Cargill Gets OK to Buy Rival’s Unit

Cargill Inc. got U.S. antitrust clearance to buy the grain unit of rival Continental Grain Co. after the companies agreed to sell nine facilities in six states, including one in California.

Under an agreement with the Justice Department, the companies will sell four port elevators, four river elevators and one rail terminal. Antitrust enforcers said the sales are necessary to ensure that farmers and other suppliers would receive a fair price for the grain and soybeans they sell.

The decision clears the way for Cargill, the world’s largest crop trader, to boost its share of the U.S. market for corn, wheat and soybeans from 6% to about 10%.

The combination had drawn fire from some farmers and questions from U.S. Agriculture Secretary Dan Glickman. Last year Glickman urged the Justice Department to determine “whether the acquisition will notably increase concentration in agriculture,” potentially harming farmers, ranchers and consumers.

In reaching the settlement, the Justice Department took the unusual step of moving to prevent an artificial decrease in prices paid to farmers. In most cases, antitrust enforcers are concerned about ensuring that combining companies don’t have the power to raise prices.

“Without the divestitures, many American farmers would have faced lower prices for major crops they produce, such as wheat, corn and soybeans,” said Assistant Atty. Gen. Joel Klein, head of the Justice Department’s antitrust division, in a statement.

The department also claimed the acquisition, as originally planned, would have made Cargill one of only two companies in control of delivery points authorized by the Chicago Board of Trade for settlement of corn and soybean futures contracts.

In Central California, both Cargill and Continental Grain operate port elevators, or facilities that buy grains and soybeans from farmers for export to other countries. Cargill will keep its facility in Sacramento and has agreed to sell a port elevator operated by Continental Grain in Stockton.

“If a single company controls both ports, they’ll be able to artificially depress prices for farmers that have no other outlet for their wheat,” said John Nannes, deputy assistant attorney general for the department’s antitrust division.

Cargill has six months to sell the facility on its own, Nannes said. If it does not sell during that time, a trustee will be appointed to dispose of the property. Cargill will sell eight other facilities in Illinois, Washington, Texas, Missouri and Ohio. The facilities to be sold are among 47 owned by Continental.

Cargill, the world’s largest privately owned business, is based in Wayzata, Minn. Continental, also privately held, is based in New York City.