AFF Sentinel Vol.5#26

R-CALF Casts Their Bogeyman Net Further Afield

Determined to cast aspersions on the proposed purchase of Smithfield and National Beef by JBS Swift, R-CALF's Bill Bullard has issued statements that appear to distort and misrepresent how the deal would affect feeder cattle markets and feedyards.

A rabid opponent of cattlemen's beef alliances and branded programs, Bullard seems not to understand what U.S. Premium Beef (USPB) is or how it operates.

"Post-merger, all competing order buyers who are now filling orders for Five Rivers and National Beef would be filling orders for the same company - JBS Brazil," Bullard claims. Bullard concluded this would reduce the number of buyers for feeder cattle, hurting demand.

First, detail errors: a) there is no such company as "JBS-Brazil." JBS-S.A., based in Brazil, is the parent company of JBS Swift, their American company; b) it is not a proposed merger but a purchase of Smithfield Beef and National Beef. Smithfield held a half-interest in Five Rivers, a multi- yard feeding company, with ContiGroup Companies holding the other half.

Further, National owns no feedyards at all, has no need for feeder cattle order buyers and, therefore, its inclusion in the acquisition would have no direct impact on the number of competing feeder cattle buyers. While Five Rivers has common headquarters management, it has managers with a degree of autonomy at each feedyard. They also feed some customer cattle, meaning some customers would be sending their own feeder cattle or feeder cattle purchased by themselves.

But the biggest fallacy in Bullard's claim involves National Beef - a beef packing and processing company - and USPB, a cattlemen's alliance. USPB is an alliance of 29 qualified member feedyards located in six different states and numerous individual ranchers from around the country. USPB owns a majority interest in National Beef and in the purchase, would end up owning shares in JBS Swift.

But USPB would not be owned by JBS, the feedyards are independent operators and procure feeder cattle as they wish and the member feedyards have sold only a part of their production to National. The idea that JBS would "control" USPB and set up the feeder cattle orders for all the USPB feedyards and their rancher members is preposterous.

The facts are these:

• USPB has averaged selling 12,000 head of fed cattle per week to National (website figures).
• USPB member feedyards have the capacity to market over 40,000 head/week, meaning that member feedyards sell lots of cattle to other packers besides National. No more than 30 percent of their capacity has been sold to National.
• National, though still a relatively small packer, slaughters three million head annually, meaning a slaughter capacity of 14,000 hd./day -- it buys fed cattle from many more than just USPB member feedyards.

So R-CALF's contention that suddenly JBS Swift would be consolidating ten percent of national feeder cattle purchases under one office and impairing demand and prices is totally incorrect as regards USPB or National. And Five Rivers has not been selling all its cattle to JBS Swift either, as differences in cattle, feedyard location and plant needs mean cattle go to different plants depending on packer needs and bids. Cattle customers feed may not be the type JBS Swift needs, either.

Bullard's contention that "in some, and perhaps many, feeder cattle markets, this would significantly reduce competition for a significant number of feeder cattle," is farfetched, when someone other than Five Rivers will buy some 92 percent of all feeder cattle. The USPB feeder cattle will be bought by 29 separate feedyards or brought in by some of the over 2,000 cattlemen who have sent cattle through USPB. They would be connected to JBS Swift only by a marketing agreement to be able to sell a certain portion of the feedyards' production to JBS Swift.

The majority of feeder cattle bought by USPB member feedyards - at least 70 percent of their capacity -- will have nothing to do with USPB at all. The USPB qualified feedyards' one-time capacity is over 800,000 head (website data).

Bullard's claim that the situation would harm feeder cattle markets nationally appears factually unsupportable.

We suspect that the Department of Justice, having received Bullard's "evidence" and R-CALF having "met personally with the agency to help it better understand how the U.S. cattle market functions," will have difficulty reconciling facts with R-CALF claims. Having seen Bullard's explanations of cattle market functions, we suspect Justice already has a much better understanding than R-CALF.

Again, R-CALF is not presenting facts and their "evidence" doesn't exist.

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