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

Issue #117                                                                          May 23, 2001
 

COMMENTARY:
EXPRESSING REGRETS IN MISLEADING READERS

Since publishing a story in Issue #116 of THE AGRIBUSINESS EXAMINER concerning an article by George Lawton writing in Acres, USA concerning the possible effects of Klebsiella.p in the environment we have received mail questioning the veracity of the story.

While some of the initial mail raised serious questions about the accuracy of the report, others including one from a Greg Williams editor\publisher of a Kentucky-based gardening newsletter, not only castigated the EXAMINER for publishing Lawton's story, terming the respected Acres,USA "not a reliable source for scientific information," but also "shamed on" Ralph Nader and "associates" (????). Go figure!

One letter, however, that the EXAMINER received from Francis Wevers Executive Director, Biotenz/NZ Life Sciences Network (Inc), Wellington, New Zealand was indeed troubling and it appears below.THE AGRIBUSINESS EXAMINER regrets misleading its readers concerning this story for it seems not only was it the victim of an academic "deceit" but so was Lawton and Acres, USA.

This story should, however, stand as a model for the dangers of publishing in an age when in an instant the world becomes privy to whatever the self-serving mind can concoct or foist upon the public. Particularly as it applies to the farm and environmental movement we must be aware of such stories for in speaking truth to power we must acquire the ability to recognize both myth and satire and treat them as such.

The Klebsiella.p story is not the only recent example of the dangers inherent in accepting myth and satire as fact. The recent widely published story concerning the Bush Administration’s firing of Ian Thomas, an anonymous government cartographer for posting a map of caribou migrations in the Arctic National Wildlife Refuge, the pristine swath of tundra where the new administration hopes to promote oil exploration, is an excellent example of such widely published myths as Michael Grunwald recently explained in The Washington Post.
http://www.washingtonpost.com/wp-dyn/articles/A53125-2001May20.html

Likewise the widely circulated "news story" that the White House planned on serving genetically engineered food to French Prime Minister Lionel Jospin when he visits the U.S. soon, was in fact intended as satire done for AlterNet by Jennifer C. Berkshire
http://www.alternet.org/story.html?StoryID=10855

When we live in times where former president Gerald Ford can be awarded the John F. Kennedy Profile In Courage Award for pardoning his predecessor Richard M. Nixon there should be no need to embellish or exaggerate the absurd.
 

LETTER TO THE EDITOR:
VICTIMS OF A CRUEL ACADEMIC DECEIT

Late last week I received copies of an article you published in the Agribusiness Examiner, "Ecological Disaster averted???? U.S. Environmental Protection Agency; treating the world's soil like dirt."  This article was published in Issue #116 dated 16 May, 2001.
 
Unfortunately George Lawton, whom you quote extensively, has been the victim of a cruel deceit.  He has had the misfortune to pen a story in the April issue of Acres USA which relies heavily on information supplied by the now discredited former Associate Professor from Oregon State University, Dr Elaine Ingham.
 
This is the same Elaine Ingham who had to withdraw the exact same assertions she makes in Lawton's article when she proffered them to the New Zealand Royal Commission on Genetic Modification. Not only had she to agree her original assertions about the effects of Klebsiella.p in the environment were not supported by the evidence she cited in support (including falsified references to non existent publications) but she had to concede the allegations she made against the EPA could not be independently substantiated either.  The EPA has specifically rejected all her assertions.
 
The New Zealand Green Party made the mistake of relying on Ingham's evidence to try to establish their argument that there should be no field trials involving GMOs.
 
Because Ingham's assertions were scientifically rebutted before the Royal Commission by three senior New Zealand and Australian scientists the Green Party was left with the humiliating responsibility of apologizing in writing for misleading the Royal Commission.
 
I attach links to the relevant documentation.
 
Evidence from three senior scientists rebutting Ingham's assertions
http://www.lifesciencenz.com/repository/media_releases/0215_ingham_rebuttal.pdf
 
Dr Ingham apologizes to Royal Commission
http://www.lifesciencenz.com/repository/media_releases/ingham_apology.pdf
 
Green Party amends evidence and apologizes
http://www.lifesciencenz.com/repository/media_releases/green_apology.pdf
 
Dr Ingham has subsequently been subjected to professional review by Oregon State University.
 
Both New Scientist and Nature Biotechnology published articles about the Ingham matter during March.
 
You may like to publish a piece in the next edition of Agribusiness Examiner which corrects the record.
 
