R-CALF USA requests U.S. Attorney General block mega feedlot merger
Billings, Mont. – In a letter sent yesterday to U.S. Attorney General Loretta Lynch, her deputy, and the leadership of the U.S. Senate Judiciary Committee, R-CALF USA requests immediate antitrust enforcement action to block the proposed mega-feedlot merger between Cargill Cattle Feeders, LLC (Cargill Cattle Feeders), and Friona Industries (Friona). Cargill, Inc. (Cargill) is proposing to sell two of its four Cargill Cattle Feeders feedlots to Friona.
R-CALF USA states the two feedlot companies, which together market about 1.5 million cattle per year, are tied as the third-largest cattle feedlot companies in the United States. The group wrote that while it fully supports the divestiture of feedlots owned by meatpacker giant Cargill, the effect of the proposed sale of two of Cargill Cattle Feeders feedlots to Friona will substantially reduce competition in both the feeder cattle market and the fed cattle market.
The group also states the merger would do nothing to remedy Cargill’s ongoing ability to manipulate prices with its massive volumes of captive supply cattle. Finally, the group asserts the merger would cause the exploitation of producers on one end of the supply chain and consumers on the other.
R-CALF USA estimates that the two Cargill Cattle Feeders feedlots subject to the proposed sale purchase about 350,000 head of cattle annually from U.S. cattle producers. Based on the 41-head size of the average U.S. cattle herd, R-CALF USA argues that about 8,500 cattle producers would experience a significant reduction in competition for their feeder calves if the merger is approved. This is because Cargill Cattle Feeders would no longer be a competitive rival to Friona for the purchase of those 350,000 feeder calves.
The group points out that competition for feeder cattle is disappearing at an alarming rate as evidenced by a 67 percent reduction in the number of U.S. feedlots since 2008.
The group asserts competition will also be reduced in the fed cattle market. It states the volume of cattle sold in the competitive cash market, where the feedlots subject to the proposed sale are located, has dropped from nearly 50 percent to less than 3 percent during the past decade. Based on representations by Friona that there is competition from four packers for Friona’s cattle, and on news accounts indicating that Friona will continue providing Cargill with cattle fed in the newly acquired feedlots, as well as cattle fed in Friona’s existing feedlots, the group said competition in the fed cattle market will be substantially reduced because it appears all of Friona’s cattle will now be provided to Cargill.
The group’s letter also contains graphs showing that concentration in the feedlot and packing industries has significantly increased the cost of converting cattle to consumable beef while packing and retailing expenses have gone down. This, R-CALF USA states, demonstrates that additional mergers will harm consumers as well as producers.
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