– With regard to efforts by JBS S.A. (JBS) to acquire Pilgrim’s Pride Corporation (Pilgrim’s Pride), R-CALF USA sent a second submission (see Pages 6 through 9, plus exhibits) of information to the U.S. Department of Justice to reinforce evidence that shows economic harm would hit the U.S. cattle industry if Justice does not block the merger of the competing protein industries (chicken v beef).

The average rule-of-thumb established by a U.S. Department of Agriculture (USDA) review of literature indicates that a 1 percent decrease in poultry prices would reduce beef consumption by 0.24 percent.

For example, R-CALF USA calculated that a 10 percent decrease in poultry prices would decrease the 2008 Nebraska Direct Choice Steer price by $7.15 per hundredweight (cwt) when the farm elasticity of demand for cattle also is considered, representing an $89.38 loss to cattle feeders for each fed steer sold.
R-CALF USA calculated a loss to cattle producers ranging from $7.50 per head to $89.38 per head.

“A loss of anywhere from $7.50 per head to $89.38 per head to the U.S. live cattle industry would have severe ramifications, particularly given the long-run lack of profitability faced by U.S. cattle feeders who have experienced 22 consecutive months of horrendous financial losses,” said R-CALF USA CEO Bill Bullard.

“The financial benefits to JBS for taking action to reduce the value of fed cattle is obvious as the meatpacking industry would realize an annual savings of $202,500,000 if the price of each of the 27 million fed cattle were reduced by $7.50, and an annual savings of more than $2.4 billion if the price of each of the 27 million fed cattle were reduced by $89.38,” he pointed out.

Bullard said it is important to note the relationship between retail Choice beef prices during this prolonged period when the cattle feeding sector has experienced horrendous losses. Choice retail beef prices rose to historical high levels and remained near record levels throughout this period.

“The JBS/Pilgrim’s Pride merger likely would result in lower cattle prices, and it’s even more likely that the cost savings realized by JBS would not be passed on to consumers,” Bullard said.

“R-CALF USA is absolutely convinced that the proposed JBS/Pilgrim’s Pride merger would severely reduce competition among and between the competing food proteins and would also significantly increase JBS’ ability to exercise market power in the marketplace to exploit both cattle producers and consumers,” he emphasized.

“We respectfully request that the Department of Justice conduct a thorough, probing review of the current state of competition in the U.S. cattle and beef industries and, in addition to blocking the proposed JBS/Pilgrim’s Pride merger, take action to restore the competition lost during the 1976-through-2007 period when the meatpackers were unrestrained in their efforts to concentrate, consolidate and vertically integrate the U.S. cattle and beef industries,” Bullard concluded.