010112 Livestock Groups Wary of Tyson-IBP Plans

Chicago - Keeping meat plants open and maintaining a competitive market structure are concerns cattle and hog industry leaders have with poultry giant Tyson Foods Inc.'s plan to buy beef and pork processor IBP Inc.

Tyson's plan is just the latest mega-merger in agribusiness, where size is increasingly seen as the key to profits and where farmers, even big farmers, feel increasingly squeezed.

Less than two years ago, top grain exporter Cargill Inc. swallowed up the grain business of No. 2 exporter Continental Grain in a deal that many feared would shrink farmers' choices to sell grain. That deal, nevertheless, passed anti-trust scrutiny.

Tyson, the No. 1 poultry producer, wants to dominate the “center of the plate” through the use of IBP, the world's top supplier of fresh beef and pork. That prospect alone has sellers of cattle and hogs nervous, but also trying to find a silver lining.

One benefit of such a merger would be Tyson using its brand name chicken products marketing expertise to sell branded beef and pork products, industry sources said.

But farmers were also wary of any “balancing” Tyson might try to put into effect as it surveys demand for meats -- or tries to shape that demand.

Pork supplies will be increasing this year, with hog producers expanding herds after a profitable 2000. All of the current slaughter capacity will be needed this year, so pork producers want to make sure IBP's demand for hogs will not be hurt by any Tyson corporate strategy to favor chicken.

“We need to keep all of the plant capacity we have right now. We are hoping the plants of IBP will stay open,” said Craig Jarolimek, president of the National Pork Producers Council. “We would hope that Tyson would look at adding capacity.”

IBP has 11 beef processing plants and six pork plants.

The National Cattlemen's Beef Association, which represents the nation's cattle producers, said activities surrounding IBP are key to the beef industry increasing demand for beef.

“While Tyson has been very successful processing and marketing poultry, beef is unique and we are interested in the company's vision for the beef industry,” said NCBA President George Hall in a statement.

Hall said the merger must provide “good relationships with producers, labor and customers” and “a competitive market structure for fair and open markets for live cattle.”

A possible benefit of a Tyson-IBP merger would be that Tyson may be able to apply its acknowledged expertise in brand-name marketing to beef and pork.

“Tyson is king of branded products... that is where beef has been lacking,” said Todd Domer, spokesman for the Kansas Livestock Association, which represents Kansas cattle producers.

In the 1980s, chicken companies like Tyson began selling fresh chicken by brand name. That assured consumers they were buying quality products of consistent quality, said Ron Plain, agriculture economist at the University of Missouri.

The beef and pork industries have only recently begun using brand names on their fresh meat products.

The use of branded products plus the introduction of convenient easy-to- prepare chicken items pushed chicken consumption past beef in the early 1990s. In 1999, U.S. per capita chicken consumption was 77.7 pounds vs. beef's 69 and pork's 53.8 pounds.

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