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

Issue #121                                                    July 13, 2001
 

                                    APPEAL

Recently, in a conversation with a reader of THE AGRIBUSINESS EXAMINER, the reader in critiquing it, mentioned that the one thing that was particularly annoying to them about the newsletter was the editor's weekly "begging" for contributions. (I will leave it up to the readers imagination as to whether the critic had ever in fact made such a contribution.) I felt it my duty to remind the reader in question that journalists do not live by bread and water alone; they do enjoy also having food in their stomachs and roofs over their heads and even on occasion a few of life's amenities.

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 circulation as it seeks to continue to monitor corporate agribusiness froma public interest perspective. Checks should be made out to A.V. Krebs and sent to P.O. Box 2201, Everett, Washington 98203-0201

To those who have so generously contributed to its work in the past, no matter the amount of such support, the editor is profoundly grateful.
 

ESSAY:
RIDING THE RAILS

As highly unlikely experience as riding Amtrak's Empire Builder from Seattle to Chicago would be to see the dire consequences which corporate agribusiness has visited upon rural America, a recent trip on that fast-moving train provided both traveler and tourist such an opportunity.

At the outset, burrowing under downtown Seattle one is reminded that it was here in the Emerald City not quite two years ago that the nation's of the world seeking unsuccessfully to resolve their agricultural trade differences unleashed a powerful and still resonating world-wide pro-democracy movement during the week-long meetings of the World Trade Organization (WTO).

Within minutes as our sleek train emerges into the sunlight we pass by the Port of Seattle's Pier 86 where a tall grain elevator, currently leased to the multinational grain giant Louis Dreyfus, stands on the waterfront of Elliott Bay.

One can not view this giant grain storage facility without recalling that when Continental Grain sold it is grain marketing facilities to Cargill Corp., the world's largest commodity trader, last year the latter was instructed by the U.S. Department of Justice's Anti-trust Division to divest itself of the lease of this very same elevator.

In their original "Complaint" the DofJ vividly showed that even prior to the purchase agreement Cargill and Continental were two of a very small number of grain trading companies competing to purchase grain in four key "captive draw areas" including the Pacific Northwest port range, which also included western Minnesota, eastern North Dakota, and northeastern South Dakota, much of the same area our train will cover on its tracks to Chicago.

Aside from brushing aside the genuine concerns of many relative to the monopolistic control of the marketplace by such corporate agribusiness behemoths as Cargill, the DofJ in a vapid effort to make it appear that it was troubled by such monopoly control on the U.S. domestic market ordered Cargill to divest itself of the Seattle elevator's lease, but in doing so only opened the door for increased international monopoly control of the grain trade by an already select few corporations.

While the Louis Dreyfus Corp. would purchase the vacated lease of the Pier 86 elevator, Cargill assumed 50% control of a nearby Tacoma, Washington port terminal while some 100 miles to the south on the Columbia River, ConAgra, Archer Daniels Midland (ADM) and the Mitsubishi Corp. a leading Japanese trading company, operates the Kalama Export Company LLC, affording western Washington State a very exclusive who's who of the international grain trade.

Soon, we are rolling through the lush Snohomish Valley to the north and east, as small dairy and vegetable farms dot the landscape, struggling to economically  survive while at the same time fighting off the encroachment of their rich farm land by the neighboring Microsoft and other high tech instant millionaires desiring suitable "rural living" quarters.

Eastward, winding through the magnificent beauty of the Cascade mountains, we descend on Wenatchee "the Apple Capital of the World" where although 15% of the nation's apple crop is produced, we begin to see the undermining affects of "free trade's" recent torrent of cheap apple juice concentrate flooding the U.S. from China.

As the Asian economy struggles to recover, China, which has now become the world's largest apple producer with more than a million acres of apple orchards and produces a huge one billion 42-pound boxes annually, compared with Washington state's 100 million boxes, has been forced to seek other markets and thus has converted its apples into concentrate and exported them to the U.S. Today, China produces 18 million metric tons of apples compared with the 4.3 MT it produced in 1990.  By 2005, China is expected to produce 40% of the world's apples, up from ten percent at the beginning of the 1990s.

