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Brazilian-owned meat processing company a big winner in USDA trade war relief contracts

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Canned meat

Canned pork from Lakeside Foods, purchased by the USDA through the agency’s Trade Mitigation Program. (Photo by Christopher Walljasper/Midwest Center for Investigative Reporting)

A Brazilian-owned meat processing company undercut its competition by more than $1 per pound to win nearly $78 million in pork contracts through a federal program launched to help American farmers offset the impact from an ongoing trade war.

As a result, JBS USA has won more than 26% of the $300 million the USDA has allocated to pork so far — more than any other company, according to an analysis of bid awards by the Midwest Center for Investigative Reporting.

The USDA’s Trade Mitigation Program was announced last August and included direct payments to farmers, as well as $1.2 billion in food purchases from farmers and ranchers whose crops normally benefit from international markets.

The plan called for $558 million worth of pork purchases. The program is intended to help U.S. farmers and ranchers hurt by the ongoing trade disputes with China, Mexico, Canada and other trading partners. But some farmers say awarding contracts to JBS goes against the purpose of the program.

JBS bid an average of $2.56 per pound for five pound pork loin cuts, while its competitors bid an average of $3.80 per pound. The company bid as low as $2.02 for the cut, the Midwest Center found.

The analysis found that JBS bid 33% less on the contracts — undercutting its competitors, even Tyson Foods, the second largest meat processor in the country.

JBS USA is the U.S. division of JBS SA, the world’s largest meat producer. The company owns more than 300 live hog operations in the United States.

It’s expanded its reach in the U.S. in the last decade, buying Swift & Co., Smithfield Beef Group Inc., Pilgrim’s Pride poultry and Cargill’s pork business, in addition to other acquisitions abroad.

JBS’ facilities in Minnesota, Iowa, Illinois and California have won trade mitigation contracts with the USDA.

“Who’s the government going to purchase it from? The Brazilian-owned JBS or the Chinese-owned Smithfield? They’ve allowed enough concentration in the packing industry; you’re running out of choices,” said Brian Duncan, a hog farmer from Northwest Illinois and vice president of the Illinois Farm Bureau.

Duncan raises 70,000 hogs each year, selling mostly to Tyson, but also to JBS’ Beardstown, Illinois, facility.

Pork bids, by company

JBS has won more than 26 percent of the money the USDA has spent on pork through the Trade Mitigation Program so far. Source:

USDA Agricultural Marketing Service
COMPANY WINNING BIDS
JBS USA Food Company $77,765,746
Goodman Food Products $50,472,997
Lakeside Foods Inc. $38,457,000
Tyson Foods Inc. $28,581,326
Mistica Foods LLC $26,033,692
Chicago Meat Authority Inc. $20,523,165
Proportion Foods $18,948,412
Seaboard Foods LLC $8,663,366
Calumet Diversified Meats Inc $8,118,468
Cargill Meat Solutions Corp. $6,579,700
Native American Enterprises LLC $6,514,148
American Custom Meats LLC $4,507,317
Skylark Meats LLC $3,482,559
John Hofmeister & Son $822,960
Rose Packing $696,400
Smithfield $240,120
JTM Provisions Company Inc. $83,040

Greg Gunthorp, who raises hogs near Mongo, Indiana, said it is JBS’ size that allows it to offer such low prices.

“They’re a huge global corporation,” he said. Because of that, they are less impacted by the demand problems purely American pork processors are facing. “To claim we’re bailing out the farmer and bailing out agriculture, and giving it to foreign multinational corporations is a joke.”

Secretary of Agriculture Sonny Perdue, in a statement, defended the purchases. “JBS is a Brazilian company operating in the United States, buying product from U.S. farmers. What we do through these companies — it’s not to help the companies — they offer a bid to us based on buying U.S. farmers production. This helps U.S. farmers by supporting prices.”

In an emailed statement, JBS stressed its American roots.

“We operate U.S. pork plants, processing American hogs raised by U.S. farmers — the true program beneficiaries,” said Nikki Richardson, a spokesperson for JBS USA. “Like other companies in the program, our sole intent for participating was to support U.S. producer prices and help our American producer partners. It was not a bailout.”

Little impact for U.S. farmers

The pork JBS is selling to the federal government comes from American farmers, the company said. JBS said its facilities in Worthington, Minnesota, Marshalltown, Iowa, Ottumwa, Iowa, and Beardstown, Illinois, work with more than 3,165 pork producers, paying $3.5 billion in livestock payments each year.

