990516 Cargill, Continental Prospects Dimming

Washington - Prospects were dimming for outright approval by the U.S. Justice Department for farm-export giant Cargill Inc. to buy the grain wing of its largest U.S. rival, sources close to the case said.

The Justice Department was expected to rule in mid-May on the deal, decried by some farmers as a competition-killer, the sources said. Cargill, one of the world's largest food processors, would control up to 35% of U.S. grain exports under the proposed deal to buy Continental Grain Co.'s global grain operations.

It was considered likely the government would trim the size of the sale or propose other conditions on it, said the sources, who spoke on condition of anonymity. Concerns appeared highest about preserving competition in shipping from export terminals on the Texas Gulf coast and the lower Mississippi River where Cargill and Continental own five export elevators.

Opposition to the deal was strongest among farm groups and lawmakers in the upper Midwest and northern Plains. The sale, announced last winter, has become a lightning rod for complaints about low prices and the small number of giant firms that dominate grain and livestock marketing.

One source blamed political opposition for obstructing the deal.

Cargill, based in suburban Minneapolis, says the deal would create a more efficient grain shipping system and bring more competitive prices for farmers. Cargill has 243 U.S. facilities and Continental has 83. Only 10 cities are served by both.

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