In years past Washington growers exported a third of their apples abroad, half of which went to Asia. With the devaluation of Asian currencies and in the face of a stronger dollar making U.S. products less affordable, demand for apples in Asia has dropped dramatically. For example, in recent years countries such as Thailand, Malaysia, Singapore and Indonesia bought 50% to 85% fewer Washington apples than they did in previous years.

Shrinking apple markets at home and abroad have also coincided with a decline in the number of apple producers as twenty years ago, 5,626 Washington apple growers worked 115,244 acres of apple orchards; today, there are about 3,800 growers with 172,000 acres.

On through Idaho where abundant potato fields await the plow as the state’s potato farmers are seeing their numbers dwindle by a third this year, losing half of their number since 1995, as their prices go from $8 to less that $1 per 100 pounds. Meanwhile, giant potato processors like J.R. Simplot and ConAgra build up large inventories and prosper as consumers find they must pay between 39 cents and 69 cents a pound for the potatoes these farmers are getting but one cent for at the farm level.

Into Montana we begin to see long abandoned farm houses and once small rural communities rotting in the chilly spring sun, victims of a long-standing farm policy that stubbornly refuses to pay the nation's 2.1 million commercial farms a fair price for what they produce, let alone a simple cost-of-production price.

Small lonesome cattle herds can also be seen, all unlikely to earn for their still independent producers a fair price in the open marketplace, being forced as they are to compete against the enriching captive supplies and the formula pricing of the meat industry's big three --- Tyson Food's IBP, Cargill's Excel and ConAgra's Monfort Beef --- which slaughters nearly 80% of all U.S. meat.

Across the flat plains of North Dakota our train speeds, passing the weather beaten, decaying prairie cathedrals of America's heartland, the one-time locally owned and hub of rural economic activity, now replaced by the large missile shaped silos storage elevators of the grain trade's elites. One cannot pause to ponder how these metal silos, storing humankind's "staff of life" so closely resemble other nearby silos buried beneath the rich soil which contain the earth's destruction.

On the nearby highways large trucks, with familiar food brand logos emblazoned on their sides, carry the average unit of food in the U.S. the 1500 miles between the point it is grown and produced and the point that it is consumed, while long freight trains with their hopper and tank cars carrying grain, foodstuffs and oils adorned with names like Louis Dreyfus, Cargill Foods, and ADM ("Supermarkup to the World") speed by our idling train.

Early morning finds us passing first by the giant flour and cereal mills of Minneapolis, where the PepsiCo.'s Quaker Oats, General Mills and other large cereal companies and bakeries consistently provide a double digit return on stockholder investment, while farmers receive but a paltry seven cents of each dollar consumers spend on their baked goods and cereals.

We cross over the mighty Mississippi River, now barely beginning its rambling journey through the nation's mid section before emptying its millions of gallons of water and tons of agricultural and industrial polluted runoff into the Gulf of Mexico, adding daily to the Gulf's already thousands of acres of aquatic "dead zone."

Wisconsin's cheese producing dairy farms soon begin to be seen as our train nears its midwest destination. Here family farm dairy men and women struggle to retain the purity of their product from the threat of the Monsanto-produced genetically engineered bovine growth hormone (rBGH) as over half of their milk goes into cheese production.

Not only have these dairy farmers become the victims of a complicated national below-cost-of-production pricing scheme, but now exacerbating that struggle in recent years has been the import from abroad of cheap milk protein concentrates (MPC's). Although not a cheese, these MPC’s --- a blend of imported dairy ingredients with a 40% casein minimum ---are presently being used in several cheese advertised products manufactured by Philip Morris's Kraft Foods (which currently has 56.8% of the nation's processed cheese market and 62.2% of the "American cheese" market), Land O'Lakes and Dairy Farmers of America.

