The Nebraska Attorney General's Office is studying the possible effects of a proposed joint venture involving ConAgra Foods' grain milling business, a deal that is now under investigation by the U.S. Justice Department.
Nebraska is not among the dozen or so states that have joined the department's antitrust investigation. The attorney general of Oklahoma — the nation's fourth-largest wheat-producing state — is leading a multistate investigation amid concerns that the joint venture could illegally lower wheat growers' prices, according to the Reuters news agency.
The new venture, called Ardent Mills, would combine the flour milling operations of Omaha-based ConAgra Mills and Horizon Milling. Horizon is a joint venture of Minnesota-based Cargill and CHS Inc., a St. Paul, Minn.-based Fortune 100 agribusiness owned by agricultural co-ops and producers.
“This multistate action is in the investigatory phase, and although we aren't currently taking part, we continue to monitor it closely,” said Shannon Kingery, spokeswoman for Nebraska Attorney General Jon Bruning. “In addition, we are reaching out to interested parties in the ag community to determine the potential ramifications of the merger.”
The joint venture was announced in March and is expected to close late this year.
“We're confident in the Ardent Mills transaction and continue to believe that it will enhance competition and customer and consumer choice,” ConAgra Foods spokeswoman Becky Niiya said.
Ardent Mills would control just over one-third of total U.S. flour milling capacity. The next-largest competitor, Archer Daniels Midland, has 17 percent, giving control of more than 50 percent of total capacity to two firms, according to the American Antitrust Institute, a nonprofit organization that has asked the Justice Department to look into “potentially adverse effects” of the venture.
Institute Vice President Diana Moss said those concerns include the new firm's ability to squeeze wheat farmers on pricing, raise prices for its customers and exclude competitors from having access to markets.
“It deserves a very thorough investigation,” Moss said.
Antitrust law professor John Lenich of the University of Nebraska College of Law said the Department of Justice will weigh those possible drawbacks with any advantages, including production efficiencies that would have a “pro-competitive effect.”
“A combined market share in the 30 percent (range) would raise some red flags,” he said.
Former Justice Department investigator Thomas Horton said a ConAgra statement about the merger addressing industry concerns about “commodity price volatility” raised concern for him.
“It jumped out at me,” said Horton, now a professor at the University of South Dakota School of Law. He said he thinks the companies are trying to hold down wheat input prices.
Nebraska was the nation's 12th-largest wheat-producing state in 2012 with about 53 million bushels produced. Iowa, which is not a major wheat-producing state, has not joined the investigation, a spokesman for Attorney General Tom Miller said.
Wheat growers are following news of the joint venture.
“Any time large organizations consolidate, it raises concerns for suppliers,” said Caroline Brauer, spokeswoman for Nebraska Wheat. “Right now we're just watching to see what comes from the Justice Department's review.”