JBS acquires Mountain States Rosen lamb plant: Rancher seeks anti-trust intervention
- Urge the Department of Justice to call for a stay on Friday's acquisition
- Ask the Trump Administration to invoke the Defense Production Act in order to keep MSR operating as a lamb processing facility
UDATE: Senator Lee, along with 11 other congressional representatives submitted a letter to the Justice Department yesterday, July 29, seeking an immediate investigation into this matter. Senator Rounds, Senator Thune and Rep. Johnson all signed the letter.
The impending purchase and transformation of the nation’s second largest lamb processing facility has sheep producers nationwide wondering whether they will get their lambs sold this fall.
Brazilian beef packing giant JBS recently acquired Mountain States Rosen, a bankrupt lamb packing plant across the road from a JBS beef processing plant in Greeley, Colorado. JBS has said it plans to use the processing plant to grind hamburger and cut steaks, which leaves the current industry with about 350,000 more lambs than available processing facility.
With about 3,500 of their own lamb carcasses sitting in limbo right now, the Jorgensen family of Mt. Pleasant, Utah said their 2020 lamb crop – their sole source of income – could soon become a liability. About half of U.S. lamb is marketed through food service and because of the economic shutdown, that market has fallen apart, leaving Jorgensen and many others unable to sell as much lamb as usual.
Carson Jorgensen raises sheep in central Utah on private and federal land along with his grandparents, parents, brother, their wives and children. After learning of the plant’s sale on Saturday, Jorgensen has in recent days sent letters to Vice President Mike Pence, his Utah Congressional delegation, and congressional representatives from Montana and Wyoming, to help them understand the grim situation sheep producers face with the sudden disappearance of 20 percent of their sheep slaughter capacity. Jorgensen’s ranching friends across the country are also contacting their congressional delegates.
UDATE: Senator Lee, along with 11 other congressional representatives submitted a letter to the Justice Department seeking an immediate investigation into this matter. Senator Rounds, Senator Thune and Rep. Johnson all signed the letter.
Jorgensen believes JBS is violating anti-trust laws by purchasing the plant and halting much of the country’s lamb processing.
He asked the politicians to urge the U.S. Department of Justice to demand a stay in the plant sale, which is expected to be finalized July 31, 2020.
The situation lamb producers face is dire enough to call for President Trump’s attention, Jorgensen believes.
“I believe this crisis rises to the level of the Trump Administration invoking the Defense Production Act,” he wrote. “Our industry and others need time to assess the damage, understand the short and long term impacts, and determine a path forward…Time is of the essence. Without immediate action, lamb production in the Western United States will be destroyed,” he said in a letter to Vice President Pence.
Jorgensen is holding out faith that the industry will gain the attention of decision-makers in DC. Like his 84-year-old grandfather who initiated and saw to completion a WTO tariff appeal in the 1980s, he’s dedicated to ensuring survivability for America’s sheep ranchers.
“JBS is coming after the lamb market. It is widely believed they did this to take the market share and fill it with imports,” he said. He is pleading with ag producers nationwide to join him in asking the DOJ to look into anti-trust violations.
“For JBS to do this while they were just subpoenaed in the DOJ anti-trust investigation is just blatant,” said Jorgensen. The country’s biggest four beef packers – JBS, Cargill, Marfrig/National Beef and Tyson are currently under investigation by the U.S. Department of Justice to determine if their beef pricing and cattle purchasing activities were legal during the COVID pandemic. While beef prices more than doubled, the price of fed cattle dropped by more than 20 percent at times.
“This is a wake-up call for all American farmers and ranchers, if this follows through it will decimate the sheep industry in the Western United States,” said Jorgensen.
Glenrock, Wyoming sheep rancher Brad Boner serves as the president of Mountain States Lamb Cooperative. The cooperative, which is comprised of 149 sheep ranching families in 11 western states, owns 87 percent of the now bankrupt MSR.
MSR bought the processing plant about four-and-a-half years ago from JBS when JBS stated its intent to stop processing lambs there, said Boner. With the plant being located across the road from a JBS cattle plant, the lamb plant has always utilized wastewater and steam services from JBS.
Facing recent financial struggles, MSR tried to sell the plant to another company interested in maintaining the lamb processing function. But JBS refused to provide the potential new owner with wastewater or steam services, rendering the plant essentially useless. Lacking the ability to sell the plant, MSR was forced into bankruptcy in recent months. On July 16, Wyoming’s bankruptcy court heard arguments and purchasing offers from both JBS and Greeley Fab (a newly established company consisting of the MSR chairman and another MSR board member).
