FEED Business Worldwide - December, 2011
Pilgrim's Pride pays contract farmers damages for price manipulation
A US federal court ordered poultry processor Pilgrim's Pride Corporation to pay US$25.8 million in damages to 91 contract poultry farmers after it found the company liable for unfairly manipulating the price of chicken.
Magistrate Judge Charles Everingham IV ruled that in 2009, Pilgrim's Pride shutting down of an El Dorado, Arkansas poultry processing plant and refusal to sell its operations to other poultry companies violated federal law. He concluded that the litigant contract poultry farmers were harmed by Pilgrim's Pride refusal to purchase their poultry while opting to idle its processing plant rather than sell it.
In his ruling, the judge cited an internal email message from William Snyder, the company's chief restructuring officer, as evidence. Snyder wrote the company planned "to restrict the chicken in the area and allow prices to rise."
"Given the length of time it would have taken other competitors to replace capacity, PPC's actions were likely to lead to a competitive injury," Everingham said. He added that the El Dorado plant's shutdown affected the national supply of chicken, causing prices to rise.
According to the ruling, the company violated a provision of the Packers and Stockyards Act of 1921, which prohibits livestock companies from unfair and deceptive practices. At the same time, the court dismissed concurrent charges of fraud and false representation made against the company.
Pilgrim's Pride filed for bankruptcy protection in 2008, after it lost nearly US$1 billion due to a coincidence of record-high feed costs and falling poultry prices. The Colorado-based company was later taken over by Brazil-based meat processor JBS S.A.
Upon filing for bankruptcy, the company opted to shut down plants in Arkansas, Georgia, and Louisiana. The court ruling noted that when the governor of Louisiana tried to negotiate the sale a Louisiana plant to a third party, Pilgrim's Pride threatened to shut down another plant in the same state.
Pilgrim's Pride CEO Bill Lovette said in a statement that he disagreed with the judge's interpretation of the Packers and Stockyards Act, and that the company would appeal the ruling. Robert Depper, an attorney representing the plaintiff contract poultry farmers, said he was confident that the ruling would stand on appeal, noting that, "The evidence for price manipulation is very strong."
Cargill and General Mills mulling Brazilian feed acquisitions
Agribusiness giants Cargill and General Mills are reported to be considering acquisition opportunities in Brazil, but may be rebuffed by the plans of existing Brazilian companies such as JBS SA and Marfrig.
Thomas Forsythe, vice president of corporate communications at General Mills, said that while the company will not "rule out the possibility of entering the protein industry in Brazil", the country's own companies are already "very strong in this sector".
Mike Fernandez, vice president for corporate affairs at Cargill, said that assets of BRF Brasil Foods have their interest, but added that Brazilian players like JBS SA and Marfrig are more likely to get them. "The issue is not our interest, which is great in this sector, but at what price the assets are being made available," he said.
General Mills is seeking to expand its global operations, with Brazil, Russia, India, and China as priority emerging markets. The company intends to construct its own feed mills in China, but acquire existing local facilities and brands in Brazil's more mature market.
General Mills is more traditionally focused on grain commodities than meat production. By comparison, Cargill's is more integrated, with activities ranging from grain handling and storage to meat packing. In Brazil however, Cargill made it clear that it intends to pursue feed-related opportunities.
Back in 2009, Cargill sold its Seara animal protein brand to Brazil's Marfrig, as the company felt it could not keep up with Brazilian meat processors. Pat Bowe, Cargill's vice president of ingredients, said that they "didn't know how to manage Seara very well," adding that, "If we had the chance to buy Perdigao or Sadia, we would have achieved better results." Bowe concluded that while Cargill may re-enter Brazil's agribusiness market, it would do so as a feed supplier rather than as a meat processor.
Nutreco completes full acquisition of China's Shihai
Netherlands-based animal nutrition company Nutreco announced that it has officially completed its full acquisition of Chinese fish and shrimp feed company Zhuhai Shihai Feed Company Limited.
The acquisition will provide Nutreco's Skretting aqua feed subsidiary business with a Chinese production base. Nutreco said the company intends to continue growing the business, supplying fish feed for various species.
In February, Nutreco had announced its intent to acquire Zhuhai Shihai Feed, subject to the approval of China's regulatory authorities. They have since officially granted permission for the takeover.
Nutreco's China aquaculture acquisition came on the heels of an earlier missed opportunity to buy out Provimi, which was acquired by America's Cargill. Going forward, the company says that intends to continue looking for similar, small-scale bolt-on acquisition targets. They make it easy to integrate the acquired company's operations into Nutreco itself while enabling it to expand its businesses into new regions.
Shihai produced approximately 100,000 tonnes of fish and shrimp feed in 2010. The same year, it commissioned a new feed plant with a capacity of approximately 150,000 tonnes.
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