July 23, 2010

The Australian Beef Association (ABA) has protested to the Australian Competition and Consumer Commission (ACCC) the proposed acquisition of Rockdale Beef (Rockdale) by JBS Swift (JBS).

ABA stated that in just three years, JBS has gone from being a non-existent factor in Australia's beef slaughter market to the number one beef packer, processing 25% of Australia's cattle. ABA cites that the acquisition of Rockdale would increase JBS' market hold to 27%, and the group is concerned that if JBS continues to grow at its current rate, it will control over 50% of the beef kill by 2013.

"We believe that this is the time to question the breakneck speed of JBS' growth and how far JBS is to be allowed to go. We are very aware of the precarious state of many Australian processors who do not have access to the extremely low interest loans that the Brazilian Development Bank grants to JBS," ABA Chairman Brad Bellinger said.

The ABA has pointed out several concerns. For example, if the Rockdale feedlot, which is a key site, were merged with the existing JBS feedlots at Griffith and Barraboi, a combined capacity of 110,000 head in the Riverina and Northern Victoria would exert considerable buying power for not only feeder cattle but also feed grains in one of Australia's prominent grain-growing areas. JBS also would have the added advantage of combining this market power with strategically located feedlots at Toowoomba, Mungindi and the Liverpool Plains.

Another concern of the organisation is about the high cost of road transport in Australia, which has made the geographical placement of meat processing, feedlot and grain growing areas even more important to the profitability of vertically integrated beef processing and feeding operations. The merging of JBS/Swift with Rockdale would increase JBS/Swift's feedlot capacity to 163,000 head.

"Allowing JBS to increase the capacity of its feedlot and processing facilities, as well as JBS' geographical spread would increase market power of one entity, giving JBS an increased ability to set prices," Bellinger said.

Another important note included in ABA's comments was the group's concern about JBS' history of engaging in anticompetitive practices.

"JBS SA was reportedly charged with anticompetitive prices for coordinating price agreements among themselves in order to keep cattle prices low when purchasing livestock for slaughter. JBS denied the charges; however, in a subsequent news article, JBS SA reportedly agreed to pay US$8.5 million to an antitrust fund as a result of the charges and agreed to end the practices that were allegedly anticompetitive," ABA said.

"This example demonstrates that it is highly likely that the Australian feeder cattle market would be subject to coordinated interaction by JBS Brazil given that the company was reportedly accused and found culpable based on the payment of restitution. ABA is requesting that the ACCC thoroughly analyse this effort by JBS to acquire Rockdale Beef to determine the potential dangers to Australia's beef industry," added Bellinger.