2Bits: Sold! A U.S. Food Supply Chain
“You will not find it difficult to prove that battles, campaigns, and even wars have been won or lost primarily because of logistics.”
Dwight D. Eisenhower
Marfrig, a Brazil-based company, just bought Kansas City-based National Beef. Is this a big deal? Yes! Logistics–food supply chain control–impacts players at both ends of the chain. It impacts farmers and food buyers—it impacts you!
Brazilian company, Marfrig, will soon own the majority of one of the top four largest meat packers in the United States.
Marfrig’s 51% purchase of National Beef will make it the world’s second-largest beef processor. Meanwhile, JBS S.A., another Brazilian company, is also a part of the top four U.S. packer group.
Now, all that is needed to solidify the purchase is the U.S. Antitrust Authority’s approval and the National Bank for Economic and Social Development’s approval.
Who owns the remaining 49% of National Beef?
- Leucadia National Corporation, an American conglomerate and investment holding company based in New York City, owns 31%.
- U.S. Premium Beef, an association of American Producers, owns 15%.
- Other shareholders own the remaining 3%.
These investors have stated they’re committed to staying on-board for another 5 years, but then what?
National Beef’s processing capacity is 12,000 head of cattle per day, coming to 13% of the total U.S. cattle harvested. National Beef currently exports to 40 countries, which includes Japan. Japan is currently off limits to Brazilian beef exports, but not now. Brazilian beef imported to the U.S. and processed in the U.S. can be labeled as U.S. beef.
Global and national food supply chain consolidation reduces the competitiveness of marketplaces.
Farmers become price takers, not price makers. Darin Von Ruden, President of Wisconsin’s Farmers Union states, “Farmers are facing the triple threat of unpredictable weather, low prices, and consolidating supply chains. This creates tremendous stress and uncertainty in their lives.”
Global food supply chain players don’t care about local food supply chains. Will National Beef continue to support American beef producers at its current level?
If not, what will happen to beef commodity prices? Downward pressure on beef commodity prices impacts prices in niche beef markets too. Niche markets are a critical part of our local food supply chains.
Marfrig’s CEO, Martin Secco, states, “The acquisition of National Beef represents the realization of a unique opportunity. We will have operations in the world’s two largest beef markets (US and China/Japan), will gain access to extremely sophisticated consumer countries, and will be able to grow while maintaining rigorous financial discipline.”
Marfrig has 31 production units in Brazil, Urugruay, and Chile and 4 distribution centers. Their current processing capacity is 4.7 million head of cattle.
The end-result of this?
What happens in 5 years if the other National Beef investors sell out? Sustainability of our rural communities depends on US farmers access to competitive markets. Local food supply chains enable consumers to know where their food is coming from.
Be an active part of local food supply chains.
Join 2BuyAg’s online marketplace today and keep real local food buying strong. Keep our farmers and rural communities growing, not stagnating.