NFU urges more disclosure on Lakeside deal

If Canada’s Competition Bureau approves the sale of Alberta’s Lakeside beef packing plant to XL Foods, it had better publicly cough up “voluminous and detailed justification” for such a decision, the National Farmers Union says.

The NFU on Thursday wrote to the Competition Bureau regarding the sale of Lakeside, the Brooks, Alta. facility owned by U.S. meat giant Tyson Foods, to XL Foods, owned by Alberta’s Nilsson Bros. Group, for $107 million.

“At a time when family farm cattle producers are shouldering devastatingly low prices, the proposed sale involves Canada’s largest packing plant,” NFU board member Dave Lewington wrote to the bureau.

Among its other duties, the bureau oversees enforcement of the “abuse of dominance” provision in the federal Competition Act, by which firms that dominate a market are blocked from “engaging in anti-competitive acts that harm competitors, and thereby significantly lessen competition,” as the bureau puts it.

“Moreover, approving the sale would extinguish any residue of competition in the Canadian beef packing market — moving us from just three dominant packers to two,” wrote Lewington, who farms at Lavigne, Ont., about 80 km east of Sudbury.

“The NFU fears that the Competition Bureau may be on the brink of a grave error: approving Tyson’s sale to XL,” Lewington wrote. “Such a move would leave two companies (XL and Cargill) with more than 80 per cent of Canadian beef slaughter capacity — 95 per cent of capacity for fed/finished cattle.

The NFU, which since last summer has urged the federal government to block the Lakeside deal or order the Nilssons to divest their cattle production assets, among others, said that if the deal is approved, “such market-warping concentration will be aggravated by the fact that Nilsson Bros./XL have pursued an aggressive program of vertical integration — buying up auction facilities and setting up cattle finance and insurance companies.”

“Scant details”

The Competition Bureau, Lewington wrote in his letter to the bureau, “has provided scant and inadequate details of how it came to its conclusions” in previous cases.

Often, he wrote, the bureau has “hidden behind the pretext of confidentiality and commercial sensitivity. But there are huge amounts of information, data, assumptions, and procedural and methodological details that the bureau could divulge without releasing confidential corporate information and without threatening the business successes of companies seeking to merge or to sell assets.”

As an example of inadequate detail, Lewington quoted the bureau’s decision on the sale of Ontario’s Better Beef, citing the bureau’s statement that “claims that Better Beef had a disproportionately large effect on price determination… were not supported by empirical evidence” but he said the bureau gave “no hint as to the nature or source of that empirical evidence.”

If the Lakeside sale is approved, he wrote, the NFU wants to see an accounting of how the bureau arrived at certain assumptions, such as “the assumed risks of future border closures due to events such as foot and mouth disease or U.S.-initiated trade actions.”

As well, he wrote, the NFU wants to see the bureau’s information on “projected shifts in the allocation of revenues and profits among the various links in the cattle/beef chain” from cow-calf producers through to retailers, as well as “information on how the bureau’s decision relates to abuse of dominance provisions” in the Competition Act.

The Competition Bureau, Lewington wrote, “provides so little detail and data that no one can be in a position to determine whether post-merger prices and conduct match the pre-merger projections made by the bureau.” Thus, no one, he wrote, “can test the bureau’s assumptions and conclusions against subsequent reality.”

“Deserve each other”

The NFU’s latest salvo against packer concentration in the beef industry comes as it defends itself against a recent release by R-CALF USA, a protectionist U.S. ranchers’ group, which implied that the two groups had common cause and could form an alliance.

R-CALF, which along with the NFU and other groups attended a meeting in Montana last week on issues in the North American livestock trade, issued a release quoting two NFU board members as saying the two groups shared common interests against packer concentration and the negative effects of trade deals such as NAFTA.

The NFU responded Thursday by saying it “has profound disagreements with R-CALF in its attacks on the (Canadian Wheat Board in 1999) and on cattle farmers’ interests” such as R-CALF’s defense of the BSE-related closure of the U.S. border to Canadian cattle and beef in 2003.

“On many issues — on analysis as well as tactics — the NFU vehemently disagrees with R-CALF and will continue to do so,” the NFU said. “But in order to resolve pressing problems within the North American cattle sector, we are willing to listen to the positions of a broad range of organizations to understand their analyses of packer power and corporate concentration.”

The Canadian Cattlemen’s Association, which has previously sparred with R-CALF in a costly and ultimately unsuccessful trade fight mounted by R-CALF against imports of Canadian beef to the U.S., said in a statement Thursday that the NFU “shares a lot in common with R-CALF.”

R-CALF and the NFU “advocate trade barriers so that they don’t have to worry about competition,” the CCA wrote. “Unfortunately their beggar-thy-neighbour mindset fails to take into account that trade barriers generate far-reaching negative consequences within our industry and for other businesses in our inter-connected economies.

“The discriminatory stance shared by R-CALF and NFU says only some cattle producers have a right to be in the industry. For anyone who actually succeeds in making a profit, then re-invests it in their operation, resulting in growth, they suddenly become undesirable.”

NFU and R-CALF “deserve each other, along with other anti-prosperity, protectionist groups they recently aligned with” at the Montana conference, the CCA wrote.

The conference in question, held in Billings, Mont., was sponsored by the NFU, Institute for Agriculture and Trade Policy, Western Organization of Resource Councils, the National Association of Peasant Marketing Enterprises and Food and Water Watch.

Other participants besides R-CALF included the Confederation of Mexican Hog Farmers, Democratic Peasant Front of Chihuahua, La Jornada del Campo, the Dakota Resource Council, Dakota Rural Action, the Farmers Legal Action Group (U.S.) and Northern Plains Resource Council.