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June 10th, 2014

Why the Federal Government Should Block the Tyson-Hillshire Merger

By Patrick Woodall meat aisle in grocery store

After several weeks of musical merger chairs, the dust finally settled this weekend leaving Tyson Foods the winner in a bidding war for Hillshire Brands. The nation’s biggest meat and poultry company offered one billion dollars more than it offered a week and a half ago and the deal is now worth about $8.5 billion. The other bidder, Pilgrim’s Pride, withdrew its bid, and the original deal for Hillshire to buy food manufacturer Pinnacle Foods will be scrubbed to pave the way for the Tyson takeover after Hillshire pays Pinnacle a $163 million “breakup” fee

This has been great for Hillshire shareholders because all the bidding activity jacked up the share price by almost 60 percent in a few short weeks. But it is a raw deal for consumers and farmers who now face a much more consolidated market for pork. And giving more market power to Tyson allows it to use its “protein power” as the dominant pork, poultry and beef position to pit cattle ranchers against contract chicken growers against hog farmers. Here are a few reasons why the federal government should block the merger: 

  1. It makes the biggest meat company even bigger: There is no real justification for letting the biggest meat and poultry company get even larger by buying the eleventh largest meat company. Tyson argues that it wants to strengthen its mix of value-added, branded meat products by capturing Hillshire’s Jimmy Dean sausage, Ball Park franks and Hillshire Farm lunchmeats. Tyson is already a major name in American supermarkets, so it shouldn’t be so hard for it to bring a more expansive portfolio of brands and products to market. 
  2. The merger strengthens Tyson as “protein powerhouse:” Increasingly, the biggest meat and poultry companies don’t think of themselves as producing beef, pork, chicken or turkey, they consider themselves to be “protein producers.” When a company sells all the items in the meat case, it can effectively manipulate prices to push consumers where there is the highest profit. If cattle prices are high, it can increase poultry production to lower prices for chicken and lure consumers away from beef that is more expensive to produce. This harms farmers who produce livestock because Tyson can always shift away from the peaks of the cattle or hog cycles by playing farmers off against one another. And it erodes consumer choice by constantly manipulating prices to fatten the company’s bottom line
  3. It gives Tyson more latitude to exploit contract farmers: Tyson practically invented the modern serfdom of contract poultry farming. These contracts are rigged in favor of the companies that enforce rigid obedience and discipline with retaliation, fear and unfair and deceptive practices. Farmers are often forced to make expensive building upgrades (over several hundred thousand dollars) just for the privilege of raising chickens owned by companies like Tyson. The merger would give Tyson another profitable revenue stream that could cross-subsidize the contract abuses that have become all too common in the contract poultry industry.

The food and agribusiness industries are already entirely too consolidated, and the livestock processing industry is the most concentrated of all. The proposed Tyson-Hillshire merger rewards shareholders but punishes America’s farmers and consumers. The Department of Justice must prevent the nation’s largest meat and poultry company from merging its way to monopoly.

2 Comments on Why the Federal Government Should Block the Tyson-Hillshire Merger

  1. Gene says:

    If anyone and I mean anyone is really expecting the government to do anything that favors the consumers and general public at large and I mean really anyone than I have land for sale in the West area of Broward County Fl. A little wet in spots but hey it’s cheap. This is the same government that’s lies in bed with Monsanto and allows them to endanger us and destroy this Planet with it’s outrageously dangerous and vile product’s GMO’s and Roundup which as more and more people are starting to realize are in the air we breath, the water we drink, the food we eat at an alarming rate. All been proven and still the government does nothing. It even has ex-Monsanto big wigs in seats of power in the FDA and parts of Obama’s decision making cabinets. Get real here they do nothing for us they serve their masters and decide as they are told. So look for jacked up prices in the meat aisles soon. Even more than the $21. pot roast I seen just this week in a Winn-Dixie local store. Never ends and I expect more of the same. So no don’t hold your breath and expect your interests to be cared for. Doubtful very doubtful…

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