Monitoring Corporate Agribusiness From a Public Interest Perspective
A.V. Krebs  Editor\Publisher
Issue #122                                                                                  July 23, 2001


From 1996 to 2000, USDA's Marketing Service purchased $484 million worth of food for school lunch and other programs from 12 companies that had multiple violations of environmental or labor laws. Five of the companies, including IBP, ConAgra, Excel Corp. and John Morrell & Co., were involved in meat recalls.

Those were the conclusions cited in "Spoiled Lunch: Polluters Profiting >From Federal Lunch Programs," a recent report by the Sierra Club. Subsequent to the study the Sierra Club of Nebraska called for an end to federal contracts for meatpackers who consistently violate environmental or labor rules.

Laura Krebsbach, a Sierra Club organizer in Lincoln, told the Omaha World-Herald's Paul Hammel that the federal government should not do business with firms that repeatedly pollute the air and water.

"This report should alarm us as parents and consumers that our federal government is not putting our health, safety or environment first, but rewards bad behavior with millions of dollars in contracts," Krebsbach said.

IBP spokesperson Don Willoughby, charged that several of the violations cited in the Sierra Club study had nothing to do with food safety. He said the study was part of the Club's larger agenda that opposes meat and meat production. Krebsbach immediately denied that the Sierra Club was anti-meat.

IBP, according to the report, had won $63 million in federal contracts during the four-year period at the same time that the Dakota Dunes, South Dakota headquartered company was sued by federal regulators for air-quality problems at its Dakota City, Nebraska, plant and fined $5,500 for environmental violations at a Columbus Junction, Iowa, plant.

IBP was also recently found guilty and fined for civil rights violations and the sexual harassment of a woman at its Perry, Iowa plant. Subsequently, the 8th U.S. Circuit Court of Appeals in St. Louis upheld the judgment against the nation's largest meatpacker and said that Sheri Madison of Urbandale proved that managers and co-workers made sexually explicit and racist remarks to her for nearly 10 years at the pork-processing plant.

The Court of Appeals also agreed that managers failed to discipline the harassers and blocked her advancement, partly because she was in an interracial marriage and had biracial children.

The court's opinion stated that Madison's supervisors "acted with malice or reckless disregard to her civil rights in failing to protect her from illegal conduct or to promote her." Supervisors were among those who harassed her, the opinion said.

The Associated Press reports that Madison, 31, started working at the plant in 1989. She was promoted from trimming to being a trainer after nine attempts. But she was blocked from ever acting in that capacity and then demoted, the opinion stated. Madison filed her lawsuit in 1996 and quit working for IBP in 1998.

The appeals court judgment affirmed benefits, back pay and compensatory damages for Madison totaling more than $343,400. The court also determined there is sufficient evidence for punitive damages. The judges have ordered the amount of punitive damages to be determined by the U.S. District Court in Des Moines.

At the end of Madison's trial, jurors awarded her $2.4 million. U.S. Chief Magistrate Judge Celeste Bremer reduced the award to comply with a law that puts a cap on how much a person alleging sexual discrimination can claim in damages.

IBP had appealed the 1999 ruling, saying Bremer improperly allowed testimony from female and minority plant workers who claimed to have been targets of harassment and discrimination. Her lawyer, Roxanne Conlin, said the most important part of the appeals court opinion is that judges found that evidence relevant.

"Does it matter that other women and minority employees were treated badly? To that, the court gives a resounding, `Yes!'" Conlin said.


Despite the fact that the four leading steer and heifer slaughtering firms account for over 80% of steer and heifer slaughter in 2000 and that the four leading hog slaughtering firms now conduct 56% of the total hog slaughter, the USDA's Grain Inspection, Packers and Stockyards Administration (GIP&SA) sees little that it can do to stem such concentration.

In a recent GIP&SA report it simply notes that with the general economic state of the changing cattle and hog industries business practices in those industries, and activities appear to raise concerns under the Packers and Stockyards Act of 1921 (P&S Act). Nowhere in the report does it name the corporations involved.

In a section of the report titled "Concerns about Changes in Livestock Pricing and Procurement" USDA said concentration in pork packing is moderate but increasing, but noted high concentration, in and of itself, is not prohibited under the P&S Act.

"The concerns expressed by many people about industry concentration and structure stem largely from concerns about the potential for large packers to abuse market power," the report says. "Members of the industry, especially producers, express concerns about possible concerted action by meatpackers to restrict competition."

