ORGANIZATION FOR COMPETITIVE MARKETS

P.O. Box 6486

Lincoln, NE 68506 

Web site: www.competitivemarkets.com

Date:  January 2, 2001                        For Immediate Release

 Contact:           Fred Stokes: 662-476-5568

                        Doug O’Brien: 860-379-6199                       

 

TYSON-IBP DEAL PUTS CONSUMERS AND INDEPENDENT PRODUCERS AT RISK SAYS OCM 

The Organization for Competitive Markets (OCM) cited the likelihood of harm to independent producers and consumers in its opposition to the announcement that IBP, Inc. has accepted a bid from Tyson Foods, Inc.  The deal merges the country’s largest poultry producer and processor with the country’s largest processor of fresh beef and pork. 

The acquisition has been valued at $3.2 billion in cash and stock.  Tyson will also assume $1.5 billion in debt.  IBP officials accepted the offer after a heated bidding war between Tyson and Smithfield Foods, Inc., the nation’s largest producer and processor of pork. 

“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.” 

OCM has called for a suspension of mergers between meat and poultry processors so that Congress has time to consider how to protect consumers and producers from the spiraling concentration in this sector. 

According the Associated Press, the new mega-meat company would control 30 percent of the beef market, 33 percent of the chicken market, and 18 percent of the pork market.  The new firm would have annual sales of $24 billion. 

“Considering the business philosophy of Tyson, farmers are worried about the specter of total vertical integration in hogs and cattle by this new firm where there is no room for the independent producer,” said Doug O’Brien, associate counsel for OCM.  Tyson is infamous for engineering the industrialization of the poultry sector and egregious contracting practices with farmers. 

“Consumers may even have more reason to be alarmed by the Tyson deal because of Tyson’s already dominant position in poultry,” added O’Brien.  The great fear is that Tyson will be able to leverage its market power in the markets of beef, poultry, and pork, to raise retail prices, limit consumer choices, and foreclose competition. 

The antitrust laws, as the courts interpret them 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.