A top US senator has urged anti-trust officials in the country to block plans by Brazil-based meat giant JBS to buy National Beef Packing Co. and the beef operations of Smithfield Foods.
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Senator Herb Kohl, who is chairman of the US Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights, wrote to the US Justice Department to argue that the deals were uncompetitive.
In March, JBS, the world’s largest beef processor struck a deal to buy National Beef Packing Co., the fourth-largest beef processor in the US, for US$560m. JBS also moved to acquire Smithfield’s beef business for $565m.
Should the acquisitions get clearance from US anti-trust officials, JBS will usurp Tyson Foods as the largest beef processor in the US, accounting for almost a third of beef sales in the country.
However, Senator Kohl said the deals would cause “substantial harm” to competition in the sector.
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By GlobalDataKohl pointed to the negative impact on cattle ranchers, who could face lower prices. “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. With little choice to whom to sell their cattle, ranchers will increasingly be left in a ‘take or leave it’ position,” Kohl wrote.
“These acquisitions are likely to substantially increase the market power of three remaining national meatpacking firms, and significantly reduce the prices ranchers are able to obtain for their cattle.”
Kohl went further, arguing that beef prices in supermarkets could rise as a consequence of the JBS deals.
“Reducing the number of major suppliers of beef from five to three obviously leaves retailers and restaurants, and ultimately consumers, with significantly fewer competitive choices,” Kohl argued. “With food prices already rising recently, this enormous consolidation in the beef processing industry is likely just to add to higher food prices at a time that consumers can least afford it.”
Officials at The US Justice Department and at JBS could not be reached for immediate comment.
