Washington - Cargill Inc.'s plan to buy the grain business of its arch- rival Continental Grain Co. stands a better chance of winning approval from U.S. antitrust regulators now that the European Commission has given its approval, industry sources said.
But the estimated $1 billion that Continental is expected to reap from the sale of the nation's second-largest grain business could set off a new set of antitrust issues if Continental uses the money to expand its already considerable holdings in livestock, according to some sources.
The acquisition is under review by the U.S. Justice Department. Cargill said it expects to complete the deal by the end of March.
The Justice Department declined to comment on the status of its investigation.
The European Commission's approval of the deal on Thursday was based on its impact on European farmers and consumers, and was completely independent of the U.S. review, a Justice spokesman said.
“We're very pleased that they formally agreed that this is compatible with the European common market,” a Cargill spokeswoman said.
Cargill, the nation's largest private company, has not yet finished submitting all the documents and papers requested by antitrust investigators, she said.
A handful of U.S. grower groups and farm state lawmakers have adamantly opposed the acquisition since it was announced last November, contending it would concentrate too much grain market power in the hands of Cargill. But they also privately acknowledge that Cargill is likely to win approval as long as it agrees to divest any problematic assets.
Two areas likely to catch the eye of antitrust regulators are Cargill's hefty market share of terminals along the Illinois River, and its additional clout with export facilities in the Texas Gulf port area, according to agriculture experts.
But Continental, another major agribusiness player, might pose even bigger antitrust issues.
“One of the big questions we're now concerned about is what will Continental do with the money it gets from the sale,” said one congressional aide.
“This could give Continental the funds to expand and become even bigger in livestock, which is an industry far too concentrated already,” he added. “We would definitely oppose anything like that.”
Continental ranks as the largest beef cattle feeder in the United States, selling about 1.1 million head per year to slaughter plants.
It is also the third-largest U.S. hog producer, producing about two million animals annually.
Continental has made no secret of its interest in acquisitions and investments to gain more of the value-added market. “We will continue to study opportunities in all of our existing agribusinesses,” a Continental spokesman said.
Next Thursday, a House Agriculture subcommittee is scheduled to hold a hearing on growing concentration in agriculture. A similar hearing was held last week before a Senate panel.
Several senators have scheduled a session next week with Attorney General Janet Reno, where they plan to urge her to take a hard line on any further concentration in the U.S. livestock markets.
The National Farmers Union, which opposes the Cargill acquisition, has called for a halt on all mergers in the agricultural sector.
Cargill and Continental handle about 35% of U.S. grain exports, including soybeans, wheat and corn.
Earlier this week, the U.S. Commodity Futures Trading Commission expressed concern that the Cargill deal would boost its control over barge loading facilities on the Illinois River, which are essential for delivery of Chicago futures contracts.
“The commission will consider further this issue at such time as the acquisition occurs,” the agency said.
Meat Industry Insights News Service
P.O. Box 553
Northport, NY 11768
Phone: 631-757-4010
Fax: 631-757-4060
E-mail: sflanagan@sprintmail.com
Return to Home Page