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JBS Acquisition

Sandhusker

Well-known member
Washington, D.C. (March 27, 2008) – Independent U.S. cattle producers are pleased that Rep. Nancy Boyda, D-Kan., and Rep. Barbara Cubin, R-Wyo., led a bipartisan effort to communicate to the Justice Department via a formal letter that there is serious potential damage to the U.S. cattle industry if Brazil-owned JBS is allowed to purchase National Beef Packing, the Smithfield Foods beef group and Five Rivers Ranch Cattle Feeding. Approval of the proposed deal would make JBS the largest meatpacker in the United States and in the world.

Others who signed the letter are: Rep. Stephanie Herseth Sandlin, D-S.D., Rep. Duncan Hunter, R-Calif., Rep. Steve Kagen, D-Wis., Rep. Marcy Kaptur, D-Ohio; Rep. Dennis Moore, D-Kan., Rep. Charles W. Pickering, R-Miss., and Rep. Earl Pomeroy, D-N.D.

“We are concerned that this purchase would reduce competition and live cattle prices in the U.S. cattle and beef industry by further limiting market choices and access for independent beef producers,” the letter states. “There are strong antitrust implications to this acquisition, and we recommend that the U.S. Department of Justice thoroughly investigate the possible consequences that will result from this merger. Should there be evidence that competition in the U.S. cattle and beef industry is substantially reduced, we urge you to block the proposed purchase.”

The letter also states that allowing three of the top five largest beef processors to consolidate would be devastating to the cattle market: “By limiting access to beef producers, independent producers will only have ready access to one beef process and will confront unfavorable pricing due to the captive supply of cattle. Many independent cattle operations currently have access to only one processor, and further constraints on independent producers’ options by limiting the number of buyers for the product would result in lower prices forced upon independent operators during a time of economic uncertainly. A vibrant, competitive marketplace requires many buyers and sellers, and can remain inefficient when run by only three major companies.”

Additionally, the letter points out that the Justice Department is charged with guarding the public from mergers and acquisitions that threaten the free market, and that JBS’ proposed purchases would give JBS control of roughly one-third of the domestic market and a monopoly in many areas of the country.

“Only three sources will buy the vast majority of cattle, and establish the live cattle price,” the letter states. “This consolidation threatens to grossly distort the current marketplace. We urge the U.S. Department of Justice to carefully consider the implications of this merger on the U.S. cattle industry, and the consequences it will have on beef producers who want nothing more than a fair and open marketplace for their product.”

R-CALF USA Marketing Committee Co-Chair Dennis Thornsberry said approval of the JBS deal – with the loss of two more meatpackers – further consolidates the industry and will not do anything except destroy competition in the open marketplace.

“I support the people who are trying to put a stop to it,” Thornsberry said. “Anyone who’s independent in the cattle industry should be paying close attention to this and calling their Senators and Representatives to oppose a Brazilian-owned firm becoming the largest meatpacker in the United States.

“If we don’t stop this merger, I think we’re headed to where the poultry and hog industries are now – where the producers are just contract growers,” he warned. “The Five Rivers part of the proposal isn’t good for the industry either because its one-time capacity of 811,000 head is a huge chunk of the feedlot industry.

“This is a perfect example of why we need the competition reforms in the Senate version of the 2007 Farm Bill to make it into the final version of the Farm Bill,” Thornsberry pointed out. “It’s also why the next Farm Bill should establish an Office of Special Counsel for Agricultural Competition to ensure proper enforcement of the Packers and Stockyards Act.”

The letter also states that further consolidation of the U.S. cattle industry leaves retailers, and ultimately consumers, with fewer options and likely higher prices for beef products.
 

RobertMac

Well-known member
A vibrant, competitive marketplace requires many buyers and sellers, and can remain inefficient when run by only three major companies.

Only three sources will buy the vast majority of cattle, and establish the live cattle price,...
That would be roughly 90% of fed cattle...remember what you said mrj, fewer buyers mean lower prices!!!
 

mrj

Well-known member
Location has something to do with it, too.

There is a difference between a LOCAL auction market and a national, or international packer.........as well as a difference between stocker/feeder cattle sales and fat cattle sales...........and SOME of those cattle auction barn owners are doing all they can to prevent local cattle producers from being able to sell their stocker/feeder cattle directly on their own, or anywhere but at a local auction sale. THAT is the tail wagging R-CALF in their so called "Competition Title", in my observation.

mrj
 

Sandhusker

Well-known member
It doesn't make a difference what the product is, the more buyers there are, the more competition there is. It's an economic law, MRJ.

It doesn't make a difference whether the market is local, national, or galaxy wide. Economic laws are economic laws.

When munincipalites in Nebraska have to buy/ sell something, we are to get at least 5 bids and more if possible. Ponder "why" for a minute.

Do you and SH drink from the same aquifer? That would explain a lot....
 

RobertMac

Well-known member
mrj said:
Location has something to do with it, too.

There is a difference between a LOCAL auction market and a national, or international packer.........as well as a difference between stocker/feeder cattle sales and fat cattle sales...........and SOME of those cattle auction barn owners are doing all they can to prevent local cattle producers from being able to sell their stocker/feeder cattle directly on their own, or anywhere but at a local auction sale. THAT is the tail wagging R-CALF in their so called "Competition Title", in my observation.

mrj

mrj, you stumble up on these gems and don't even realize it...location is important!!! Not everyone can ranch next to a processing plant or feedlot. If there were more processing plants across more of the country, more cattle producers could get better prices simply because of transportation savings!!! Again, more is better in a free market capitalistic system!!!!! :shock: :shock: 8)
 

Sandhusker

Well-known member
MRJ, when you have to go to such rediculous lengths and reach so far to explain NCBA's policies and positions only to come up with such irrational explanations and reasonings that defy all sense of logic, it should tell you something about those policies and positions.
 

feeder

Well-known member
We NEED competion in all aspects of the cattle cycle. We have gotten calls from a sale barn saying a few of the regular cattle buyers didn't show up for the sale, so the market would be soft. We watched it on the net and yes the market was very soft for the calves. You take away competition from any arena and you will have depressed prices. When a few control the feeding, finishing, and processing you will see them dictate the prices to the consumer and producer. We see it in the hog and chicken industries and now it is closer than ever in the cattle industry.
 

mrj

Well-known member
Sandhusker, obviously you believe your OPINIONS are infallible and support R-CALF rhetoric, therefore should have the force of absolute law.

