JBS fallout will depend on what unfolds in US

International news agencies are reporting the controlling shareholder of JBS, J&F Investimentos, has agreed to pay a fine in the billions of dollars linked to a political bribery scandal in Brazil, with payments due to start in December.

J&F's owners, Joesley and Wesley Batista, have resigned from their board positions and Reuters is reporting Joesley Batista has signed a plea agreement with prosecutors acknowledging he distributed payments to as many as 2000 politicians over ten years.

JBS Australia, the largest meat processor in Australia with plants and feedlots in five states,  is a wholly owned subsidiary of JBS internationally.

JBS Australia said the issues were Brazillian-specific and related to the family owned J&F company with no implication for JBS Australia.

Australian analysts and industry leaders say there are big questions around whether the Brazilian Government would continue to insist on repayments of the fine.

However, claims the Batista brothers have been attempting to influence government departments in the United States were now starting to emerge, said longtime industry leader and cattleman John Carter.

“The threat for the Australian section of the company is if New York shareholders take legal action or the US government acts,” he said.

“If charges are proven in the US, you can be sure their government will uphold fines.”

JBS was intending to float on the US stock exchange this year but that move seems to have been put on hold.

Already, JBS has sold Argentine assets to their biggest competitor.

However, international media has published a statement from the company saying no core assets at JBS USA, or any other part of the world, are candidates for sale.

Australian beef market commentators said while a fine of this magnitude was significant, unless there were global rationalisations within the company to belt tighten, the fallout in Australia could well be zero.

There is widespread acknowledgment JBS Australia has tended to run a relatively independent operation.

If JBS Australia did downscale significantly, all agree it could have a big impact on the local cattle market given the company’s processing muscle.

JBS and Teys account for around 35 per cent of the market share so the downscale of one would have an effect on demand in the short term and be a catalyst for lower prices, particularly for finished lines, one market watcher said.

“There would be a lag until others could step up to fill the void in demand but into the medium and longer term the situation would balance out,” he said.

A situation in which Teys attempted to obtain more than 50pc of Australia’s processing capacity would certainly test the Australian Competition and Consumer Commission, Mr Carter said.

He claimed most in the beef industry saw the corruption claims coming.

“It didn’t make sense that they went from owning one butcher shop to being the biggest beef  manufacturing business in the world in just 12 years,” he said.

“They were buying businesses, for big money, that we all knew were uneconomical.”

Beef marketing experts did not think the scandal would impact the local JBS name.

JBS Australia should be able to leverage off the good reputation of the Australian beef product and the strong local corporate governance that agricultural firms here are able to enjoy in an international setting, they said.