Pending packer merger discussed in Casper
Casper – Good or bad for the cattle industry was the question when JBS-Swift’s Wesley Batista and R-CALF USA Vice President Randy Stevenson spoke in Casper June 5 at the summer convention of the Wyoming Stock Growers Association.
At question was JBS-Swift’s plan to purchase National Beef Packing Co., Smithfield Beef Group and Fiver Rivers Ranch Cattle Feeding. The merger would make the Batista family’s company both the largest packer and cattle feeder in the nation. They’re now the largest packer in both Brazil and Australia. U.S. Department of Justice (DOJ) officials are reviewing the proposal that some groups, including Stevenson’s R-CALF USA, oppose.
Batista said cattle fed at Five Rivers account for five percent of the nation’s kill. If the merger moves forward they’d account for 10 percent of his company’s needs. To Batista it’s a drop in the bucket and cattle he said will be directed at specialty markets. Stevenson claimed it’s enough to allow the company to leave the cash cattle market and bring prices down. A one and a half percent decline in cattle costs, he said, results in enough money for a packer to cover labor costs.
Stevenson told of prices he claimed were aimed at leveraging down prices such as February 2006 when he says three packers almost simultaneously announced they were going to cut kills. Prices fell for the cattle industry, he said, but the slaughter numbers climbed based on USDA reports. Stevenson challenged JBS to report all market purchases, buy 50-60 percent of its kill on the spot market every day and not to sign long-term contracts with retailers.
Batista said his company likes high cattle prices. Operating on a margin allows them to make more money when they’re adding their percentage of profit to a higher number. Stevenson said packers’ biggest expense is in the cattle they purchase. Leveraging that number down is something he said is beneficial to the packing industry and practiced as a matter of doing business.
Working together Batista believes additional value can be brought to the cattle industry through expanded exports and increased demand for beef. Swift spokesperson Chandler Keys said JBS’s plants are leaders in innovation and the marketing of the right cuts to the right markets. He told of a cut popular for grilling in South America that’s now being imported from Australia. “If you sell the right cut in the right place, you’ll add value,” said Batista. Keys, during a late May interview with the Roundup, said JBS’s global presence gives the company an edge in tapping international markets.
Batista offered the Hallmark beef recall and the recent protests in South Korea over the re-entry of American beef as cases where stronger unity is needed in the cattle industry. Batista said groups like the National Cattlemen’s Beef Association and the American Meat Institute need to join forces for the betterment of the beef industry.
If the merger is approved and value is added to individual carcasses, Batista said that money will be shared with cattle producers. Stevenson countered that what he described as “trickle down economics” only works when there’s open and competitive markets forcing the money’s flow.
As the meeting came to a close WSGA member and Shoshoni rancher Lois Herbst called for a resolution opposing the merger. Sheridan rancher Chas Kane seconded the motion that was then approved on a narrow voice vote. As this edition of the Roundup went to press the full membership was preparing to debate the resolution in its business meeting.
It will be at least fall before the DOJ announces whether or not it will allow the proposed merger to move forward. If allowed to move ahead attorneys general and other interested parties would have the option of appeal. Wyoming’s AG office is among those tracking the proposed merger.
Jennifer Womack is managing editor of the Wyoming Livestock Roundup and can be reached at firstname.lastname@example.org.