GREELEY, Colo. — JBS USA Pork announced on July 1 its agreement to purchase Cargill Pork’s U.S.-based pork business for $1.45 billion, with completion of the acquisition subject to federal regulatory review and approval.
"Today’s announcement of our agreement to purchase the Cargill pork operations is a strategic investment in the long-term growth of our domestic and global pork business and demonstrates our continued commitment to the U.S. livestock sector," said Martin Dooley, president and chief operating officer of JBS USA Pork in Colorado.
"This transaction will strengthen our position as a producer and supplier of all major animal proteins around the world, and provide increased opportunities for our producer partners and key customers."
Under terms of the agreement, JBS’ acquisition of Cargill’s pork business would include Cargill’s two meat-processing plants in Ottumwa, Iowa, and Beardstown, Ill. In 1987, Cargill acquired both Midwest facilities, which processed a total of 9.3 million hogs in 2014 – one of the many factors Dooley said led to the multibillion-dollar deal.
"The strength and success of Cargill’s pork team and hog suppliers, as well as its industry leadership in areas such as animal welfare, exports, bacon production and innovation, were significant and compelling factors that led us to pursue this acquisition and enhance our ability to serve our diverse, global customer base," he said.
Moreover, the purchase by JBS of Cargill Pork would also include five feed mills (two in Missouri, and one each in Arkansas, Iowa and Texas), as well as four hog farms (two in Arkansas and one each in Oklahoma and Texas).
Todd Hall, Cargill senior vice president in Minneapolis, added the strengths of the JBS and Cargill pork businesses would complement one another. "Together, they promise to offer enhanced service to customers and more opportunities for employees and hog producers, while providing an important source of protein to consumers around the world," he said.
"The professional and focused manner in which JBS approached Cargill demonstrated to us that they place a great deal of value on growing this part of their company to better compete in the marketplace and are willing to invest in its future. JBS is acquiring a business with excellent people and fixed assets, and an established track record of success."
In 2007, JBS first entered the U.S. pork market with the acquisition of Swift & Co., and has steadily improved performance ever since, according to JBS company officials. With more than 6,000 workers and the total daily capacity to process more than 50,000 hogs at processing facilities in Marshalltown, Iowa, Worthington, Minn., and Louisville, Ky., JBS officials said the company offers "a wide selection of well-known brands including Swift and Swift Premium.
"The announced transaction will enhance JBS USA Pork’s ability to meet increasing global demand for high-quality, innovative fresh and frozen pork products."
But Phil Howard, associate professor in the Department of Community Sustainability at Michigan State University, told Mother Jones the deal was "bad news," claiming "JBS will have even more power to drive down the prices it pays to farmers, and drive up the prices it charges to consumers."
In addition, Howard charged Smithfield and JBS would together "own 45.5 percent of the pork market, moving closer to the Coke/Pepsi model of domination by just two giant firms."
Steve Meyer, an agricultural economist who recently became vice president of pork analysis at Express Markets, Inc. Analytics in Des Moines, doesn’t view the merger as being either good or bad for U.S. pork producers or the industry.
"It is not necessarily good, since there wasn’t a big need for it," he explained. "Cargill’s operation was in no danger. Swift didn’t really need larger scale to be competitive. It is not bad, because I don’t see any significant damage to competition.
"The two companies overlap in their procurement activities in eastern Iowa, where JBS’ Marshalltown, Iowa, plant and Cargill’s Ottumwa, Iowa, plant compete to some degree for hogs. But Tyson, Farmland, Trim-Rite and, to a lesser degree, Indiana Pack, buy in or near those areas, too, so I think there will still be multiple bids for most sellers."
But, Meyer said, "The merger does trip some Department of Justice (DOJ) merger review criteria, so it will be reviewed, but my guess is that it will be approved without any divestitures being required."
In the long run, he said Cargill may have viewed JBS’ bid as being "a very good one … There was no indication that I know of that Cargill was unhappy with their pork business and the company has, in fact, invested a lot of money over the past five years to build its own hog supply system."
In its initial company announcement, Meyer also said Cargill said JBS "put an offer on the table that demanded their attention.
"This is, to my knowledge, Swift’s first foray into raising their own pigs – at least here in the U.S.," he said. "That will be interesting, but I’m guessing they will keep the Cargill hog production people and pretty much leave them alone."
