ORGANIZATION FOR COMPETITIVE MARKETS

P.O. Box 6486

Lincoln, NE 68506 

Web site: www.competitivemarkets.com

 

Date:  December 5, 2000                        For Immediate Release

 

Contact:           Fred Stokes: 662-476-5568

                        Doug O’Brien: 860-379-6199                       

 

OCM RENEWS CALL FOR SUSPENSION OF PROCESSOR MERGERS 

The Organization for Competitive Markets (OCM) renewed its call for a two-year suspension of mergers in the meat and poultry processing sectors, pointing to yet another troublesome development on the fate of IBP.  Tyson Foods, Inc. has offered to acquire the nation’s largest combined pork and beef processor.  The Organization for Competitive Markets opposes the proposed acquisition as yet another example of the degradation of market competition in the livestock and poultry sectors. 

The latest bid by Tyson, which would price IBP’s stock at $26 per share, follows offers from an investment group comprised of IBP senior management, Archer Daniels Midland, and Donaldson Lufkin & Jenrette, as well as an offer from Smithfield Foods, Inc.  Smithfield, the nation’s largest hog producer and pork processor, offered $25 per share. 

“This Tyson deal provides more evidence that the rapid consolidation of the meat processors simply must be stopped,” said Fred Stokes, president of the OCM.  “How are farmers supposed to sit at the bargaining table with a firm so big that it is the major player in beef, pork, and poultry?”  

“Consumers also should be concerned,” added Stokes.  “There’s no doubt this deal will restrict their choices at supermarkets.  And given the concentration of firms in food retail, its likely that if a new major meat firm raises prices to retailers, the retailers will simply pass through the price increase to consumers.” 

The deal would severely concentrate the protein sector into the hands of a single processor, with over one-quarter of both chicken and beef, and 18% of pork. 

Tyson is the world’s largest fully integrated producer, processor and marketer of chicken.    Besides its position in poultry, Tyson also owns 110,000 sows.  Tyson raises the hogs and sells them to major meat packers. 

IBP is the nation’s leading beef processor and the nation’s second leading pork processor with 18% of the nation’s capacity. 

Many of the same concerns surround a Tyson acquisition as surround the earlier Smithfield proposal.  “Considering the business philosophy of the companies, farmers are worried about the specter of total vertical integration by these firms where there is no room for the independent producer,” said Doug O’Brien, associate counsel for OCM.  “Consumers may even have more reason to be alarmed by the Tyson deal because of Tyson’s already dominant position in poultry.”  The great fear is that Tyson will be able to leverage its market power in the three markets, beef, poultry, and pork, to raise retail prices, limit consumer choices, and foreclose competition. 

The antitrust laws, as they are interpreted by the courts today, are likely insufficient to deal with the harm that processor concentration causes to producers and consumers.  “The only true remedy at this time is to take a time out, temporarily halt meat processor mergers, and assess the harm done to competition in the agricultural marketplace,” Stokes said. 

The Organization for Competitive Markets is a multidisciplinary, nonprofit group of farmers, ranchers, academics, attorneys, and policy makers dedicated to reclaiming the agricultural marketplace for independent farmers, ranchers and rural communities. 

end