Local dairy industry expresses concern
Central Valley Meat (CVM) Holding Company, who already owns four different facilities; Central Valley Meat in Hanford, Harris Ranch Beef Company, Harris Ranch Feeding and CLW Foods, will be California’s largest beef producer in a deal with Kansas-based Cargill. The Hanford beef processor has entered an agreement to purchase the Cargill Meat Solutions beef processing facility in Fresno, California. This move marks a significant expansion in Central Valley Meat’s operational capacity. Already CVM employs more than 2000 people.
In a news release May 7, CVM says this will strengthen their processing capabilities, enhancing their ability to meet market demands while reinforcing their commitment to supporting the cattle and dairy industry in California and the western region. “Our decision to acquire the Cargill Meat Solutions beef processing facility in Fresno, California aligns with our long-term vision of strengthening our offerings to better serve the needs of our customers,” said Brian Coelho, CEO and Owner of Central Valley Meat. We’re excited to work alongside cattle producers in the state.”
Both companies say they are committed to retaining as many employees as possible and retaining beef processing capacity for producers. Cargill has almost 1,000 employees at their Fresno beef plant.
”Cargill will continue to operate its neighboring ground beef and hamburger patty facility in Fresno. The additional capacity gained through acquiring the beef processing facility will enable Central Valley Meat to be more adaptable, ensuring that they remain agile in meeting evolving industry trends.”
Nationwide, consolidation in the beef, pork and chicken industry has raised concerns about lack of competition and high prices and locally this transaction has done the same in the San Joaquin Valley, a big beef and dairy production region.
Monopoly concerns
Weeks ago, local dairy industry representatives contacted the offices of Congressman Valadao and Congressman Costa about the rumors that this deal was about to happen – concerned that livestock owners here would have fewer buyers for their product similar to what is happening across the US.
Four giant companies Tyson, Cargill, and Brazil-based National Beef and JBS, now control 85% of the U.S. beef market. WH Group (Chinese), JBS, Hormel, and Tyson control about 67% of the pork market. Tyson and Pilgrims Pride control about 45% of the chicken market.
Ironically, Cargill might argue they are reducing their current competitive advantage by selling this division to a local beef company.Cargill Meat Solutions is a subsidiary of Cargill Inc—a family-owned agribusiness company said to be the largest privately held firm in the US.
With the merger with Harris Ranch in 2019, Central Valley Meat was said to be the 7th largest beef producer in the US.
Dairy industry view
Tulare County dairyman Tom Barcellos says” everyone in the dairy business has some degree of concern.”
“Brian is a good friend and I believe his heart is in the right place but as a producer when there’s less competition at the sales yard or at auction, there is cause for concern with fewer buyers.”
“We can only hope that Central Valley Meat works for the good of all concerned.”
The Barcellos dairy ships 6,500 gallons of milk each day to the Land O’Lakes plant in Tulare that produces 80 percent of the Land O’Lakes butter sold nationwide. These days Barcellos says the beef side of the business is more important than before, due to the rising price of beef and the opportunity to breed drop calves for beef.
Local dairy industry representative Cornell Kasbergen of Tulare says “we could be left with only one buyer. Our income from beef is pretty significant, and we may be paid less than producers in other areas.”
From the” consumer side, there’s the same concern.”
“I would hope the Justice Department would do a review of the transaction before it is finalized.”
Kasbergen is chairman of the Milk Producers Council Board of Directors.
Mr Coelho argues that “By building on Cargill’s expertise and resources, they are positioned to enhance efficiencies and drive innovation across their entire supply chain. Central Valley Meat remains committed to upholding the highest standards of quality, integrity, and customer service. As they embark on this new chapter of growth and expansion, they are confident that their strengthened capabilities will further solidify their position as a trusted partner in the beef industry.”
Biden weighs in
President Biden has weighed in on the issue connecting it to inflation as well in a statement a few years ago.
Four large meat-packing companies control 85 percent of the beef market. In poultry, the top four processing firms control 54 percent of the market. And in pork, the top four processing firms control about 70 percent of the market. The meatpackers and processors buy from farmers and sell to retailers like grocery stores, making them a key bottleneck in the food supply chain. When dominant middlemen control so much of the supply chain, they can increase their own profits at the expense of both farmers—who make less—and consumers—who pay more. Most farmers now have little or no choice of buyer for their product and little leverage to negotiate, causing their share of every dollar spent on food to decline. Fifty years ago, ranchers got over 60 cents of every dollar a consumer spent on beef, compared to about 39 cents today. Similarly, hog farmers got 40 to 60 cents on each dollar spent 50 years ago, down to about 19 cents today. Even as farmers’ share of profits have dwindled, American consumers are paying more—with meat and poultry prices now the single largest contributor to the rising cost of food people consume at home. And, when too few companies control such a large portion of the market, our food supply chains are susceptible to shocks. When COVID-19 or other disasters such as fires or cyberattacks shutter a plant, many ranchers have no other place to take their animals. Our overreliance on just a handful of giant processors leaves us all vulnerable, with any disruptions at these bottlenecks rippling throughout our food system.
Hormel settlement
Last month Hormel Foods reached a settlement in a pork-price fixing case. The case involves allegations of price-fixing within the pork industry. The settlement, totaling millions of dollars, addresses claims made by three different classes of pork purchasers.
The settlement agreement involves a payment of $2.4 million to the commercial indirect purchaser class, $4.8 million to the class of direct pork purchasers, and $4.5 million to the consumer indirect purchaser class. These settlements come after a series of legal proceedings that began with the consolidation of 27 cases in December 2022, involving 146 parties.
The lawsuit revolves around accusations of collusion among pork processors, who collectively control over 80% of the wholesale pork market.