While the report acknowledges that so-called "thinly traded" markets would be a concern under the P&S Act to the extent that they may facilitate unlawful price manipulation or other anti-competitive practices, the GIP&SA report seeks to remain neutral on production contracts.

Acknowledging, however, that some producers have expressed concern that they are unable to obtain a production or marketing contract, while others worry that some packers may not offer the same contract terms to  smaller volume producers as they do to larger volume producers, the GIP&SA notes that in order for it to act, it must first determine that the prices discriminate unfairly.

"It is not sufficient for the Packers & Stockyards Programs (P&SP) to prove that a particular marketing arrangement results in higher prices for one group of producers than for others. P&SP must also prove that the higher prices were unjustly discriminatory," the report says.

While many cattle producers believe USDA has authority over all production contracts the Department claims its authority under the P&S Act is restricted to entities subject to the Act, according to the report. This means the P&S Act only covers production contracts between a livestock producer and a packer or other entity subject to the Act. The Act does not cover production contracts between livestock producers or contracts between a producer and a feed company.

The report also says mandatory price reporting may eliminate some price series that are currently used in livestock procurement contracts. P&SP says it will continue to monitor the impacts of the implementation of livestock mandatory reporting.


Support for the United Farm Workers (UFW) long running labor dispute with California's Picsweet Mushroom Farms, a subsidiary of the Tennessee-based United Foods Inc., came on June 26 with the filing of a detailed nine-count complaint issued by prosecutors with the state Agricultural Labor Relations Board (ALRB).

The ALRB complaint affirmed worker charges that Pictsweet's Ventura County farms has violated a host of state labor laws in its bid to avoid negotiating a union contract with the UFW.

Among the counts in the consolidated complaint issued against Picsweet by ALRB El Centro Regional Director Kerry M. Donnell are refusing to provide information to the UFW that it needed to bargain, laying off mushroom workers without talking with the union, granting a worker a job transfer in return for signing a petition to decertify the UFW and discontinuing biennial wage increases without negotiating with the union, the workers' official bargaining representative. The firm employs more than 350 mushroom workers.

Union organizers hailed the complaint as a major victory for the plant's 350 workers, who are required to dig through compost beds ---fortified with horse manure and set in a series of sunless bunkers near Ventura Harbor --- to harvest more than 20 million pounds of mushrooms a year.

The UFW first won a contract at Picsweet in 1975, but lost it in 1987 when the company was sold to United Foods Inc. although the union has continued to represent the workers while seeking unsuccessfully to negotiate a new contract. The union is asking that the company provide dental and vision coverage for workers, less-costly medical insurance and a pension plan. They also want the company to boost wages by five percent for hourly employees and five cents a bucket for pickers paid by the piece. Currently, piece-rate workers earn 47 cents a bucket.

"The state has supported the workers' charges against Picsweet," UFW President Arturo Rodriguez points out. The ALRB complaint "is just another example of how this company has refused to heed its workers' pleas for a voice on the job, decent working conditions and a livable wage to support their families." Included in the farm labor board complaint are the following:

* Since October 2000, Picsweet has refused to provide the union with requested relevant information regarding its profit-sharing proposal. State law says good faith bargaining requires employers to supply information necessary for the union to bargain intelligently.

* Since September 2000, the company unilaterally laid off employees without notifying or bargaining with the UFW over the decision and the affects of the decision in violation of California law.

* In late November 2000, Picsweet conditioned the granting of a job transfer to a worker if he would sign a petition to trigger a decertification election to oust the union as the workers' bargaining agent. State law expressly prohibits a grower from coercing workers from exercising their right to organize and bans discrimination in terms and conditions of employment based on employees' exercise of their organizing rights.

* In August 2000, after workers renewed their demands to negotiate a union contract, the employer unilaterally discontinued the historic practice of issuing minimal piece rate increases of one cent or two cents per unit every two years.

* In September 2000, Picsweet unilaterally violated an interim agreement with the UFW that recalls from layoffs would be accomplished by seniority, without notifying and bargaining with the union.

The next step is for the ALRB's executive secretary in Sacramento to set a date for a formal hearing on the complaint before an administrative law judge with the farm labor board.

Workers at the Picsweet plant in Ventura earn up to 15% less than mushroom workers employed at other California fresh mushroom ranches where there are UFW contracts. Picsweet workers also want an end to on-the-job favoritism and a better medical plan.

Negotiations have gone on since January 2000 with Picsweet refusing to respond to the workers' basic demands, the UFW states. The Cesar Chavez-founded union has contracts protecting about 70% of the mushroom workers on California's Central Coast.

