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Concentration in Agriculture and an Examination of the Jbs/Swift Acquisitions Hearing Committee on the Judiciary United States S

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Concentration in Agriculture and an Examination of the Jbs/Swift Acquisitions Hearing Committee on the Judiciary United States S S. HRG. 110–569 CONCENTRATION IN AGRICULTURE AND AN EXAMINATION OF THE JBS/SWIFT ACQUISITIONS HEARING BEFORE THE SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS OF THE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED TENTH CONGRESS SECOND SESSION MAY 7, 2008 Serial No. J–110–91 Printed for the use of the Committee on the Judiciary ( U.S. GOVERNMENT PRINTING OFFICE 45–064 PDF WASHINGTON : 2008 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Aug 31 2005 16:12 Nov 03, 2008 Jkt 045064 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\GPO\HEARINGS\45064.TXT SJUD1 PsN: CMORC COMMITTEE ON THE JUDICIARY PATRICK J. LEAHY, Vermont, Chairman EDWARD M. KENNEDY, Massachusetts ARLEN SPECTER, Pennsylvania JOSEPH R. BIDEN, JR., Delaware ORRIN G. HATCH, Utah HERB KOHL, Wisconsin CHARLES E. GRASSLEY, Iowa DIANNE FEINSTEIN, California JON KYL, Arizona RUSSELL D. FEINGOLD, Wisconsin JEFF SESSIONS, Alabama CHARLES E. SCHUMER, New York LINDSEY O. GRAHAM, South Carolina RICHARD J. DURBIN, Illinois JOHN CORNYN, Texas BENJAMIN L. CARDIN, Maryland SAM BROWNBACK, Kansas SHELDON WHITEHOUSE, Rhode Island TOM COBURN, Oklahoma BRUCE A. COHEN, Chief Counsel and Staff Director MICHAEL O’NEILL, Republican Chief Counsel and Staff Director SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS HERB KOHL, Wisconsin, Chairman PATRICK J. LEAHY, Vermont ORRIN G. HATCH, Utah JOSEPH R. BIDEN, JR., Delaware ARLEN SPECTER, Pennsylvania RUSSELL D. FEINGOLD, Wisconsin CHARLES E. GRASSLEY, Iowa CHARLES E. SCHUMER, New York SAM BROWNBACK, Kansas BENJAMIN L. CARDIN, Maryland TOM COBURN, Oklahoma JEFFREY MILLER, Chief Counsel PETER LEVITAS, Republican Chief Counsel (II) VerDate Aug 31 2005 16:12 Nov 03, 2008 Jkt 045064 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\45064.TXT SJUD1 PsN: CMORC C O N T E N T S STATEMENTS OF COMMITTEE MEMBERS Page Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa ..................... 2 prepared statement .......................................................................................... 186 Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 4 Kohl, Hon. Herbert, a U.S. Senator from the State of Wisconsin ....................... 1 prepared statement .......................................................................................... 195 WITNESSES Balto, David A., Senior Fellow, Center for American Progress, Washington, D.C. ........................................................................................................................ 25 Batista, Wesley M., Chief Executive Officer, North America, JBS Swift and Company, Greeley, Colorado ............................................................................... 17 Bullard, Bill, Chief Executive Officer, Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, Billings, Montana ........................................ 20 Carstensen, Peter C., Professor of Law, University of Wisconsin Law School, Madison, Wisconsin .............................................................................................. 6 Feuz, Dillon M., Professor, Department of Economics, Utah State University, Logan, Utah .......................................................................................................... 22 Hunt, Steven D., Chief Executive Officer, Premium Beef, Ltd., Kansas City, Missouri ................................................................................................................ 19 Ross, Douglas, Special Counsel for Agriculture, Antitrust Division, Depart- ment of Justice, Washington, D.C. ..................................................................... 5 Stumo, Michael, Legal Counsel, Organization for Competitive Markets, Lin- coln, Nebraska ...................................................................................................... 24 QUESTIONS AND ANSWERS Responses of David Balto to questions submitted by Senators Kohl and Grass- ley .......................................................................................................................... 34 Responses of Wesley Batista to questions submitted by Senators Kohl, Hatch, Grassley and Feingold ......................................................................................... 39 Responses of Bill Bullard to questions submitted by Senators Kohl, Grassley and Feingold ......................................................................................................... 