Food & Power: Ranchers Oppose Marfrig Acquisition that would Spell More Foreign Control Over US Beef
Posted by Kevin Carty
A growing number of American ranchers are calling on the Trump Administration to block a Brazilian corporation’s plan to take over America’s fourth largest meatpacker. They say the deal would worsen monopolization in the sector and further harm the livelihoods of American farmers and ranchers.
“It sounded good when Trump said he would bring everything back to the United States,” says Vaughn Meyer, a South Dakota cattle rancher currently serving with his state’s Stockgrowers Association. “But he’s going to have to activate the Justice Department if he wants to do that” in the cattle industry, he says.
Brazilian meatpacker Marfrig earlier this month paid $969 million to buy National Beef. The deal would make Marfrig the world’s second largest beef processor behind Brazil’s JBS.
The U.S. beef industry is already highly concentrated. Four companies – Tyson, JBS, Cargill, and National Beef – control 84% of all beef processing.
America’s ranchers are also concerned that the U.S. meat processing industry is increasingly foreign-owned. JBS, which is funded in part by the Brazilian National Development Bank, became the world’s biggest beef processor with its acquisition of Swift in 2007. (The company processes poultry and pork as well.) If Marfrig’s proposed acquisition of National Beef is approved, these two Brazilian corporations will control approximately a third of American beef processing. Smithfield, the world’s largest pork processor and producer, was acquired by Chinese company WH Group in 2013.
Both Marfrig and JBS also control large herds of cattle in Brazil and other nations across the Americas. Right now, U.S. businesses are forbidden from importing Brazilian beef of because of safety issues. But those imports are expected to resume sometime in 2018. When they do, ranchers say, these international corporations will be free to buy cattle on the U.S. market from independent ranchers, slaughter their own cattle in the U.S., or import beef from the herds they control abroad. Meyer says this gives JBS the ability not only to swiftly respond to changes in pricing but also to manipulate markets in the United States.
American ranchers have already had to reckon with the power of Brazilian beef. Beef prices hit a record high in 2014. But in December 2015, Congress passed and President Obama signed a law repealing country of origin labeling rules for beef and pork, meaning that American and foreign-grown beef no longer had to be labeled as such in U.S. supermarkets. Also in 2016, the USDA reopened the U.S. to Brazilian beef imports, meaning that packers could import cheaper beef at will and limit their purchases of higher-priced American beef. Prices for market-ready cattle promptly collapsed, falling from approximately $1.70 pound to $1.10 per pound.
Since 1996, an average of nearly 11,000 cattle operations have gone out of business each year. These closure rates have remained constant both in years when Americans ate more beef and in years when they ate less, and Meyer and other ranchers blame consolidation for the losses. “We’ve lost so many farmers and ranchers,” says Meyer.
Lower payments to ranchers have not helped eaters either. Data shows that even in years of falling prices, the meatpackers don’t pass those savings on to the consumer.
Bullard and his fellow ranchers hope the Trump Administration will block the Marfrig deal, in part because they see parallels between their situation and that of U.S. manufacturing workers, who President Trump has promised to help by fighting against “unfair trade practices.” “The country of Brazil’s efforts to take over US beef processing is what China is doing to U.S. manufacturing,” Bullard says.
Some members of Congress have weighed in on the deal as well. Senators Debbie Stabenow (D-Mich.), Chuck Grassley (R-Iowa), Joni Ernst (R-Iowa), and Sherrod Brown (D-Ohio) – last week co-authored a letter advising the Committee on Foreign Investment in the United States to look into the deal. As they wrote, “growing foreign investment in U.S. agriculture requires a thorough review process to safeguard the American food system.”
What We’re Reading
- On Tuesday, lawyers gave their closing remarks in a federal trial revolving around the stench of hog manure from a North Carolina farm supplying pork to Smithfield. The case is the first of twenty-six federal lawsuits filed by Eastern North Carolina residents against Murphy Brown, a Smithfield subsidiary, in which residents argue that the stench of manure from the farm has negatively impacted their lives. Smithfield, owned by WH Group, a Chinese company, is the world’s largest pork producer.
- An “anti-poverty software company” called Propel has found its business stifled by Conduent, a monopolistic government contractor that runs the U.S. government’s SNAP network in 25 states, The New York Times reported this week. The story goes to show the negative effects of the highly concentrated food stamp provision business, in which two companies – Conduent and FIS – control most food stamp state networks.
- The head of Australia’s competition authority said his agency will look into possible anti-competitive issues posed by contracts between restaurants and UberEats, the food delivery service. As we reported in the last edition of Food & Power, delivery platforms like UberEats have consolidated a great deal of control over independent restaurants and liquor stores.
Correction: A previous version of this story misstated beef prices during the 2016 price collapse. We regret the error.