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Vertical Integration Marchs On

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Anonymous

Guest
Brazil's JBS makes new acquisition in US Agra Europe -
Thursday July 01 2010

Brazilian meat giant JBS continues to expand in the US, yesterday agreeing to buy Arizona-based cattle business McElhaney for US$24 million.

The McElhaney feedlot has the capacity to confine more than 130 000 head of cattle at any one time. The facility is strategically located near JBS's Tolleson plant, also in Arizona. The deal includes cattle confining facilities and a feed plant. agra-net.com
 
A

Anonymous

Guest
I don't know all of the answers, but I think letting a foreign company have so much influence in the American beef and meat industry cannot be a good thing. I wish there were a way to prevent this from happening. It seems like this will be a good way to weaken the American beef industry to where we are no better off than the third world countries we will be competing with.
 

Texan

Well-known member
BAR BAR 2 said:
I don't know all of the answers, but I think letting a foreign company have so much influence in the American beef and meat industry cannot be a good thing. I wish there were a way to prevent this from happening. It seems like this will be a good way to weaken the American beef industry to where we are no better off than the third world countries we will be competing with.
If you're really concerned about influence in the American beef industry, PM me with your address - I've got a book you need to read. No cost or obligation, other than to pass it on when you're finished with it.
 

redrobin

Well-known member
JBS isn't vertically integrating anything. They own it all so far. You remember my warning that if we didn't vertically integrate the Brazillians would eventually own our industry. I didn't realize they would be over here though. I figured they'd do it from their own country.
 
A

Anonymous

Guest
ACCC concerned over Swift competition



BY LUCY KNIGHT – North Queensland Register (Australia) - 01 Jul, 2010 11:24 AM



THE Australian Competition and Consumer Commission has deferred its decision on the proposed purchase of the Japanese-owned Rockdale Feedlot at Yanco, in southern NSW by Brazilian processor, JBS Swift, and is calling for more market feedback over the next week.



However in a detailed paper on the takeover, released last week, the ACCC has raised dozens of areas where it sees "issues" with the proposal, including the future acquisition of feeder cattle and increased market concentration.



This is despite the ACCC forming the view already that the proposed acquisition would be unlikely to result in a substantial lessening of competition in the market for the supply of processed beef.



ACCC said in its report on the proposed takeover that the merged entity would continue to be "competitively constrained".



The ACCC began investigating the proposed deal between JBS Swift and Rockdale in April this year, with concerns a new JBS-owned entity could exercise too much market eastern-States control over the feedlot, slaughter, processing and even freight chains.



Swift already own nine processing plants and five beef feedlots in Queensland, NSW, Victoria, Tasmania and South Australia and concerns have been raised about rumoured company plans to control the supply of domestic beef to the major supermarket chains.



But there has also been concern too about potential job losses and the flow-on effect to the broader regional economy should the purchase not be allowed to go ahead.



The ACCC said last week it wants further information by next Tuesday on certain competition issues following its market inquiries to date.



In particular it's looking for comment on whether the proposed acquisition could raise competition concerns in the market for feeder cattle in the NSW and Victoria.



"The ACCC is concerned the proposed acquisition will result in increased market concentration within the region and remove Rockdale as a significant competitor to Swift and other market participants for the acquisition of feeder cattle," the report says.



"This could have an effect of forcing down or otherwise distorting the prices paid by the merged entity for the acquisition of feeder cattle."



The report notes that should the merger proceed, Swift would become the "largest single buyer of feeder cattle in the relevant market" and would hold two of the largest feedlots in the market and the merger world remove a significant buyer from the market which could have an impact on other local players.



The ACCC says it also wants information on the extent to which restockers and backgrounders compete with feedlots for feeder cattle, details of the cost to establish a new feedlot and the extent to which new smaller feedlots compete with the likes of Rockdale and Swift.



The ACCC says it will now publicly announce its final review by July 22, although this could still be subject to change.



Submissions with the relevant extra information can be sent by email to the ACCC at: [email protected]



The Statement of Issues is available on the public merger register page: www.accc.gov.au/mergersregister



nqr.farmonline.com.au
 
A

Anonymous

Guest
R-CALF United Stockgrowers of America



“Fighting for the U.S. Cattle Producer”

For Immediate Release Contact: R-CALF USA Communications Coordinator Shae Dodson-Chambers
July 2, 2010 & nbsp; Phone: 406-252-2516; [email protected]
Group Urges Justice Department to Block JBS Swift Acquisition of Another Top 25 Cattle Feeding Operation



Billings, Mont. – In response to recent national and international news articles announcing that Brazilian-based JBS Swift has agreed to purchase McElhaney Cattle Company – one of the United States’ top 25 cattle feeding operations with a one-time capacity of 130,000 head – R-CALF USA today sent a formal request letter to the U.S. Department of Justice (Justice Department) urging immediate antitrust enforcement acti on to block the sale.