57 Responses of Peter Carstensen to questions submitted by Senators Kohl, Grassley and Feingold ......................................................................................... 72 Responses of Dillon Feuz to questions submitted by Senators Kohl and Hatch 78 Responses of Steve Hunt to questions submitted by Senators Kohl, Hatch, Grassley and Feingold ......................................................................................... 86 Responses of Douglas Ross to questions submitted by Senators Kohl, Grassley and Feingold ......................................................................................................... 91 Responses of Michael Stumo to questions submitted by Senators Kohl, Grass- ley and Feingold ................................................................................................... 105 SUBMISSIONS FOR THE RECORD Balto, David A., Senior Fellow, Center for American Progress, Washington, D.C., statement .................................................................................................... 115 Batista, Wesley M., Chief Executive Officer, North America, JBS Swift and Company, Greeley, Colorado, statement ............................................................ 128 Bullard, Bill, Chief Executive Officer, Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, Billings, Montana, statement ..................... 131 Carstensen, Peter C., Professor of Law, University of Wisconsin Law School, Madison, Wisconsin, statement ........................................................................... 166 (III) VerDate Aug 31 2005 16:12 Nov 03, 2008 Jkt 045064 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\45064.TXT SJUD1 PsN: CMORC IV Page Feuz, Dillon M., Professor, Department of Economics, Utah State University, Logan, Utah, statement ....................................................................................... 177 Hunt, Steven D., Chief Executive Officer, Premium Beef, Ltd., Kansas City, Missouri, statement ............................................................................................. 191 Ross, Douglas, Special Counsel for Agriculture, Antitrust Division, Depart- ment of Justice, Washington, D.C., statement .................................................. 197 Stumo, Michael, Legal Counsel, Organization for Competitive Markets, Lin- coln, Nebraska, statement and attachments ..................................................... 212 U.S. Senators, Washington, D.C., joint letter ........................................................ 227 VerDate Aug 31 2005 16:12 Nov 03, 2008 Jkt 045064 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 S:\GPO\HEARINGS\45064.TXT SJUD1 PsN: CMORC CONCENTRATION IN AGRICULTURE AND AN EXAMINATION OF THE JBS/SWIFT ACQUISI- TIONS WEDNESDAY, MAY 7, 2008 U.S. SENATE, SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY AND CONSUMER RIGHTS, COMMITTEE ON THE JUDICIARY, Washington, D.C. The Subcommittee met, pursuant to notice, at 2:32 p.m., in room SD–226, Dirksen Senate Office Building, Hon. Herb Kohl, Chair- man of the Subcommittee, presiding. Present: Senators Kohl, Feingold, Hatch, and Grassley. OPENING STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE STATE OF WISCONSIN Chairman KOHL. Good afternoon. We will call this hearing to order at this time. Today we meet to examine the rising tide of con- solidation in agriculture. Recent years have witnessed an enormous transformation in the agriculture industry. Disparity in market power between family farmers and large agribusiness firms all too often leaves the individual farmer and rancher with little choice re- garding who will buy their products and under what terms. In this hearing, we will focus on just the latest example of that trend: JBS/ Swift’s plans to acquire two other meatpacking firms, a transaction that would reduce the number of major competitors in this industry from five down to just three. In 1890, our Nation’s fundamental antitrust law, the Sherman Act, was passed in large part as a response to the consolidation in the meatpacking industry. We now appear to have gone full circle as the JBS/Swift acquisitions will leave the meatpacking industry even more concentrated than it was a century ago. If approved, the JBS/Swift acquisitions will increase the market share of the top four firms to 91 percent. JBS/Swift will also acquire Five Rivers, the Nation’s largest feedlot, marketing 2 million cattle annually. This threatens to give JBS/Swift a very strong lever over the Na- tion’s cattle supply while leaving independent ranchers with little bargaining power. By reducing the number of major buyers for ranchers’ cattle from five down to three, and in some regions even two, this deal will give the remaining beef processors enormous buying power. With little choice to whom to sell their cattle, ranch- ers will increasingly be left in a ‘‘take it
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