000466 Senators Want More Power Over Meat Mergers

Washington - USDA should be allowed to challenge mergers between companies that process meat and grain or sell seed and other supplies to growers, some farm state senators said.

The Justice Department hasn't done enough to slow down a wave of mergers and acquisitions that some producers blame for a downturn in commodity prices during the late 1990s, the lawmakers said.

“We have an obligation to act. Current laws are not working,” Sen. Kent Conrad, (D-ND), said during a Senate Agriculture Committee hearing.

Bills introduced by Sen. Charles Grassley (R-IA) and Senate Minority Leader Tom Daschle (D-S) would allow USDA to block agribusiness mergers or to force the divestiture of assets and give the department more authority to regulate the business practices of food and agriculture companies.

The legislation is given little chance of passing this year, and economists say that worldwide overproduction of grain, not agribusiness consolidation, caused the fall in commodity prices. In fact, beef and pork prices have rebounded in recent months as demand has increased. Beef and pork processing are among the most highly concentrated segments of the industry.

Mergers allow companies to cut costs and get the capital it takes for expansion, said David C. Nelson, an industry analyst with CS First Boston.

“Essentially, we have too many companies fighting for too few profits. Agribusiness will not attract the capital it needs to make the investments farmers say they want until profitability improves,” he said.

The Clinton administration has not taken a position on the bills, although Justice Department officials have previously said that existing antitrust laws are adequate to protect the interests of farmers and consumers.

“Our antitrust laws have stood the test of time,” said John Nannes, deputy assistant attorney general for the department's antitrust division.

In recent months, the department has blocked a merger between the two biggest cotton seed producers but allowed other acquisitions to go through, although sometimes requiring companies to sell off some assets.

Among the most recent mergers: Smithfield Foods Inc. (NYSE:SFD - news), the world's largest hog producer and processor, acquired No. 2 producer Murphy Family Farms, and Cargill Inc., North America's second-largest grain trader, bought the grain operations of No. 5 Continental Grain. Cargill and Continental were required by Justice to sell some of their facilities.

The Senate voted overwhelmingly last fall against imposing an 18-month moratorium on agribusiness mergers. However, the consolidation in the industry is a major issue with many farm groups, and in an election year, farm state lawmakers say they are determined to keep the heat on Congress and the Clinton administration.

“It's an uphill climb this year, but that doesn't keep us from raising Cain,” said Sen. Max Baucus, D-Mont.

RETURN TO HOME PAGE

E-mail: sflanagan@sprintmail.com