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

Issue #116                                                                          May 16, 2001
 

ECOLOGICAL DISASTER AVERTED????
U.S ENVIRONMENTAL PROTECTION AGENCY;
TREATING THE WORLD'S SOIL LIKE DIRT

“In 1992 the Environmental Protection Agency was only a few weeks away from ending life on the planet as we know it,” so writes George Lawton in the April, 2001 issue of Acres USA (“A Voice For Eco-Agriculture”).

Lawton reports that the EPA, although only having done limited tests at that time on a variety of genetically engineered microbes, all of which had been approved for release into the atmosphere, were prepared to approve the release of a GE variant of Klepbsiella planticola (KP), one of the most common bacteria on the planet

“This particular variety of KP,” he writes, “had the unique ability to convert dead plant matter into alcohol. It was hoped that this would provide a way for farmers to transform their unused stalks, leaves and other types of compost material into alcohol, which could be used for washing, running vehicles, etc.

“The EPA had done a variety of tests on this organism, all of which indicated that it would not be toxic to humans or animals. They were only a few weeks away from releasing these bacteria into the wild, when Michael Holmes, a graduate student at the University of Oregon, came looking for an interesting thing to study for his doctoral thesis.”

Under the direction of his academic advisor, Elaine Ingham, Holmes elected to do his thesis on the effects of this genetically engineered KP on plants, something which had not occurred to the EPA, as it was not required for the release of new genetically modified organisms, Lawton notes in his Acres USA expose.

Holmes study revealed, after testing samples of plants growing in sterile soil, soil with regular KP and soil with genetically engineered KP, that no plants in the latter soil were growing as the alcohol produced by the bacteria had killed them all.

At the time, Lawton notes, the EPA was envisioning that farmers would use these bacteria in a kind of fermenting process to convert plant material into a mixture of 17% alcohol and 83% mineral sludge, which could be poured off into the soil and reused.

“If that had occurred, the genetically engineered KP could have colonized the entire planet over the course of several years, turning all of the soil where it grew into barren dirt.”

Ingham said that problem was and still is that the EPA only looks at the immediate impact of new genetically modified organisms on animals, and does not take into account the larger impact on the ecosystem as a whole. That approach can work to a limited extent when working with chemicals, which can break down and dissipate over time. But living organisms have the ability to procreate and overwhelm the natural ecosystem.

After the Holmes research, Ingham claims, the EPA didn't accept their findings. Further, she said that she received considerable flack from the EPA, which also objected to Holmes' graduation because they thought his research was flawed. The EPA repeated the experiment but never released the results to the general public.

Ingham believes that the EPA was trying to hide the results because they were under pressure from chemical, seed, and biotech companies. She feared, Holmes says, "If we had not done that testing, the EPA would have allowed its field use in two weeks. We just happened to be working on that for academic interest. What would have happened if we
had not done that work? What kind of unexpected effects are already out there? Hopefully nothing as devastating as this organism, but we don't know because they have not been tested."

The EPA applied the rules mandated by the Federal Insecticide, Fungicide, Rodenticide Act and the Toxic Substances Control Act, and found no problems with the microbe, so it was approved for field testing.

Ingham explained, "Clearly the current regulatory methods are totally inappropriate. The work we were doing was not normal work for engineered organisms. The regulatory testing is appropriate for chemicals, but not appropriate for biological things that reproduce. If we were going to do appropriate testing, we should use the system developed by the Edmonds Institute in Edmonds, Washington. They publish a biosafety handbook which goes through all of the testing that should be required to assess the potential effects of genetically engineered organisms.

"This was the first organism capable of surviving in the soil. KP is found in the root systems of all the plants we have looked at, and it exists in decomposing plant material everywhere in the world. It is one of the few organisms that is everywhere," she adds.

As Lawton points out, “the problem with any organism and particularly with bacteria is that there is no surefire way to recall them once they have been released. Even plants pose a problem, despite the possibility of mechanical control. Imagine how hard it would be to selectively kill something that cannot even be  seen with the naked eye” and Ingham observes, "We have never been good at recapturing any organisms
we have released into the world.
 

$1.3 BILLION IN LEGAL COSTS AND 33 YEARS LATER:
DUPONT WILL CEASE MANUFACTURING
CHEMICAL POISON BENLATE

Citing high legal costs, rather than its serious adverse health impact and millions of dollars lost by farmers in crop damage, DuPont recently announced that by the end of the year it will cease after 33 years marketing the fungicide, Benlate.

