The
AGRIBUSINESS EXAMINER
Montioring Corporate Agribusiness From a Public Interest Perspective
A.V. Krebs  Editor\Publisher
 

Issue #106                                                                           February 27, 2001
 

NOTEWORTHY BOOKS:
Five books that deserve AGRIBUSINESS EXAMINER readers attention
 

EDGAR BEAVER'S DESTINY: AN ENVIRONMENTAL FABLE
by Joseph Petulla.  2000.
Available through Xlibris Corporation (www.Xlibiris.com).  Paperback.  124 pages. $16.00 ISBN 0-7388-2471-2.

Reviewed by John Opie for The Journal of Environmental Education, February 18, 2001

Unlike humans, beavers have a very large, working appendix as part of their digestive systems.  Their food is digested and taken into the appendix where bacteria break down wood or plant cellulose.  This happens largely while they sleep.  The result is a soft, green, porridge-like mixture, and rich in vitamin B-1 that passes out of their bodies and which they lap up as it emerges.  They can distinguish between this porridge and their normal wastes, which are hard and dry and pass out as they swim.  The green stuff,  described on p. 62, is integrated in Joe Petulla's fable because it nourishes the gravely wounded beaver Pongo, and exemplifies the extensive research by the author to assure the authenticity of his fable.

Joe Petulla is a distinguished environmental historian, policy analyst, ethicist, and advocate whose career spans over thirty years of teaching and research at the University of California at Berkeley and the University of San Francisco.  Edgar Beaver's Destiny is a charming and provocative tale, less for children than adults, written in the tradition of Victorian fables.

It is unabashedly anthropocentric, giving human qualities to its animal protagonists, and would have been popular among Victorians.  They would not, however, have understood its strong environmental focus.  The fable also expresses a very strong Native American slant with the appearance of the Great Beaver who is the source of wisdom, power, and creativity.  The tale may be best when read aloud in the Native American and Victorian parlor traditions.

The tale is of a maverick and somewhat dorky adolescent beaver, Edgar, who believes that beavers, as they always have, chew down far more trees than they need for food and dams, and in fact waste most of their food.  Much to his delight, Eula Mae, the fairest maid of the beaver pond joins him, as they leave their families to strike out on their own stream to build a dam and beaver house.  Edgar believes he has been destined to preach to all of beaverdom the important of conservation for their own survival as their numbers grow and as they as beset by human intervention.

Edgar tells his family, friends, and anyone else who would listen that "beavers are mindless and destructive,", wasting ten times more resources than they need for
comfortable existence.   Wherever beavers settle, the landscape is "dotted with stumps and battered looks" that looked desolate, "almost like some great conflagration passed over the place and left stumps for a great cemetery, the water itself seemed demoralized and sluggish."

Unfortunately, fellow beavers, who see him as a crank and irritant, ignore Edgar.  Even Elua Mae has her doubts.  And their children revert to bad beaver habits.  Edgar despairs until a fair human damsel-a woman naturalist named Jennie-contacts them through patience, understanding, and affective non-verbal language.  Edgar is at first suspicious because of the long history of pain, mutilation and death inflicted by humans, but he is won over by sweet, calm sounds "that speak our tongue" from the woman.

Their communication is kin to the droll Dr. Doolittle but at best like Native American stories.  The naturalist finds an untouched alpine stream for Edgar and his family to embark upon a new beginning, like in a Shangri La or a New World.  After some setbacks, Edgar prevails and becomes the great beaver hope to overcome the fatal destructiveness of beavers with a new self-sustaining conservation ethic. He advocates the "New Beeve" which means "Conservation.  Waste Management.  Sanitary Engineering.  A way of life that can be sustained for a long, long time."

The message is obvious for human readers-whatever our natural inclinations, humans (and beavers) will not long survive if we continue in our habitual destructive consumption.   Humans may not have found a universal spokesman for conservation, but the transformation is necessary.

John Opie,  Distinguished Professor Emeritus, New Jersey Institute of Technology, and Visiting Professor, The University of Chicago
 

STOP GROWING OUR OWN FOOD? DON'T BET THE FARM ON IT
By Bill Virgin
Seattle Post-Intelligencer, February 19, 2001

In homes and barns and fields and offices all over the state, Washington's farmers and growers are ordering seed and fertilizer, checking equipment, monitoring weather predictions, tracking costs and market prices, and planning for the season soon to start.

Maybe they're wasting their time.

Maybe they ought to realize that it's time for this country to face economic fact, acknowledge the inevitable and get out of agriculture.

