CQ TODAY – AGRICULTURE
Aug. 12, 2008 – 12:28 p.m.
Lawmakers Keep Up Fight Against Meatpacking Deal

Some lawmakers continue pressing the Justice Department to block a proposed meatpacking acquisition they argue will undercut farmers and drive up consumer prices, but the deal is unlikely to become a campaign issue, farm groups say.

The Justice Department is currently reviewing an offer announced this spring to allow Brazilian beef behemoth Grupo JBS S.A. to take over U.S. companies National Beef Packing Co. and Smithfield Beef Group. Should the deal pass muster, JBS would control about a third of the U.S. beef processing market currently shared by the three companies, Tyson Foods Inc. and Cargill Inc.

The proposed deal has sparked opposition in Congress, where critics fear squeezing an already concentrated market into three national firms will bolster the buying power of the industry and diminish prices paid to ranchers for their livestock.

Lawmakers leading the opposition have been trying to prevent the current scenario even before the deal was brokered. Sen. Charles E. Grassley, R-Iowa, has worked for more than five years to bar meatpackers from owning, feeding or controlling cattle. A ban on packer ownership of livestock made it into the Senate-passed version of the farm bill but was nixed by conferees.

“What’s been done so far is encouraging, but I don’t have the sense that Congress is looking to take anything to the next step at this point in time,” said John Crabtree, a development officer at the Center for Rural Affairs.

Despite the scrutiny in Congress from Farm Belt lawmakers, the proposed deal has been largely ignored by the major presidential contenders, except for a brief mention on the Web site of the presumed Democratic presidential nominee, Sen. Barack Obama of Illinois.

“Obama is a strong supporter of a packer ban, his campaign says. “When meatpackers own livestock they can manipulate prices and discriminate against independent farmers. Obama will strengthen anti-monopoly laws and strengthen producer protections to ensure independent farmers have fair access to markets, control over their production decisions, and transparency in prices.”

The campaign of presumed Republican nominee Arizona Sen. John McCain does not mention agriculture antitrust in its policies.

“In a time of high prices — record prices for some feedstocks — and for that matter, high prices for livestock . . . it is difficult to make the case that farmers and ranchers are getting the shaft,” Crabtree said. “Of course, the reality is that they probably are. But again, politics is politics and presidential candidates are not known for making complex arguments.”

Still, Crabtree said challenging consolidation in the meatpacking industry could play well with voters in farm producing Midwestern states, many of which are considered up for grabs in the presidential race.

Grassley aides said the Iowa senator has not had a conversation with McCain on packer ownership or agriculture concentration.

Grassley this month said JBS executives invited him to a casual discussion. Company officials have met with numerous members and staffs who represent states where JBS would be located to ensure positive relationships, said Chandler Keys, the company’s vice president for industry and government relations.

“It’s part of our due diligence,” Keys said. “We’re a major employer, an economic factor in their states.”

Grassley said he explained to the executives his concerns “about their 30 percent being too much of a lock on the market” and why he asked the Justice Department to scrutinize the transaction.

Sen. Herb Kohl, D-Wis., chairman of the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, recently urged Justice Department officials, following a May subcommittee hearing, to call off the meatpacking deal. Reducing the number of major suppliers “obviously leaves retailers and restaurants, and ultimately consumers, with significantly fewer competitive choices,” Kohl wrote June 24 to Thomas O. Barnett, assistant attorney general for antitrust. “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.”

He added that federal antitrust regulators should at least seek the divestiture of Five Rivers Ranch Cattle Feeding, the nation’s largest cattle feeder and part of the purchase package.

Critics contend that the company could kill its own cattle in times of extraordinary high prices to avoid buying cattle on the open market. That strategy could lower prices paid to independent farmers, Kohl wrote.

Kohl aides said they have not seen a response from Justice officials, but still share the same concerns.

A Justice Department spokeswoman said the investigation is ongoing and was unable to provide a timetable for resolution.

Source: CQ Today
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