Wisconsin Ag Connection - Senator Kohl Against Proposed JBS Swift Acquisitions

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Senator Kohl Against Proposed JBS Swift Acquisitions
Wisconsin Ag Connection - 06/26/2008

One of Wisconsin's two U.S. Senators is being vocal about his opposition to the proposed merger between JBS Swift, National Beef Packing Co. and Smithfield's beef division. Herb Kohl, who chairs the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights, recommended in a letter to the Department of Justice that the deal be blocked on the grounds that these acquisitions are 'anticompetitive and would likely cause substantial harm to competition and consumers.'

"JBS Swift is currently the nation's third largest beef processor," Kohl stated in a letter to U.S. Assistant Attorney General Thomas Barnett. "It now intends to acquire the fourth and fifth largest beef processors, National and Smithfield, which will result in JBS Swift becoming the nation's largest beef processor and leaving only two other major companies in the industry. These three remaining firms will have over 80-percent market share of steer/heifer slaughter, and JBS Swift alone will control nearly a third of the market."

Kohl held an Antitrust Subcommittee hearing on the proposed deal in May. He says the likely anti-competitive effects of permitting such a high level of concentration in an already concentrated market are plain to see.

"By reducing the number of major buyers for ranchers' cattle from five to three--and in some regions even one or two--this deal will give the remaining beef processors enormous buying power," Kohl said. "With little choice to whom to sell their cattle, ranchers will increasingly be left in a take or leave it position."

On the national level, the JBS Swift acquisitions would combine 11 meat packing plants now owned by three meatpackers under the single ownership of JBS Swift. On the regional level, many ranchers and feed lot operators will be left with only one, and at best two, meat packing plants to sell their cattle.

Kohl also stated that these acquisitions raise serious concerns that the three major meatpacking firms will substantially increase their market power in the downstream market--finished beef sold to supermarkets, small grocery stores, butcher shops and restaurants. According to the Bureau of Labor Statistics, U.S. beef prices have increased at a rate 68-percent faster than overall inflation over the last decade.