In its letter, R-CALF USA referenced the findings made pursuant to a 2008 congressional hearing of the U.S. Senate Committee on the Judiciary, Subcommittee on Antitrust, Competitive Policy and Consumer Rights (“Senate Subcommittee”). The hearing examined the competition issues concerning JBS Swift’s then proposed acquisition of two U.S. beef packers and the United States’ largest cattle feeding operation – Five Rivers Ranch Cattle Feeding, LLC (Five Rivers). As a result of evidence raised at the hearing, including evidence provided by R-CALF USA, the Chairman of the Senate Subcommittee, Herb Kohl, urged the Justice Department to “at a minimum” require JBS Swift to divest Five Rivers. R-CALF USA’s letter to the Justice Department included the following quote from Chairman Kohl:



The acquisition of Five Rivers would give JBS Swift an enormous captive supply of cattle. JBS Swift could strategically slaughter this captive supply at certain times without needing to purchase cattle on the spot market. Such conduct could substantially depress prices paid to independent ranchers. Many academic studies have shown that captive supplies depress cattle prices, and allowing JBS Swift to gain such a large captive supply by virtue of its Five Rivers acquisition could have dangerous consequences for independent producers. I therefore urge that you obtain the divestiture of Five Rivers should the Justice Department decline to block the acquisitions as a whole.



R-CALF USA’s letter states that if the Department of Justice allows JBS Swift to acquire McElhaney Cattle Company, “the increased market power and harm to competition arising from JBS Swift’s acquisition of Five Rivers, which, as revealed by the Senate Subcommittee’s examination is particularly detrimental to independent cattle producers, will be greatly intensified. . .” the letter continues, “Such an outcome should not be tolerated and we respectfully urge the Justice Department to bring an immediate enforcement action to prevent JBS Swift from acquiring McElhaney Cattle Company.”



R-CALF USA further forewarns the Justice Department that JBS Swift likely will point to recently higher cattle prices as evidence that the company is not exercising market power in the U.S. cattle market. However, R-CALF USA states, “our U.S. cattle herd – which now is estimated to be the smallest in 50 years (since 1958) – has been so decimated by the abusive market power wielded over time that JBS Swift, despite possessing substantial market power, is currently unable to fully exploit that power because cattle supplies are so exceptionally tight.” In support of its claim, R-CALF USA cites a recent study that “analyzed the relationship between the dynamic cattle cycle and the potential for market power in cattle purchases.” R-CALF USA suggests the study substantiates its claim that “when cattle stocks are low, as they are today, markdowns of cattle prices (due to the exercise of market power) would not be expected to be as severe as when cattle stocks are high.”
 
A

Anonymous

Guest
redrobin said:
....yet since jbs bought 5 rivers , feeder prices have been as high or higher than they were before the purchase.

R-CALF USA further forewarns the Justice Department that JBS Swift likely will point to recently higher cattle prices as evidence that the company is not exercising market power in the U.S. cattle market. However, R-CALF USA states, “our U.S. cattle herd – which now is estimated to be the smallest in 50 years (since 1958) – has been so decimated by the abusive market power wielded over time that JBS Swift, despite possessing substantial market power, is currently unable to fully exploit that power because cattle supplies are so exceptionally tight.” In support of its claim, R-CALF USA cites a recent study that “analyzed the relationship between the dynamic cattle cycle and the potential for market power in cattle purchases.” R-CALF USA suggests the study substantiates its claim that “when cattle stocks are low, as they are today, markdowns of cattle prices (due to the exercise of market power) would not be expected to be as severe as when cattle stocks are high.”

Not only is the US herd at the smallest in 50 years-- the Canadian herd is way down from its peak...I think the last I read it was down 10% from 5 years ago....
 

redrobin

Well-known member
Oldtimer said:
redrobin said:
....yet since jbs bought 5 rivers , feeder prices have been as high or higher than they were before the purchase.

R-CALF USA further forewarns the Justice Department that JBS Swift likely will point to recently higher cattle prices as evidence that the company is not exercising market power in the U.S. cattle market. However, R-CALF USA states, “our U.S. cattle herd – which now is estimated to be the smallest in 50 years (since 1958) – has been so decimated by the abusive market power wielded over time that JBS Swift, despite possessing substantial market power, is currently unable to fully exploit that power because cattle supplies are so exceptionally tight.” In support of its claim, R-CALF USA cites a recent study that “analyzed the relationship between the dynamic cattle cycle and the potential for market power in cattle purchases.” R-CALF USA suggests the study substantiates its claim that “when cattle stocks are low, as they are today, markdowns of cattle prices (due to the exercise of market power) would not be expected to be as severe as when cattle stocks are high.”