Picsweet officials had ten days to respond to the charges. After that, a hearing will be set before an administrative law judge, who will decide if Picsweet violated the law and whether remedies should be imposed. That decision can be appealed to the labor board, which was established by state law in 1975 to referee farm labor disputes and oversee union elections.


Charging that Labor Secretary Elaine L. Chao broke the law by ignoring a requirement to set higher wage rates each year for more than 30,000 foreign guest workers, a requirement intended to prevent their wages from undercutting those of farm workers living in the U.S., the United Farm Workers (UFW) and the Farm Labor Organizing Committee (FLOC) have filed suit against the U.S. Labor Department.

In their law suit the nation's two largest farm worker unions accused the Department of acceding to corporate agribusiness employer pressure at the expense of a vulnerable group of workers, mostly from Mexico, Central America and the Caribbean, who work under the H2-A temporary visa program and come to the United States for several months each year to plant and pick fruits and vegetables.

During the last decade, the Labor Department has usually announced the higher wage rates in February.

"We felt it was time to force the issue," Arturo S. Rodriguez, president of the UFW told the New York Times Steven Greenhouse.

Bruce Goldstein, executive director of the Farmworker Justice Fund, one of the groups that prepared the suit, said: "The whole point of the regulation is to issue the new wage rate for the year in which the farm workers are working. If you issue it in December, you haven't raised the rate in time to help the workers during that year."

Stuart Roy, a Labor Department spokesman, said Secretary Chao had not violated the law. She would be acting legally, Roy told Greenhouse, as long as she announced the new wage rates sometime in the calendar year.

Under federal regulations, the Labor Department must announce each year a minimum wage, different for each state, to be paid to the H2-A workers. The rate, based on the average wage that each state's farm workers receive, is $7.27 per hour in California, $7.25 in Florida and $7.68 in New York. Farm worker advocates said that based on recent studies, the wages should be raised three percent to five percent this year.

The National Council of Agricultural Employers, an association of growers, has told the Labor Department that it believes the wage rates are not calculated accurately and should be much lower.

"It basically means a lot of small growers aren't able to use the program because they can't afford the wage rate," said Sharon Hughes, the council's executive vice president. The council defended the Labor Department and said the government was complying with the law as long as the wage rates were issued before December 31.

In addition to the Labor Department suit, Goldstein notes that recently Sen. Larry Craig (Rep.-Idaho) introduced an agricultural guestworker bill, S. 1161 with the support of various corporate agribusiness interests, a bill "far worse than the compromise that was reached with the growers last year."

S 1161 contains a legalization program, which few farmworkers would qualify for because they would have to prove that they worked 150 days in a 12-month period, something that is difficult to prove for the majority of farmworkers. Then, once in the program, participants would work with the false hope of a future green card.  Few would ever get permanent immigration status.

In the meantime, their desperate need to find and prove 150 days of agricultural work each year for at least 4 years would subject them to exploitation by the employer. (The compromise's future-work requirement contained a more realistic number of days.)  And they could not work outside agriculture during those years.

As Goldstein notes, "in addition, the bill would change the current H-2A guestworker program would be substantially revised to lower the guaranteed wage rates, allow exploitative piece-rates, and remove other labor protections. By the way, nothing would stop the growers from continuing to hire undocumented workers."


Farms with sales of more than $500,000 a year received 22% of government payments in 1999, up from 13% in 1993, the General Accounting Office (GAO) has documented in a recent report to the Senate Agriculture Committee. Farms with sales of between $250,000 and $500,000 received 21% of payments in 1999, compared to 18% in 1993.

Because the subsidies are tied to both historic and current production levels, the largest payments tend to go to established corn and wheat farms in the Midwest, the report said.

"The bottom line is we must have a fairer system for providing support to farmers in the next farm bill," said the Senate committee's chairman, Iowa Democrat Tom Harkin.

Harkin wants to shift some federal farm spending into a proposed new conservation program that would subsidize farmers for good environmental practices, such as those that help control runoff of manure and farm chemicals. The payments would help many producers, including fruit and vegetable growers, that don't get federal subsidies now, Harkin says.

Defenders of the federal programs say that since large farms produce most of the food it's only natural that most federal assistance would go to them. Farmers say they have been forced to expand their operations in order to cover their expenses.

One of the major issue facing lawmakers as they currently draft new farm legislation is whether to raise the limits on subsidies that individual farmers can receive.

