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The Concentration Just Got More Concentrated

Mike

Well-known member
Smithfield buys Premium Standard Farms for $810 million
by Pete Hisey on 9/18/2006 for Meatingplace.com

Smithfield Foods is paying a 13 percent premium to purchase Kansas City, Mo.-based Premium Standard Farms for about $810 million in cash, stock and assumed debt of $117 million. Smithfield said it expects the deal to close in early 2007, and doesn't expect to close any Premium Standard plants or significantly reduce workforces.

The purchase of the No. 2 hog grower, with about $1 billion in revenues, makes Smithfield even more dominant in the pork industry. The company said that all hog production contracts will be honored and that Smithfield will continue to purchase hogs on the open market.

The deal breaks down to about $690 million in stock and cash, depending on the stock price at completion, with about $1.25 per share of that in cash, and $117 million in assumed debt. Premium Standard has operations in Texas, North Carolina and Missouri, and has a sow herd of over 220,000, which compares to Smithfield's herd of nearly a million.
 

Econ101

Well-known member
Consolidation makes it easier for politicians to wrap up campaign contributions. They don't have to go after so many different interest groups.

Consolidation can bring prices down in the short run. It is the loss leader of economic concentration of non competitive markets and their subsequent abuses in the economy.
 
A

Anonymous

Guest
Conman: "Consolidation can bring prices down in the short run. It is the loss leader of economic concentration of non competitive markets and their subsequent abuses in the economy."

Yeh that would explain why we have the highest cattle prices ever recorded with the highest level of packer concentration. Yup, those packers are just raping the economy aren't they? Poor little Conman!

Stick to topics you understand such as how to make highschool the best seven years of your life.


~SH~
 

Sandhusker

Well-known member
~SH~ said:
Conman: "Consolidation can bring prices down in the short run. It is the loss leader of economic concentration of non competitive markets and their subsequent abuses in the economy."

Yeh that would explain why we have the highest cattle prices ever recorded with the highest level of packer concentration. Yup, those packers are just raping the economy aren't they? Poor little Conman!

Stick to topics you understand such as how to make highschool the best seven years of your life.


~SH~

If concentration is the only factor in cattle price, you have a point. If it is just one factor of many, you just made a fool of yourself again.
 

Econ101

Well-known member
~SH~ said:
Conman: "Consolidation can bring prices down in the short run. It is the loss leader of economic concentration of non competitive markets and their subsequent abuses in the economy."

Yeh that would explain why we have the highest cattle prices ever recorded with the highest level of packer concentration. Yup, those packers are just raping the economy aren't they? Poor little Conman!

Stick to topics you understand such as how to make highschool the best seven years of your life.


~SH~

With your wacky standards of causality, there is no logic in anything.

I am not poor at all, very richly blessed, thank you, sh.

Smithfield bought another pork company, not a beef company. Maybe you could stay on topic.
 
A

Anonymous

Guest
Sandbag: "If concentration is the only factor in cattle price, you have a point. If it is just one factor of many, you just made a fool of yourself again."

When your R-CULT buddies are telling producers that "captive supplies" are holding down prices, do you tell them that "captive supplies" is not the only factor involved in cattle prices? Why not you damn hypocrite?

You don't have to tell me what factors affect cattle prices, I'm not an R-CULT blamer. I understand market factors. Obviously you don't or you would be policing your own.


Conman: "Smithfield bought another pork company, not a beef company. Maybe you could stay on topic."
Your statement was:

Conman (previous):"Consolidation can bring prices down in the short run. It is the loss leader of economic concentration of non competitive markets and their subsequent abuses in the economy."

Why don't you explain for everyone how consolidation brings down prices in the short run? Hmmmm??

Watch the circus chicken dance..............

You can sure talk but when it comes to backing that cheap talk, you run like a scalded dog.


~SH~
 

Econ101

Well-known member
~SH~ said:
Sandbag: "If concentration is the only factor in cattle price, you have a point. If it is just one factor of many, you just made a fool of yourself again."

When your R-CULT buddies are telling producers that "captive supplies" are holding down prices, do you tell them that "captive supplies" is not the only factor involved in cattle prices? Why not you damn hypocrite?

You don't have to tell me what factors affect cattle prices, I'm not an R-CULT blamer. I understand market factors. Obviously you don't or you would be policing your own.


