ContiBeef, Smithfield merge feedlot business

Cattle Market & Farm Reports, Editorials
Feb 21, 2005
by WLJ
The Organization for Competitive Markets (OCM) has expressed concern about the proposed merger of the second- and third-largest cattle- feeding companies in the U.S. because it would create the largest such firm and consolidate power into the hands of the country's largest hog producer.
Smithfield Foods Inc. announced last week a deal to merge its MF Cattle Feeding subsidiary with ContiBeef, a subsidiary of ContiGroup Companies Inc. The combined entity would be the nation's largest cattle-feeding company, with more than 1.6 million cattle marketed per year, based on filling available one-time capacity two times a year.
"We are very worried about potential market impacts resulting from this merger," said Keith Mudd, OCM president, in a release. "Smithfield grew from meager beginnings in Virginia in the early 1980s to become the major force integrating the hog industry and destroying market access for tens of thousands of independent hog producers in the Southeast and later the Midwest."
The venture would surpass Cactus Feeders of Amarillo, Texas, as the U.S's largest cattle feeder, OCM said. Cactus Feeders was one of the first to feed cattle in large scale on contract to a packer, a practice that gives packers "captive supplies" that several groups, including OCM, have credited with taking packers out of cash fed cattle market.
Cactus Feeders has a one-time capacity of about 480,000 head with an estimated annual marketing double that amount, OCM said.
“We now have the pioneer of captive supply in hogs overtaking the pioneer of captive supply in cattle as the dominant feeding company in America,” said Mudd. “Joseph Luter, CEO of Smithfield, lives in a New York City Park Avenue apartment affecting the lives of millions in Rural America with lower income and reduced independence.”
"We fear market access and captive supply problems will increase with this new merger. It is hard to believe Smithfield will not purchase a major packer to integrate its production business, and further thin the fed cattle market volume,” said Mudd. "This event heightens the urgency for states and the federal government to prohibit packer ownership and reduce the percentage of captive supply cattle marketed.”