Edmondson raises issue on merger: beef prices

By John Greiner

Published: May 30, 2008

A proposed purchase of two American meat companies by a Brazilian firm could lead to higher beef prices for consumers and lower prices being paid to beef producers, Attorney General Drew Edmondson said Thursday.

In a letter to U.S. Attorney General Michael Mukasey, Edmondson expressed his concerns about harmful effects from the proposed acquisition of National Beef Packing Co. of Kansas City, Mo., and Smithfield Beef Group of Green Bay, Wis., by the Brazilian company, JBS.

This is a serious concern to him and Oklahoma beef producers, he said.

Beef production is vital to Oklahoma's economy, and Oklahoma is the fifth-largest cattle producing state with an inventory of 5.4 million head, he said.

"Beef processing is already a highly concentrated industry. The top five processors exercise an 85 percent market share, and this merger will result in the consolidation of three of these processors into one,” Edmondson wrote.

The entity that is created from the merger will be the largest beef processor in the United States, Edmondson said.

Representatives of the American companies involved in the proposed sale could not be reached for comment Thursday.

The market concentration could be even greater in Oklahoma when the acquisition of Five Rivers Ranch Cattle Feed of Smithfield by JBS is taken into consideration, Edmondson wrote.

The purchase of Five Rivers means the merger has implications not only for meat packing but also the feedlot segment of the beef industry, he said.

Five Rivers is reported to be the largest cattle feeder in the United States with five of its feedlots in southwest Kansas and the Oklahoma and Texas panhandles, Edmondson wrote.

"After the merger, Oklahoma beef producers could face a packing market with only three competitors,” the Oklahoma attorney general said. "However, one of those competitors, JBS, may have a limited need to buy cattle because of the cattle inventories in Five Rivers' feedlots.”

This merger as currently proposed would result in the nation's largest meat processor exercising control over the nation's largest feedlot operation.

"This kind of vertical integration could result in a company that has the power to drive down the prices paid to beef producers while at the same time driving up the prices consumers pay for beef at the grocery store,” he said.

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