Brazilian beef firm defends plans to buyout US rivals
May 12, 2008
According to the Associated Press, the head of Brazilian meatpacking company JBS SA tried to assure lawmakers recently that his company''s buyout of two U.S. rivals would mean more jobs and more competition in the beef industry.
But his assurances were met with skepticism from Democratic and Republican senators. One called for an investigation into whether recent agriculture buyouts have driven up food prices.
JBS is seeking U.S. government approval to acquire Smithfield Beef Group Inc. and National Beef Packing Co. for payments totaling $1.1 billion. If completed, the transaction would make JBS the largest meat processor in the U.S and lower the number of major industry players from five to three.
The company''s Chief Executive for North America, Wesley Batista, tried to head off concerns from senators that the buyouts could reduce competition and drive up meat prices in the U.S.
Subcommittee Chairman Herb Kohl, D-Wisc., urged Justice Department regulators to carefully review what impact JBS'' purchases will have on rising food prices.
The Wisconsin Democrat called on the government''s watchdog agency to investigate whether consolidation in U.S. agriculture has led to less competition for producers and higher food prices for consumers.
Congress held multiple hearings this week on the surging food prices that have pushed up grocery bills at home and touched off riots in the developing world. Experts blame a mix of factors, including poor weather conditions, a falling dollar and low grain stockpiles.
Ranchers are concerned JBS'' acquisition of Smithfield and National Beef Packing, the fourth and fifth largest U.S. beef companies, will leave them with less bargaining power when they sell their livestock.
With the purchase of Smithfield, JBS will gain control of the largest cattle feeding lot in the U.S., giving the company major influence over the expenses of raising livestock.
Analysts expect the government to complete its review of the JBS deals by late 2008.
Kohl and ranking Republican Charles Grassley, R-Iowa, both complained that the Justice Department has been too lax on consolidation in the agriculture market, citing recent mergers in the milk, pork and grain industries.
A Department of Justice official declined to comment on JBS'' proposed acquisitions, but told lawmakers his agency has been vigilant at stopping anticompetitive practices in the agriculture markets.
Douglas Ross, the Department''s special counsel for agriculture, stressed that his responsibility is to enforce laws, "not engineer the best competitive structure of the marketplace."
Grassley and Kohl introduced a bill last year that would have created stricter guidelines for the review and approval of agriculture mergers.