Hockey approves JBS takeover of Primo

04 Mar, 2015 05:15 PM
Comments
14
 
If we get this decision wrong, farmers will lose

FARMERS and producers have failed to sway Treasurer Joe Hockey on the takeover of Australian smallgoods company Primo by the US arm of beef giant JBS Holdings.

JBS USA Holdings Inc is the subsidiary of the Brazilian company JBS S.A., the world’s largest processor of fresh beef and pork, and Primo (Australian Consolidated Food Holdings) is the largest producer of ham, bacon and smallgoods in Australia and New Zealand.

The Treasurer approved the buyout tonight, saying: "The government welcomes foreign investment in Australia and continues to ensure that investments are consistent with Australia’s national interest".

Agriculture Minister Barnaby Joyce said conditions attached to the sale would ensure that local cattle producers "would have certainty around access" for contract processing.

The Treasurer has approved the sale on condition that:

  • the Scone abattoir in NSW must remain open and retain its capacity for consignment killings accessible by third parties
  • JBS reports to the Foreign Investment Review Board (FIRB) on its compliance every six months, and
  • the transaction be reviewed in three years.
  • The lack of diversity in the processor market has become an urgent issue for cattle producers, with Rockhampton plants owned by JBS Swift and Teys Australia closed following cyclone damage to the buildings, and farmers calling for a Senate inquiry into the red meat processing sector to investigate shrinking market competition.

    “Market consolidation in the meat processing sector is causing lower returns to farmers”

    In a joint statement last week, NSW Farmers and Victorian Farmers Federation (VFF) said reduction in meatworks competition had hampered cattle producers’ ability to “get a fair price”.

    NSW Farmers Cattle Committee chair Derek Schoen said producers relied on a diverse market, saying JBS’ acquisition of processor Primo was a particular point of concern. Primo and JBS compete directly, he said, and the takeover would "cruel cattle prices for farmers".

    “The acquisition of Primo by JBS will (make it) incredibly difficult for any new entrants to enter the market," Mr Schoen said.

    "I am making a direct plea to the Treasurer - put this decision on hold until all the facts are tabled," he said earlier this week. "If we get this decision wrong, farmers will lose."

    Mr Hockey said the conditions of the buyout - which include maintaining the custom service killings currently provided by Primo at Scone - will be reviewed in three years and that JBS could be forced by the Treasurer to divest the purchase if conditions are not met.

    “This is an issue which demands a serious examination of the national interest”

    VFF Livestock president Ian Feldtmann said the JBS takeover bid was not an isolated problem, but "a symptom of the structural inequity that exists in the cattle market".

    "Market consolidation in the meat processing sector is causing lower returns to farmers and it is time this trend is stopped," he said.

    The Australian Competition and Consumer Commission (ACCC) signed off on the JBS bid last month, but at the same time the consumer watchdog also flagged concerns about a consolidating abattoir industry trend.

    “The ACCC will continue to monitor this industry and any future acquisitions will face additional scrutiny,” ACCC chair Rod Sims said.

    Mr Joyce said the conditions attached to the sale met the demands of a number of producers, farming organisations and other concerned stakeholders he met spoke with on the issue.

    "I acknowledge that there were calls for more than this, but given the outcome of the ACCC decision, there was every chance that we may have gotten less," he said.

    "With these stringent conditions in place I believe the Treasurer has found an appropriate balance for all parties using his powers under the FIRB framework."

    NSW Farmers said the retail price for beef had risen from $10 a kilogram in 2000 to $16 a kilogram in 2012, while saleyard prices had remained at around $3/kg over the same period.

    The organisation also questioned the usefulness of focusing on foreign investment in Australian agriculture when domestic issues were undermining producers' profitability.

    "What is the point of protecting our agricultural land from too much foreign acquisition when all of our produce will be processed and controlled by a select few?" Mr Schoen said.

    "This is an issue which demands a serious examination of the national interest.

    "Farmers just want a fair go; a fair price for their produce. If the Treasurer approves this decision it will have long term ramifications for cattle farming in Australia."

    Nationals Senator John 'Wacka' Williams labelled the ACCC "out of touch with reality" on its controversial call.

    “I find it confusing that on one hand the ACCC will not oppose this acquisition, yet in the next breath says it is wary of the potential impact of the further consolidation of abattoirs," Senator Williams said.

    “If that is true, why didn’t it act in this instance?"

