Acquisition of Primo by the by the Brazilian company JBS Swift is of concern to most thinking producers throughout Australia.
A decade ago JBS made an entry into Australian processing with much fanfare and promise of a new way that producers would be treated, that of course involved producers being treated as partners.
The fact is JBS is as hard-nosed as any processor that we have seen in Australia and their appetite for acquisition of more share of the processing sector has grown quite dramatically.
Now we have Nippon meat 6% Teys Cargill 21% and of course JBS with 25% of all beef processing in Australia. Top three processors account of 50% of the red meat processing in Australia.
Primo is the latest takeover target for JBS and reading JBS literature they say that there will be very significant benefits which can be delivered to the Australian meat processing industry and its many stakeholders throughout the transaction. They suggest it represents a fantastic opportunity for both businesses to come together to create a company with the necessary scale to take high-quality Australian meat proteins produce to the global market.
Under JBSs ownership Primo will have access to global distribution networks and enhanced market intelligence to compete more effectively with large food manufacturers internationally. The benefits of our investment and efforts to accelerate growth both in Australia and internationally would have significant positive impact on its employees and they expect these benefits will flow through to producers and the local community in which they operate.
In 2010 the ACCC studied the acquisition of Rockdale meat by JBS. Findings based on information available then the ACCC considered that the proposed acquisition is unlikely to result in a substantial lessening of competition.
Reputedly the Brazilian government has a rather large stake in the company and Brazil has one of the biggest cattle herds in the world and if a problem developed, who would JBS support to my way of thinking there’ll be no doubt. Brazil are good marketers and will push any advantage.
In 2007, one major supermarket submitted that the producer got 55% of the retail dollar. This was accepted, by the ACCC as there was only the ABA with conflicting information. Since that time the MLA, under much pressure, have now bought out the fact that the producer is getting 31% of the retail dollar. This figure which is very close to where the ABA believes the producers share lies at current cattle prices. This figure does not include value of by-products.
Of course in latter years we have had terrible droughts and an interruption in live shipping, which bought cattle prices down to an unsustainable level and of course the bigger processors have feasted greedily on the producers’ misfortune. The low prices could be a lot to do with the lack of competition in Australia. The lowest prices in the developed world!
The point is producers cannot remain viable with the sort of prices that major processors have been paying. Of course processors will tell everybody that their business relies on viable producers, however they will take advantage of any chance to push prices down. Saleyards were great barometers of the price offered for stock. Coles & WW pushed butchers out and then refused to buy in saleyards. JBS have also been very reluctant to buy in the saleyards and this is causing huge problems for saleyards which of course relies on competition.
Perhaps we could look at the US where producers are getting double the price that the producers in Australia have been getting. In contrast US consumers are paying less for their beef than Australian consumers. The fact is in Australia while we have seen some of the lowest prices ever seen when one takes into consideration inflation they are in all probability the lowest ever. Polies talk about low interest loans, surely the time has come to look at why farmers are struggling and they may find that low farm gate prices are a big part of the problem.
In the US Australian processors are getting record prices for things like 90cl trim which has almost doubled in price and most of the cuts are at record prices. The question must be asked ‘why this is so?’ The fact is the concentration of processing has done immeasurable damage to the Australian cattle producers and if we continue to lose more competition then we will see more consequences of lessening competition.