But many of those producers are on long-term pricing contracts with JBS and may not see much benefit from the USDA’s purchases.

“How does that trickle down to farmers raising pigs for them?” Gunthorp asked. “They’re on a contract. That contract’s not changing because JBS sold more pork to the government.”

Cities winning pork bids

The pork purchased through the USDA’s Trade Mitigation program is raised and processed in the United States. These are the cities where those companies are processing pork. Source:

USDA Agricultural Marketing Service
CITY VALUE
Inglewood, California $50,472,997
Plainview, Minnesota $38,457,000
Addison, Illinois $26,033,692
Marshalltown, Iowa $22,867,329
Chicago $21,940,264
Round Rock, Texas $18,948,412
Worthington, Minnesota $25,570,984
Riverside, California $11,696,579
Council Bluffs, Iowa $11,386,065
Beardstown, Illinois $9,172,838
Ottumwa, Iowa $8,458,016
Pleasant Prairie, Wisconsin $8,118,468
Columbus, Nebraska $6,579,700
Wichita, Kansas $6,514,148
Logansport, Indiana $5,154,424
Tracy, California $4,507,317
Guymon, Oklahoma $3,709,190
Omaha, Nebraska $3,482,559
Houston, Texas $3,268,080
Waterloo, Iowa $3,105,046
Sioux City, Iowa $2,584,838
Storm Lake, Iowa $2,440,390
St. Joseph, Missouri $2,369,338
Concordia, Missouri $2,241,190
Emporia, Kansas $986,130
Carroll, Iowa $240,120
Harrison, Ohio $83,040

Duncan said he hasn’t seen much uptick in prices because of the trade dispute commodity purchases.

“There was a slight run up in price late last fall,” he said. “There was a rally and the rumor was the government was making some purchases.”

The first USDA awards for pork products were released in November. But Duncan said a bigger factor affecting hog prices has been the African swine fever that’s been hurting hog farmers in China and Southeast Asia since last August.

China’s hog population has dropped by 40 million.

The U.S. produces 74.3 million hogs annually, according the USDA’s National Agricultural Statistics Service.

The disease has increased global demand for pork and could be an opportunity to sell more U.S. pork to Asian markets. But that depends on trade with China reopening.

“There’s opportunity there for us to be a major supplier,” Duncan said. “But I don’t know if this administration is going to let us take advantage of that opportunity.”

The USDA’s purchases represent such a small portion of U.S. hog production, it’s unclear they’ll make much difference.

Ted Schroeder, an agriculture economist at Kansas State University, said many of the impacted markets will barely notice these purchases.

“I just don’t see these programs being huge support for farmers,” he said.

While pork makes up nearly half the food to be purchased through the USDA trade mitigation program, it’s small in comparison to the amount of pork produced each year, Schroeder said.

“Once completed, it will have resulted in moving a week’s worth of U.S. pork production, which is significant during a challenging time,” said Jim Monroe, senior communications director for the National Pork Producers Council, referring to the first round of pork purchases. “Our preference is an end to trade disputes that have prompted retaliatory tariffs against U.S. pork from two of our largest export markets, Mexico and China.”

The U.S. Department of Agriculture has bought $748 million worth of food from farmers and ranchers, nearly two-thirds of the original $1.2 billion goal according to the Midwest Center analysis.

That’s five times as much on food as the agency bought in the first six months of the program, according to analysis by the Midwest Center for Investigative Reporting.

The program was intended to be temporary relief for farmers struggling against the effects of the trade wars. On May 13, President Donald Trump announced the USDA would buy an additional $1.3 billion in food from U.S. producers.

An agency spokesperson said in an email that the first round of commodity purchases won’t be completed until January . The USDA has yet to give details on the second round of purchases.

JBS is under scrutiny by several U.S. senators who say the company shouldn’t be able to participate in the USDA program.

“It is counterproductive and contradictory for these companies to receive assistance paid for with U.S. taxpayer dollars intended to help American farmers struggling with this Administration’s trade policy,” nine senators wrote in a May 29 letter to Perdue.

The Midwest Center for Investigative Reporting is a nonprofit, online newsroom offering investigative and enterprise coverage of agribusiness, Big Ag and related issues through data analysis, visualizations, in-depth reports and interactive web tools. Visit us online at www.investigatemidwest.org

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