Beginning in 1989 when DuPont was forced to temporarily recall the product due to contamination with the herbicide atrazine U.S. farmers have been filing hundreds of lawsuits against the chemical company alleging that using Benlate caused millions of dollars in crop damages. After years of litigation, which began in 1991, the company settled the majority of the claims at a total cost of approximately $750 million, the largest such settlement to that date.

In 1996, a U.S. jury awarded $4 million to a couple whose child was born without eyes after the mother was sprayed with Benlate while pregnant; however, on appeal, the award was reversed. The case is now awaiting a hearing by the Florida Supreme Court.

In June 2000, DuPont was ordered to pay over $100 million to two Texas fruit companies for damage to their orchards due to Benlate dust. And in December and February 2000, DuPont lost two separate lawsuits to Ecuadorian shrimp farmers and was ordered to pay $10.2 million and $12.3 million respectively. The shrimp farmers contended that Benlate runoff from banana fields had poisoned their shrimp farms.

Total litigation costs associated with Benlate have so far cost DuPont an estimated $1 billion dollars, and the company has set aside additional money to cover future losses and litigation expenses bringing Dupont's total financial cost to an estimated $1.3 billion dollars.

In spite of numerous jury decisions against the company, DuPont continues to insist that the product is "safe when used as directed". A company statement announcing the decision to stop production denied responsibility for problems associated with Benlate and instead cited "the high and continuing cost of defending the product in the U.S. legal system" as the primary reason for ceasing production.

According to a Pesticide Action Network Updates Service (PANUPS) report, in addition to the legal storm surrounding its use, Benlate is also notable for problems with fungal resistance. The active ingredient in all Benlate products is benomyl (in some formulations, the active ingredient is reported as carbendazim, the primary metabolite of benomyl), which is in the benzimidizole class of fungicides. The Fungicide Resistance Action Committee notes that the benzimidazole fungicides "met serious resistance problems that arose in most of their target pathogens." Fungal resistance and the reluctance of farmers to use a chemical that has been implicated in crop losses limited the market for Benlate. Worldwide sales last year amounted to $96 million.

PANUPS is a weekly email news service providing resource guides and reporting on pesticide issues that don't always get coverage by the mainstream media. It's produced by Pesticide Action Network North America, a non-profit and non-governmental organization working to advance sustainable alternatives to pesticides worldwide.

Visit their extensive web site at http://www.panna.org
 

USE OF DEADLY CHEMICAL POISON INCREASES
AS CHILE SEEKS TO UP GRAPE EXPORTS TO U.S.
WHILE LOCAL FARMWORKER HEALTH SUFFERS

Dormex, a chemical used to speed the growth of grapes, is reportedly taking a  staggering human health toll in Chile’s Copiapo Valley, the nation’s leading source of grapes, Chile’s second-largest export to the United States after copper. In 2000, 322,090 metric tons of grapes worth $314 million were sold to the United States.

And as Chile strives to increase its annual exports of fruit, the pressure to use more agricultural chemical poisons such as Dormex, manufactured by Germany's SKW Trostberg AG, has dramatically increased the chances of skin disease, miscarriages, sterility and cancer in farmworkers, according to public health workers.

The San Francisco Chronicle’s Foreign Service correspondent Jimmy Langman reports that a 1998 study by the Rancagua Hospital in Copiapo’s central valley region, where 60% of the nation's chemical poisons are used, showed that residents are 40% more likely to have children born with defects than in other regions.

Last year, more than 15,000 tons of chemical poisons were imported to Chile, almost twice the amount in 1990. There are 928 registered chemical poisons in use, of which 39 are on the United Nations' list of pesticides prohibited or severely restricted by governments, according to government officials.

Dormex (hydrogen cyanamide), which is also found in the United States, Mexico, New Zealand, Australia and Israel on grapes, kiwis, apples, pears, peaches and plums, may cause cancer, according to the Environmental Protection Agency.

Alberto Palma, 32, has managed chemical poison use at his family-owned Copiaco Valley vineyard for almost a decade.

Farmworkers, he claims, have only themselves to blame for not applying the chemical properly and often choosing not to wear protective gear that his farm provides. "The problems are due to the irresponsibility of some workers," he said.

Palma says he needs Dormex to help the development of grapes and overcome effects from adverse weather. "Our exports will decline without it," he adds.

Some observers, Langman in his report from the Copiapo Valley notes, say that rationale is the crux of the problem.

"The economic model emphasizes deregulation and export. It pushes farmers into a competitive rush," notes Miguel Altieri, a Chilean who is professor of sustainable agriculture at the University of California at Berkeley. "The farmers don't understand that they could reduce the use of pesticides dramatically and obtain the same levels of production."

