Source: R-CALF USA press release
R-CALF USA recently sent a letter to the U.S. Department of Justice requesting that it block the proposed merger of Brazilian-owned JBS S.A. and Pilgrim's Pride Corporation.
JBS is the largest beef packer in the world and has rapidly been expanding globally, as well as in the United States, in the past several years. In 2007, JBS purchased Swift & Co., then the nation's third-largest beef packer. In 2008, JBS purchased Smithfield Beef Group and attempted to purchase National Beef Packing Co. In 2008, the Justice Department found the acquisition of National Beef Packing Co. would lessen competition among packers in their purchase of cattle, which is critical to ensure competitive prices for the nation's hundreds of thousands of ranchers. R-CALF USA contends that the proposed acquisition by JBS of Pilgrim's Pride would create the same problem.
"The demand and price for cattle is influenced by the supply and price of competing proteins such as pork and poultry, and prices received by R-CALF USA members for their cattle are particularly susceptible to increased poultry supplies," said R-CALF USA CEO Bill Bullard. "We estimate that JBS' share of fed cattle packing capacity in the U.S. is now over 25 percent, and with the acquisition of the vertically integrated Pilgrim's Pride – which controls over 20 percent of U.S. poultry production – JBS could further manipulate the competing protein market in the United States."
Concerns expressed about the proposed acquisition of JBS' protein product competitor – Pilgrim's Pride – include the likelihood that JBS would secure the means to manipulate both live cattle and beef prices by varying the output of the Pilgrim's Pride poultry operation and the price of its poultry, according to the R-CALF USA press release.
Pilgrim's Pride has the capacity to produce and process more than 45 million birds per week, controlling virtually every aspect of cost in the entire process. Studies show that a decrease in the price of poultry products results in a decrease in beef consumption. The already complete vertical integration of Pilgrim's Pride coupled with JBS' huge market share would enable JBS to increase the supply and decrease the price of poultry to effectively lower the price of live cattle, which would directly harm U.S. cattle producers.
Because cattle are the slowest growing of all meat animals, R-CALF USA contends that cattle farmers and ranchers would be unable to adjust their stocking rates in a timely fashion to avoid greater financial loss caused by a decision by JBS to lower poultry prices. As a result, R-CALF USA believes the merger likely would cause acceleration in the ongoing liquidation of the U.S. cattle herd, as well as an increased exodus of U.S. cattle producers from the industry.
"JBS and Pilgrim's Pride are currently fierce competitors in the meat protein market, and a merger between the two would most definitely reduce competition and result in the exploitation of both producers and consumers,” he emphasized. "We urge the U.S. Department of Justice to vigorously investigate the antitrust and anticompetitive aspects of this proposal and take all necessary enforcement action to prevent its consummation.”