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Home / Business / JBS, the food giant based in Brazil, received US tax money. Now it will grow in America.

JBS, the food giant based in Brazil, received US tax money. Now it will grow in America.

JBS wins hand in securing a quarter of all pork bailout contracts is an example of the power a small number of multinational meat companies now have in the United States. JBS has become a major player in the United States despite facing pricing and other federal government investigations.

The company's explosive growth through acquisitions over the past decade has been a dominant factor in the consolidation of the meat industry.

A dozen years ago, JBS did not own a single American meat plant. Today, JBS and three other food companies control about 85 percent of beef production. JBS and Tyson Foods control about 40 percent of the poultry market. And JBS and three other companies control almost 70 percent of the pig market.

JBS and major multinational meat companies, including Tyson Foods, Smithfield Foods and Cargill, use their size and global presence to create efficiencies that enable them to produce a variety of quality foods at a lower cost. But many agricultural economists and food marketing analysts say that when so few companies control the market, they can drive smaller operators out of business, reduce competition and even raise prices for consumers.

Candidates have other concerns, including threats to the availability and reasonableness of the country's food supply. Large food companies have recently reduced the offer to increase the price of the products. The Ministry of Justice is investigating whether JBS and other poultry companies are illegally coordinated to do just that.

JBS says it is an important part of the agricultural economy; The company employs more than 60,000 people in the United States and buys from more than 11,000 American farmers and ranchers. The company and Agriculture Secretary Sonny Perdue say the rescue tools JBS received helps American farmers because the company buys pigs from them.

JBS CEO Gilberto Tomazoni told analysts in August that JBS is "at the best moment in its history." He said an upcoming US stock offering would allow the company to continue expanding; JBS says expansion efforts "will better position the company to sustainably meet customer and consumer expectations."

However, the US sensed challenge. Marco Rubio (R-Fla.) And Robert Menendez (DN.J.) recently about JBS's entry into the US market should have been allowed.

Corruption scandals have engulfed JBS in Brazil, Senators wrote to Secretary of Finance Secretary Steven Mnuchin, and the company's officials have "admitted criminal behavior to secure loans used for investment in the United States. “They have asked for a review of the purchases.

JBS said that it received all "necessary approvals from the authorities. . . antitrust authorities, including the Ministry of Justice ”before purchasing each of the companies.

Small farmers and cattlemen are happy that some politicians are listening. They say that the federal government's bail – and JBS & # 39; s part of it – is reminiscent of bank robberies during the 2008 financial crisis. Although many of the banks were investigated by the federal government, they still received federal money.

"I think that's one of those situations where it's too big to fail," said Greg Gunthorp, who runs his Indiana family farm. "We're talking about a company that has shown that it doesn't follow the rules."

Buying spree

JBS purchased its first American meat plant in 2007 using Brazilian bank loans that its owners have secured illegally, court records show. In a prayer agreement, brothers Joesley and Wesley Batista told prosecutors how they bribed banks and government agencies to receive low-interest loans.

The bank loans and other financing allowed JBS to consolidate five US companies – which produced pork, poultry and beef – into one single company, JBS USA.

In 2007, JBS purchased pork and beef manufacturer Swift and Co. In 2008, the company purchased the beef business from Smithfield Foods. In 2009, it bought poultry producer Pilgrim & # 39; s Pride. In 2015, JBS purchased Cargill's pig division. And in 2017, the company bought poultry producer GNP Co.

"JBS used their poor profits to dominate the meat market," said Joe Maxwell, a fourth-generation pig farmer and executive director of the Competitive Markets Organization, a nonprofit that fights income inequality in the US agricultural markets. The loans, Maxwell said, "allowed them to become the big dogs almost overnight."

JBS said it did not refute the placement agreement, but said it also raised capital by selling the company's shares.

The Bailout payments underline JBS's advantage over smaller domestic competitors. Some of the pork plants kill more than 1,000 pigs per hour, allowing JBS to operate at a narrower profit margin and undercutting other companies for the rescue contracts.

JBS is also able to shift production to avoid high tariff rates. While American pork exported to China faces a 72 percent tariff, pork from JBS facilities in Brazil is only at a 10 to 12 percent tariff.

JBS increased production where customs duties were lower, and benefited twice twice from the Chinese trade war – first by collecting rescue money and then by increasing pork production at factories outside the United States, which JBS announced this year.

JBS has grown and thrives despite several federal inquiries. The agriculture department said JBS underpaid the family's farmers and farmers last year at three slaughterhouses in Colorado, Nebraska and Texas by claiming the cattle weighed less than they did. Domestic bigfire owners say they lost millions of dollars.