Not only is the US herd at the smallest in 50 years-- the Canadian herd is way down from its peak...I think the last I read it was down 10% from 5 years ago....

You're suggesting that we have lesser production so our price is higher??? Not from my point of view. Due to the successful vertical integration of the chicken industry and then the turkey and hog industry, our competition for the meat segment of the consumers purchase has increased and we also produce much more beef with the cows we have than they did in 1950. I would guess it could be blamed on those bigger, better , faster bull chasers that you loathe. If we were of your mindset, we could go back to the lower production bulls of the 50's and get a higher price for our calves. :lol: If it wasn't for the success of the chicken, turkey, and hog industry our beef prices would be fantastic. We have been slow to react as an industry though so we don't benefit from the uniformity in product and efficiency of production that our competition has.
My math isn't real good on these big numbers but I think we've increased beef marketing totals (cows and calves I would assume) around 20 billion pounds from 1958 to 2008.

Total pounds of beef production and marketing in thousand pounds.

US : 41,594,392 54,695,975 2008

US 41,620,414 55,255,981 1998

US 40,327,023 54,449,464 1988

US 40,829,023 58,426,941 1978

US 35,932,105 46,410,444 1968

US 26,808,031 34,168,966 1958

I have no idea what Canada has done but as you say, there isn't really a North American beef industry, just U.S. beef and Canadian beef. :lol:
 

Big Muddy rancher

Well-known member
Oldtimer said:
redrobin said:
....yet since jbs bought 5 rivers , feeder prices have been as high or higher than they were before the purchase.

R-CALF USA further forewarns the Justice Department that JBS Swift likely will point to recently higher cattle prices as evidence that the company is not exercising market power in the U.S. cattle market. However, R-CALF USA states, “our U.S. cattle herd – which now is estimated to be the smallest in 50 years (since 1958) – has been so decimated by the abusive market power wielded over time that JBS Swift, despite possessing substantial market power, is currently unable to fully exploit that power because cattle supplies are so exceptionally tight.” In support of its claim, R-CALF USA cites a recent study that “analyzed the relationship between the dynamic cattle cycle and the potential for market power in cattle purchases.” R-CALF USA suggests the study substantiates its claim that “when cattle stocks are low, as they are today, markdowns of cattle prices (due to the exercise of market power) would not be expected to be as severe as when cattle stocks are high.”

Not only is the US herd at the smallest in 50 years-- the Canadian herd is way down from its peak...I think the last I read it was down 10% from 5 years ago....

And what happened to that "WALL" of cattle from Canada that would "FLOOD" the US market when the border opened?
 
A

Anonymous

Guest
I don't know where you got your numbers RR- but they don't match the USDA numbers:

•U.S. beef production (commercial carcass weight):
2002: 27.09 billion pounds
2003: 26.24 billion pounds
2004: 24.55 billion pounds
2005: 24.68 billion pounds
2006: 26.15 billion pounds
2007: 26.42 billion pounds
2008: 26.56 billion pounds

http://www.ers.usda.gov/news/BSECoverage.htm

While I agree changes in feeding practices have added about 200 lbs to animal/carcass weights- those vertical integration changes (factory/corporate feedlots) have also put thousands of smaller and family feeders out of business....I guess that is just good business- eh? But is it the way this country keeps wanting to go?

And during just that time above our US population (consumers/demand) has grown by 20 million-- and from 1950 it has more than doubled- from 150 million in 1950 to 309+ million in 2010...
 
A

Anonymous

Guest
Big Muddy rancher said:
Oldtimer said:
redrobin said:
....yet since jbs bought 5 rivers , feeder prices have been as high or higher than they were before the purchase.

R-CALF USA further forewarns the Justice Department that JBS Swift likely will point to recently higher cattle prices as evidence that the company is not exercising market power in the U.S. cattle market. However, R-CALF USA states, “our U.S. cattle herd – which now is estimated to be the smallest in 50 years (since 1958) – has been so decimated by the abusive market power wielded over time that JBS Swift, despite possessing substantial market power, is currently unable to fully exploit that power because cattle supplies are so exceptionally tight.” In support of its claim, R-CALF USA cites a recent study that “analyzed the relationship between the dynamic cattle cycle and the potential for market power in cattle purchases.” R-CALF USA suggests the study substantiates its claim that “when cattle stocks are low, as they are today, markdowns of cattle prices (due to the exercise of market power) would not be expected to be as severe as when cattle stocks are high.”

Not only is the US herd at the smallest in 50 years-- the Canadian herd is way down from its peak...I think the last I read it was down 10% from 5 years ago....

And what happened to that "WALL" of cattle from Canada that would "FLOOD" the US market when the border opened?