Maybe they'd realize that if they had read the 1998 book "The End of Agriculture in the American Portfolio" (Quorum Books) by Steven Blank, or heard the author's presentation at a Washington State University conference last fall.

Or maybe they've got more long-term economic perspective ... and a lot more common sense.

Debating the proposition that American agriculture is doomed to failure and extinction is not an academic exercise. Certainly, the trend line would seem to support Blank's thesis. For the last half decade the combination of depressed commodity prices, urban development pressures and regulatory burdens have pushed farmers out of business.

It won't get any better this year. Not only are commodity prices not showing improvement, farmers in this part of the country are facing higher electricity prices, higher fuel prices, higher fertilizer prices (derived from natural gas) and water shortages.The future of American agriculture will also weigh heavily in this year's consideration of a new federal farm bill, as the new administration and Congress argue which sectors should get assistance, and how much.

Blank would argue that it should get no help, that subsidies merely cover up the fact that the United States can no longer compete in world agriculture, and shouldn't try.

"Most Americans could not care less if farming and ranching disappears, just as long as they get their burgers and fries," Blank writes in his book.

"America will waddle on. Our economy no longer needs agriculture and is rapidly outgrowing it. Our voters support urban positions over rural interests. Our taxpayers are tired of paying subsidies to farmers while surplus food sits in subsidized storage facilities. Our suburbanites are fed up with the odors, dust and toxins from the old farm down the road. No one is buying the farmer's sob story anymore. Instead, they are buying imported food."

In Blank's scenario, farmland should be put to higher economic use (golf courses and turf farms being among them). The United States is moving up the economic food chain to the information economy; the rest of the world can feed us.

A nice, succinct summation of the situation. With just a few problems ...

Thomas Schotzko, a WSU agricultural economist who spoke at the same conference last fall at which Blank did, doesn't disagree with the author's depiction of the problems farmers face on the input side of things.

But that, he contends, is only half the story. Farmers are not helpless or hopeless. They have marketing tools -- like the Western Washington farmers who market directly from their farms or at grower markets -- to compete.

"Those who learn to be profit-maximizers, in concert with shippers, will survive," he says.

But beyond that are some questionable assumptions about agriculture's present and future.

First is the notion that farming survives only because of federal subsidies unique to it. Certainly, we spend billions on agriculture, sometimes in the wrong places (anyone else want to take a run at tobacco programs?). Certainly, the debate on the next farm bill would be a prime time to make sure we're not allocating money according to those sectors with the best lobbyists.

But let's not kid ourselves, either. All American industries are subsidized, some more overtly than others.

Then there's the notion that we can move out of agriculture and all we'll lose is a bunch of Willie Nelson benefit concerts. This is all too eerily and ominously reminiscent of the arguments we heard in the era of "Megatrends," one of the silliest books ever written, and manufacturing. We can abandon manufacturing, the mantra went. What matters is what we know, not what we make (or grow).

But, in fact, it does matter what we make and grow. Information has to be about something, like how we can make better what we make or grow; information without that context is like static on the radio, devoid of meaning.

Those who are presently making or growing things are the ones most likely to derive the innovations leading to the next generation of what we'll grow or make.

Further, the agricultural economy is more than the guy who drives the combine. It's bankers and equipment dealers, shippers and food processors. You don't have to look far for evidence of what gets lost when you lose the basic industry.

National Frozen Foods closed a processing plant in Burlington and laid off 248 people because of the decline of agriculture in Western Washington. AgriFrozen Foods is laying off 368 workers at a facility in Grandview, and is closing plants in Walla Walla and Woodburn, Ore., after its board decided not to plant or process crops this year.

As for the notion the rest of the world will feed us, even dismissing the issues of food supply and national security issues (one of the original reasons we have a farm aid program) for the moment, why should we believe those developing nations will, as they climb the economic food chain, be content to continue shipping us raw food?

Eventually they will want to do the "value added" work themselves that we may be counting on for future growth.

Finally, for those of you in technology fields ranging from biotech to computer software, who think this is an Old Economy phenomenon and not your concern, let us close with this cautionary note: It's your issue, too. Nothing renders your industry immune from the same long-term trends or the suggestion someone else can do it.

The world is full of talented, smart and ambitious people. There is nothing you can do that they can't do just as quickly and competently -- not to mention at less than half the cost.
 

'FAST FOOD NATION;" HOLD THE PICKLES, HOLD THE LETTUCE
By Michiko Kakutani
New York Times, January 30, 2001
 
Eric Schlosser's compelling new book, "Fast Food Nation," will not only make you think twice before eating your next hamburger, but it will also make you think about the fallout that the fast food industry has had on America's social and cultural landscape: how it has affected everything from ranching and farming to diets and health, from marketing and labor practices to larger economic trends.

