| FOR IMMEDIATE RELEASE | CONTACT: Ron Zellar |
| July 15, 2008 | (406) 444-3144 |
New Owners Lack Connection with Montana Ag Producers
By Ron de Yong, Director
Montana Department of Agriculture
Montana's farm and ranch families can be forgiven if they feel threatened, even besieged, by the upheaval occurring in commodity markets. They are blamed unjustly for high food costs, struggle to justify staggeringly high fuel and fertilizer costs, and suddenly find fewer opportunities to use traditional futures markets to cushion the risks they are asked to accept.
Now, it appears that consolidation in food industries is occurring so rapidly they might not even recognize the buyers when it comes time to sell the grain and animals they produce.
The apparent success of InBev in its efforts to buy Anheuser-Busch -- which has a long-standing relationship with Montana malt barley growers and the communities of Fairfield, Conrad and Sidney -- is just the latest acquisition that leaves Montana farmers and ranchers wondering about the future.
Meat processor Swift & Co., bought by the Brazilian firm JBS in 2007, told Wyoming stock growers recently they have nothing to fear from the company's plans to acquire Smithfield Beef, National Beef and Five Rivers Ranch Feeding, giving JBS Swift control over an increasingly large share of U.S. fed cattle.
Peavey elevators in a half dozen Montana communities including Moore, Wolf Point, Billings and Miles City were sold recently by ConAgra Foods to Ospraie Management, a New York-based hedge fund group. The elevators will be rebranded under the name Gavilon. Just last year, ConAgra and Cargill sold several Midwest elevators with a total storage capacity of 36 million bushels to Whitebox Advisors LLC, a Minneapolis-based hedge fund.
Invariably, the new owners say they will keep the current workforce in local operations and will continue to work with existing producers and food industry customers. It's doubtful, though, that the motivation and the time horizon will be the same.
The mere threat of InBev's offer for Anheuser-Busch caused the St. Louis-based company to announce that it would accelerate cost-cutting efforts on its own to attempt to build shareholder value while avoiding a hostile takeover.
Stock industry analysts have speculated that hedge fund operators want to own farm land and grain elevators to better anticipate commodity price trends and make money by holding grain when prices are rising. The word "manipulate" is never used when hedge fund managers are interviewed about the purchases. However, what has attracted well-heeled investors to hedge funds is their ability to profit from rapid changes, up or down.
Producers understand that elevators and merchandisers are in business to turn a profit on the price difference between grain sales and purchases. But, given the hedge funds' penchant for quick profits, Montana farmers and ranchers can be forgiven if they long for the stability and pre-season contracts that characterized their previous relationships with suppliers and commodity buyers.
Food in the United States remains a bargain although higher input costs, transportation charges and worldwide demand have had an impact on supermarket prices. It is less clear whether higher prices will mean more profit, or less, for the families that form the backbone of U.S. food supplies.