Francis Wevers
Executive Director
Biotenz/NZ Life Sciences Network (Inc)
PO Box 715, Wellington, New Zealand
 

USDA CHEATS CATTLE PRODUCERS OF MILLION$
THROUGH INACCURATE LIVESTOCK REPORTING SYSTEM

Exhibiting an amazing degree of incompetence the U.S. Department of Agriculture has admitted that in the first six weeks of its new livestock price reporting system, involving millions of understated wholesale beef price transactions, that it has been furnishing the beef industry with inaccurate price reports.

The system, based on reports that packers are now required to give to USDA about their cattle purchases and beef sales, was inaugurated April 2,  and was mandated by Congress in 1999 to provide livestock producers with more accurate and timely data. It replaced a less comprehensive system that was based on voluntary reports.

According to Keith Collins, USDA's chief economist the extent of the producers' and packers' losses won't be known until all the daily reports are corrected.

The error came at a peak season for cattle trading, as packers speed up production to meet summer demand for beef. More than 700,000 cattle are slaughtered weekly at this time of the year. "Virtually every transaction that took place was skewed at some level, whether it's very minor or dramatic," said Jay Truitt, executive director of legislative affairs for the National Cattlemen's Beef Association told the Associated Press's Philip Brasher.

The biggest impact of the mistake would fall on sales contracts that were tied directly to the inaccurate price, industry officials say. One major packer estimates that 20% of cattle are purchased under such contracts.

Even before the recent disclosure, Brasher reports, some producers were complaining that they were receiving less data under the new system than they did before. About 15% of the 91 reports issued under the system have been blank because of confidentiality rules that prevent the disclosure of prices in markets where there are fewer than three companies buying livestock or where one firm controls more than 60% of the purchases.

Agriculture Secretary Ann Veneman has ordered an internal review of the system.

Collins also told DowJones Newswires that the department's lawyers are investigating the government's potential legal liability for the mistakes. "We made no commitment to provide compensation" to the industry, Collins said. "We also do not know our legal authority in that area.," he added after a two-hour meeting with representatives of meatpackers and cattle producers.

Responding to USDA's gross error, the Kansas Cattlemen's Association warned producers to use extreme caution marketing cattle until the issue is resolved.

"We are asking producers to shut the gates until we sort the price out," said Mike Schultz, a cow-calf producer and association president. The computer glitch in USDA's price reporting process could have cost producers $100/head or more in lower prices. Market experts estimate feeders and cattle traders have lost $20 million to $40 million as a result.

Since April 2, when mandatory price reporting was implemented, live cattle prices have declined to $73.00, approximately $92/head on a finished animal weighing 1150 pounds. Meanwhile, USDA reports retail prices are now at a record high of $3.44/lb.

"The President should call for a full and comprehensive into this mammoth price reporting problem," said National Farmers Organization (NFO) Livestock Director Brian Harris. "Why do irregularities always seem to favor large agribusiness, and not the hard-working rural men and women who actually produce America's beef and pork? How can independent producers continue to have faith in a system that creates unjust rules and procedures?

"American agriculture cannot survive these types of manipulative transactions," emphasized Harris. "Producers continue to be manipulated out of profits, with little or no repercussions for those whose pockets are being lined with livestock dollars. Enough is enough, we encourage producers and consumers to contact their Senate and House representatives and demand a full investigation."
 

USDA ACCUSES FARMLAND NATIONAL BEEF
ENGAGING IN UNJUST PRACTICES,
DISCRIMINATING AGAINST CALLICRATE CATTLE CO.

Farmland National Beef, one of the nation's major beefpackers, is currently under investigation by the U.S. Department of Agriculture for engaging in unjust practices when it cut back its purchases of cattle from the Callicrate Cattle Company Feedyard in St. Francis, Kansas.

Farmland is a partnership of Farmland Industries Inc., based in Kansas City, Missouri, and U.S. Premium Beef Ltd.

The complaint presented to USDA hearing officers yesterday alleges that Farmland routinely bought cattle at the feedlot, owned by Mike Callicrate, from 1986 to 1998. But a Farmland buyer told Callicrate that the meatpacker had reservations about doing business with the feedlot, because a Callicrate manager had criticized Farmland in a livestock journal article.

After that discussion, Farmland stopped routinely buying cattle from Callicrate, the USDA says. In the first six months of 1999, it bought cattle at the feedlot only during three weeks, the agency adds.

In an interview with Candace Krebs (no relation) and published in the November/December, 2000 edition of Beef Today, Callicrate observed:

"USPB started out with a good idea, but when they got in bed with Farmland, they sold out the mission. USPB is a source of captive supply for National Beef,that's all it is, giving them leverage in the marketplace to drive prices lower just like IBP, ConAgra and Cargill do with their captive supply."