As the subtitle of his book, "The Dark Side of the All-American Meal," clearly indicates, Mr. Schlosser is not sanguine about the consequences of the fast food business.

He argues that "the centralized purchasing decisions of the large restaurant chains and their demand for standardized products have given a handful of corporations an unprecedented degree of power over the nation's food supply," and that as "the basic thinking behind fast food has become the operating system of today's retail economy," small businesses have been marginalized and regional differences smoothed over. A
 deadening homogenization, he writes, has been injected into the country and increasingly the world at large.

Mr. Schlosser, a correspondent for The Atlantic Monthly, draws on earlier works like Jim Hightower's "Eat Your Heart Out," Stan Luxenberg's "Roadside Empires," Robert  L. Emerson's "New Economics of Fast Food," and "Big Mac: The Unauthorized Story of McDonald's" by Max Boas and Steve Chain. He has also done a lot of legwork,  interviewing dozens of fast food workers, farmers, ranchers and meatpackers in an effort to trace the snowballing effect that fast-food production methods have had on their work.

The resulting book, which began as a two-part article in Rolling Stone magazine, is not a dispassionate examination of the subject but a fierce indictment of the fast food industry. Mr. Schlosser contends that "the profits of the fast food chains have been made possible by losses imposed on the rest of society," including a rising obesity rate and an increase in foodborne illnesses (most notably, those caused by the E. coli O157:H7 bacteria, whose spread has been facilitated by the growing centralization of the meat production process).

He argues that "since the administration of President Richard Nixon, the fast food industry has worked closely  with its allies in Congress and the White House to oppose new worker safety, food safety and minimum wage laws." He urges the government to ban advertising aimed at children, to "create a single food safety agency that has sufficient authority to protect the public health" and to stop subsidizing the sort of dead-end jobs generated by the fast food business.

On occasion, Mr. Schlosser undermines the substantive points he wants to make by seeming eager to blame that industry for virtually every contemporary ill. Talking about restaurant robberies, he writes that "crime and fast food have become so ubiquitous in American society that their frequent combination usually goes unnoticed." Talking about teenagers who take jobs after school to buy a car, he complains that "as more and more kids work to get their own wheels, fewer participate in after-school sports and activities"; "they stay at their jobs late into the night, neglect their homework and come to school exhausted."

Despite such melodramatic lapses, "Fast Food Nation" provides the reader with a vivid sense of how fast food has permeated contemporary life and a fascinating (and  sometimes grisly) account of the process whereby cattle and potatoes are transformed into the burgers and fries served up by local fast food franchises. It's an account that includes an unnerving description of the dangerous, injury-filled work performed in slaughterhouses, where job assignments have names like "first legger, knuckle dropper, navel boner" and an equally absorbing description of how the New Jersey-based "flavor industry" tries to make processed frozen food palatable  by manipulating taste, aroma and "mouthfeel."

What is perhaps most astonishing about America's fast food business is just how successful it has been: what  began in the 1940's as a handful of hot dog and  hamburger stands in Southern California has spread, like kudzu, across the land to become a $110 billion industry. According to Mr. Schlosser, Americans now spend more on fast food than they spend on higher education, personal computers, computer software or new cars, or on movies, books, magazines, newspapers, videos and recorded music combined.

Mr. Schlosser writes that "on any given day in the United States about one-quarter of the adult population visits a fast food restaurant" and that "the typical American now consumes approximately three hamburgers and four orders of French fries every week." "An estimated one of every eight workers in the United States has at some point been employed by McDonald's," he adds, and "the company annually hires about one million people, more than any other American organization, public or private."

As fast food franchises from McDonald's to Pizza Hut to Kentucky Fried Chicken go global, this dynamic has assumed an international flavor. In Brazil, Mr. Schlosser reports, McDonald's has already become the nation's largest private employer. Classes at McDonald's Hamburger University in Oak Park, Ill., are now taught in 20 different languages, and a Chinese anthropologist notes that all the children at a primary school in Beijing recognized an image of Ronald McDonald. For the Chinese, the anthropologist noted, McDonald's represents "Americana and the promise of modernization."
 

TWO BOOKS ABOUT THE ADM PRICE-FIXING SCANDAL
Reviewed by John M. Connor, Purdue University and American Antitrust Institute Food Industries Committee member in FTC:WATCH #556

James Lieber. Rats in the Grain: The Dirty Tricks and Trials of Archer Daniels Midland; New York: Four Walls Eight Windows (2000). Indexed. $26.
Kurt Eichenwald. The Informant: A True Story; New York: Broadway Books (2000).  No index. $26.

