Monitoring Corporate Agribusiness From a Public Interest Perspective
A.V. Krebs Editor\Publisher
Issue #146 March 8, 2002
SEN. DASCHLE'S ENERGY LEGISLATION
BOON TO NATION'S
LARGEST ETHANOL PRODUCER --- ADM
DAN MORGAN, WASHINGTON POST: The Democrats' comprehensive energy bill that the Senate plans to debate . . . .has a provision sure to appeal to farm state voters. It would require gasoline refiners to triple their use of corn-based ethanol by 2012. The provision's author? No less a power than the Senate's majority leader, Thomas A. Daschle (Dem.-South Dakota).
His provision also would ban by 2006 the use of ethanol's principal competitor, the petrochemical MTBE. Both ethanol and MTBE (methyl tertiary-butyl ether) are blended into reformulated gasoline to make it burn more cleanly, reducing smog.
The prospect of imminent legislation has produced a furious round of lobbying by corporate and environmental interests. Sources say the oil industry, in exchange for agreeing to a "phasedown" of MTBE, wants modifications in some tougher environmental standards proposed by Daschle.
While the Daschle provision would be a boon to the largest ethanol producer, Archer Daniels Midland Co., delays are being sought by MTBE producers, including Enron Corp. The MTBE trade group, the Oxygenated Fuels Association, is represented by, among others, former Republican National Committee chairman Haley Barbour.
Daschle, whose state is home to a growing number of farmer-owned ethanol plants, has long championed greater ethanol use. "He firmly believes it is good public policy," said his spokesman Jay Carson. But with farm states posing a key political battleground in the Democrats' fight to keep control of the Senate this fall, a senior Daschle aide acknowledged the political import "has not escaped our attention."
Democratic senators face strong Republican challengers this year in Iowa, Minnesota, South Dakota and Missouri -- all states with ethanol plants and heavy corn production. In addition, Iowa's party caucuses in 2004 will serve as the first test for a new field of presidential candidates. One likely Democratic contender, Sen. John F. Kerry (Dem.-Massachusetts), said recently that promoting ethanol should be part of U.S. energy policy.
Ethanol refined from corn has been touted since the 1970s as a renewable, domestic alternative to gasoline made from foreign oil. But the expansion of production has depended heavily on the federal government and political decisions.
Over the years, ADM executives courted top politicians, from then-Senate Majority Leader Robert J. Dole (Rep.-Kansas.) to Daschle. In the last election cycle, ADM contributed $660,000 to the two political parties, including $100,000 in August 2000 to the campaign fund of Senate Democrats.
The 5.3 cents-a-gallon tax subsidy for gasohol, a blend of ethanol and gasoline, already costs the government nearly $1 billion a year in lost gasoline excise taxes, according to the American Highway Users Alliance. The figure could rise to $2.5 billion under Daschle's proposal to require refiners to increase ethanol production from the current 1.7 billion gallons a year to 5 billion gallons. "We are concerned about the impact on the highway trust fund," which finances road construction out of excise tax revenues, said William Fay, president of the Highway Users Alliance.
The ethanol issue pits Daschle against another prominent Democrat, Gov. Gray Davis of California.
Ethanol received a major boost in 1990 when Congress, with strong farm state support, directed that cleaner-burning reformulated gasoline used in high-smog areas such as Los Angeles be made from oxygenates, replacing harmful additives such as benzene. Both MTBE and ethanol qualified. The legislation ignited a battle between the two industries, especially in California's huge gasoline market.
Because the state had no network of ethanol plants and lacked a major corn industry, refiners initially turned to MTBE. But in the wake of complaints that MTBE tainted groundwater in some communities, Davis announced in 1999 that the state would ban MTBE effective January 1, 2003.
One Canadian company complained in a federal trade arbitration dispute that ADM brought Davis to its Decatur, Illinois, headquarters in 1998 and later contributed $100,000 to his campaign. A Davis spokesman said last week that the MTBE ban was "based on science, and there was no nexus between a contribution and the policy decision." Davis's 1998 campaign budget was about $50 million, he added.
In fact, Davis's decision to ban MTBE did not open the way for ethanol to take over the California market, as some ethanol proponents had hoped. Instead, Davis pressed the federal government to waive technical provisions of the Clean Air Act to allow California refiners to meet the smog standards with new fuel mixes other than ethanol.
California officials said that, with limited ethanol production facilities, California could suffer severe shortages and price spikes once MTBE was banned. But the ethanol industry contends it can meet demand by building more plants and shipping Midwest ethanol by rail to California.
Daschle lobbied hard against California's waiver request, and farm state lawmakers were elated when the Bush administration denied it last June. A month before the decision, ADM sent a $100,000 check to a 2001 Republican presidential dinner fund, according to the watchdog group PoliticalMoneyLine.
Democrats hope the Daschle provisions, which would allow California refiners greater flexibility in meeting smog-reducing requirements without ethanol, will settle the row with Davis. A national mandate for ethanol use would make the industry far less dependent on sales in California.
But oil industry officials say they want changes in Daschle's provision that would require gasoline made with ethanol to meet the same clean-air standards as regular gasoline. Environmental groups say the industry modifications would add at least 35,000 tons of pollutants to the air annually.
Nonetheless, oil industry officials expressed hope that a deal could be reached. "There's an opportunity to hit a home run here," said Edward Murphy, the American Petroleum Institute's general manager for refining. "All we're suggesting is that states should have a range of fuels to choose from."
