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October 20, 2008

Miller Joins Lawsuit to Block Merger of Big Beef Processors

Deal would allegedly decrease cattle prices to western Iowa cattle producers and increase beef prices to consumers.

Des Moines, Iowa - Iowa Attorney General Tom Miller today joined the United States Department of Justice and Attorneys General of twelve other states to block the proposed acquisition of National Beef Packing Co. LLC by JBS Beef, S.A.  The two companies are the third and fourth largest beef processors in the United States. 

“This is especially important to western Iowa beef producers,” said Iowa Attorney General Tom Miller.  “Some of these producers sell their livestock in the Kansas market that is directly affected by this merger.  Combining two of the four largest beef packers will mean that there will be fewer buyers for livestock and less competition and that will decrease prices to these Iowa cattle producers.  If allowed to go through, the acquisition of National would place more than 80% of the domestic fed cattle packing capacity in the hands of three firms: JBS, Tyson Foods, and Cargill, Inc. That could ultimately also mean higher prices for consumers.”

JBS, headquartered in Brazil, is already in the process of acquiring Smithfield Beef Group, Inc.  The U.S. Justice Department is not challenging that acquisition.   In 2007, JBS purchased Colorado-based Swift Foods Company. 

The location of the National facilities in the high plains makes the National acquisition a particular problem, Miller said.  JBS already has a beef packing plant in Grand Island, Nebraska.  The acquisition of National would add two plants in Kansas among others.  “The heart of the beef processing industry is in the high plains because of the proximity to large-scale cattle grazing,” Miller said.  “Control of finishing facilities in this area becomes a particular anti-trust concern.” 

According to the complaint filed today in the federal district court in Chicago, the combination of JBS and National would give JBS and the remaining two large beef processors, Tyson and Cargill, the market power to reduce the price they pay for cattle in the high plains and southwestern United States.  At the same time, this increase in market power would enable JBS, Tyson and Cargill to raise the prices they charge customers for processed beef.  [Click here to see complaint.]

“Consumers rely on the cattle industry to provide high-quality, reasonably priced beef products,” Miller said.  “We allege that this deal threatens competition which would reduce the amount producers get paid for their cattle while at the same time increasing the amount consumers pay for their beef.”

Beef packers purchase annually $30 billion in fed cattle from feedlots, slaughter them, and process them into USDA-graded cuts of beef and other products.  Packers then package the cuts as boxed beef for sale to wholesalers and grocery store chains.

The U.S. Justice Department has been investigating this transaction in conjunction with the Attorneys General of Colorado, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Texas, and Wyoming.

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