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  • Bribery Scandal Forces JBS to Sell Five Rivers. No Impact to Feedlot Operations Expected

Bribery Scandal Forces JBS to Sell Five Rivers. No Impact to Feedlot Operations Expected

Recently, JBS SA, the Brazilian parent company of Greeley-based Five Rivers Cattle Feeding LLC, announced plans to sell Five Rivers as part of a $1.8 billion divestment designed to assist in reducing debt. 

Five Rivers is the largest lot feeding operation in the world with commercial feed yards in Kansas, Colorado, Texas, Arizona and Idaho and a one-time capacity of 980,000 cattle. 
JBS-Greeley, CO
In Colorado, Five Rivers has four feedlots:  Kumer Feedlot in Kersey, Gilcrest Feedlot in LaSalle, Yuma Feedlot in Yuma and Colorado Beef in Lamar.

The lot feeding operation also plays a crucial role in assuring supply of cattle to JBS beef processing. 

When contacted, Cameron Bruett with JBS headquarters in Greeley, declined to comment and, instead, sent a copy of the press release JBS issued on June 20, 2017.

“Today, the JBS S.A. Board of Directors reviewed and approved a proposal to commence a divestiture process for certain assets. The divestment program is intended to further sharpen the focus of the business on key strategic areas, protect core assets and allow the Company to reduce net debt as it works on plans for future growth.

Following a careful assessment, the Company has decided to proceed with the sale of JBS Five Rivers Cattle Feeding assets.

Selling these assets is central to a strategy designed to reinforce JBS’ competitive advantage in the global food industry. The sale of feed yard assets will more closely align the JBS business model with key U.S. competitors and allow the Company to concentrate its efforts on its core food and value-added products businesses.

An orderly sales process will be conducted to ensure business continuity. JBS Five Rivers will continue to operate as usual, including the purchasing of cattle and commodities in the ordinary course of business, until the closure of a transaction. In addition,
JBS USA intends to continue agreements to purchase cattle from feedlots associated with Five Rivers Cattle Feeding operations.”

Not mentioned in the press release is an on-going scandal involving JBS SA that is at the heart of the need to divest.

After a three year period involving a series of corruption investigations, JBS SA was accused of allegedly bribing numerous high ranking Brazilian officials, including $4.6 million paid to current President Temer, $50 million paid to former President Luiz Ignacio Lula da Silva and $30 million to former President Dilma Rousseff.  

JBS was, at one time, a small meat producer, but, the company grew at an astonishing rate during 13 years of government ruled by former President Lula and Rousseff’s Workers Party.  The company’s growth was largely attributed to acquisitions funded by low-cost loans from Brazil’s development bank.

At first, former JBS chairman Joesley Batista publicly denied bribing officials.  Then, in a taped plea-bargain testimony, Batista admitted to bribing the three presidents as well as numerous other officials.
Temer vehemently denied accepting a bribe, but, in a bombshell worthy of a Hollywood drama, the Supreme Court released an audio tape of him speaking with Joesley Batista. 

In the tape, secretly recorded by Batista in a meeting he had with Temer last March, Temer apparently condones the payment of “hush money” to a jailed legislator who was involved in the impeachment of former President Dilma Rousseff and later prosecuted for corruption charges.  That impeachment resulted in President Temer being placed in power.

In exchange for leniency, JBS publicly admitted to making illegal payments and agreed to pay a fine of $10.3 billion over 25 years.

As recently as two weeks ago, JBS SA said it had no plans to sell its core assets, which included Five Rivers.  That decision appeared to change overnight when Brazil’s Attorney General stated JBS must make an initial payment of $3 billion on its $10.3 billion fine.

Throughout all of its public statements, up to and including those most recently made, JBS continues to confirm the following statement:

“An orderly sales process will be conducted to ensure business continuity. JBS Five Rivers will continue to operate as usual, including the purchasing of cattle and commodities in the ordinary course of business, until the closure of a transaction. In addition, JBS USA intends to continue agreements to purchase cattle from feedlots associated with Five Rivers Cattle Feeding operations.”

Closer to home, employees and management at Five Rivers’ feed yard Colorado Beef in Lamar are not concerned about continued business operations.  There are no plans for layoffs of any kind, and it’s expected to be business as usual.  As one employee who preferred not to be named stated, “I’ve been through changes in ownership here before, and things just keep going along.  The only thing that changes is the name at the bottom of the check.”

Additional development:  On June 23, 2017, the USDA announced that “recurring safety concerns” had prompted the halting of all imports of fresh beef from Brazil.

Dow Jones Newswires reports that “beef from now shuttered Brazilian slaughterhouses was found to have abscesses, caused by a vaccine against hoof-and-mouth disease that Brazil’s agriculture inspectors said do not pose health risks.”

Since last March when questions were raised about potential bribery of an inspection official, USDA officials have been inspecting all Brazil meat imports.  In 11% of inspections, the USDA has refused entry, a sharp contrast to an average rejection rate of 1% of all other global shipments.

U.S. Secretary of Agriculture Sonny Perdue made the following statement. “The Brazilian government had pledged to address those concerns, including by self-suspending five facilities from shipping beef to the United States.”  Perdue went on to add, “Although international trade is an important part of what we do at USDA, and Brazil has long been one of our partners, my first priority is to protect American consumers.”
 
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