JBS S.A., the world’s largest beef processor, has split ownership of its Five Rivers Cattle Feeding (FRCF), the largest cattle-feeding enterprise in the world with an annual capacity of 1.5 million head.
In making the decision, JBS S.A. officials cite the risk of potential legislation aimed at curbing packer ownership of cattle, as well as the significant working capital required to feed cattle.
Under terms of the agreement announced by JBS S.A., J&F Oklahoma will own the cattle fed in FRCF lots. J&F has agreed to keep those lots at least 85% full and sell at least 500,000 head of finished cattle to JBS-Swift annually through 2011. JBS retains ownership of the FRCF lots and will operate them as a commercial cattle-feeding company.
The most recent legislation aimed at packer ownership of cattle is the “Livestock Marketing Fairness Act” introduced last month by Sen. Mike Enzi (R-WY). See the commentary “Increasing Competition Through Discrimination” elsewhere in this issue of BEEF Stocker Trends.
JBS S.A. is the parent company of JBS-Swift, the third-largest beef packer in the U.S. You’ll recall that its efforts to buy National Beef last year, which would have made it the largest beef packer in the U.S., were blocked by the U.S. Department of Justice (DOJ). In February JBS ended litigation with the DOJ. At the time, Wesley Batista, JBS USA's President and CEO said, "We disagree with the Department of Justice's decision to try and block this transaction. This transaction is highly pro-competitive and will generate significant efficiencies and synergies that will benefit our cattle suppliers and our beef customers.”