Also, as Chile pushes for a bilateral free trade agreement with the United States --- an effort being touted as a possible model for a proposed Western Hemisphere-wide pact called the Free Trade Area of the Americas (FTAA) --- Margaret Reeves of the San Francisco office of Pesticide Action Network North America (PNNA) said Chile's chemical poison policies should be closely scrutinized.

"The trend in these trade agreements is to harmonize environmental standards downward," she said. "The bottom line is, nobody should be exposed to dangerous pesticides, neither Chileans nor Americans."
 

BBC DOCUMENTARY:
"TOXIC TRAIL"  SHOWS SOUTHEAST ASIAN NATIONS
VICTIMIZED BY MAJOR CHEMICAL POISON MANUFACTURERS 
 
"It is not my contention that chemicals never be used. I do contend that we have put poisonous and biologically potent chemicals in the hands of persons largely or wholly ignorant of their potential harm"
                     ---- Rachel Carson, Silent Spring, 1964

With annual sales of over $30 billion the world’s chemical poison industry has become big business, according to a recent aired BBC documentary --- The Toxic Trail --- and while these poison manufacturers say they try hard to encourage “responsible use” of their chemicals, each year more than 25 million cases of chemical poisonings are reported, nearly all the victims being in developing countries.

“Toxic Trail,” produced by TVE for the BBC, set out to uncover the scale of the problem by following the flow of chemicals from their manufacturers in Thailand across the open border into Cambodia where they are posing a serious threat to human health and the environment.

As the documentary details, “multinational companies disclaim responsibility for what happens to their products in Cambodia since they have no formal operations there, leaving the responsibility to the government. But after decades of civil war, the impoverished Cambodian Ministries are struggling to build regulatory capacity in an attempt to control illicit trade and use of pesticides. But they're no match for the massive commercial pressure coming from both east and west.”

As 85% of Cambodians rely on agriculture for their livelihood, the market for chemical poisons in that country is enormous as many farmers believe that chemical poisons are a miracle ally in the war against pests while the country's recently opened borders have become a highway for these products. But few of Cambodia's poorly educated and impoverished farmers, the documentary concludes, realize how dangerous those chemicals are.

Methyl Parathion, Monocrotophos, and Mevinphos, all classified as “extremely hazardous” by the World Health Organization (WHO) and banned or restricted in many developed countries are sold freely, and widely used by poor farmers across Cambodia with no safeguards whatsoever. For most of Cambodia's farmers, chemical poisoning is a way-of-life.

Methyl parathion, a widely used organo-phosphate, seriously affects the nervous system if applied without due care. Minor symptoms include irritability, insomnia and nausea, while more serious poisoning will cause vomiting, staggering, ataxia, excessive sweating, shortness of breath, diarrhea, abdominal cramps and excessive fatigue.

Among those facts revealed in the BBC documentary:

* Over $30 billion a year is spent on chemical poisons with 25% of that total being spent in Asia alone, where sales were up by more than 10% in 2000. Thailand is the biggest spender in the South Asia Region, with chemical poison sales equaling $247 million. Across Asia, however, there are over 800 million people living in poverty. Out of desperation, farmers trust the sellers and promoters of the chemicals, those convincing them that chemical poisons will keep insects and weeds from destroying their crops, often farmers only means of income.

* The Asia Pacific Crop Protection Association (APCPA) which represents such multinationals as Bayer, Cyanamid, Dow AgroSciences, DuPont, Novartis and Zeneca, claim their products are reducing famine by minimizing crop damage by insects and weeds, and that they are saving lives through controlling disease-carrying insects. The global chemical poison market is dominated by ten companies, which between them take 80% of more than $30 billion worth of sales.

* Some 73% of the imports into Thailand are WHO categories Ia and Ib, extremely toxic and highly toxic. In Cambodia, 84% of chemical poisons are moderately to extremely hazardous to human health. In developed countries these chemicals are either banned, or they can only be used by licensed specialists who must carry out a number of stringent precautions. In SE Asia, however, the chemicals are freely used without precautions. Labels are often written in a foreign language or they fail to provide data on the active ingredient, application, date of manufacture or safe handling of the chemical.

* Between 1992 and 1994, more than 344 million pounds of hazardous chemical poisons were exported from the U.S. --- at least 25 million pounds of which were forbidden for domestic use --- the majority of which went to destinations in the developing world.

* There are many loopholes in the regulatory system. According to European legislation, only end products permitted in Europe can be exported. However, it is legal to export the starting product, the active ingredient, which is then manufactured into the end product in developing countries.
 

