JBS Swift, and its parent company JBS S.A., are positioning themselves to build future market share in the United States and internationally. Economist John Nalivka, with Sterling Marketing, Inc., Vale, Oregon, says the company’s announcement of a planned $2 billion public stock offering is consistent with its long-term growth strategy.

The U.S. packing industry is not in good shape, Nalivka notes. Packer margins have been in the red most of this year, and last week packers lost just under $70 on every animal they slaughtered, according to our exclusive Sterling Beef Profit Tracker. Much of the problem, he says, is overcapacity in the packing sector. Packers continue to fight over shrinking supplies of cattle, and while producers might disagree, pay too much for them during a time of weak demand and flat wholesale beef prices.

JBS, Nalivka says, is not the kind of company that sits back and waits for things to improve. Since the Brazilian company JBS S.A. acquired Swift & Company two years ago, they have aggressively pursued acquisitions and expansion opportunities in the United States and abroad. Current efforts to raise capital likely are a step toward further acquisitions in the United States intended to better manage slaughter capacity while building new markets.

It is generally more cost-effective for a packer to purchase existing plants, brands, and by extension, new customers, than it is to build from scratch, Nalivka says. He speculates that as the company expands, they could shift some plant capacity away from slaughter and into production of value-added and case-ready products for domestic and export markets.

“JBS is a different kind of company than we’ve seen in the U.S. packing business,” Nalivka says. “They purchased Swift to gain access to export markets on the Pacific Rim with high-quality grain-fed beef.” Just 7 percent of beef produced in Brazil, he says, is grain fed, compared with 80 percent of U.S. production. JBS, he says, has a focused, calculated strategy to position themselves for future growth in global meat markets.

So will the IPO raise the cash JBS wants for their expansion goals? Nalivka says it’s a tough call. Investors today have a low tolerance for risk, but on the other hand, commodities can offer an attractive investment alternative during times of economic volatility. JBS sees long-term potential for growth in global meat demand, and their strategies for managing slaughter capacity, purchasing market share and gaining access to new markets should position the company to capitalize on future growth in demand.