Since a General Accounting Office report last year reported that the USDA has not fully exercised its authority in attempting to curb anti-competitive practices in the livestock, meatpacking and poultry industries, the agency has been under increasing pressure to exercised its authority in that area.

Callicrate is confident about his success at the hearing. '"We'll win this case," he said.

In July 1996, Callicrate joined a handful of cattlemen in suing the nation's largest meatpacker, alleging that IBP Inc. illegally cornered the beef market and conspired to fix prices. That suit has languished in the Alabama courts awaiting a number of court rulings.
 

DR. DARYLL E. RAY:
FUTURE NATIONAL FARM LEGISLATION
FARM POLICY OR AGRIBUSINESS POLICY?

In a recent statement on farm policy or agribusiness policy relative to pending federal farm bill legislation Dr. Daryll E. Ray of the Agricultural Policy Analysis Center, University of Tennessee addressed the question, if since crop agriculture could obtain its income from the market without government payments if public production-level policy toward crop
production mimicked private production-level policy as practiced by non-farm industries, are current farm subsidies really subsidizing agribusinesses, livestock integrators and our export customers with prices that do not reflect the full economic cost of producing the grain?

The text of his statement reads:

Let me ask you something. When General Motors contemplatesproduction cuts because of bloated inventories, which do you think receives the most weight in the decision making process: a) the impact on GM’s thousands of parts suppliers, b) the impact on GM’s hundreds of car dealers, c) the impact on its share of the domestic or export market, or d) the impact on GM’s profits and returns to its stockholders?

Can you imagine the thrashing that the CEO of General Motors would receive by the financial press and the drubbing that GM’s stock would experience if he even hinted that any of a) through c) would now dominate GMÕs decision making?

It’s not that General Motors does not recognize that down-stream and up-stream sectors are affected by its actions; it most certainly does. But its decision making approach, or private policy rules, puts GM’s interests above all else. General Motors responds to reduced consumer demand by producing fewer vehicles. GM’s parts suppliers, in turn, reduce output in response to lower derived demand for parts.

It is in GM’s interest to reduce output since GM is large enough to influence the price of its products. General Motors knows that it is better off to nearly hold the line on car prices by reducing output rather than allow vehicle prices to fall precipitously by ignoring demandconditions with full-production assembly schedules.

Switching production from pickups to sports utility vehicles works fine if pickup demand has dropped and the demand for SUVs is growing. But having production flexibility does GM little good during a time of general oversupply of all types of vehicles.

A major reason the U.S. instituted commodity programs in the 1930s was because, unlike GM, individual agricultural production firms (farms) are unable to affect the supply of their product and therefore influence the price it brings. Recognizing that farmers have no incentive but to produce on their land, even when prices are low, legislation was put into place that provided public policy mechanisms similar to the private policy prerogatives of a firm like GM.

As we have previously explained . . . . the fundamental nature of crop markets is virtually unchanged from six decades ago; that is, neither total crop supply nor total crop demand are any more responsive to sharp price drops today than they were in the 1930s.

But over the last decade or more, farm legislation has seemed to gradually embrace a “do agribusiness no harm” posture. Beginning in the 1980s, the agribusiness bias, as manifest by policies to maximize export volume and market shares, was relatively obscure. It became more apparent during the debate of the 1996 Farm Bill when agribusiness actively lobbied for the elimination of farm policies that reduce the volume of crop production such as set-asides and the Conservation Reserve Program.

The discussion often focused on the impacts that crop acreage reduction programs have on local businesses like grain elevators and ag-chemical and equipment dealers. If crop agriculture supply really is more price responsive with farmers using “private policy rules” to reduce acreage and production, wouldn’t the effect on agribusiness be nearly the same as if the Secretary of Agriculture, acting as the CEO of U.S. Agriculture, used “public policy rules” to reduce acreage and production?

From my perspective at least, the reason for considering the use of farm programs is because the market fails, in a timely manner, to adequately adjust total crop quantities supplied and demanded in response to sharp price movements. In contrast, agribusinesses can adjust operation size just like most other sectors in the economy when profitability wanes or sales volumes decrease.

Even though non-farm industries can and do use “private policy” to adjust production levels in response to demand declines, the use of this same approach via “public policy” for agriculture has been stigmatized. In its place we have adopted a policy of producing at full tilt with government payments that are used to compensate for prices that are well below the full economic cost of producing the products. This approach, in contrast to the standard method used in the private sector of reducing production, forces little adjustment on the tonnage of inputs sold and the tons of output processed and transported by the agribusiness sector.