DEAN FOODS AND SUIZA FOODS:
DOFJ SEEKING ADDITIONAL LOOK
AT PROPOSED $2.5 BILLION MILK PROCESSOR MERGER

A proposed $2.5 billion merger between the nation’s two largest dairy processors --- Suiza Foods of Dallas, Texas and Dean Foods of Franklin, Illinois --- is reportedly getting a closer inspection than usual by the U.S. Justice Department’s Antitrust Division.

In an employee Dean Foods bulletin attached to a filing with the Securities and Exchange Commission (SEC), the company disclosed that a second request from the DoJ will require it and Suiza to produce detailed information about their businesses for the government agency’s review. The bulletin said that during a second review period, “which can last for months,” the DoJ would likely be contacting industry participants, including Dean Foods' customers, competitors and suppliers.

Under the Hart-Scott-Rodino Antitrust Improvements Act, premerger applications are usually subject to a 30-day waiting period during which  antitrust authorities can raise objections to the transaction by issuing a formal second request for information. The waiting period may be ended earlier, or it could be extended by a request for more information by regulators. The waiting period allows the Federal Trade Commission (FTC) and the antitrust division of the DoJ to examine antitrust issues.

In previous SEC filings, the companies have said they plan to sell six plants to "avoid potential regulatory issues."

“While there is very little overlap between Suiza's and Dean Foods'  operations,” the companies said in an April 5 prospectus, "we have concluded that it will be necessary to divest a small number of plants in order to preempt potential regulatory concerns and enable approval for this transaction in a timely manner."

Those plants include four Dean Foods' plants --- Coburg (Charleston, South Carolina), Cream o'Weber (Salt Lake City, Utah), H. Meyer (Cincinnati, Ohio) and Barber Milk Plant (Birmingham, Alabama). The other two plants to be sold --- Velda Miami (Miami) and Velda Winter Haven (Winter Haven, Florida.) --- are owned by Suiza.

According to previous SEC filings, the six facilities will be acquired by a newly formed joint venture between Dairy Foods of America Inc., the nation's largest dairy farmer cooperative, and three dairy processors --- Tex Beshears, Tracy Noll, and Alan Meyer.

Once the Suiza\Dean Foods merger is complete, all six plants will be combined with other dairy processing facilities in Texas and Louisiana operated by Milk Products, L.P. under the Borden brand name, and the single Valley Rich plant in Roanoke, Virginia, the companies have said in past filings with the SEC.

The plants will then form National Dairy Holdings, L.P., which will be what Dow Jones Newswires calls “a strong multi-regional competitor” to the entity formed from the combination of Dean and Suiza. National Dairy Holdings will have operations reaching from the Midwest to the Southeast.

In an April 5 conference call transcript filed with the SEC, Dow Jones reports, Suiza Foods Chairman and Chief Executive Greg Engles said he would not speculate on whether he would make additional divestitures if the DoJ made such a demand. He did say, however, that he thought "we have offered up what's necessary to make this transaction work.

"We believe the solution that we have offered up here is one that addresses all the areas relevant overlap between the two companies," Engles had said, although he noted that he wasn't speaking on behalf of the DoJ.

Dean Foods spokeswoman LuAnn Lilja also told Dow Jones Newswires, that the six planned divestitures won't occur until the completion of the deal between Dean Foods and Suiza Foods.  She added that Dean Foods doesn't plan to make any more divestitures than the ones already announced and that Dean Foods sees the deal closing within five to eight months.
 

AT THE FEEDING TROUGH:
PURINA MILLS STOCK RISES, SPECULATION INCREASES
AS UNNAMED SUITOR MAKES ACQUISITION BID 

After a week-long dramatic rise in its stock price Purina Mills Inc., the nation’s largest producer of livestock feed, revealed it has received an acquisition bid from an unnamed suitor.

Industry speculation immediately centered on companies such as ConAgra Foods, Archer Daniels Midland, Cargill Inc., which recently purchased Agribrands International Inc., another St. Louis, Missouri-based feed company, and Bunge Corp., a major food and feed ingredient company also based in St. Louis, as possible suitors.

Phillipe DeLaperouse, a Bunge spokesman, however, told the St. Louis Post Dispatch’s Thomas Lee that was unlikely. "I don't think that would be a good idea for us," he said.

Jeffrey Kantor, an analyst at Prudential Securities Research, told Lee that he doubts that these companies could make a bid for Purina Mills without attracting attention. More likely, he said, the suitor is a farm cooperative such as Minnesota-based Land O'Lakes, which could quietly make a bid for Purina Mills.

