What is JBS Thinking?
Sep 07, 2009
By Steve Cornett
What can JBS be thinking, trying to buy Pilgrim’s Pride?
Don’t they know the Obama Administration’s trust-busters have been sitting there waiting for just such a nice, fat dove to land on the fence wire so they could display their marksmanship to their fellow populists ?
Not that I don’t feel for the Pilgrim’s folks in bankruptcy. I always thought Mr. Pilgrim was a nice guy, even if he is from the fowl industry. He always had time to talk to the little people because he used to be one of us. He used to come and talk to cattle groups about how he ran his business and how cattle folks might emulate some of his successful practices.
And it’s not that I don’t respect the skill with which JBS has pushed its nose into U.S. beef packing. I think a strong international beef company will be good for the country with the best beef in the world. And I certainly appreciate the way they borrowed all that money to keep feeder prices so high so long.
And it’s not that I don’t think corporations like JBS have a right to grow and compete. I know that Tyson’s multi-meat capabilities give them an advantage over competitors who lack their diversified market exposure and can’t offer big retailers a full line of meat case products.
But my gut tells me beef shouldn’t want its sales staff—which is what packers are—to be taking on another, more profitable, line. And year-in, year-out, there’s a bunch more money for processors in poultry than in there is in beef. They own the chickens from the time they’re eggs until they’re cut into pieces and shipped to the highest value market.
And you don’t see many chicken ranchers or chicken processors running around in four-door duallies pulling aluminum horse trailers with living quarters up front. When there is a profit, the integrator gets it. That gives him a lot of incentive to push their own product rather than yours. So if a retailer calls up and says, “Hey we’d like to feature a low-cost product for the holiday,” guess where Tyson’s bottom line flourishes most?
I didn’t like it when the last administration stood by while Tyson bought IBP. If you want my prime explanation, it’s that before that merger, Tyson management was pushing to force USDA to disallow all that water pumped into poultry. In those days, Tyson rightly saw that poultry’s outsized sway in Washington had provided that industry with a flock of competitive advantages. And Tyson—CEO Bob Peterson, to be exact—was fully aware that beef and poultry were competitors. And he was for beef. And he was putting his lobbying efforts into getting some of the discrepancies corrected.
But after the merger, we heard no more of that. Few people were as reviled by the protectionists of the beef industry as was Bob Peterson, but until Tyson came along, he was a beef promoter.
My gut tells me that we want our whole system—from purebred breeders through packers—to be pro-beef. And in my book, pro-beef means anti-fowl.
Let me be the first of my acquaintances to ever say this, even though it’s not easy: fu fufu foo…fufufoorrt… fortunately, we have Obama in office this time around. His Department of Justice and USDA give every indication they’d like nothing better than to bust some corporate somebody for something. And—double points!—these guys are foreigners, to boot. Lou Dobbs is going to love this.
So, what can JBS be thinking? I mean, the Obamistas are already planning to have joint USDA-DOJ hearings—or should we call them “town hall meetings”—on agricultural concentration next spring. They are itching for a fight. What part of “walking into the enemy camp with an unloaded gun” do the JBS folks not understand?
Steve Cornett is editor emeritus at Beef Today. You can reach him via e-mail at firstname.lastname@example.org.
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