multiple sequential points in the value chain, they make it even more difficult for change to occur.
This inertia arises due to:
Market Interdependence — Oligopolies at different points in the value chain rely on each other to maintain profitability, reinforcing the status quo.
Barriers to Entry — High barriers to market entry reduce external pressures for innovation. This is particularly true in agriculture where physical goods need to be moved, meaning a high capex dependency.
Risk Aversion — Fear of disrupting existing revenue streams prevents firms from investing in new technologies.
Regulatory Complexity — Regulatory environments and lobbying often favor established players, amplifying inertia.
In essence, monopolistic inertia sustains a system optimized for the present at the cost of future progress, hindering industries from addressing new challenges or unlocking transformative opportunities.
In agriculture, the need for very scaled (eg: buy in bulk), specific products and technology (eg: equipment) and assets (eg: expensive fertilizer manufacturing facilities or grain terminals and trading infrastructure) at specific times makes the average farmer overly reliant on the largest companies at any given time.
Adoption Chain Risk
Adoption chain risk, as cited by Ron Adner, is a reliance on multiple stakeholders in a value chain to embrace innovation— this deepens monopolistic inertia by amplifying the control dominant firms exert across the value chain, enabling them to act as gate keepers.
Many ag companies at various points of the value chain grow in unison and create products based on the other companies product offering.
Consider an equipment manufacturer developing a sprayer for crop protection product that the large crop protection companies manufacturer and bundle with their seed— both groups have a lower natural tendency to look at alternative weed control methods (eg: laser weeding, mechanical weeding) to innovate around because it is outside their core competency and risks losses in their core business segment.
When you combine all of these factors across various points of the value chain, you end up with a slower evolution.
For clarity, none of this is meant to suggest poorly of large companies— they are always going to act in their best interest. The point is simply to highlight what causes this monopolistic inertia and why it makes change difficult.
Shaping the Overton Window: How Monopolistic Firms Define "Acceptable" Innovation
The Overton Window refers to the range of ideas and practices deemed acceptable within a given context. In agriculture, monopolistic firms wield power in shaping this window, ensuring it aligns closely with their products and practices. This strategic framing subtly positions new innovations as impractical, risky, or even untenable, effectively sidelining competition and reinforcing their position.
Controlling the Narrative Around Innovation
Dominant firms don’t just supply products; they set the boundaries of what is considered “acceptable” and “normal” in farming practices. Whether it’s through marketing campaigns or direct engagement with farmers and value chain stakeholders, they can frame emerging approaches—like regenerative agriculture—as fringe ideas that lack feasibility or scalability, or present in a manner that best suits them. By doing so, they push alternatives outside the Overton Window and keep the focus on solutions that reinforce their existing business models.
Corporate Venture Capital: Incremental Change Over Transformation
Corporate Venture Capital (CVC) is viewed as having potential to drive innovation, but in practice, it can reinforce monopolistic inertia. Rather than catalyzing change, CVC often focuses on incremental improvements that align with existing business models.
Strategic Investments That Protect the Core
CVC arms often prioritize startups that fit neatly within their parent company’s existing frameworks and reinforce their current business models. Investments are made in technologies and business models that complement the core rather than challenge it.
Acquisitions as a Defensive Move
Startups acquired by CVC programs often face a critical crossroads: integration or stagnation. Many are redirected to support incremental improvements or, worse, shelved entirely to prevent them from introducing innovations that could disrupt the parent company’s market position. These acquisitions become more about neutralizing threats than fostering transformative progress.
Rather than acting as a springboard for transformative innovation, CVC can function as a mechanism for entrenching practices. This iterative approach to innovation serves to maintain market stability, but at the cost of the disruption and creativity needed to drive meaningful progress in the industry.
Final Thoughts
This article is meant to be a reference point for what I mean when I say “monopolistic inertia”.
I wanted to have a baseline of the term to also lay the foundation for future consideration of slowing or reversing the inertia— what does that look like? Is it possible? What’s necessary? What firms are doing it?
I don’t have the answers, but I look forward to looking at the industry, and outside, for ideas.