However your crystall ball is seriously out of order concerning how I view most ANYTHING! I'm not "explaining" anyone buy my own take on this issue, based on what several people, some I know, and some I don't, some NCBA members, and some not, have said they BELIEVE most likely to happen if this law, the apparent brainchild of OCM and R-CALF is passed and implemented.

Have you never attended an auction, any kind of auction, when just two determined bidders who either want or need an item will bid it up, even above "market value"?

And just how is "market value" truly etablished on a given day or time?

Some of us believe that the old emotion based, shuck and jive, even rafter bid, or employee-behind-the-gate bids used all too often to manipulate bidding for favored customers (buyers or sellers) in too many 'popular' cattle auction barns do not serve the cattle producer well.

RobertMac, who is going to build all those packing plants out in the country next to the feedlots or the ranches? How will it be funded? Who will build the additional infrastructure needed? What will it cost to transport the meat to consumers? Who will persuade the Enviro-Extremists to allow such growth? How many consumers will be able to afford that beef? What will it do to your niche market?.........and those are only a FEW of the questions which need to be answered if we are going to dismantle the big packers and have neighborhood packing plants.

It is high time for honest, value based marketing of cattle. Your R-CALF Competition Title, IMO, will take away some of the options for cattle producers and force more of us through the auction markets, SOME of which are more concerned with manipulating laws to protect their own businesses than with making changes to improve the quality of their service to cattle producers and feeder/stocker buyers alike.

mrj
 

Sandhusker

Well-known member
MRJ, "Have you never attended an auction, any kind of auction, when just two determined bidders who either want or need an item will bid it up, even above "market value"?

You make that comment after stating; "Does having more buyers or fewer buyers have anything to do with selling prices? I hear some sale barn owners bragging about how many buyers are in sitting in their barns on sale day, so apparently they think it helps sell cattle to have more buyers."? You're talking in circles. First you say (correctly) the more buyers the better, now you say the opposite.

MRJ, "It is high time for honest, value based marketing of cattle. Your R-CALF Competition Title, IMO, will take away some of the options for cattle producers and force more of us through the auction markets"

Name ONE option that is taken away from the Competition Title, MRJ...ONE.
 

RobertMac

Well-known member
mrj said:
RobertMac, who is going to build all those packing plants out in the country next to the feedlots or the ranches? How will it be funded? Who will build the additional infrastructure needed? What will it cost to transport the meat to consumers? Who will persuade the Enviro-Extremists to allow such growth? How many consumers will be able to afford that beef? What will it do to your niche market?.........and those are only a FEW of the questions which need to be answered if we are going to dismantle the big packers and have neighborhood packing plants.

All this infrastructure was in place years ago back when we only had ONE cattlemen's association and they sat on their hands while a few large packers bought up and shut down this infrastructure. The lie we were told is that a more efficient (read as concentrated) packing industry would be able to pay producers more for our cattle. That is why I got out of NCA!!! :mad: NCA/NCBA failed the producer!!!!!!!!!

We will have a honest, value based market for our cattle when producer wholesale 30-50% of beef!
 

mrj

Well-known member
Sandhusker, obviously you do not believe there is any difference than a LOCAL sale barn, of which there are MANY, and a REGIONAL packing plant, of which there are not so many. Nor, of economies of scale.

Does it make sense to locate feedlots and packing plants in areas where there is little available corn or soybeans grown, but near where there is much grass to raise feeder cattle, even in desert areas, far from large consumer bases.

It seems a 'no brainer' that location of feedlots in proximity to feed grain production, and packing plants in proximity to large supplies of FED cattle, and transportation centers with best access to national and international meat trade, IMO.

RobertMac, your location with the enviable grazing capacity and population base give your niche market far more potential for profitability than does the majority of the area in this country where cattle currently are produced.

That infrastructure you recall from the distant past would be highly unlikely to be adequate for modern demands for facilities to produce beef.

REading what you post, one would not know there are about a thousand meat processing plants in this country.

Re. what you dislike about NCBA, there obviously are many thousands of cattle producers who do not share your thoughts.

mrj
 

Sandhusker

Well-known member
MRJ, "Sandhusker, obviously you do not believe there is any difference than a LOCAL sale barn, of which there are MANY, and a REGIONAL packing plant, of which there are not so many. Nor, of economies of scale."

You're trying to muddle the issue. What I'm telling you is that the more buyers there is for a product, the more competition there is for that product. It doesn't matter whether you're talking about feeders, fats, bulls, or sacks of rocks. With that increase in competition, the seller can expect a better price. This is elementary economics. You know this too, as evidenced by your sale barn example. Your problem is that you actually expressed a common sense opinion that you're trying to backpedal on because it goes against NCBA policy. You actually used your own head once, and you disagreed with NCBA.

Now, have you come up with ONE option that is taken away from the Competition Title, yet?
 

cutterone

Well-known member
The real question is that would JBS still want to make this offer if... they could not bring in foreign beef or own any 14 days prior to slaughter?
 

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