Rejecting all public comments opposing the pending purchase of Continental Grain's commodity merchandising division by Cargill, the world's largest grain trader, the US Department of Justice has asked that US District Court Judge Gladys Kessler enter the Final Judgment approving the sale.
Public comments by 67 individuals, eight public officials, 65 individual farmers, and 19 organizations addressed such issues as the Cargill/Continental sale doing nothing to raise farm prices; that the markets in which farmers presently sell their grain have become so concentrated that the grain companies will be able to depress prices paid to farmers for their grain; that Cargill will be able to monopolize "specialty or niche" markets or lessen competition in grain futures markets, and that there should be a complete ban on mergers and acquisitions in the agribusiness sector.
Other comments addressed the prohibiting of certain other companies, such as Bunge & Born Corp. in Missouri, from purchasing the divested elevators; concern about there being one less significant competitor in the national grain trading market after the transaction; belief that the proposed Final Judgment does not go quite far enough to ameliorate antitrust concerns raised by the transaction; that grain markets are already too highly concentrated and that agriculture industries, in general, are experiencing high rates of vertical consolidation; that the relevant geographic markets as defined in the Complaint is not adequate and that the DofJ Justice should have focused more on overlapping draw areas for country, rail, river or port areas, that the relevant market should be enlarged to include the entire US and that the two firms should not be permitted to merge under any circumstances.
Professor C. Robert Taylor of Auburn University expressed concern that the DofJ did not adequately consider the extent of vertical integration in the agricultural sector while others voiced concerns about general levels of market concentration in agriculture industries, that the DofJ's analysis did not adequately consider concentration in agriculture markets beyond grain buying, whether declining grain "basis levels" would mean that farmers will receive lower prices for their grain after the transaction, and whether the transaction may facilitate Cargill's exercise of market power in "organic and specialty" markets.
The National Farmers Union filed comments opposing the transaction because the transaction does not increase competition in grain markets. NFU also believed that the proposed Final Judgment is deficient because it does not ensure that divested facilities will remain competitive and that the proposed Final Judgment fails to address the roles played by Cargill and Continental in export markets.
In dismissing the public's comment about the proposed Cargill/Continental sale, the US Department of Justice revealed just how indifferent, if not unconcerned, about concentration in corporate agribusiness it has become.
Aside from brushing aside the genuine concerns of many relative to the monopolistic control of the marketplace by such corporate agribusiness behemoths as Cargill, the DofJ in a vapid effort to make it appear that it was troubled by such control on the US domestic market opened the door for increased international control of the grain trade by an already select few corporations.
Of the seven US elevators and terminals that Continental was ordered to divest itself of by the DofJ, in two cases (Salina, Kansas, rail elevator and Birds Point, Missouri, river elevator) Continental simply decided to not renew its minority interest lease.
Of the five remaining elevators it was ordered to divest, three were sold to the Louis Dreyfus Corp. (Lockport, Illinois, river elevator, Caruthersville, Missouri, river elevator, and the Beaumont, Texas, port elevator). The other two facilities (Troy, Ohio, rail elevator and the Stockton, California, port elevator) were sold to the Mennel Milling Company and the Penny Newman Grain Co. respectively.
Among the three elevators Cargill was ordered to divest itself of, the East Dubuque, Illinois, river elevator has been bought by CBG Enterprises Inc. (formerly Consolidated Grain & Barge) and the Morris, Illinois, river elevator has been purchased by the Louis Dreyfus Corporation.
The third Cargill facility, a port elevator leased from the Port of Seattle, Washington since 1970, was recently leased to Louis Dreyfus who will assume the remainder of Cargill's five-year lease. The Port will continue to receive more than $1 million a year in rent, including 50 percent of all dockage revenue generated from the facility. Dreyfus will have the option of renewing the lease once it expires in November 2005. Cargill will now assume 50 percent control of a nearby Tacoma, Washington port terminal while some 100 miles to the south on the Columbia River, ConAgra, Archer Daniels Midland (ADM) and the Mitsubishi Corp. a leading Japanese trading company, operate the Kalama Export Company LLC, affording western Washington State a who's who of the international grade.
Thus, of the ten facilities ordered divested by the DofJ, half of them have are now part of the Louis Dreyfus corporate structure.
The Louis Dreyfus Corporation, with world headquarters in Paris, France and US headquarters in Wilton, Connecticut, traditionally has been ranked among the four largest grain traders in the world, behind Cargill, Continental and the Bunge & Born Corporation. In 1999 the privately-owned company generated $18 billion in revenue.
Dreyfus' acquisitions of the divested facilities raises an interesting question as to its relationship with the other major US grain traders. In 1993 Dreyfus and ADM ("Supermarkup to the World") reached an agreement to establish a joint venture under which ADM assumed operational control of most US grain elevators owned by Dreyfus. That transaction involved 46 facilities, including 12 terminal elevators, two port facilities, nine river facilities, three subterminals and 23 country elevators.
In the response to public comments on the Cargill/Continental sale, DofJ states:
"In summary, the divested facilities will be controlled by new entrants with the background, expertise, and incentive to compete effectively for the purchase of grain produced in these markets. With these divestitures, therefore, it is not likely that this transaction will create or enhance the exercise of market power by Cargill or other grain companies enabling them to depress prices paid to farmers for their crops in any market."
No mention is made by the DofJ of the ADM-Dreyfus "joint venture."