Brazil’s JBS wins a quarter of Trump-tariff contracts for pork

A Brazilian-owned meat processing company undercut its competition by more than $1 per pound to win nearly $78 million in pork contracts through a federal program launched to help American farmers offset the impact of the ongoing trade war.

As a result, JBS USA has won more than 26 percent of the $300 million the USDA has allocated so far for pork purchases — more than any other company, according to an analysis of bid awards by the Midwest Center for Investigative Reporting.

The USDA’s Trade Mitigation Program, announced last August, included direct payments to farmers as well as $1.2 billion in food purchases from farmers and ranchers whose crops normally benefit from international markets. The program is intended to help U.S. farmers and ranchers hurt by ongoing trade disputes with China, Mexico, Canada, and other trading partners. The plan called for $558 million worth of pork purchases.

JBS bid an average of $2.56 per pound for five-pound pork loin cuts, while its competitors bid an average of $3.80 per pound. The company bid as low as $2.02 for the cut, the Midwest Center found. Its analysis determined that JBS bid 33 percent less on the contracts, undercutting its competitors, including Tyson Foods, the second-largest meat processor in the country.

JBS USA is the U.S. division of JBS SA, the world’s largest meat producer. The company owns more than 300 live-hog operations in the United States. It has expanded its reach in the U.S. in the last decade, buying Swift & Co., Smithfield Beef Group, Inc., Pilgrim’s Pride poultry, and Cargill’s pork business, and has made other acquisitions abroad. JBS facilities in Minnesota, Iowa, Illinois, and California have won trade mitigation contracts with the USDA.

“Who’s the government going to purchase it from? The Brazilian-owned JBS or the Chinese-owned Smithfield? They’ve allowed enough concentration in the packing industry, you’re running out of choices,” said Brian Duncan, a hog farmer in northwestern Illinois and vice president of the Illinois Farm Bureau. Duncan raises 70,000 hogs each year, selling mostly to Tyson but also to a JBS facility in Beardstown, Illinois.

Greg Gunthorp, who raises hogs near Mongo, Indiana, said it’s JBS’s size that allows it to offer such low prices. “They’re a huge global corporation,” he noted. Because of that, they are affected less by the demand problems purely American pork processors are facing. “To claim we’re bailing out the farmer and bailing out agriculture, and giving it to foreign multinational corporations is a joke.”

In an emailed statement, JBS stressed its American roots. “We operate U.S. pork plants, processing American hogs raised by U.S. farmers — the true program beneficiaries,” said Nikki Richardson, a spokesperson for JBS USA. “Like other companies in the program, our sole intent for participating was to support U.S. producer prices and help our American producer partners. It was not a bailout.”

The pork JBS is selling to the federal government comes from American farmers, the company said. JBS said its facilities in Worthington, Minnesota; Marshalltown and Ottumwa, Iowa; and Beardstown, Illinois, work with more than 3,165 pork producers, making $3.5 billion worth of livestock payments each year. But many of those producers are on long-term pricing contracts with JBS and may not see much benefit from the USDA’s purchases. “How does that trickle down to farmers raising pigs for them?” asked Gunthorp. “They’re on a contract. That contract’s not changing because JBS sold more pork to the government.”

Agriculture Secretary Sonny Perdue echoed the company’s defense of the purchases. “We’re buying U.S.-produced agricultural products. The premise behind procurement is to take product off the market and support prices. This will help U.S. farmers,” Perdue said in a statement released Wednesday. “These are legal companies operating in the United States. This is no different than people buying Volkswagens or other foreign autos that are manufactured in the United States, where their executives may have been guilty of some issue along the way. They still buy the cars. JBS is a Brazilian company operating in the United States, buying product from U.S. farmers. What we do through these companies — it’s not to help the companies. They offer a bid to us based on buying U.S. farmers’ production. This helps U.S. farmers by supporting prices. Companies are able to buy from our farmers more because we are buying that product and taking it off the market.”

Duncan said he hasn’t seen much uptick in prices because of the trade dispute commodity purchases. “There was a slight run-up in price late last fall,” he said. “There was a rally, and the rumor was the government was making some purchases.”

The first USDA awards for pork products were released in November. But Duncan said a bigger factor affecting hog prices has been African swine fever, which has been hurting hog farmers in China and Southeast Asia since last August. China’s hog population has dropped by 40 million. The U.S. produces 74.3 million hogs annually, according the USDA’s National Agricultural Statistics Service.

The disease has increased global demand for pork and could create an opportunity to sell more U.S. pork in Asian markets. But that depends on reopening trade with China. “There’s opportunity there for us to be a major supplier,” said Duncan. “But I don’t know if this administration is going to let us take advantage of that opportunity.”

The USDA’s purchases represent such a small portion of U.S. hog production, it’s unclear they’ll make much difference. Ted Schroeder, an agriculture economist at Kansas State University, said many of the affected markets will barely notice these purchases. “I just don’t see these programs being a huge support for farmers,” said Schroeder. While pork makes up nearly half the food purchased through the USDA trade mitigation program, it’s still just a small portion of the total pork produced each year, he said.

“Once completed, it will have resulted in moving a week’s worth of U.S. pork production, which is significant during a challenging time,” said Jim Monroe, senior communications director for the National Pork Producers Council, referring to the first round of pork purchases. “Our preference is an end to trade disputes that have prompted retaliatory tariffs against U.S. pork from two of our largest export markets, Mexico and China.”

The U.S. Department of Agriculture has bought $748 million worth of food from farmers and ranchers, nearly two-thirds of the original $1.2 billion goal, according to the Midwest Center. That’s five times as much on food as the agency bought in the first six months of the program, according to the Center’s analysis. The program was intended to offer temporary relief to farmers struggling to offset the effects of the trade wars. On May 13, President Trump announced that the USDA would buy an additional $1.3 billion in food from U.S. producers.

A USDA spokesperson said in an email that the first round of commodity purchases won’t be completed until January 2020. The agency has yet to offer details on the second round of purchases.

JBS is under scrutiny by a number of U.S. senators who say the company shouldn’t be able to participate in the USDA program. “It is counterproductive and contradictory for these companies to receive assistance paid for with U.S. taxpayer dollars intended to help American farmers struggling with this administration’s trade policy,” said a May 29 letter to Perdue from nine U.S. senators.

This story was written by Chris Walljasper and produced by the Midwest Center for Investigative Reporting, a nonprofit, online newsroom offering investigative and enterprise coverage of agribusiness, Big Ag, and related issues through data analysis, visualizations, in-depth reports, and interactive web tools.