United States-JBS-Swift.

BRAZIL-JBS WALKED AWAY.

As most people know, JBS announced Friday they were not going to pursue at this time the purchase of National Beef. They had been negotiating with the DOJ to try and get the deal done. I am sure frustration with the DOJ was part of the reason. Particularly from the DOJ’s initial ruling which showed they did not have a good understanding of the beef industry in general and the High Plains Beef market in specific.I think the primary reason JBS backed away was basic economics. As good business people, they looked at the depression in all the world markets and demand in most of the countries they are in, including the total meltdown in the American financial markets. Also, like the rest of us, they probably have no clue what this stimulus package really says -- let alone what it may mean – and certainly nothing understandable to the benefit of agriculture.Times are tough in their home court of Brazil. The third largest beef company declared bankruptcy and the two giant South American processors -- Perdigao and Sadia -- are laying off almost 10,000 workers. Times are tough in Argentina, where JBS has a large beef plant being negatively affected by a crazy socialist government ours is trying to copy. Also, times are very, very tough in the EU beef industry where JBS has a large beef plant in Italy. I think their plants in Australia are still doing well.Look at the US beef industry. I think JBS may have underestimated how much capital they were going to have to put into the Swift beef plants to bring them up to speed as well as modernizing waste water facilities.I think perhaps the biggest handicap at this time may be the operation and the number of cattle in their five Readers Feedlots. I don’t know if they have closed any feedlots yet, but when they bought the feedlots they had a one-time capacity of 800,000 cattle. That’s a staggering number and I bet it would be a huge financial challenge even if beef feeding times were good. And they are not. In fact, feeding cattle is resulting in some of the highest per head feeding losses in history. In 2008 I think the experts believe feeders lost about $120 per head. Lately I understand it is closer to $200/head.So what is there to make anyone enthusiastic about buying another large beef plant with significant debt and more feedlots?.