A popular book on antitrust will strike many as a classic oxymoron. Two in one year and both selling well is surely a Shermanian phenomenon.

New York Times Senior Write Kurt Eichenwald has crafted a 606-page narrative of a global price-fixing scheme that, slimmed down to one-tenth its heft, has a good good chance of coming to your neighborhood theater soon. Eichenwald reduces a story of seamy corporate conspiracy that began in 1992 (and is still unwinding in foreign courts of law) to a federal-cops-and-robbers tale, told from the perspective of the feds.

Eichenwald has great material to work with.  He has well dressed thieves for whom stealing from their customers was about as serious as rigging a frat-house election, one of the world's greatest agribusiness companies located in a sleepy Corn Belt town providing a surface of rectitude below which bubbled veins of corruption, and a brilliant mad scientist who volunteers to become the greatest white-collar mole the FBI has ever had and then uses the FBI as a cover to defraud the very company he is spying upon.  Nearly all this twisted tale is captured on hundreds of video and audio tapes handed over to the FBI and made available to Eichenwald and his three research assistants.

The Informant also incorporates ". . . about eight hundred hours of interviews with more than one hundred participants . . .as well as tens of thousands of confidential corporate and government records, including secret grant jury testimony"
 
Eichenwald worked for five years on this book.  He narrates events from November 1992, when the FBI investigationof Archer Daniels Midland began, to February 1997, when the informant Mark Whitacre was convicted by the U.S. Department of Justice for embezzlement of ADM.  A brief epilog sketches the dramatic 1998 Chicago trial that convicted Whitacre and his former colleague Michael Andreas for criminal price fixing and the January 1999 downfall of the powerful Chairman of ADM, Dwayne Andreas, father of Michael.

In a style that seems at times borrowed from a John Grisham novel, pages of pure dialog --- some of it reconstructed -- fill most chapters.  A single page may jump across three or four scenes pulled from as many days.  Perhaps this approach is inevitable in a book that is an extremely visual rendering of the actions of 86 "main characters," as Eichenwald calls them.  To prove that he is the proverbial fly on the wall, the author strews the work with such details as the wallpapers of countless meeting rooms.  The whole approach creates the breathless immediacy of a challenging mystery novel and sweetens an otherwise tart tale of corporate crime.

I doubt that a nonfiction book has been written since the 1930s that makes the FBI look so Olympian.  Telling the story from the FBI's angle solves a big dramatic problem for anyone who would write about this scandal.  For the first three years, the episode looks like the good guys (Whitacre and the FBI) versus the bad guys (ADM's profit-mad top executives in cahoots with an Asian tong), but then the tale melts into the good guys versus the nutty guy (Whitacre) Black and white is easy, but gray is death to a colorful novel, unless your name is John Le Carre.

Lest I leave the impression that Eichenwald hankers after the life of a Hollywood writer, it should be noted that even the most assiduous reader of press reports on the ADM affair will be rewarded with novel information.  Eichenwald followed up on Whitacre's charges that ADM tolerated embezzlement as a type of tax-free fringe benefit for its top executives by nailing down the story of how ADM's treasurer had defrauded the company of $14 million in 1991 and how ADM blocked attempts by the FBI to investigate the crime.

The treasurer was allowed to quietly retire.  Moreover, Eichenwald manages to get Whitacre finally to admit on the record that his embezzlement was not a company-sanctioned bonus scheme.  He also turned up facts about ADM's overly generous treatment of one manager it fired for refusing to fix prices.

Eichenwald also has a lot of good material on the secret bargaining that went on between ADM's law firm, Williams & Connolly, and the DOJ that resulted in ADM's breathtaking $100-million price-fixing fine.  The haggling was not without its moments of humor.  Williams & Connolly actually proposed that ADM's Board of Directors sue the government for damages because Whitacre's cooperation agreement prevented the informant from telling his bosses at ADM about the price-fixing.  Of course, nearly all of Whitacre's supervisors at ADM were themselves conspirators.

James Lieber is more comfortable with gray.  As a practicing lawyer with a strong track record as a writer of popular works about major business developments, he makes a convincing case that ". . . bloodless white-collar crimes say more about the way the world works. . ." than the gruesome crimes covered by tabloids and Court TV.

Rats in the Grain seems like a needlessly provocative title for a serious book about one of the most egregious corporate crimes of the late 20th century.  Yet, this book does a good job of characterizing the Archer Daniels Midland Company as a sort of ever-full granary undermined from within by top executives constantly nibbling at the  shareholders' grain.  What the shareholders did not know was that the granary was being replenished by short-changing the grain terminal down the road.

