Originally published August 29 2008
No End Seen to Cartel's Destruction of Food Capacity
by Barbara L. Minton
(NaturalNews) Farmers are blasting the role of the food cartels in destroying farm output capacity, creating food shortages and producing monopolistic conditions. In a recent interview for Executive Intelligence Review, Frank Endres, board member of the National Farmers Organization, focused on newly announced acquisitions by JBS Swift & Co. of the 4th and 5th largest beef packing companies in the U.S. He sees the acquisitions as symbolizing the refusal of our government to enforce anti-trust laws. This failure allows tremendous amounts of consolidation in the food industry, resulting in huge multi-national corporate control of commodities and food production.
The Sao Paulo, Brazil based JBS-S.A., parent company of JBS Swift & Co., is Latin America's biggest beef producer. It bought U.S. based Swift Foods in July, 2007 for $1.4 billion, making it the world's largest processor of beef and pork. In addition to the acquisitions of National Beef Co. of Kansas City, and Smithfield Beef Group and Five Rivers Ranch Cattle Feeding, a joint venture of Smithfield Foods and ContiGroup based in Loveland, Co., JBS' current buying binge includes the Tasman Group, the second largest meat processor in Australia.
Some cattle producers have raised concern that the merger would reduce the number of cattle buyers from five to three, leading to depressed prices for cattle producers and higher retail prices for consumers. Many independent producers may be put out of business, with the hardest hit being taken by those with fewer than 80,000 beef cattle operations that have herd sizes over 100 head.
Many onlookers are astounded at the pace, size and bundling of these acquisitions. According to Endres, this cartel will now control 35% of the U.S. beef supply and over 35% of the livestock slaughter in the U.S. He notes that farmers in general and especially those involved in the raising of livestock are very concerned because the parent company has been investigated and fined for its cornering of the meat processing market in Brazil, and there is fear that these tactics will soon be seen in the U.S.
After the acquisitions are completed, JSB Swift will have a capacity of over 875,000 head of cattle in their feeding operations. Endres sees that as way too much centralization of control in too few hands, and as leading to the further bankrupting of family-owned farming operations, ranching and livestock operations that produce the feeder cattle. When buyers for feeder cattle are very few, setting low prices and enforcing them will be much easier than it would be under a free market system, and a small number of buyers can often lead to price fixing.
Right now there is a shortage of calves in the U.S. The consumption of beef in the country outstrips the production of beef cattle. But despite these shortages, the downward pressure on prices for calves has remained consistent, bringing about 40 percent of parity, what the producers need to pay their bills. This shortage has led to the need to import beef to keep up with demand.
Onlookers expect the U.S. Justice Department to look the other way on the merger, even though it means that JBS Swift will have the capacity to slaughter 42,500 head of cattle per day in the U.S., a number that is far ahead of the next two largest processors, Cargill, at 29,000 head per day, and Tyson Foods at 28,300 per day. And the acquisition of Five Rivers will allow JBS Swift to become the largest cattle feeder in the world, with a one time capacity of 81,000 head of cattle.
The timing of the acquisitions is perfect. Strengthening of the Brazilian currency compared to the sinking U.S. dollar will make the buying power of JBS-S.A. go a lot farther. And there has been downward pricing for beef processors in the U.S. since 2004, further setting the stage for JBS-S.A.
Seen as counterpoint to these huge corporate monopolistic trends is the recent call from the Schiller Institute founder, Helga Zepp-LaRouche, who advocates that "Instead of wars of starvation, let us double food production". She calls for emergency action to increase agricultural production and stop the "free trade policies that have led to starvation and food riots in 40 nations over the past year." She also advocates the dissolving of the World Trade Organization and its free trade policies, which she sees as having enriched the few at the expense of the many.
Zepp-LaRouche wants the United Nations Food and Agriculture Organization to immediately institute programs for increasing food production, and medium-term measures to build infrastructure, develop water management systems, and create food processing industries in developing countries. She is also advocating a new financial system that would bring a "New Deal for the entire world", in the tradition of President Franklin D. Roosevelt. This New Deal would be a "new and just world economic order."
While this is going on, Endres is preoccupied with the current chaos among dairy farmers in California where he see another food industry falling into the hands of the big cartels. Lack of regulation for perishable products such as milk has opened the door for Nestle and other giant corporate processors such as Unilever, Suiza, and Kraft, leaving farmers uncertain of whether they can market their output or not.
Dairy farmers in California have increased production and don't have the processing facilities to handle it. Farmers have had to dump their milk when their tanks get full so they can keep on milking their cows on schedule. Farmers will have to transport their milk out of state, or they will have to sell to what are known as calf ranches, which will pay them next to nothing for it. If they can't get their milk picked up by a trucking company before their milk tanks are full and its time for the next milking, they will literally have to dump it into the sewer.
Endres has seen 128 loads of milk dumped at a time, loads from large 7,000 gallon tank trucks. When the trucks go to deliver milk out of state to get rid of it, the turn-around time is doubled. If the trucks can't get back in time to pick up the next load of milk at the dairies, the milk will no longer be in a condition to sell.
In a competitive business market where niches are always filled, one has to wonder why the shortage of trucks and processing facilities remain.
Executive Intelligence Review, 'Shiller Institute Founder Calls for Doubling World Food Production - Now!', June 6, 2008.
Bill Jackson, The Tribune, "JBS-Swift preps to buy nos. 4 and 5 in beef packing industry", March 5, 2008.
Bill Jackson, , "JBS Swift CEO at Senate subcommittee hearing", May 8, 2008.
Lyndon LaRouche Political Action Committee, May 23, 2008.
About the authorBarbara is a school psychologist, a published author in the area of personal finance, a breast cancer survivor using "alternative" treatments, a born existentialist, and a student of nature and all things natural.
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