Processing Magazine

Wyo. Ranchers Wary of Consolidation

March 31, 2008
The Associated Press is reporting that Wyoming cattlemen concerned about consolidation in the meatpacking industry said they''re worried by a Brazilian company''s bid to buy out two rivals and become the nation''s largest meatpacker.

Meanwhile, Wyoming Sens. Mike Enzi and John Barrasso have asked Attorney General Michael Mukasey to make sure that the Justice Department closely reviews Brazil''s JBS SA''s proposed $1.1 billion buyout of Smithfield Foods Inc.''s beef operations and National Beef Packing Co.

The senators said they wanted to ensure a fair and open market in the beef industry. They''re particularly concerned about the $565 million buyout of Smithfield''s beef operations, which would give JBS full control of Five Rivers Ranch Cattle Feeding LLC, which includes up of 10 feedlots in five states with capacity for 811,000 head of cattle.

The proposed deal would result in JBS becoming the largest meat processor in the United States. Many Wyoming ranchers do business with the five Colorado feedlots owned by Five Rivers.

Some industry observers say the merger would be good for American producers by opening Europe and other markets to American beef. Jim Magagna, executive vice president of the Wyoming Stockgrowers Association, said the merger could indeed help producers that way.

The federal farm bill includes an amendment by Enzi to prohibit meatpackers from owning cattle for more than two weeks before slaughter. Magagna said Enzi''s amendment could make it harder for JBS to own cattle in the Five Rivers feedlots.

JBS Swift has a plant in Grand Island, Neb.

Randy Stevenson, owner of a small Wheatland feedlot and a regional director of the Ranchers-Cattlemen Action Legal Fund, said consolidation to just a few companies in any industry is dangerous, in case one of the companies collapsed.

Stevenson said the merger could open the door to competition from imported beef.

A rancher in the Chugwater area, Philip Ellis, said he''d heard that the merger could open new markets. But he also wanted more information.

National Beef has operations in Liberal, Kansas City and Dodge City, Kan.; Brawley, Calif.; Hummels Wharf, Pa.; and Moultrie, Ga. The company had $5.6 billion in sales last year and processed almost 4 million head of cattle.

Smithfield Beef, which has major facilities in Green Bay, Wis.; Tolleson, Ariz.; Plainwell, Mich.; and Souderton, Pa., processes more than 2 million head of cattle a year and its sales exceed $2.5 billion annually.

JBS had $11.9 billion in revenue in 2007 with operations in Brazil, Argentina, the U.S. and Australia.