Halting a Giant: DOJ Stop JBS Conquering Beef World

US - The Department of Justice has filed a civil antitrust lawsuit to block the proposed acquisition by JBS S.A., currently the third-largest U.S. beef packer, of National Beef Packing Company LLC, the fourth-largest U.S. beef packer.
calendar icon 22 October 2008
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The Department said that the proposed deal would combine two of the top four U.S. beef packers resulting in lower prices paid to cattle suppliers and higher beef prices for consumers.

JBS, headquartered in Brazil, is in the process of acquiring Smithfield Beef Group Inc. from Smithfield Foods Inc. The Department is not challenging JBS's acquisition of Smithfield Beef Group Inc. In 2007, JBS purchased Colorado-based Swift Foods Company.

Beef packers purchase annually $30 billion in fed cattle from feedlots, slaughter them, and process them into USDA-graded cuts of beef and other products. Packers then package the cuts as boxed beef for sale to wholesalers and grocery store chains.

"It proves that the system works"
AFBF President Bob Stallman

If not blocked, JBS's acquisition of Kansas City, Mo.-based National would make it the largest U.S. beef packer, with an ability to slaughter more than 40,000 head of cattle per day (or more than one third of U.S. fed cattle packing capacity) and annual sales of more than $14 billion.

"The combination of JBS and National will likely lead to grocers, food service companies and ultimately American consumers paying higher prices for beef,"said Thomas O. Barnett, Assistant Attorney General in charge of the Department's Antitrust Division. "It will also lessen the competition among packers in the purchase of cattle that has been critical to ensuring competitive prices to the nation's thousands of producers, ranchers and feedlots."

The Department said that JBS's acquisition of National would substantially restructure the beef packing industry, eliminating a competitively significant packer and placing more than 80 percent of domestic fed cattle packing capacity in the hands of three firms: JBS, Tyson Foods Inc., and Cargill Inc. The Department concluded that the acquisition would lessen competition among packers in the production and sale of USDA-graded boxed beef nationwide.

The Department also concluded that JBS's acquisition of National would lessen competition among packers for the purchase of fed cattle -- cattle ready for slaughter -- in the High Plains, centered in Colorado, western Iowa, Kansas, Nebraska, Oklahoma and Texas, and the Southwest.

The American Farm Bureau Federation welcomed the move saying that although they did not take a position on the proposed acquisition, it is pleased that the Department of Justice thoroughly reviewed the proposal and is taking action. "It proves that the system works,” said AFBF President Bob Stallman, a cattle and rice producer from Columbus, Texas.

"AFBF met with DOJ officials earlier this year, pointing out concerns with the acquisition. In a March 10 letter to Douglas Ross, DOJ’s special counsel for agriculture, Stallman asked DOJ for a thorough review and analysis of the proposed acquisition. AFBF raised concerns that the merger could potentially cause market manipulation and put downward pressure on prices received by producers."

Members that comprise the National Cattlemen’s Beef Association (NCBA) also showed their support. They said that they encourage the process of due diligence and will be closely monitoring this case and the impacts on the beef industry.

Further Reading

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