    Producers, abattoirs, meat and small goods suppliers and customers have been particularly worried about two more abattoirs joining the powerful JBS network - further reducing processing competition options - and made submissions to the ACCC and the Foreign Investment Review Board last November damning the proposal.

    Although the Brazilian-based giant JBS - the world's biggest animal protein processing company - has only been in Australia for seven years, it already owns 11 abattoirs (10 are operating) in five States, including Queensland's big Dinmore and Rockhampton plants. Primo operates abattoirs at Port Wakefield in South Australia, processing pigs, and Scone in NSW's Hunter Valley, which processes cattle.

    The Primo Group owns the Primo, Hans and Beehive brands and key processing operations in five locations. Primo, established in NSW by the Lederer family in 1985, has been majority owned by Singaporean-based equity fund manager Affinity Equity Partners for the past three years.

    Affinity bought 70.1 per cent of the business in late 2011 in a deal which then valued the company at $740 million.

    The Lederer's Primo business activities also include the Joes Meat market and Farm Fresh Meats butchery chain in NSW and suburban shopping centre interests, although JBS is considered unlikely to keep the retail operations in the long-term.

    - with Andrew Marshall

    FarmOnline

    Katie McRobert

    is the national editor of FarmOnline
    Date: Newest first | Oldest first

    READER COMMENTS

    Concerned
    4/03/2015 8:11:31 PM

    Do these clowns have any idea? Less competition = less returns for farmers it's as simple as that. Less viable farmers = less food production which ultimately sees Aust become dependant on foreign supplies. If this government is that bloody stupid & out of touch with reality then then let's vote them out ASAP before they do intractable damage to our grazing industry. Farmers need to withhold food for a week & see what government is trying to create with there imbecilic decision.
    Jock Munro
    5/03/2015 6:23:21 AM

    Joe Hockey is a member of the urban political elite and it come as no surprise that he would allow the sale. Ex Liberal treasurer Peter Costello has acted as an agent in the sale of our farms to Middle Eastern governments.
    pepper
    5/03/2015 9:43:50 AM

    So JBS get to report on their compliance of conditions every six months????? Duh! ...Good one Joe another self fulfilling prophesy. A few more words around consignment killings may give some clarity to producers. e.g. batches of 10,20 or 20,000. and who regulates the cost of processing? either way blind freddy can see the diminished competition.
    Philip Downie
    5/03/2015 1:11:44 PM

    Why don't you whack them with a wet lettuce leaf while your at it Joe. You wont be around for the review, so that is a nothing encumbrance.
    genazzano
    5/03/2015 5:47:56 PM

    Concerned - it needs to be ONE MONTH and maybe they will understand - the bottom line is they don't give a damn about you
    littleguy
    6/03/2015 9:02:51 AM

    Combine this article with the article on Normanville meat works(a service works for many farmers) going into administration and the gravity of the situation is even more apparent. SA will now only have 2 main buyers of livestock TFI and Swifts(and they are both very matey)! Urrgh sounds like the supermarket industry!
    Ian McCamley
    6/03/2015 9:04:09 AM

    Less processing competition means lower prices for Australian cattle, whilst the beef from those cattle is sold into the highest price beef market ever. Hockey is supporting taking money out of Australian cattle producers pockets and giving it to a Brazilian based processor. Disgraceful decision Joe Hockey - with friends like you who needs enemies?
    Bruce Collins
    6/03/2015 11:35:35 AM

    I don't particularly blame Hockey because he is supposed to get 'expert' advice from FIRB and ACCC. These are the guys who should lose their jobs. As my father used to say,"if their brains were dynamite, they wouldn't blow their ears off".
    John Carpenter
    6/03/2015 6:03:13 PM

    With friends like the CCA who needs enemies?The SFO,s are just waking up to the reality that the rotten industry structure that they and the NP put in place in 1997 is blowing up in their face.Instead of them "running the industry" as they used to claim it has effectively handed control of the entire beef supply chain to 5 mega corporations whose management can't see beyond next year's bonus.If anyone is in any doubt about who really calls the shots in this industry look no further than this unjustifiable acquisition.Cattle producers should be as mad as hell and vote accordingly.
    Jude
    7/03/2015 8:49:52 AM

    I heard a report that Hockey could only do so much as the decision was made by the ACCC and he was limited as to what he could do about it. Don't join the Lib Gov knockers, lobby the ACCC.
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