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Competition watchdogs to allow Lakeside sale

Canada’s Competition Bureau doesn’t plan to challenge U.S. meat giant Tyson Foods’ sale of its Lakeside beef packing operations at Brooks, Alta. — yet.

Tyson announced last June it would sell its Lakeside Farm Industries operation to XL Foods, the meat packing business operated by Alberta-based cattle feeding and marketing firm Nilsson Bros. for $107 million.

Tyson’s then-CEO Dick Bond said in June that Lakeside “no longer fits the long-term strategy of our company.”

Some ag groups have said the deal would leave cattle producers even more at the mercy of “packer concentration” as Alberta’s beef packing capacity now ends up largely in the hands of either XL or Cargill.

But the bureau said Friday it “will not at this time challenge the acquisition.”

That said, the bureau “intends to closely monitor the industry and will reassess the competitive impact of the transaction once the outcome of U.S. labelling measures, and the U.S. packers’ response to these measures, are clear.”

The bureau was referring to the planned implementation of the U.S. government’s final rules for mandatory country-of-origin labelling (COOL) on meats and other food imports.

COOL, the bureau warned, “could inhibit Canadian cattle producers’ ability to sell into the U.S. market.”

The bureau noted in its release that the “primary concerns raised by industry participants were not related to the transaction, but rather related to the possibility that the Lakeside plant… would close if the transaction did not proceed, and to recent U.S. mandatory (COOL) legislation.”

U.S. packers have purchased “substantial volumes” of Canadian slaughter cattle, cattle producers told the bureau, but “they were concerned that U.S. packers may adopt more rigorous labelling requirements for beef products,” the bureau noted.

“Industry participants anticipate that the final rule of COOL could enable U.S. packers to increase purchases of Canadian slaughter cattle. However, should U.S. buyers adopt more rigorous (COOL) practices for beef products, this could inhibit the sale of Canadian slaughter cattle to the U.S.”

The bureau added that it “will not hesitate to take appropriate remedial action” if any later assessments find that Lakeside’s sale to XL “has resulted or is likely to result in a substantial lessening or prevention of competition.”

But the National Farmers Union, for one, already predicts that will happen. “Cattle farmers are already struggling with record low prices,” NFU Manitoba co-ordinator Fred Tait said in a release Friday. “This will only make the situation worse.”

“Command and control”

Canada’s cattle marketing system “has become a full-fledged ‘command and control’ operation that will operate solely for the benefit of the two big companies,” Tait said.

The Nilssons’ holdings currently include beef plants in Edmonton, Calgary and the former Western Canadian Beef Packers plant at Moose Jaw, Sask., which make it Canada’s largest domestically-owned and -operated beef processor. The Nilssons also own beef plants at Omaha, Neb., and Nampa, Idaho.

With only two companies controlling the market, there will neither be competition nor regulation in the marketplace, and that will lead to “predictable outcomes which are bad for producers and consumers,” he said.

“The Competition Bureau has become a joke,” Tait said. “It is more appropriate to call it the Consolidation Bureau.

“This decision allows XL to attain a 48 per cent market share of the beef packing industry in Canada, as well as acquiring auction markets, cattle finance companies and cattle insurance companies,” said Tait, who farms at Rossendale, Man., about 40 km southwest of Portage la Prairie.

The Nilssons, he said, “already had control over virtually all the largest auction markets in Saskatchewan, and this merger strengthens its captive supply of cattle going into its plants.”

In 2005, Tait said, the bureau allowed Cargill to buy out major Ontario packer Better Beef, since which time cattle prices in Ontario have become the “lowest” in the country.

“Now western farmers can expect to see the same thing, and consumers can expect to see higher retail prices,” said Tait.

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