The current House Agricultural Committee's bill would allow the largest farm operations to get an even bigger share of farm subsidies by making more porous the already loophole-ridden system of payment limitations. This would follow the same pattern in recently-passed emergency aid legislation that set an effective subsidy limit of $460,000. By some "creative restructuring" that limit could easily be doubled by big farmers.

As the Des Moines Register's George Anthan observes, "the House Agriculture Committee leaders are bowing, as ever, to the farm, commodity and agribusiness organizations that make up Washington's still-influential farm bloc."

He notes that the testimony of others, like Iowa State University economist  Michael Duffy, who appeared recently before the committee, is largely ignored. Duffy emphasized what long has been obvious: The tens of billions of public dollars spent to help farmers "favor commodities more than people." The more commodities you produce, the more public money you get.

The system, as Duffy notes, "simply leads to the continued overproduction of those crops and results in the unhealthy situation like we have today."

Duffy and Iowa State sociologist Paul Lasley, Anthan reports, propose paying farmers a minimum wage amounting to no more than each person might make from full-time employment. "The payment emphasis would shift from commodities to labor, from grains to people," said Duffy.

Former Iowa Democratic Congressman Neal Smith long pushed for limiting payments to the production from a medium-sized farm. Those who produce more should have to depend entirely on the market, Smith said.

The GAO report has also noted that such large federal payments hurt aspiring young farmers by making it more expensive to buy or rent land.

Finding affordable land is the biggest obstacle to people who want to get into farming, the report said, adding that the value of government payments "causes sellers to ask higher prices or prospective purchasers to bid up the price of the limited farmland on the market."

An estimated 500,000 farmers will retire between 1992 and 2002, and only about half as many people will enter the business, the report said.

Farms with more than $500,000 in sales account for three percent of the farms nationwide. They received an average $85,208 in government payments in 1999. Farms with between $250,000 and $500,000 in sales accounted for four percent of farms and received an average of $50,790.

Farms with $100,000 to $250,000 in sales accounted for eight percent of all farms in 1999, and received a quarter of all payments. Their average subsidy in 1999 was $27,022.

Iowa received 9.8 percent of federal farm payments in 1999, followed by Illinois (nine percent), Texas (7.7 percent), Kansas (7.5 percent), Nebraska (7.2 percent) and Minnesota (6.6 percent). No other state received more than five percent.


Corporate agribusiness's "urge to merge" continues with the recent announcements that Purina Mills Inc. agreed to be acquired by Land O'Lakes Inc. to add to what is already the country's largest animal-feed processor and that Sara Lee Corp. has agreed to buy Earthgrains Co., the nation's second-largest bakery.

In what was reported to be a $230 million deal Purina Mills, of St. Louis, would become part of the agricultural cooperative Land O'Lakes, of Arden Hills, Michigan., Farmland Feed LLC, a joint venture between Land O'Lakes and the large farm cooperative Farmland Industries.

While feed miller rival Cargill Inc. holds a stake in Purina Mills, one analyst told the Wall Street Journal's Desiree J. Hanford and Richard Gibson she doubts that the nation's largest private corporation would make a counteroffer for Purina. Juli Niemann of the St. Louis firm R.T. Jones Capital Equities, said $23 a share was "more than a fair price."

Niemann, one of the few analysts who follows Purina, also said she doubted that the proposed deal would encounter antitrust issues. The animal-feed processing business doesn't have good profit margins and costs have to be watched carefully and eliminating a competitor can help, she said. "It just makes sense," Niemann said of the proposed transaction.

As for a deal with Cargill, Niemann told the Journal, it would result in a culture clash that would be difficult to resolve. Cargill acquired a stake in Purina Mills in mid-May. At the time the company, a major rival to Purina Mills and Land O'Lakes in the animal-feed business, said it was buying 451,868 shares "for investment purposes only." Reacting at the time to speculation that perhaps Cargill was contemplating a bid for the St. Louis competitor, a Cargill spokesman said "We made the investment for the same reason most investors invest --- you think the value is going to go up."

According to Feedstuffs, a trade publication, Land O'Lakes Farmland Feed unit has an 8.9 million ton manufacturing capacity, which is tops in the industry. But it's closely followed by Cargill and its Nutrena feed operation, with eight million tons. Purina Mills is third in the ranking, with 6.8 million tons capacity.

Sara Lee Corp. said it agreed to buy Earthgrains Co., for $1.8 billion, plus the assumption of about $950 million in debt.