Well according to many of your countrymen on Agriville- the vertical integration that now controls much of the Canadian feeding/slaughter industry has kept the market to where they can't make a go of cattle anymore- and they sold them....
 

redrobin

Well-known member
Oldtimer said:
I don't know where you got your numbers RR- but they don't match the USDA numbers:

•U.S. beef production (commercial carcass weight):
2002: 27.09 billion pounds
2003: 26.24 billion pounds
2004: 24.55 billion pounds
2005: 24.68 billion pounds
2006: 26.15 billion pounds
2007: 26.42 billion pounds
2008: 26.56 billion pounds

http://www.ers.usda.gov/news/BSECoverage.htm

While I agree changes in feeding practices have added about 200 lbs to animal/carcass weights- those vertical integration changes (factory/corporate feedlots) have also put thousands of smaller and family feeders out of business....I guess that is just good business- eh? But is it the way this country keeps wanting to go?

And during just that time above our US population (consumers/demand) has grown by 20 million-- and from 1950 it has more than doubled- from 150 million in 1950 to 309+ million in 2010...

I got the numbers from the USDA. Read what I posted. Here's a link.

http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1101

TOTAL pounds of beef production, not carcass. I don't see how vertical integration has done damage to the feeding sector, cow calf sector, stocker sector, sale barn sector, trucking sector, etc. since there isn't really much vertical integration in the U.S. cattle industry. Maybe you don't really understand what Vertical Integration is. Go read up on it. For example you can go to the chicken data at the link I provided and see how much damage VI has done to the total market segment for the chicken industry since the 60's. The doubling of the population is correct. Beef lost market share percentage to chicken , hog and turkey over the last 50 years precisely because we can't take advantage of efficiencies because of dull tooth aches like you who couldn't keep a setting hen on her eggs. You don't know any more about the beef industry than you do about politics. You failed to provide a link between JBS swift purchase of 5 rivers and lower cattle prices. You never address an argument in an honest fashion though do you your honor.
 

redrobin

Well-known member
Washington, D.C.

U.S. Broiler Industry Structure


Released November 27, 2002, by the National Agricultural Statistics
Service (NASS), Agricultural Statistics Board, U.S. Department of
Agriculture. For information on "U. S. Broiler Industry Structure" call
Tom Kruchten at 202-690-4870, office hours 7:30 a.m. to 4:00 p.m. ET.



Evolution of Chickens Raised for Meat

The broiler industry has evolved from millions of small backyard flocks,
where meat was a by-product of egg production, to less than 50 highly
specialized, vertically integrated agribusiness firms.

A measure of the changing structure is the number and size of chicken
hatcheries. In 1934, there were 11,405 facilities which hatched all
chickens in the U.S. Those hatcheries had the capacity to incubate
276 million eggs at one time for an average capacity of 24,224 eggs. In
2001, there were 323 chicken hatcheries, with an incubator capacity of
862 million eggs, which includes inactive capacity (Chart 1). The
average incubator capacity of those hatcheries is 2.7 million eggs.

"Broilers" are defined as chickens of meat-type strains raised
specifically for meat production. Chickens raised for egg production or
other uses are not included. There are often over 170 million broiler
chicks placed on feed for meat production each week by the companies in
19 major states (Chart 2). The average weight per bird has increased
dramatically, with consumer preference the limiting factor for future
increases. U.S. broiler production in 1945 was 366 million broilers with
an average live weight of 3.03 pounds. In 2001, 8.4 billion broilers
were produced with an average live weight of 5.06 pounds (Chart 3).

While broiler production has soared, the live weight price has not. In
1948, the live weight price of broilers was 36 cents per pound, compared
to 39.3 cents in 2001 (Chart 4). In recent years the price of broilers
has been a live weight equivalent price, based on wholesale prices of
processed whole birds. The broiler companies are vertically integrated
with contract growers, and therefore transactions of live broilers are
rare.

Broiler production compared to other meats has been dramatic. In 1945,
broiler production was 1.11 billion pounds live weight, compared with
19.52 billion pounds of cattle and calves, and 18.84 billion pounds of
hogs live weight. In 2001, broiler production was 42.45 billion pounds,
slightly higher than the 42.37 billion pounds of cattle and calves, and
well ahead of the 25.94 billion pounds of hogs and pigs (Chart 5). The
price of broilers has kept the growth in the value of production more
subdued. In 1945, the value of broiler production was $327 million,
compared to a gross income for cattle and calves of $3.37 billion, and
hogs of $2.64 billion. In 2001, the value of production for broilers was
$16.69 billion, with $29.27 billion for cattle and calves, and $11.44
billion for hogs and pigs respectively (Chart 6).

In summary, as the broiler industry continues to consolidate, it also
continues to expand production. Therefore, broilers will continue to be
an abundant source of relatively inexpensive meat.
 

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