Study - Growing US Ag Concentration: Agriculture Concentration Continues to Consume Market

By Robert Pore, quotes Mary Hendrickson

Grand Island Independent

March 3, 2005

With Smithfield Foods looking to expand its beef business with possible acquisitions of rivals such as Swift & Co., a new report shows that the trend of consolidation and concentration in agriculture continues to grow.

Swift & Co.'s Grand Island plant is the community's largest employer, with more than 2,000 workers.

A recent National Farmers Union-commissioned study by the University of Missouri department of rural sociology outlines the increased concentration in domestic agricultural markets. The study shows that the concentration ratio for the top four firms has increased in all commodity sectors except ethanol production.

During the recent National Farmers Union convention in Lexington, Ky., delegates passed policy initiatives in hopes of ensuring that all agricultural markets are competitive, accessible, transparent and fair, NFU President Dave Frederickson said.

"We need comprehensive agricultural competition and concentration policies to restore balance in the marketplace," he said. "Independent producers cannot succeed in the absence of protection from unfair and anticompetitive practices."

According to the report, prepared by Mary Hendrickson and William Heffernan, the nation's top four beef packers -- Tyson, Cargill (Excel), Swift & Co.

and National Beef Packing Co. -- control 83.5 percent of the beef packing industry.

Smithfield Foods became the fifth largest beef packer after a series of recent acquisitions.

Smithfield, which is already the largest U.S. hog and pork producer, recently agreed to merge its cattle-feedlot business into a joint venture with ContiGroup Cos. to create the largest U.S. supplier of livestock to beef producers.

The merger between the six ContiGroup feedlots and four owned by Smithfield's MF Cattle Feeding will be able to feed 811,000 head of cattle, or about 7 percent of the U.S. feedlot herd. The combined group's feedlots are in Kansas, Colorado, Oklahoma, Idaho and Texas.

Smithfield bought MF Cattle Feeding's three feedlots in Colorado and Idaho from ConAgra Foods Inc. last year and has been acquiring beef processors since 2001, including Moyer Packing Co. and Packerland Holdings.

Smithfield said its joint venture with New York-based ContiGroup will create the largest U.S. cattle feedlot company. Amarillo, Texas-based Cactus Feeders Inc. had been the largest.

The nation's four largest pork packers -- Smithfield, Tyson, Swift and Hormel Foods -- control 64 percent of the pork packing market.

Along with being the largest pork packer, Smithfield also leads the nation in pork production with 825,000 sows, followed by Premium Standard Farms at 225,000 sows, Seaboard Corps. at 213,600 sows and Prestage Farms with 129,000 sows. Those four pork producers control 49 percent of the nation's pork production market.

According to the report, the one notable exception to continued consolidation and concentration in the agriculture industry was ethanol production.

The report said that four companies control 41 percent of the nation's ethanol production, while farmer-owned ethanol plants accounted for 1.28 billion gallons per year, or 37.3 percent of the total capacity.

The four largest ethanol producers were ADM, 1.07 billion gallons; Cargill,

128 million gallons; Aventine Renewable Energy Inc., 100 million gallons; and VeraSun Energy Corp., 100 million gallons.

"The ethanol industry's decreased concentration demonstrates that proactive public policy can restore competition in the marketplace," Frederickson said. "It is time for Congress to pass legislation that restores true competition in the marketplace for U.S. farmers and ranchers so that they have the opportunity to receive fair prices for their production."

With two new Wal-Mart Supercenters scheduled to open in Grand Island this year, the report also shows that Wal-Mart was not only the nation's top food retailer but also the world's top grocery retailer.

According to the report, the top five U.S. food retailers are Wal-Mart,

$66.47 billion; Kroger Co., $46.32 billion; Albertsons, $31.96 billion; Safeway, $29.57 billion; and Ahold USA Inc. at $25.12 billion. Those five controlled 46 percent of the market. Total supermarket sales in 2003 were

$432.8 billion.

Wal-Mart worldwide grocery sales in 2004 were $244.5 billion, followed by Carrefour of France at $64.7 billion.