R-CALF fears JBS purchase will hurt markets

Efficiency benefits producers

Reduced competition | JBS says the acquisition of XL Foods and two plants in the U.S. will be good for beef producers

The option for JBS USA to buy several XL Foods assets in Canada and the United States has raised the hackles of R-CALF, a Montana-based cattle group.

In an Oct. 24 letter to U.S. attorney general Eric Holder and U.S. agriculture secretary Tom Vilsack, R-CALF requested an investigation to see if the JBS acquisition of XL Foods plants in Edmonton and Brooks, Alta., as well as two plants in Omaha, Nebraska, and Nampa, Idaho, will create a harmful monopoly.

JBS USA has an option to buy XL assets that extends into December.

“To the extent that JBS USA and the other dominant beef packers in the U.S. claim that the U.S. cattle and beef industry and the Canadian cattle and beef industry operate in an integrated North American market, it would be important to determine the potential effect on the U.S. cattle market should JBS USA acquire a dominant market position in Canada and further increase its dominant market position in the United States,” R-CALF chief executive officer Bill Bullard wrote in the letter.

Cameron Bruett of JBS corporate communications said the company will look at its acquisition options after the XL Foods plant in Brooks is operating again. 

The plant’s licence to operate was revoked Sept. 27 over E. coli contamination issues.

“They certainly have the right to express their opinion and reflect their constituency as best they see fit,” Bruett said about R-CALF. “We certainly disagree with any contention that this is anything but a good thing for the Canadian beef industry.”

JBS USA and its parent company, JBS SA, constitute the largest beef packer in the world. Bullard said acquisition of the two American XL Foods plants would increase the JBS daily kill capacity to more than 26,000 head. 

That would mean JBS, Cargill and Tyson jointly controlling 82 percent of the U.S. cattle market, he added.

“We strongly oppose any further mergers or acquisitions by any of the “Big Four” U.S. beef packers on the grounds that any such merger or acquisition would result in the reduction, if not elimination, of competition in the U.S. cattle market and in the consumers’ U.S. beef market,” said Bullard.

The fourth company in the so-called “big four” is National Beef Packing of Kansas City, Missouri.

Bruett said JBS’s international capacity is an asset.

“The greatest advantage that we have in North America is an efficient processing sector that can get product all around the world and maximize the market destinations for producers.”

JBS attempted to acquire National Beef in 2008 for $560 million, but the deal was called off when regulators filed an antitrust lawsuit.