And they are being used despite the fact that MPC is considered a food adulteration since the Food and Drug Administration (FDA) does not classify it as a Generally Recognized As Safe (GRAS) food ingredient and does not have a standard of identity for it.

As another afternoon sun begins to burn itself across the western horizon for the third time on our Empire Builder cross country trip we disappear into the skyscraper canyons of Chicago where the once bustling and infamous stockyards of Upton Sinclair's "The Jungle" gave the city with Carl Sandburg's "broad shoulders" a singular place in the nation's folk lore.

Ironically, our journey's terminus lies only a few city blocks from the Chicago Board of Trade and Chicago Mercantile Exchange where the nation’s and the world's food future is speculated on, gambled on and where the so-called economic theory of "supply and demand" gives way to the theory of "it's the pits!!!"

Despite claims to the contrary, actual farmer participation in farm commodity futures programs is limited to a select few. Most farmers have come to have little faith in the system.  Wayne Cryts, a Missouri soybean producer, who led 150 protesting farmers into the CBOT in 1984, argues that the Board of Trade has failed to acknowledge farmer concern over the unfair trading practices of the speculative seller, as opposed to those who have a legitimate position of ownership of the commodity.
 
"We have no problem with speculators in the market as long as they have taken a position of production costs similar to that of the farmer, which means they must buy, or be able to produce commodities before they can sell them --- period!"
 
The fallacy of corporate agribusiness's claim that the so-called "supply and demand" maxim is manifested in the nation's futures markets is suggested by figures obtained from the CBOT and the U.S. Department of Agriculture's Economic Research Service (ERS). They show that for each bushel of wheat produced by the farmer in 2000, 16 bushels were traded on commodity exchanges, for corn the ratio was one to nine bushels, and for soybeans a staggering one bushel produced for every 31 traded.
 
A critic of this so-called agricultural "paper blizzard harvest," still called by some the "free market" system, Texas farmer David Senter believes that remedial steps are long overdue to curb the manipulation and speculation that affects farmers day-to-day prices of agricultural commodities.
 
"CBOT speculators are depressing the price of commodities by selling unlimited numbers of futures contracts, regardless of what we can produce or what's in storage. These paper contracts with nothing to back them up should be barred."
 
Reflecting on this deification of the law of supply and demand, one veteran trader has observed that "it's just a bunch of numbers. And we all know that people use statistics the way dogs use lampposts --- for convenience rather than illumination."

Yet, it is here in the CBOT and CME where the vast majority of America's family farmers believe their long-train of economic abuses originates in what can rightfully be called America's largest and costliest gambling casino.

Our trip now finished one can not help but reflect on how many of the train’s travelers, as they gazed out of their windows or sat in the train's diner eating three abundant meals a day, actually saw the economic and social brutalization which is currently besetting rural America given the fact that all such sights were constantly framed by the grandeur of our country's Pacific Northwest and the singular beauty of its heartland.
 

PUBLIC CITIZEN'S GLOBAL TRADE WATCH REPORT:
THE DISASTA OF NAFTA

Farm incomes plummeted and bankruptcies escalated in the U.S., Canada and Mexico while U.S. food prices increased 20% during the first seven years of the North American Free Trade Agreement (NAFTA,) according to a new study issued recently by Public Citizen's Global Trade Watch.

The study found that contrary to promises and predictions at the time of NAFTA's 1993 passage, North America's farmers and consumers have not benefited from the pact ø but many large agribusinesses have seen record profits during the period.

A conservative Democratic Congressman from a farm district in Minnesota and U.S. farm organization leaders joined Public Citizen today for the release of the new report: "Down on the Farm: NAFTA's Seven-Years War on Farmers and Ranchers in the U.S., Canada and Mexico."

The 70-page study is the most comprehensive review of NAFTA's agricultural outcomes. It comes as President Bush launches an effort to persuade Congress to provide to him a broad delegation of Congress' constitutional trade authority through a procedure called Fast Track.