In making its largest acquisition ever, the food and consumer-goods company announced that its campaign to focus more tightly on core products had reached a turning point. After shedding 15 businesses, the company now will look to grow again, said C. Steven McMillan, president and chief executive.

"Our efforts to create a more focused company are paying off," McMillan told the Wall Street Journal's Jonathan Eig, noting that strong cash flow would make additional acquisitions possible in the year ahead. He said any acquisitions were likely to be large ones.

Earthgrains, with bread products such as Earth Grains, IronKids and Grant's Farm, had sales of more than $2.6 billion last year in the U.S. and Europe. It trails only Interstate Bakeries Corp. in size among U.S. bakeries. Sara Lee said the acquisition would quadruple its annual bakery sales to $3.4 billion.

McMillan praised Earthgrains' direct-to-store delivery system, saying it would help place the Sara Lee brand name on more grocery shelves around the world. The combined bread business will operate from St. Louis, and most of Earthgrains' management team is expected to stay in place.

The sale must get federal approval, but Barry H. Beracha, chairman and CEO of Earthgrains, told Eig he expected the process to proceed smoothly. Though both companies sell fresh bagels in California and the Southwest, they otherwise have few overlapping interests.

In addition to its fresh-bread business, Earthgrains also has a strong presence in refrigerated dough, another area in which Sara Lee has been weak.

Earlier this year, Sara Lee and Earthgrains both bid to acquire Unilever's Bestfoods Baking Co., but were outbid by George Weston Ltd. Some analysts suggested that Sara Lee is overpaying for Earthgrains and said Sara Lee might have been better off with Bestfoods, which offered stronger brands. Others praised the move, saying Sara Lee was wise to keep up with the food industry's consolidation.


British supermarkets, the Times of London's Science Editor Jonathan Leake reports, are studying a technique to carbonate fruit and market it to children as sparkling oranges, pineapples and pears.

The new technique follows a "scientific breakthrough" that allows natural fruit to be filled with carbon dioxide, making its flesh fizz like a bottle of carbonated drink. The fizziness is also said to enhance the flavor, making oranges and other fruit taste stronger and sweeter.

Supermarkets see it as a "money-spinner," Leake notes, as they hope it will make it easier to sell fruit and even some vegetables to children "who are notoriously reluctant to eat fresh foods."

A spokesman for Asda, the British supermarket chain now controlled by Wal-Mart, said it was taking a close look at fizzy fruit. "It is in its early stages, but it sounds like fun, especially if it encourages children to eat more fresh fruit."

Fizzy fruit was invented by Dr Galen Kaufman, an American researcher in  Galveston, Texas, who works on the behavior of gases. He found that, under certain conditions of temperature and pressure, carbon dioxide can diffuse into almost any fruit --- with the exception of bananas, which explode.

Leake points out that a series of consumer tests carried out in U.S. supermarkets showed that youngsters' attitude to fruit completely changed when they knew it was fizzy --- and many adults with an aversion to fresh food would also eat it.

For supermarkets, fizzy fruit could be a welcome antidote to the disaster suffered by Sunny Delight, the orange-flavored drink aimed at children, Leake adds. While sales soared after it was marketed as a health drink, they plunged when it was found that chemicals used to color it could turn children yellow, a phenomenon now known as Sunny Delight syndrome.

Kaufman said fruit was best if carbonated shortly before consumption, otherwise the gas could diffuse out again, although his firm Fizzy Fruit was working on wrappers that could retain the gas for days.

"Most carbonated fruit tastes great --- grapes become a bit like champagne and oranges and other fruit gets much tastier --- but I have to admit the tomatoes are a bit strange," he noted.

The link to Asda comes from Wal-Mart, its parent company, which is in talks with Kaufman over marketing the product once trials are complete.

The idea of carbonating fruit to appeal to children is, however, a dubious  one, according to food psychologists. Dr Troy Cooper, an Open University psychologist specializing in food, said the technique was effectively turning fruit into packaging for a fizzy drink.

"Research shows that if you take a melon and fill it with fizzy drinks it will not actually persuade children to eat more real fruit. So children might eat  this fruit and, if they retain their healthy properties, that is good --- but it is unlikely to make them eat ordinary fruit."

Tricks to encourage children to eat fresh food are not new. In 1997 the  supermarket chain Iceland introduced a range of "snack-flavored" vegetables. They included baked bean-flavored peas and Brussels sprouts tasting of bubble gum.


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
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To those who have so generously contributed to its work in the past, no matter the
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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
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In "Between the Furrows," besides a modern search engine, there is a wide range of
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