Brazilian packer JBS S.A. announced last Friday the restructuring of its ownership of Five Rivers Cattle Feeding, which it acquired when it bought Smithfield Beef Group last October. Five Rivers operates 10 feedlots and boasts an annual capacity of 1.5 million head of cattle.

Ownership of Five Rivers afforded JBS access to a steady supply of finished cattle, plus the capability to customize feeding programs for customers. But full ownership presented challenges that included the financial risk of feeding cattle, as well as exposure under growing legislative pressure to regulate packer ownership of cattle.

Thus, JBS split ownership of Five Rivers with J&F Oklahoma, with JBS USA owning the feedlot operation and J&F the cattle. Under the new structure, JBS Five Rivers, a subsidiary of JBS USA, now owns 10 feedlots, while J&F will own up to 800,000 head of cattle on feed and pay JBS Five Rivers for the cost of feed and medicine at cost, plus a yardage fee.

J&F also has agreed to maintain sufficient cattle on JBS Five Rivers' yards to maintain 85% capacity at all times. J&F also agreed to sell to JBS USA at least 500,000 cattle/year from 2009 through 2011, based on USDA pricing and a grading grid identical to the grid used for third parties.