Bush seeks Fast Track authority to expand NAFTA to an additional 31 nations through a proposed agreement called the Free Trade Area of the Americas (FTAA). The study provides a substantive context for the escalating political opposition to Fast Track and NAFTA expansion in the agricultural sector.

Recently, House Agriculture Committee Chair Larry Combest (R-Texas) withdrew his co-sponsorship of the GOP's Fast Track bill after the Bush administration listed as potential trade irritants some of the U.S. farm bailout payments used to counter falling commodity prices and the declining U.S. agriculture trade balance.

"In the past year, we noticed that wheat, soy, beef and other producers who had been a base of support for trade deals really starting to complain about how badly things were going since NAFTA," said Lori Wallach, director of Public Citizen's Global Trade Watch.

"We understand why farmer are so upset, because nearly every U.S. commodity has faced a flood of new NAFTA imports swamping modest export gains, and prices have tanked."

During debate over NAFTA, farmers were promised that new export opportunities to Canada and Mexico would stabilize and reinvigorate the economics of farm life. The reality has been quite different. Independent farmers have seen commodity prices plummet and critical domestic safety nets dismantled in the name of implementing NAFTA and other export-oriented farm policies.

For the past seven years, wheat farmers in the Midwestern and Plains states; ranchers in Montana, Texas and other states; flower and fruit growers in California; lumber mill and timber workers in Louisiana, Arkansas and Washington; vegetable growers in Florida and California; chicken farmers nationwide; and others have suffered declining farm income while a flood of NAFTA imports outpaced U.S. exports to Canada and Mexico.

Yet it was not farmers in Mexico or Canada who benefited from the woes of U.S. farmers. Up to 15 million campesinos throughout Mexico have lost a significant source of income and are threatened with losing their small corn farms.

Among the report's findings:

* During NAFTA, the rate of elimination of small U.S. farms with sales under $100,000 was six times greater than in the preceding five-year period.

* U.S. farm income is projected to decline 9 percent between 2000 and 2001 ø from $45.4 billion to $41.3 billion ø compared to annual farm income of $59 billion before NAFTA.

* While the U.S. agricultural trade surplus with Canada and Mexico grew by $203 million between 1991 and 1994, it fell by $1.5 billion since NAFTA.

* Instead of reaping special trade advantages with Mexico and Canada, under seven years of NAFTA, the U.S. agriculture trade balance with the NAFTA countries declined more rapidly, 71% than the U.S.-world agriculture trade surplus, which suffered a 29.6% decline.

Promises of new NAFTA export markets for U.S. farm products have proved to be as elusive as NAFTA proponents' promises of new U.S. manufacturing jobs created by exports to Mexico. Between the 1994-95 growing season and the 1999-2000 season:

* U.S. corn export volume fell by 11% and prices fell by 20%

* the volume of wheat exports declined by eight percent and prices dropped 28%.

* the volume of cotton exports fell by 28% and prices plunged 38%.

* during the same period, even though the volume of soybean exports increased 16%, the total U.S. soybean crop value still declined by two percent because the per-bushel price fell by 15%.

In Canada, falling commodity prices meant that net farm incomes declined 19% between 1989 and 1999, even though Canadian farm exports doubled.

In Mexico, crashing commodity prices caused by a flood of imports and the elimination of domestic farm programs have resulted in a massive transfer of land from small farmers to large multinational corporations.

Meanwhile, as farmers and consumers suffered, some giant agribusiness and food companies made out like bandits, according to the report. During NAFTA's seven years,  Archer Daniels Midland's profits nearly tripled ø from $110 million to $301 million and ConAgra's profits grew from $143 million  to $413 million.

"Given the track record of the NAFTA model for farmers and consumers in the three NAFTA countries, it is not surprising that farmers nationwide are increasingly opposed to the notion of expanding NAFTA through the proposed Free Trade Area of the Americas," said Public Citizen President Joan Claybrook.

"As bad as NAFTA's seven years has been in the United States, the results for poverty-stricken Mexican farmers and consumers is horrific and puts to rest that myth that these trade deals benefit people in developing countries."