Rats covers most of the ground omitted by The Informant.  Lieber tries to give the readers some of the background necessary to understand the import of the Chicago trial of three ADM executives who colluded on the price of lysine, a feed ingredient made by ADM and four other companies in the world that accelerates the growth of hogs and poultry.

The book covers ADM's notable success in the agribusiness sectors; the key role played by its aging patriarch, Dwayne Andreas, a genius in both management strategy and political machination; and a smattering of what the antitrust laws are all about.

The centerpiece of Rats in the Grain is the five-week Chicago trial, which Lieber attended faithfully.  Nearly half the text is given over to the "fire and iron" of the American legal system --- trial by jury.  Nearly every major witness has a chapter of  his own, with insightful commentary by Lieber on courtroom strategy and tactics.  Lieber has 50 names in his Cast of Characters, and he needs almost all of them to narrate the tale.  As a non-lawyer who had previously read the 6000-page trial transcript, I was fascinated by insights that had escaped my reading, but I can sympathize with  others who might find it tedious at times.  Although a well crafted rendition, its depth will be best appreciated by professionals or journalists who have covered such trials.

Eichenwald makes little attempt to provide background, even on his protagonist Whitacre, and eschews the kind of summing-up that would help his readers make sense of it all or place it in historical context.  Lieber is better on this score.  His last three chapters valiantly try to draw implications of the events for Whitacre as a person, for the wounded ADM, and for antitrust enforcement.  Eichenwald reveals much about the folly of human behavior and the arrogance that flows from market power, but Leiber's work will stand as a longer lasting historical document of an antitrust trial the equal of Microsoft and certainly the most important price-fixing trial since the great electrical-equipment convictions in 1961.

Although both books are praiseworthy and overlap very little, both leave many tantalizing topics for future writer Neither book addresses the business pressures that make price-fixing seem to be so profitable and worthy of risk. Readers are left in the dark about ADM's simultaneous involvements in three to five other international cartels and how these related to the lysine case, nor does one learn much about ADM's partners in the lysine crime, four Asian manufacturers.  Finally, for quite understandable reasons, the role played by Dwayne Andreas himself in the  conspiracy is little mentioned, nor are we enlightened about the highly likely lobbying of the White House by Andreas' friends.

De gustibus non est disputandum, but my advice is to give both hemispheres of your brain a treat: The Informant to whet your appetite for excitement and Rats in Grain to satisfy your thirst for historical knowledge.

John M. Connor teaches economics at Purdue University. He has been involved in several antitrust cases that havealleged price-fixing in lysine and other agribusiness products made by ADM. His book, Global Price Fixing, is scheduled to be published in mid 2001.
 

APPEAL FOR CONTRIBUTIONS

While THE AGRIBUSINESS EXAMINER is a subscription free e-mail newsletter it
welcomes contributions in the hope that readers still value THE AGRIBUSINESS
EXAMINER to such an extent that they will willingly  and generously financially
support  its continued circulation as it enters its third year. Checks should be made out to A.V.  Krebs and  sent to P.O. Box 2201, Everett, Washington 98203-0201
 

RECOMMENDED WEB SITE:
CORPORATE AGRIBUSINESS RESEARCH PROJECT

Readers of THE AGRIBUSINESS EXAMINER are reminded that past issues of the
newsletter can be found at the Corporate Agribusiness Research Projectís web site on
the Internet. The CARP web site features: THE AGBIZ  TILLER, THE
AGRIBUSINESS EXAMINER and "Between the Furrows."

THE AGBIZ TILLER, the progeny of the one-time printed newsletter, now becomes an  on-line news feature of the Project. In-depth essays dealing with corporate agribusiness  activities are posted here periodically.

In "Between the Furrows," besides a modern search engine, there is a wide range of
pages designed to inform and educate readers on the inner workings of corporate
agribusiness. In addition to CARP's "Mission Statement," "Overview" and the Project
director's "Publication Background," the viewer will find a helpful "Fact  Miners" page  which is an effort to assist the reader in the necessary art of researching corporations; a  page of  "Quotable Quotes" pertaining to agribusiness and corporate power; a  "Links"  page which allow the  reader to survey various useful public interest, government and  corporate web sites; a "Feedback" page for reader input, and  a page where readers can  order  directly the editor's The Corporate Reapers: The Book of Agribusiness.

The CARP web site was designed and produced by ElectricArrow of Seattle,
Washington.
http://www.electricarrow.com

Simply by clicking on either of the addresses below all the aforementioned features and  information are yours  to enjoy, study, absorb and sow.

http://www.ea1.com/CARP/
http://www.ea1.com/tiller/