JBS was awarded the right to purchase the plant for $14.25 million. Greeley Fab’s final offer of $14,050,000 fell just short.
But Boner said in the bankruptcy auction, neither the negotiating parties nor the judge placed any value on the existing employees, the families of the 149 ranching co-op shareholders, nor the rest of the industry – all of whom will obviously be significantly affected by this move.
JBS’s interest may be in increasing their market share in the US marketplace, believes Boner. “Although they are making it into a steak or grinding facility, JBS is also the largest lamb importer in the United States and it’s likely they will take some of this market share away with imported product,” he said
For the more than 17 years of MSR’s existence, each shareholder was required to deliver a minimum of one lamb per year for the shares owned. Some individuals or families owned tens of thousands of shares, said Boner, at $20 per head. While the shares are not recoverable, that loss is minute compared to the elimination of the slaughter and processing option, said Boner.
MSR’s head of procurement, Brad Anderson, is out of a job, along with the other approximately 221 employees. He explained that the plant’s freezer is full of about 10,000 boxes of lamb meat valued at around $4 million. This inventory, as well as debt and accounts receivable will become JBS property when the turnkey deal is completed on Friday, unless halted by DOJ.
Anderson explains that the plant last year processed around 360,000 head but has the capacity to handle about twice that in a year, if the market demand existed.
He also said that while co-op shareholders provided about half the lambs each year, MSR bought the other half from ranchers across the country.
Earlier this year when beef slaughter plants closed because plant workers fell ill with COVID, beef slaughter numbers were reduced by 20-25 percent at one point. Fed cattle prices dropped accordingly, by at least 20 percent. With the permanent loss of 20 percent of the lamb slaughter capacity, sheep producers can fairly expect an even bigger financial hit.
Jorgensen said sheep producers including his own family are in a state of emergency. “Honestly sheep ranchers are panicking right now. They don’t know what to do. My family has been doing this since we immigrated from Norway. I’ve got six generations behind me.” Jorgensen said his family is financially conservative and has prepared for tough times as much as possible, but that the removal of a fifth of the lamb processing capabilities will throw the industry into turmoil. JBS’s intention of retro-fitting the plant into a beef grind and processing plant, destroys all hope of processing lambs there at any future time. Jorgensen said this move will leave himself and other ranchers with extremely limited options for their lambs which are mostly marketed in September and October.
The Jorgensen family usually maintains ownership of their lambs, and also buys lambs from a couple of other area ranchers. They send the lambs to various feedlots and hay meadows to grow and fatten until they are slaughter weight, then process them through MSR.
With the market struggles in recent months, the Jorgensens are looking for a buyer for 3,500 frozen carcasses from last year’s lamb crop, and will wean this year’s lamb crop in about two months. Jorgensen has heard that some larger operators have as many as 15,000 lambs in freezers, unable to ship them due to the COVID-induced market collapse.
Like cattle and hog producers, sheep ranchers experienced a price collapse during COVID. Unlike the beef and pork businesses, though, the sheep industry had already lost well over half its market share to foreign product.
With nearly three-quarters of lamb sold in the United States being imported product, the entire shrunken sheep industry, from producer to meat salesman, struggles. USDA data indicates that the nation’s sheepgrowers currently own about 5 million head of sheep, less than one tenth of the US sheep inventory in the 1940s.
Lamb feeders with lambs ready to slaughter could struggle to find an outlet for them, said Jorgensen.
“Some lamb feeders are telling me they could get lambs for free this year and still not make any money on them,” said Jorgensen.
Fat lambs are worth around $.90 to $1 per pound currently, at 175-190 pounds. Jorgensen said the market needs to be around $1.50 for fat lambs in order for most producers/feeders to be profitable.
A new lamb slaughter plant in Brush, Colorado, that is expected to begin operating in August or September will ship whole carcasses, not individual meat cuts, said Spence Rule, one of Colorado Lamb Processors owners.
The plant will be able to handle as many as 2,000 lambs per day and employ 50-60 people when at full capacity which will be potentially more lambs than MSR was slaughtering, but without the carcass breakdown capabilities. Rule expects most carcasses will be shipped to facilities on the east coast specializing in breaking them down into food service and retail cuts.
The plant owners: the Raftopoulos Family, and the Harper Family, along with Rule Feeders, are all lamb feeders. Rule said that the plant will buy lambs to fill their needs, and that the industry will dictate whether they will need to purchase more finished lambs or more feeder lambs.
JBS did not respond to our request for an interview.