“Sometimes I think producers don’t believe packers are part of their business. And some packers don’t believe producers are part of their business. But we’re all in the same business,” says Wesley Batista, president and CEO of JBS USA Holdings, Inc., a wholly owned indirect subsidiary of JBS S.A. Batista is also JBS S.A. executive director of operations.
In an exclusive interview with BEEF magazine, Batista explains that every segment of the industry has a vested interest in serving consumers. He also means that he and his family remain involved in farming and ranching in Brazil.
“We understand how hard it is to raise cattle and run farms. We came into this business through the farm and ranch,” Batista emphasizes.
The short version goes like this. Wesley’s father, Jose Batista Sobrinho – the JBS in the company name – came from a small farm, started with nothing. He began harvesting one or two cattle every day to sell to butcher shops; eventually he owned one. In 1953, the elder Batista began a small slaughtering plant, harvesting five head daily. In 1968, he purchased another slaughter plant, then another in 1970, then another and so on.
Most Americans knew nothing of JBS until it acquired Swift and Company in 2007, then Smithfield Beef Group and Five Rivers Cattle Feeding – the largest in the world – and most recently Pilgrim’s Pride.
JBS is the world’s largest beef packer. In fact, it’s the world’s largest processor and exporter of animal protein. The company has a daily harvesting capacity of 90,300 head of cattle (28,900 in the U.S.), 48,500 pigs, 25,500 lambs and 7.6 million head of birds. It has beef-packing plants in the U.S., Brazil, Argentina Australia, Uruguay, Paraguay and Italy. The company exports to 110 countries.
For the past two decades, Wesley’s father has spent most of his time managing the family’s Brazilian cow-calf and cattle-feeding operations.
“My father is 76 years old, and it’s still difficult to keep up with him,” Batista says.
When Batista and his two brothers turned 17, each was put in charge of one of the family’s packing plants, utilizing the knowledge and skills they’d already acquired by working in those plants.
“My dad always told us, ‘You need to take the responsibility. Do what you think is right. If you need something ask,’” Batista says. “When you have the responsibility on your shoulders, it’s different than having your dad or your uncle telling you what to do.”
As important, Batista says, “My father always told us, ‘When you enjoy what you do, it’s not work; it’s fun.’ We have a passion for our business. We don’t view what we do as work.”
It’s likely that background in agricultural production that makes Batista seem so familiar when you first meet him. Wesley’s two brothers and three sisters are also deeply involved in the family business.
It begins with producers
For the breadth and depth of JBS holdings, Batista draws upon his roots in production agriculture to put the business in simple terms: “At the end of the day, it’s all about consumption.” Everything else is a consideration of consumption – from genetics to cow-calf production to feeding and packing.
“We need to work together to increase beef consumption around the world,” Batista says. “Together, we are all responsible for our industry’s success. JBS can’t do it. The other packers can’t do it. Producers and feeders can’t do it. It takes all of us.”
At the same time, Batista understands that opportunity for everyone else in the business begins with the cow-calf producer.
“If cattle producers in the countries where we do business don’t do well, then we don’t do well as a company,” Batista says. In Brazil, for instance, JBS established a bank so cattle producers could have more access to capital. They also established a risk-management company so producers could more easily hedge their cattle. For that matter, the youngest daughter runs the JBS foundation that established a school that makes primary education available to 200 students.
For Batista, it’s easy to understand why the U.S. cowherd continues to decline.
“I can only believe producers are reducing their herds because it hasn’t been very profitable,” he says. “The biggest issue is how to improve profitability, and a primary component of that is to increase demand. Related to increasing demand is improving food safety.”
This year, JBS began what it terms a cow-calf council in the U.S. Chandler Keys, JBS vice president of government affairs and industry relations, says it is a group of 10 producers from across the nation who meet quarterly with JBS representatives to discuss ways that the various sectors can work together to improve beef demand.
