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Ranchers wary of beef merger, demand DOJ reviewCHEYENNE, Wyo. (AP)--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 JBS SA's proposed $1.1 billion buyout of Smithfield Beef Group Inc. 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 $565 million in the deal that would be paid for Smithfield Beef Group Inc. That would give JBS full control of Five Rivers Ranch Cattle Feeding LLC, made up of 10 feedlots in five states with capacity for 811,000 head of cattle. The nation's largest meatpacker would then control the nation's largest feedlot company. Many Wyoming ranchers do business with the five Colorado feedlots owned by Five Rivers. "The feeding and meat processing sectors of the livestock industry are inextricably linked," Enzi and Barrasso, both Republicans, said in a letter to Mukasey on Friday. "The potential for a packing company to manipulate the market with ownership of livestock is inherent, and this merger exacerbates that situation. It is imperative that a full review of the JBS acquisition include consideration of these factors." 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. "We want to be open-minded on it," Magagna said March 19. "But certainly given the current status of the beef industry, where we already have a high degree of concentration in the packing sector, we're concerned that this moves us just a little bit closer to a monopoly situation," Magagna said. 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. "Even aside from that, the end scenario would be that the largest packer in the United States, which would be JBS, would also be the largest feeder in the United States, which would be Five Rivers," Magagna said. 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. "It's imperative that we have diversification," he said. "If there were 10 meatpackers and one made a bad decision, it would create ripples. But not a tsunami." Stevenson also said the merger could open the door to competition from imported beef. "What we see in Brazil is a huge cattle producing nation," he said. "They will have not just the infrastructure but the marketing ability for a direct pipeline from Brazil to the United States of America." 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. "I'm real concerned about it," Ellis said. "I would like to know more about it to find out how it's going to affect us back on the ranch." 3/31/08 Date: 3/27/08
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