Crop agriculture does not have to receive multi-billion dollar subsides to be profitable. If, like General Motors, production levels were better gauged to meet demand at prices that cover their full economic cost (and more in the case of GM), crop farmers could receive about the same income they presently receive, but from the market rather than from government payments. And, just like GM’s parts suppliers and dealerships, agribusinesses would have to adjust to the reduced volumes.

Since crop agriculture could obtain its income from the market without government payments if public production-level policy toward crop production mimicked private production-level policy as practiced by non-farm industries, a couple of questions come to mind. Are the billions and billions of federal dollars subsidizing farmers? Or, are they really subsidizing agribusinesses, livestock integrators and our export customers with prices that do not reflect the full economic cost of producing the grain?

Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of the UT’s Agricultural Policy Analysis Center.
 

VENEMAN PROFESSES IGNORANCE
OF GAO AND USDA OIG'S PORK CHECK-OFF REPORTS

U.S. Secretary of Agriculture Ann Veneman has recently admitted to a Des Moines, Iowa press conference that she knew nothing about two key government reports when she ordered the continuation of the pork tax program, even though hog farmers voted to end it.

Last fall, over 30,000 hog farmers voted 53% to 47% in a nationwide referendum to end the mandatory pork tax which is assessed against hog farmers on each hog they sell.

During the USDA sponsored press conference, Veneman said she was unfamiliar with the reports issued by the U.S. General Accounting Office (GAO) and the USDA's Office of Inspector General (OIG).

In September 2000, the GAO investigation concluded that former Ag Secretary Dan Glickman acted within his statutory authority when he held a referendum to terminate the pork tax.

On January 10, 2001, the OIG issued a report on their investigation into National Pork Producers Council (NPPC) claims of voting irregularities in the referendum.  The OIG report dismissed the NPPC's specific claims of voting irregularities and concluded, "after our review of the information and interviews with [government] staff, we concluded that there were controls in place governing the conduct of the referendum...we found no evidence that the controls did not work as intended. Thus we have no basis for further inquiry."

Last week the Campaign for Family Farms filed a federal lawsuit against Secretary Veneman challenging her decision which overturned the democratic referendum and required hog farmers to continue paying the failed and unpopular tax.  The lawsuit asks the court to order USDA to end the pork checkoff and prohibit the collection of the $54 million a year pork tax.

"We're appalled Veneman made such a monumental decision without even looking at these two reports. It smacks of incompetence," said Land Stewardship Project Policy Program Director Mark Schultz. "Veneman claims that her decision was based on legal concerns and `insurmountable flaws' surrounding the vote --- yet these issues were thoroughly addressed and dispelled by the two government reports."

The Campaign for Family Farms is the multi-state coalition that has led the fight to end the mandatory pork tax over the last three years. Member groups of the Campaign for Family Farms are: Iowa Citizens for Community Improvement, Missouri Rural Crisis Center, Illinois Stewardship Alliance, and Land Stewardship Project.
 

LEGISLATION INTRODUCED TO CURB MPC IMPORTS

Senators Charles E. Schumer (Dem-N.Y.) and Hillary Rodham Clinton (Dem.-N.Y.) recently disclosed that they are backing a Senate bill that would close a trade law loophole that allows for the importation of milk protein concentrates (MPCs), a dairy substitute that can be used in cheese and other dairy products.

Since MPCs are not subject to the same tariff rules as other dairy products, imports have skyrocketed in recent years --- contributing in part to lower dairy prices and further exacerbating the financial situation facing New York dairy farms.

A study by the General Accounting Office (GAO) released last March revealed that MPC imports skyrocketed by more than 600% over the last six years. Between 1998 and 1999 alone, the number of MPC coming into the United States doubled.

MPC's are today being widely used in the making of so-called cheese products, principally by Kraft, the nation's largest cheese manufacturer, and Land O'Lakes. The general definition of MPC is a blend of dry dairy ingredients from 42% to 90% casein (pure dairy protein). The World Trade Organization (WTO) has two Harmonized Trade Schedule (HTS) numbers to designate MPC --- 04049 and 3501. Neither of these two products are considered milk by the Food and Drug Administration's (FDA) definitions.

MPCs are cheaper than domestic forms of dairy proteins (farm milk, nonfat dry milk, etc.). Not manufactured in the U.S. MPC's are added to cheese vats --- on the cheap yielding more end products with "savings" retained by the manufacturer. Traditionally, half of all U.S. milk is destined to go into cheese production.

Imported MPCs come from traditional dairy countries such as new Zealand, which provides the U.S. with 45% of its imports. Other countries importing MPC's into the U.S. include Argentina, Poland, India, China and the Ukraine, home of the city of Chernobyl.