Conman: "Smithfield bought another pork company, not a beef company. Maybe you could stay on topic."
Your statement was:

Conman (previous):"Consolidation can bring prices down in the short run. It is the loss leader of economic concentration of non competitive markets and their subsequent abuses in the economy."

Why don't you explain for everyone how consolidation brings down prices in the short run? Hmmmm??

Watch the circus chicken dance..............

You can sure talk but when it comes to backing that cheap talk, you run like a scalded dog.


~SH~

I will give you just enough to think about, SH. I quit spoon feeding when my youngest could hold the spoon.

Consolidation is a loss leader into the powers of non competitive markets, their barriers of entry that are constructed, and future high profits.
 

S.S.A.P.

Well-known member
What? ?

Econ101 said:
1. ?
It is the loss leader of economic concentration of non competitive markets and their subsequent abuses in the economy.

2.?
Consolidation is a loss leader into the powers of non competitive markets, their barriers of entry that are constructed, and future high profits.

... oh never mind :roll:
 

Econ101

Well-known member
S.S.A.P. said:
What? ?

Econ101 said:
1. ?
It is the loss leader of economic concentration of non competitive markets and their subsequent abuses in the economy.

2.?
Consolidation is a loss leader into the powers of non competitive markets, their barriers of entry that are constructed, and future high profits.

... oh never mind :roll:

Look at the oil companies and think about it, ssap. Pareto saw it happening close to a hundred years ago and wrote about it.

The Robber Barons is a book you need to read to understand how it happened last time.
 

RobertMac

Well-known member
SH said:
Why don't you explain for everyone how consolidation brings down prices in the short run?

You have three items and three buyers...there is competition.

Buyer A merges with buyer B.

You have three items and two buyers...there is less competition.

SH, are you originally from Rio Linda??? :lol: :lol: :lol: :lol: :lol: :lol:
 

fedup2

Well-known member
Thought you might be interested in Kruse's comments on this.

[ "The politicians will give the announced purchase of PSF by Smithfield Foods a good going over, saying all the politically correct things about the need to protect competition, but they surrendered the issue in the late 1990's, when efforts to block packers from owning hogs were beaten back by integrators. It's too late now.

The Senate passed a ban on packers owning livestock as the 2002 farm bill was being marked up, but the measure was killed in conference committee. The compromise was COOL, included in the farm bill, but later circumvented by derailing enforcement. Whatever intent of Congress to promote and protect competitive livestock markets, including mandatory price reporting, has been thwarted by packer special interest influences on agency implementation. The interests of independent livestock producers, even when they win legislatively, have been derailed bureaucratically.

The damage has been done and the merger of PSF and Smithfield Foods is just a reminder. The additional adverse impact to competition from this specific merger is negligible, like shooting a dead body.

Iowa has two great U.S. Senators willing to champion independent livestock producer interests, but leaders can only do so much if no one will follow. Independent livestock producers chose to seek safety under the perceived protection of integrated production rather than fight it out to remain independent. NPPC and NCBA policy supported integration, prompting Senator Chuck Grassley to label them "packer lackeys." Neither state cattle or hog organizations gave Iowa Senators the backing they needed, always stopping short of full fledged battle. 1998 broke hog producers resolve, prompting them to trade a competitive market for a guarantee of shackle space.

The merger of PSFs and Smithfield Foods is just a progressing result of that victory. With fewer than 10% of hogs now sold in the spot market, it's too big a dog for the tail to wag. Senator Chuck Grassley says that he believes that anti-trust laws are strong enough, but they lack enforcement. Packers/integrators own the USDA. It's a captured agency. The Inspector General found that the administrator of Packers and Stockyards was purposefully suppressing enforcement of P & S statutes. This was being done with the full support and understanding of the political interests inside USDA and the Bush administration.

USDA is a captured agency, with policy dictated by meat packers, no different than the Pentagon being run by the military industrial complex. Meat packing officials move in and out of USDA like Generals and Admirals shuttle jobs between the Pentagon and defense industry, but no one even thinks anything of it at USDA. The PSF/Smithfield Foods merger may prompt some hearings on meat industry concentration, but nothing will come from them, as the fox owns the chicken coop and all the chickens in it. Smithfield Foods bet $100 mln that the deal will go through by agreeing to a termination fee if it doesn’t. They own the process so it's not much of a risk."]
 

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