WASHINGTON --- Senator Chuck Grassley today expressed strong reservations about a possible merger between Smithfield Foods and Premium Standard Farms.
The merger brings Smithfield Foods, the leading processor and marketer of fresh pork and processed meats in the United States, as well as the nation’s largest producer of hogs, together with Premium Standard Farms, the second largest pork producer and the sixth largest pork processor in the United States.
Grassley said that the United States needs family farmers and independent producers to make the free and open market system work and expanded packer ownership of hogs, exclusive contracting and captive supply are all adversely impacting their ability to compete in the marketplace.
"I cannot fathom how Smithfield, which is the largest and fastest growing integrator can continue to be allowed to purchase hog operations across the country," Grassley said. "Over the last several years Smithfield has made it perfectly clear that it intended to purchase its competitors to assert its dominance in the pork industry. This is alarming. I expect the Justice Department to take a serious look at this merger."
Here is a copy of Grassley’s letter.
September 19, 2006
The Honorable Thomas O. Barnett
Assistant Attorney General
Antitrust Division
United States Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
Dear Assistant Attorney General Barnett:
I am writing to express my concerns regarding the proposed merger between Smithfield Foods, Inc. and Premium Standard Farms, Inc. I have strong reservations about this proposal and the continued trend in concentration in the pork industry and, as such, I urge the Department of Justice to carefully scrutinize this transaction.
As you know, Smithfield is the leading processor and marketer of fresh pork and processed meats in the United States, as well as the nation’s largest producer of hogs. Premium Standard Farms is the second largest pork producer and the sixth largest pork processor in the United States.
A combined Smithfield and Premium Standard Farms would severely reduce the already limited number of buyers for the commodities of small, independent producers. This merger would allow Smithfield/Premium Standards Farm to control over 1.2 million breeding animals. The union of the largest and second largest producers of hogs could hugely impact competitive markets for livestock producers selling animals. Moreover, the merger could decrease product choice for the American consumer.
I urge the Antitrust Division to thoroughly examine this merger to protect competition in this important sector of our nation’s economy. The small, independent producers and family farmers in my state of Iowa, as well as across the country, are concerned about reduced market opportunities, possible anti-competitive and predatory business practices, and increasing agribusiness consolidation. Expanded packer ownership of hogs, exclusive contracting and captive supply are adversely impacting their ability to compete in the marketplace. I share these concerns about fewer competitors and increased consolidation, as well as less choice for consumers.
Thank you for your attention to this matter. I look forward to hearing from you soon.
Sincerely,
Charles E. Grassley
United States Senator
cc: Attorney General Alberto Gonzales