At this group’s next meeting, members will hear from one of the nation’s largest food-service companies and one of the nation’s largest beef retailers about what’s needed to grow demand in those sectors. At the next one, they’ll meet in Washington, D.C., to discuss what changes in export and public policies could grow beef demand.
“This council can’t accomplish anything alone. As a company, we can’t accomplish anything alone,” Batista says. “But as individuals and groups like this council, we can be a voice trying to influence the organizations representing the industry to work together as an industry in areas that can build beef demand.”
Ask most packers what they want in terms of a carcass and they will tell you mostly Choice, mostly Yield Grade 1-2 with no outs. Pose that same question to Batista, though, and he says, “I think we have a market for everything.”
Batista says consumer definitions of quality vary widely between countries. In Russia and the Middle East, for instance, he says consumers want lean beef; in Japan, lots of marbling. European consumers will pay more for tenderloin filets than anyone else in the world. Koreans covet short ribs more than anyone else. His point is that everything has value to someone; it’s a matter of getting it to them.
That’s why Batista believes market access is so important. The more markets the industry has access to, the more value that can be aggregated across the carcass as a greater proportion of the carcass flows to the consumers willing to pay the most. Rather than adding value per se, it’s a matter of retrieving the value that’s already there based on cultural preferences.
The knowledge of market access in different countries is one of the synergies JBS achieves with its business interests spread around the globe.
For instance, Batista explains that the U.S. traditionally exported mostly to North America and Asia. Meanwhile, through its South American operations, JBS exported to markets the U.S. has little experience with, such as Russia, China and the Middle East.
Now, JBS has working knowledge of how to do business in all of those countries combined.
Another primary synergy JBS obtained when it invested in U.S. operations is the ability to benchmark and identify best practices between countries.
“There are some things we were doing better in the U.S. than in our operations in South America and Australia,” Batista says. “And there were some things we were doing better in South America and Australia than in the U.S. Through benchmarking we identify best practices that improve operations in all of our plants.”
A universal language
Batista says it’s amazing how similar the industry is in each country JBS does business. Producers talk the same language and have the same concerns. And, the industry faces the same public and political scrutiny.
There is one difference in the U.S., though.
Batista moved his family here in 2007, near the company headquarters in Greeley, CO. His 90-year-old uncle couldn’t believe it; how could someone up and move to another town, let alone another country?
Batista explained to him that in America, farmers and ranchers live on their farms and ranches; in Brazil and South America, the owners and managers live in the city. Batista says that, more than anyone else in the world, Americans are proud to claim their agricultural heritage, to tell you that they came from the ground, as he puts it.
“Now, I understand why the U.S. is such a strong nation,” his uncle said.
Reasons for producer optimism
Batista’s crystal ball is as good as any producer’s, so he relies on facts and logic instead.
During the first half of this year, U.S. beef exports grew 20% compared to 2009 in terms of volume. The world is emerging from economic recession.
“It is not reasonable to see the growth in gross domestic product (GDP) that is occurring in emergent economies like China and Russia and not expect beef and meat demand to increase there,” Batista says.
The same level of GDP growth affects meat demand differently in emerging economies than developed ones, he says. Grow GDP 5% in the U.S., where consumers already have a rich diet, and there won’t necessarily be much impact on beef demand. But, grow GDP 5% in nations where diets are poorer, and the impact on meat demand and beef demand is more pronounced.
“The first thing consumers do is improve their diet,” Batista says.
In sum, Batista believes U.S. producers are on the verge of healthier profits.
“I believe we are at the bottom of the cycle in terms of U.S. cowherd size,” he says. “I’m optimistic we’ll see better demand and prices in 2011.Within the next few years I believe U.S. beef carcass and byproduct value will move to a higher price range.”
In other words, Batista believes now is the time to think about expansion rather than contraction.
“My father always taught us that the time to get into a business was when everyone else was leaving,” Batista says. “I think now is a great time to get in the cattle business.”