South America Calling
Cattlemen's Group Asks for Federal Review of Marfrig's Purchase of National Beef Shares
OMAHA (DTN) -- The U.S. Cattlemen's Association is asking the U.S. treasury secretary to conduct a review of Brazil's Marfrig Global Foods increasing its stake in Kansas City, Missouri-based National Beef Packing.
Marfrig announced in mid-November the company would buy the remaining 31% of National Beef, the fourth-largest meatpacker in the U.S. The shares in National Beef had been owned by the investment firm Jefferies Financial Group. Marfrig had already purchased 51% of National Beef from Jefferies and other shareholders in June 2018.
National Beef operates two beef packing plants about 80 miles apart in Kansas. One is in Dodge City and the other is in Liberal. National Beef also owns a packing plant in Tama, Iowa, and operates other case-ready and further-processing plants in Pennsylvania, Georgia, Kansas, Ohio and Missouri.
Marfrig announced the purchase of that 31% of shares from Jefferies is already final.
USCA wrote Treasury Secretary Steven Mnuchin on Wednesday asking him to review the sale under the Committee on Foreign Investment in the United States, known as CFIUS. The committee is made up of members from several federal agencies, and it meets in closed settings to review foreign acquisitions in critical industries involving infrastructure, technology, manufacturing and mining. In recent years, CFIUS has examined multiple major acquisitions in agriculture, but the Treasury Department has not added a representative from USDA and FDA to join the committee for reviews, despite calls from members of Congress.
In its letter, USCA cited work from the Institute for Agriculture and Trade Policy, highlighting that Brazilian meatpackers have benefitted from subsidized loans and other resources from the Brazilian National Development Bank. Marfrig had also settled an agreement with Brazilian prosecutors, paying $28.73 million to cover damages from an earlier bribery investigation.
National Beef did not respond to an email seeking comment.
Marfrig and one of its main Brazilian competitors, JBS S.A., are now two of four of the largest meatpackers in the United States with Cargill and Tyson Foods being the other two U.S.-based competitors.
USCA President Kenny Graner warned of the growing influence of foreign ownership in U.S. agriculture. In an interview, Graner noted a large share of packing capacity is now controlled by Brazil.
"You have these foreign owners buying up a large percentage of our kill capacity here in the U.S.," Graner said. "What is it to them to give back to our rural communities when they just want to take the profits back to Brazil and utilize the exchange rate and become more profitable in their own countries?"
Graner added that President Donald Trump has stressed "America first," but that runs counter to increased foreign ownership, especially when Brazilian beef competes against the U.S. for global exports. "You've got political people in both parties working with these foreign investors, but it's time to put our ag industry first," Graner said. "Let's not allow our industry to be sold off to foreign investors."
If CFIUS were to review the sale, the findings would likely remain undisclosed to the public. CFIUS seldom releases details of its reviews and often releases a single report of its work more than a year afterward.
The chairman and ranking member of the Senate Agriculture Committee wrote Mnuchin in April 2018 to request a CFIUS review of Marfrig's initial majority-stake purchase of National Beef. Three other senators signed the letter at the time. The senators cited earlier purchases of major agricultural companies, stating, "It has become increasingly clear that growing foreign investment in U.S. agriculture requires a thorough review process to safeguard the American food system."
The senators added in the 2018 letter that there were also issues over corruption scandals in Brazil "that revealed unacceptable safety and quality issues with Brazilian beef intended for the American market, including Marfrig."
Read the letter here: https://bit.ly/…
Grassley said Tuesday he did not recall receiving any response from the Treasury Department regarding the letter. Responding to a question from DTN, Grassley also said he does not think CFIUS takes foreign investment in agriculture as seriously as other industries.
"No, but that's probably because the ignorance of agriculture inside the beltway mentality here," Grassley said.
In October, Sens. Robert Menendez, D-N.J., and Marco Rubio, R-Fla., wrote Mnuchin also raising concerns about Brazilian meatpackers and their expansion in the U.S. Menendez and Rubio specifically asked CFIUS to investigate JBS S.A.'s acquisitions in the U.S.
USCA stated the group "believes an investigation into the activities of Marfrig Global Foods is necessary to ensure the safe, affordable and abundant food supply that our nation currently enjoys."
Read the Menendez and Rubio letter here: https://bit.ly/…
On Nov. 17, Marfrig's board of directors unanimously voted to increase Marfrig's ownership interest in National Beef. Marfrig recently announced its third quarter results showing its North American quarterly revenue at just under $2.25 billion and gross income at $374 million for the quarter. Marfrig also recently signed a partnership with ADM to produce more plant-based products.
Chris Clayton can be reached at Chris.Clayton@dtn.com
Follow him on Twitter @ChrisClaytonDTN
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