Cattle producers said that the cure was an insult to small ranchers. "It's a penny for them," said Steve Krajicek, an independent cattle producer selling to JBS. “They make in excess of $ 1 million a day at Nebraska plants. It is not even enough for them to blink or look at how they do business. "

JBS's growth has not been slowed by steep fines for workers' safety violations – about $ 20 million over the past decade, according to information from the US Occupational Safety and Health Administration.

A Washington Post analysis of OSHA data from 2015 to 2018 shows that JBS has the highest rate of serious injury – including those involving amputation and hospitalization – among meat companies in the United States, and the second highest rate of serious injury among all companies. in the United States.

JBS declined to comment on the $ 79,000 fine and its employee injuries.

Consumer Problems

Consolidation can lead to benefits for consumers. Michigan State University agricultural economist Trey Malone said consolidation has led to lower prices and an explosion of new food products. The average grocery store in 1995 had about 8,000 options. Now there are more than 45,000.

"As businesses grow, you get economies of scale. The cost of production per unit is decreasing," Malone said. – Companies are increasingly competing at the quality level and offering hormone-free meat, Angus beef. "From a consumer perspective, you have higher quality meat and cheaper meat products."

But the small number of large players increases the possibility for companies to work together to increase prices, says Malone and other economists. by a New York food service company claims that JBS-owned Pilgrim's Pride and other poultry companies intentionally destroyed flocks of breeder chickens to reduce poultry supply. The civil case is on hold while the Justice Department is investigating.

"This is a consumer disaster because of the amount of power, money and political power that these companies have, "said Marion Nestle, a professor at New York University who studies the food industry. "If you own everything, you have to set the rules, and you have to set the price, because there is no real competition."

JBS declined to comment on the pricing study. Attorneys for Pilgrim's Pride and other poultry companies filed a petition to dismiss the case in January.

With a few major operators, meat pollution can pose a greater threat since their products end up on plates across the nation. Retail giants Costco, Walmart and Sysco sell all JBS products.

In 2018, for example, JBS ordered the largest recall of minced dough in American history, according to U.S. Centers for Disease Control and Prevention. About 12 million pounds of beef
contaminated with a virulent strain of salmonella in 30 states afflicted 403 people, 117 of whom were hospitalized. Less than 2 percent of the meat was extracted.

"They can cause a major food safety disaster," said Tony Corbo, senior lobbyist for Food & Water Watch, a consumer group. "These facilities are larger, show product faster, and the federal government has deregulated them, giving plant owners more control over security controls."

JBS said it quickly responded by issuing the recall. The company said it was working with "internal and external food safety experts" to "ensure the safety of our products."

Small cattle ranchers launched a social media campaign in October at a rally called "Stop the Stealin "" To protest the power JBS and other large beef processors have over setting cattle prices. Ranchers said they are underpaid at around $ 200 per head. JBS declined to comment on the farmer's complaints.

Around 400 cattlemen and women attended the rally in Nebraska – some riding on horseback. Younger ranchers downloaded the Twitter app to the older ranchers' smartphones and taught them how to tweet their protests directly to Trump.

“Stop packer collusion !!” tweeted Casey Perman, a small rancher in South Dakota. “Time to help the little guy you promised. . . #FairCattleMarkets @realDonaldTrump. "

The Ranchers and some Democratic members of Congress say that the concentrated power of these companies gives them too much influence over federal regulators. “These multinational corporations are taking over the food supply, and the federal government has been complicit in this; The USDA has been complicit in this, "said Rep. Rosa L. DeLauro (D-Conn.).

Since entering the US market in 2007, JBS has spent more than $ 7.7 million on lobbying, shows records, making it the fourth-largest spender in the meat processing industry, and more than $ 900 million in government meat contracts have been won, following US-based Tyson Foods, according to a Washington Post analysis of government records.

JBS created a new position – global head of food safety and quality assurance – in 2017, and gave the position to a former top food safety regulator at USDA named Al Almanza.

At USDA, Almanza was seen of small farmers and food safety groups as advocates for the major producers; he led efforts to deregulate inspections of poultry, pork and beef sought by JBS and other companies. Three days after leaving the USDA, Almanza started at JBS.

In a statement, JBS said that Almanza "strongly disagrees with a notion that he had any interest in maximizing the industry's profits compared to safeguarding public health during his career as a public service." [19659002] Maxwell's group also focuses on Agriculture Secretary Perdue and the rescue money he has awarded to JBS. The little ranchers campaign circulates a political cartoon of Perdue and JBS's Wesley Batista in bed with Perdue who threw tiles of rescue money into the air.

Andrew Ba Tran and Alice Crites contributed to this report.

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