In September, 2000 Land O'Lakes and Farmland Industries, another major farm cooperative, combined operations to create the largest feed company in North America. The joint venture, called Land O'Lakes Farmland Feed LLC, operates 70 plants and expects to generate $1.8 billion in sales this year. By comparison, Purina Mills in 1999 reported $881.9 million in sales.

If Purina Mills is sold, it will mark the latest company that was once part of the Ralston family to be bought out. In addition to Cargill's acquisition of Agribrands, Ralston Purina, the pet food maker, is currently in the midst of an $11.2 billion merger with Nestle SA. Purina Mills , currently operates 49 mills producing everything from swine feed to horse chow.

The company has changed hands frequently since it was sold in 1986 by Ralston Purina Co. to British Petroleum PLC. The United Kingdom company in turn sold the St. Louis business in 1993 for $425 million to a leveraged-buyout group that included Houston-based leveraged buyout firm Sterling Group and Purina Mills management. In 1998, Koch Industries Inc., one of the nation's largest closely held companies, bought Purina for $670 million. A year later, Purina, crippled by a recession in the Farm Belt, filed for bankruptcy-law protection.

From April 27 to May 10 the stock price of Purina climbed 75% giving the
company a market value of about $179 million, excluding assumption of debt. The volume of Purina shares traded also skyrocketed to 123,400 shares on May 1 and 271,500 shares on May 4 --- the company's single largest trading day of the year until Tuesday, when 306,900 shares were traded.

Some Wall Street analysts and agribusiness officials, according to the Wall Street Journal’s Scott Kilman, have become perturbed that Purina, which emerged from bankruptcy only a year ago, took so long to shed any light on the extraordinary move in the price of its stock.

“The sharp run-up in Purina shares last week is raising questions about whether some investors had knowledge of the acquisition overture before it was disclosed publicly,” Kilman reports.

"Clearly, somebody knew about it before" last Tuesday's press statement, said Kantor.
 

BARGAIN BASEMENT SHOPPING:
SMITHFIELD EYES CHEAPENED IBP

"If we do something, the offer will be substantially less than what it was a few months ago," Joseph W. Luter III, Smithfield chairman and chief executive officer, told a group of financial analysts recently at a conference in New York in answer to a question whether the nation’s largest pork producer might reconsider bidding for IBP Inc. the nation’s largest beef processor.

Initially Smithfield offered $25 a share for IBP, but then Tyson Foods joined the bidding arguing that as a chicken producer, it had a better chance to pass regulatory hurdles than Smithfield, which had some duplication with IBP in pork assets. After a furious bidding war Tyson ultimately won out with a bid of $30 a share in stock and cash, however, at the last minute, citing bad bookkeeping and other tax problems at IBP, Tyson backed out of that deal. Currently,  IBP is suing Tyson in a Delaware court for breach of contract.

Luter wouldn’t give a price per share for what Smithfield might offer to pay for IBP, but analysts believe there are good reasons that Smithfield should not now pay the same premium that it offered in the fall.

"I don't want anyone to think I'm trashing IBP," Luter said. "But their earnings were great last year at this time, their projections were great last year at this time. Now the beef market is down everybody knows that. They have start-up expenses at their plants, and their earnings are down substantially."

Luter, while not saying what he thought the stock might be worth, didn't dispute an analyst who speculated that IBP's share price might eventually fall to the  "10-12-14"-dollar-a-share range less than half of what Smithfield first offered.

Luter, who spoke in New York at a conference hosted by Goldman Sachs, also said that his own company would continue to hunt for acquisition candidates. “We will take advantage of opportunities as they present themselves,'' he said. The company agreed last month to buy Moyer Packing Co., the largest East Coast beef processor, and Reuters News Agency reports that it is expected to announce two more acquisitions within weeks.

In addition to the recent purchase of Moyer,  Smithfield plans to buy one-half of the Pottstown, Pennsylvania-based Pinnacle Foods Inc., a producer of pork, beef, lamb and veal packaged for retailers. In a deal valued at $6 million, Smithfield would also provide a $30 million line of credit for Pinnacle.

Further bolstering its "case-ready" business, where meats are processed, wrapped and labeled before delivery to stores, Smithfield also has offered to buy the remaining stock of meatpacker Schneider Corp. of Kitchener, Ontario, Canada, for about $50 million after buying a controlling share of Schneider --- Canada's second-largest meat processor --- in late 1998 for about $112 million.

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