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Organization for Competitive Markets

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HAY MAKER

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Organization for Competitive Markets
P.O. Box 6486
Lincoln, NE 68506
www.competitivemarkets.com



Date: February 16, 2005

FOR IMMEDIATE RELEASE

Contact: Michael Stumo, 860.379.6199



OCM Concerned about Smithfield-ContiBeef Merger


Lincoln, NE ~ The Organization for Competitive Markets expressed concern in response to the announced merger of the second and third largest cattle feeding companies in the United States. Smithfield Foods, Inc. announced its deal to merger its MF Cattle Feeding subsidiary with ContiBeef, a subsidiary of ContiGroup Companies, Inc. The combined entity will be the nation’s largest cattle feeding company, with over 1.6 million cattle marketed per year.



“We are very worried about potential market impacts resulting from this merger,” said Keith Mudd, OCM president. “Smithfield grew from meager beginnings in Virginia in the early 1980’s to become the major force integrating the hog industry and destroying market access for tens of thousands of independent hog producers in the Southeast and later the Midwest.”



The joint venture will far surpass Cactus Feeders of Amarillo, Texas as the nation’s largest cattle feeder. Cactus Feeders was founded by Paul Engler, a former vice president of IBP, Inc. (not Tyson Fresh Meats, Inc.), and pioneered the market destroying practice of captive supplies of cattle. Cactus Feeders has a one time capacity of approximately 480,000 head with an estimated annual marketing double that amount.



“We now have the pioneer of captive supply in hogs overtaking the pioneer of captive supply in cattle as the dominant feeding company in America,” continued Mudd. “Joseph Luter, CEO of Smithfield, lives in a New York City Park Avenue apartment affecting the lives of millions in Rural America with lower income and reduced independence.”



Luter told a bank conference in 2001: “We have to convince them (opponents) that [vertical integration/captive supply] is coming and that it’s irreversible.” (Feedstuffs, pg. 34, April 9, 2001).



“We fear market access and captive supply problems will increase with this new merger. It is hard to believe Smithfield will not purchase a major packer to integrate its production business, and further thin the fed cattle market volume,” said Mudd. “This event heightens the urgency for states and the federal government to prohibit packer ownership and reduce the percentage of captive supply cattle marketed.”



The Organization for Competitive Markets (OCM) is a multidisciplinary, nonprofit group of farmers, ranchers, academics, attorneys and policy makers dedicated to reclaiming the agricultural marketplace for independent farmers, ranchers and rural communities. OCM helps lead the Cattlemen’s Competitive Market Project which is a voluntary contribution program funding the effort to increase demand for U.S. cattle and beef in open and competitive markets.
 

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