ANALYSIS - It was surprising news last week when JBS's USA Pork division announced that it had entered into an agreement to acquire Cargill's US pork business for $1.45 billion.
The acquisition includes two Cargill processing plants, five feed mills and four hog farms.
“The announcement of our agreement to purchase the Cargill pork operations is a strategic investment in the long-term growth of our domestic and global pork business and demonstrates our continued commitment to the US livestock sector,” said Martin Dooley, president and COO of JBS USA Pork.
“This transaction will strengthen our position as a producer and supplier of all major animal proteins around the world, and provide increased opportunities for our producer partners and key customers. The strength and success of Cargill’s pork team and hog suppliers, as well as its industry leadership in areas such as animal welfare, exports, bacon production and innovation, were significant and compelling factors that led us to pursue this acquisition and enhance our ability to serve our diverse, global customer base.”
Discussing the reasons for the acquisition, Steve Meyer and Len Steiner wrote in the CME that JBS has been aggressively buying meat assets all over the world in the past few years.
According to Mr Meyer and Mr Steiner, this is the first time that JBS has entered into primary hog production — at least on any scale as significant as this.
According to Successful Farming’s 2014 Pork Powerhouses listing of the nation’s largest pork producers, Cargill ranked 8th with 161,000 sows.
Completion of the acquisition is now subject to regulatory and competition review and approval.
Putting together the third and fourth largest pork packers will increase the industry’s four-firm concentration ration (CR-4) by 8.2 per cent to 63.0 per cent by moving Hormel to the number four spot in the rankings, said Mr Meyer and Mr Steiner.
More importantly, combining these high-ranking companies will drive up the Herfindahl-Hirschman Index (HHI) by about 190 points.
In disease news, Canada has reported a new outbreak of Porcine Epidemic Diarrhoea (PED) at a farrow-to-finish farm in Lambton County, Ontario.
There was more bad news in African Swine Fever (ASF) as Russia reported the disease in a village pig herd, confirming that the disease is starting to spread outside wild boar populations once more.
Across the three effected villages in Saratovskaya, 335 pigs were destroyed.
Over the past week, there have also been outbreaks of ASF in wild boar. Three outbreaks were reported in Estonia, two in Russia, 15 in Latvia and one in Ukraine.
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