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Ranchers.net

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.
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