Clear Perspective: Standing on the Shoulders of JBS

US - JBS became the world's largest meat processor earlier in the year with it's purchase of Swift and other company's of US and Australian origin. Last week the Brazilian company announced it's latest intention to aquire National Beef and Smithfield Group also. Such huge acquisitions call for scrutiny and thorough review, but not panic, say the US National Cattleman's Association.
calendar icon 11 March 2008
clock icon 3 minute read

Until JBS's entry into the U.S. market, most experts thought Swift would be acquired by one of its domestic competitors. JBS's purchase of Swift kept the number of major U.S. beef processors at four, while many had predicted that number would fall to three. JBS also brought significant investment to the U.S. processing industry at a time when it was badly needed, and enhanced production at plants that many had feared would close.

However, the National Cattleman's Beef Association say that there is a stark contrast between the Swift acquisition and the latest round of announcements from JBS. If the Smithfield and National Beef acquisitions are approved, JBS will essentially consolidate the third, fourth and fifth largest U.S. beef processors into a single entity. "We all know that further mergers and acquisitions are likely to happen in the packing industry. But by most any measurement, the impact of these transactions would be quite dramatic. For example, the "Big Four" presently hold about 66.5 percent of beef slaughter capacity. After the proposed acquisitions, JBS and its three largest remaining competitors would hold about 76 percent."

"By most any measurement, the impact of these transactions would be quite dramatic."
Andy Groseta is a rancher from Cottonwood, Arizona, and president of the National Cattlemen's Beef Association.

Not only is this bound to get cattlemen's attention, it will also receive some well-deserved regulatory scrutiny. Per its member-directed policy, the National Cattlemen's Beef Association (NCBA) supports a thorough review by the Department of Justice and other federal agencies with responsibility to review agriculture mergers and acquisitions. And we feel this review must consider "buyer-side" impacts to agricultural producers as well as "seller-side" impacts to consumers, so that a competitive environment is maintained at every level of commerce in the cattle and beef industries.

But it is important to note that the statutory procedures and requirements for this review are already in place. The proper agencies have the ability to scrutinize these transactions, and to deny approval if they are found to threaten the competitiveness of the marketplace. So these agencies need to be allowed to carry out their responsibilities, before anyone starts calling for new regulations or so-called market reforms.

Some are already calling for Congress to further inject itself into this situation by banning packer ownership of cattle. But that would not be productive, nor would it make any sense. Banning packer ownership more than 14 days before slaughter actually limits the marketing options of cattle producers, and reduces the field of potential buyers. It does nothing to enhance competition.

Packer ownership of cattle didn't cause packer concentration, and banning packer ownership won't prevent further concentration. Concerns that the proposed JBS transactions may further reduce competition in the processing sector are legitimate, but they have little or nothing to do with packer ownership of cattle.

NCBA will be fully engaged in this situation in order to ensure that cattlemen's interests are represented and that regulatory agencies fulfill their responsibilities. We will adhere to our member-driven policy by doing everything we can to maintain marketing options for cattlemen and protect the integrity of the competitive marketplace. But doing so effectively requires that we separate fact from fiction, and that we not call for new government "fixes" at every turn.

Further Reading

- Go to our previous news item on this story by clicking here.

TheCattleSite News Desk

© 2000 - 2024 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.