JBS talks history proposes future ‘alignment’ for efficiency in US beef
JBS is the third largest packing plant in the U.S., harvesting roughly 28,600 head of cattle daily and garnering 21 percent of the market share. The company also owns Five Rivers Feeding, which consists of 13 feedyards and has a current one-time capacity of 960,000 head.
“JBS is a hands-on company that works very hard. Previous to being called JBS, after the patriarch Jose Batista Sobrinho, whose initials form the company name, it was called Friboi. That term loosely translates to ‘kill steer.’
“This company is the largest in the world, killing 90,000 head daily. Well, in 1953 they were killing one head. They were killing that one head because they were basically order buyers – cattle traders – at the time, and they were absolutely sure the packer was ripping them off. So, they started hanging them up in a tree and weighing parts and pieces, and putting them back together. That’s how they got into the packing business,” explains President and CEO of Five Rivers Feeding Mike Thoren.
“Kenneth Monfort and his father started a packing plant in Greeley, Colo. in the 1960s. In 1987, after adding additional plants in Grand Island, Neb., they sold to ConAgra, which ran the company until about 2001. Then they sold it to Swift & Company, which was investors from Texas. Then in 2007 they sold it to JBS,” adds Vice President of International Sales for JBS Swift & Company Mark Gustafson of how JBS became the third largest packer in the U.S.
“We have projected revenue of $30 billion for 2010. We have 125,000 employees around the world and operate 140 operations in South America, North America, Australia, Europe, China and Italy,” says Gustafson. He adds that JBS is the largest producer and processor of beef and lamb in Australia, and in South America – both in Brazil and Argentina.
“We have four beef plants, one in Greeley, Colo., Grand Island, Neb., Cactus, Texas and Hyrum, Utah. In the summer of 2008 we also purchased the full packer lamb-packing company from Smithfield, and got four plants there. Those plants are blended, and we’ll kill both fed Holsteins – some native and some natural – but we’ll also kill a lot of cows in those plants as well. We also operate the Five Rivers Feeding Company,” says Gustafson of the company today.
“Originally Five Rivers was a the result of a joint venture initiated in 2005. This venture merged the cattle feeding assets of ContiBeef and Smithfield Foods to form a company of 10 feedyards in Colorado, Texas, Oklahoma, Kansas and Idaho with a capacity of 810,000 head. Today we have 13 feedyards, in eight states, with a one-time capacity of 960,000 head,” explains Thoren.
“We are a very lean organization, and employ about 770 people. We empower these people to make the best decisions for the care of the cattle with which we are entrusted. We operate relatively large and efficient facilities. We routinely invest in our infrastructure to ensure our cattle and our people enjoy the best accommodations,” adds Thoren.
“We at JBS are truly excited about the transformations we see taking place around the world. The world populations are posed to grow by 45 percent, to 10 billion people, by 2050. The challenge of feeding this growing population is daunting. To meet this demand, producers around the world have to employ the most efficient technology, production and husbandry tools available,” notes Thoren.
To do this, he suggests the U.S. beef industry take an aligned approach.
“I think the use of the word ‘aligned’ warrants a little definition. It simply describes an industry where participants are smart enough to not lose sight of the forest for the trees, and realize that generally, by working together, we gain more than by working against each other. It doesn’t suggest a vertically aligned industry as we see in pork and poultry,” explains Thoren.
“The concept of working together with a packer or feeder may be in strict conflict with some of your philosophies. I would wager if this is the case, you base these views on economic realities you have faced in your career. The reality is, for the past 40 years, the beef industry has been generally faced with shrinking beef demand. The beef demand environment is what sets the stage for survival of the fittest, where each participant has to take their margin from another segment, and in the end there is never enough to go around.
“However, I see a vastly different situation for beef demand in the near future. Today, the supply and demand balance is so strongly tilted toward small world supply and growing global demand, that we are seeing price relationships we’ve never seen before,” states Thoren.
“These two factors aren’t likely to change quickly. I truly believe we are entering a period where we may not be able to produce enough beef to meet potential demand. It’s quite feasible that we are likely entering a situation where all segments of the beef industry are simultaneously profitable.
“My greatest concern about achieving that vision is that we, as an industry, lose sight of the concept of alignment and waste efforts on in-fighting. Wouldn’t it be shameful if we waste our political resources on constructing and enforcing domestic laws aimed at driving wedges between segments of the industry, versus holding the government accountable to provide an environment where all participants can thrive and keep our regulatory efforts at a reasonable level?” asks Thoren.
He lists full re-opening of foreign markets and combating the regulation of greenhouse gases in the agriculture sector as two examples of issues that need to be resolved. To do its part, JBS has formed a Cow-Calf Advisory Council made up of 10 ranchers from across the U.S.
“The charge of this council is to provide timely insight on how JBS can help cow-calf producers increase profitability in a sustainable manner, and ultimately reverse the trend of the decreasing U.S. cowherd.
“As I’ve said, we at JBS are extremely excited about the future prospects of the beef industry, and we see the U.S. cattle industry collectively moving past our current challenges. We know we can’t do it alone, and as lifelong participants in the agriculture industry, the Batistas understand that cattle – the raw material you supply – are the lifeblood of our business at JBS,” says Thoren.