Senator urges DOJ to block JBS Swift acquisitions
June 25, 2008
The Associated Press is reporting that a key Democratic senator recently urged the Justice Department to block the purchase of two U.S. meatpackers by Brazilian beef processor JBS Swift.
The acquisitions would make JBS Swift the largest beef processor in the U.S., and could harm domestic cattle ranchers and beef consumers by substantially reducing competition, Sen. Herb Kohl, D-Wis., wrote in a letter to Thomas Barnett, the head of the Justice Department''s antitrust division.
JBS Swift said in March that it would acquire Kansas City-based National Beef Packing Co. and the beef processing operations of Smithfield Foods Inc., which is based in Smithfield, Va.
Kohl doesn''t have the power to stop the transaction but can raise objections. He chaired a hearing that looked into the deals last month.
JBS Swift became the third-largest beef processor in the U.S. after purchasing Greeley, Colo.-based Swift & Co. last year.
The two purchases announced in March would vault JBS Swift past Tyson Foods Inc. and Cargill Meat Solutions, part of privately held Cargill Inc., into the top spot.
The three companies would control over 80 percent of the beef market, Kohl wrote, and JBS would have almost a third.
Such market concentration would lead to lower cattle prices for ranchers, and potentially higher beef prices for consumers when food prices already are rising due to the Midwestern floods and higher transportation costs, Kohl wrote.
Justice should at least require that JBS Swift sell Five Rivers Ranch Cattle Feeding LLC, a unit of Smithfield, if it allows the two acquisitions to proceed, Kohl wrote.
Five Rivers sells about 2 million cattle annually, which would give JBS a "captive supply" of cattle, according to Kohl. That enables the company to avoid purchasing cattle on the spot market and could depress prices, he wrote.
A phone call to JBS Swift wasn''t immediately returned.
A Justice Department spokeswoman said the department is aware of the letter, and will respond appropriately. The department is currently reviewing the transactions, she said.