December 19, 2012

   

   
Canada's Competition Bureau has authorised two mergers in the local hog industry, where producers are coping with significant losses caused by higher feed prices.

The bureau said it would allow Toronto food firm, Maple Leaf  Foods, to buy hog producer, Puratone Corp. for US$42 million as well as allow Quebec meat packer, Olymel, to buy Big Sky Farms, Canada's second-largest hog producer, out of receivership for US$65.25 million.

The bureau added that it considered whether Olymel or Maple Leaf would be able to "totally or partially foreclose rivals' access to live hogs in upstream markets... or to limit or cease their purchases of live hogs from upstream rivals."

The bureau concluded that the buyers would be unable to create or boost market power upstream due to "excess demand" for hogs, and they could not create or increase market power downstream for reasons including "effective remaining competition" -- not the least of which would be between Olymel and Maple Leaf.

The bureau did find the two companies may be in a position to hinder other hog producers' access to buyers, but added that neither Olymel nor Maple Leaf would have any incentive to foreclose rival hog farmers from access to their slaughter plants.

The costs of limiting their procurement of hogs from upstream rivals "would likely exceed the gains from doing so, thereby rendering such a strategy unprofitable," the bureau said.