Public Citizen is a consumer advocacy group with 150,000 members nationwide. The report can be read on the Web at
http://www.tradewatch.org.
 

NATIONWIDE POLL SUPPORTS U.S. FARMERS
VALUE THEIR CONSERVATION EFFORTS,
PUBLIC WANTS FOOD LOCALLY GROWN

America's farms and ranches are important to the nation's voters, and not just for their locally grown food. A new poll released this week shows that voters value farms and ranches for the conservation benefits they provide, such as cleaner air and water and wildlife habitat. And not only do voters want the federal government to support programs that secure those values, by linking conservation practices with farm payments, but voters are willing to pay to ensure conservation benefits from farms and ranches.

The poll, a telephone survey of 1,024 registered voters nationwide,
uncovered strong support for American agriculture, with 81% of voters
saying they want their food to come from within the United States. Americans professed a close connection to farmers and ranchers, with 70% reporting that they have bought something directly from a farmer during the last year, such as at a farm stand or a farmers’ market.

Voter concern about farm environmental issues registers almost as high as
for current "hot" political issues. For example, 71% are concerned
about chemical poison residues on food and 69% of American voters say they are concerned about loss of farmland to development, compared with more than 80% of voters concerned about public education and gas prices.

Seventy-eight percent of the American electorate report they are aware of
government income support programs for farmers. Voters strongly approve of these programs when they are used to correct low market prices or in cases of drought or flood damage.

The addition of conservation conditions to farm supports, however, received overwhelming approval, as 75%  of American voters feel income support to the American farmer should come with the stipulation that farmers are required to apply "one or more conservation practices," such as protecting wetlands or preventing water pollution.

"We were struck by how many voters make the link between agriculture and conservation benefits," said Ralph Grossi, president of American Farmland Trust. 


"The public feels strongly about all the values they see in American agriculture; not only do they appreciate America's bounty on their tables,
they also realize farms and ranches provide environmental benefits and they are willing to share the cost."

Several programs exist to support conservation on farms and ranches, among them the Farmland Protection Program (FPP), Environmental Quality Incentives Program (EQIP) and the Wetlands Reserve Program (WRP). For each of these programs, demand has far outstripped federal funding in 2001. For WRP alone, unmet requests from farmers totaled $568 million. This year FPP was only allocated $17.5 million in funding—leaving a gap of $90 million and hundreds of farmers waiting in line to protect their land.

"As expected, when we asked voters about how they wanted to increase federal spending, they placed a high priority on addressing pressing needs like finding cures for cancer, educating our children and ensuring adequate
energy supplies," said Grossi. "What we did not expect was the finding that a majority of voters --- 53% --- feel increasing funds to keep productive farmland from being developed should be a national priority."

And voters are willing to spend their own money to help farmers protect the environment. When asked whether they would like to get all or some of a possible $100 tax refund, 63% said they’d forego some of that money to protect waterways, wetlands or wildlife habitat.

"With such strong support for agricultural conservation, policymakers should triple conservation spending in the next farm bill," Grossi pointed out. "The programs are there, and they work. With $21 billion allocated annually to farm support payments by the budget agreement, half should be reserved for conservation programs. It's just a question of putting some financial muscle into making conservation happen."

"Over the past 19 years I have repeatedly surveyed farmers and found them very willing to conserve natural resources. These new results strongly
indicate that conservation-oriented farm programs will please not just
farmers, but most voters," said Dr. J. Dixon Esseks, a political scientist
from Northern Illinois University (NIU) who directed the poll.

The telephone survey of 1,024 registered voters nationwide was conducted
June 2 through 21, 2001, with a margin of sampling error of +3.1% in 95 out of 100 cases. The poll, directed by Dr. Esseks, was conducted by the Public Opinion Research Laboratory of NIU. The Tarrance Group, Inc., a strategic research and polling firm in Alexandria, Virginia, provided consulting and analytical services. Funding for the poll was provided by The Joyce Foundation and the members of American Farmland Trust.
 

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 Project’s 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/