MPC is a food additive without exemption. FDA has no standard for MPC. The FDA does not list MPC among food additives "Generally Regarded As Safe" (GRAS). Thus, using MPC in any human food constitutes adulteration, EXCEPT when individual manufacturers have followed exact costly and complex rules for properly self-determining unapproved food additives to be GRAS.

"As of late January, 2001," John Bunting, a New York dairy farmer notes, "no food manufacturer has voluntarily submitted any GRAS self-determination to the FDA. Nor has FDA reviewed any GRAS self-determinations by firms listing MPC in human foods. Don't ask! Don't tell!"

"The dairy farms that have formed the backbone of rural life in Upstate New York have been hurting for some time," Schumer said. "MPC imports are worsening the financial situation facing New York dairy farmers at a time when incomes are at their lowest levels since 1978 and hundreds of farms are being forced to close. After getting New York admitted into the Northeast Dairy Compact, closing the MPC loophole is the next major step to preserve this rapidly disappearing way of life."

"American dairy producers should not have to compete with a flood of unregulated imports that have skirted quotas. New York dairy producers are already contending with low dairy prices and this unfair influx of foreign dairy products is only making matters worse," Senator Clinton said. "By closing this loophole, we can better protect New York's dairy producers from having to compete against unfair and unregulated imports."

Schumer and Clinton said the bill they are co-sponsoring would make MPCs subject to the same tariff rate quotas as other dairy imports by bringing them in line with the tariff rates that were established by the Uruguay Round trade negotiations.

Specifically, the bill would allow the US to levy tariffs on imports that exceed 50% of the five year average import level of MPCs. Practically speaking, that means that imports exceeding 54,000 metric tons/yr for high-end MPCs and those exceeding 15,818 metric tons/year for low-end MPC imports will charged a duty. All other imported dairy products are subject to the 50% tariff rate quota.

New York is the third-largest dairy producing state in the country with nearly 8,000 dairy farms. Between 1999 and 2000, 300 farms closed due to lack of profitability, according to the New York Farm Bureau. The New York Agricultural Statistics Service has reported that cash receipts from milk sales dropped 11% from 1999 to 2000, despite just a one percent drop in productivity.
 

SIFCA-CI:
LEADING IVORY COAST COCOA EXPORTER
LARGELY BLAMES ADM FOR FINANCIAL WOES

"We don't have any money," lamented an executive of Sifca-Ci, one time the largest cocoa exporter in the Ivory Coast, which produces around 40% of the world's cocoa. "We aren't doing anything."

Speculation is that a major contributor to the company's financial plight is Archer Daniels Midland --- "The Nature of What's to Come" --- since following a deal in 2000 in which ADM took over the company's cocoa business, Sifca hasn't received payment from ADM for the company's cocoa assets.

ADM in Abidjan refused to comment on the matter, with a spokesman there telling Dow jones Newswires Daniel Balint-Kurti that final details of the deal between ADM and Sifca are still to be worked out.

ADM Cocoa Sifca, a new company owned 80% by ADM and 20% by Sifca, took on most of Sifca's cocoa purchasing and conditioning assets last year. That company had exported 107,382 tons of cocoa by the end of February, or some 13% of total exports for the season to that date. Unicao, a processing company which ADM took over from Sifca as part of the deal, had exported a further 24,388 tons of cocoa by the end of February.

One source told Balint-Kurti that Sifca has processed only around 5,000 metric tons of coffee for export this season, on behalf of Ivorian exporter Cocaf Ivoire. That figure is well below the capacity of Sifca's coffee processing plant in Abidjan, of 400 tons a day, he said.

When the deal was being completed last year, Sifca sources said that the company was aiming to export 50,000-60,000 tons of coffee in the 2000-01 season (October to September), and a further 50,000 tons of cocoa. Most recently available data on cocoa exports by the company from Ivory  Coast, Balint-Kurti reports, show Sifca as having exported just 1,351 tons of cocoa in the 2000-01 season up until the end of February. Sifca's coffee exports to the end of February were at just 3,085 tons.

In the 1999-2000 cocoa season, Sifca shipped out a total 202,251 tons of cocoa, with a further 74,129 tons exported by associated companies. Sifca was also Ivory Coast's largest coffee exporter that season, exporting 50,984 tons.

An unexpected rise in farmers' cocoa prices caught Sifca out in early 2000, during Ivory Coast's first season under market liberalization. The company became embroiled in debt and ADM, the world's largest cocoa processor, then went from being a minority stake holder in Sifca to taking majority control over its cocoa business.
 

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