See Issue #123
NICHOLAS E. HOLLIS:
"COMING `ETHANOL REGIME' WILL NOT HELP
CORN FARMERS" . . AS "THEY ARE QUICKLY
BEING PAUPERIZED AND REDUCED TO SERFS".
NICHOLAS E. HOLLIS, AGRIBUSINESS COUNCIL (ABC): The energy legislation coming up for debate . . . . has a provision in it which would require the use of ethanol in all oxygenated fuels across the country.
ADM is slipping this one under the sponsorship of Daschle after quietly building a fallback campaign in case California balked --- which it has so far . This campaign was funded by your tax dollars via a lavish seminar campaign run out of Department of Energy (DOE) which conducted more than thirty state seminars in 2000-2001 pushing ethanol (usually with ADM approved speakers and coordinated with a Colorado consulting outfit which was handpicked by ADM).
The seminar lists are now being used to generate constituent letters targeting swing vote types, so what ADM tried (and failed) to pull off in Iowa (corn capital of the world) --- mandating and enforcing the use of ethanol at the pump --- they now have in sight at the national level.
And why isn't anyone paying attention to this brazen new heist? Hey, the Olympic Games were about patriotism and setup a great distraction generally, while the so-called energy experts in town . . . tangled up with multiple Enron hearings and probes --- so the ethanol angle (once again) gets short shrift. While the ag toady phalanx opens fire on W-H. This could be the week coming up that Americans lost their freedom to choose at the pump. Wait till they find out the lousy mileage ethanol blends reduce them to --- not to mention additional engine wear and tear. Farmers discovered this long ago --- and have talked about it on the radio --- but the news never quite filters up.
The ethanol charade --- like the "phantom" cellulose to ethanol plant at Jennings, Louisiana, which ballyhooed another feedstock --- is taking this country over a steep cliff. The coming "Ethanol Regime" will not help corn farmers any more than the last twenty years have. They are quickly being pauperized and reduced to serfs. Is there no limit to ADM's greed and bribe-generated government facilitation? Hope you can pass the word and get some opposition mounted.
One might conclude that we are anti-ethanol but that's not it ---- we are
against the monopolistic control, massive subsidies and reliance on one
feedstock (corn) which disproportionately favors one company (ADM) which then
uses the influence to further subjugate the farmer and payoff more politicians.
"STRUCTURALLY, U.S ETHANOL INDUSTRY
IS CURRENTLY HIGHLY CONCENTRATED"
February 27, 2002
The Honorable Dianne Feinstein
United States Senate
SUBJECT: U.S. Ethanol Market: MTBE Ban in California
Dear Senator Feinstein:
In response to your request, we obtained information as (1) ethanol consumption, supply, and prices as well as factors that could potentially contribute to ethanol price spikes in California, and (2) the structure of the U.S. ethanol market and conditions that could conceptually affect competition. . . . .
The 1990 amendments to the Clean Air Act (CAA) requires that an additive (oxygenate) be added to the gasoline used in areas with excessive carbon monoxide or ozone pollution to help mitigate these conditions. The CAA specifically requires those areas with "severe" ozone pollution to use reformulated gasoline, which contains at least two percent oxygen by weight. In California, like most other areas of the country, oil refining companies predominantly use the oxygenate methyl Tertiary butyl ether (MTBE) to meet the CAA requirement. However, because MTBE has been detected in ground water, the governor of California issued an executive order in March 1999 to MTBE in the state's gasoline by the end of 2002.
In summary, if California decides to use ethanol to replace MTBE, ethanol production capacity from 2003 through 2005 could likely satisfy U.S. consumption, according to available ethanol industry projections. However, if other states also banned MTBE and moved to ethanol, consumption could increase significantly and potentially affect the industry’s ability to meet demand. Moreover, production capacity projections could be overstated because they include not only existing plants and plants under construction, but also new plants being planned, which may or may not materialize.
According to our analysis of average monthly data from 1993 through May 1998 (the latest data available) U.S. ethanol prices generally ranged from $ to $1.20 per gallon. While prices have been relatively stable to this point, ethanol price spikes could occur in California if supplies were disrupted by either production or distribution problems.
Structurally, the U.S. ethanol industry is currently highly concentrated, as measured by the Herfindahl-Hirschman Index (HHI), a standard measure of market concentration. According to the guidelines of the Federal Trade Commission and the U.S. Department of Justice, an HHI above 1800 is highly concentrated. Our analysis of January 2002 data from the Renewable Fuels Association shows that the U.S. ethanol industry's HHI is 1866.
According to economic theory, while high market concentration could conceptually limit competition in an industry, this factor alone is not necessarily sufficient to determine competitiveness of an industry. In addition to market concentration, competition in the ethanol market could conceptually be affected by the interaction of a variety of other factors including the cost of initial investment and the availability of substitute products.
Please note that information on future ethanol consumption and supply in this report reflects the potential implications of the proposed ban on MTBE in California by the end of 2002. We did not examine the potential impacts of switching to ethanol on California's gasoline market or on U.S. corn prices, both of which could ultimately be affected by the MTBE ban.
The quick snapshot of the industry, based largely on data from other federal agencies and industry sources, does not allow us to draw conclusions or predict with accuracy the ethanol industry's capability to meet changing demands . . We discuss our methodology . . . We provided portions of the statistical information to the relevant federal agencies from which we obtained data and they reviewed and verified the data. We performed our work in February 2002 in accordance with generally accepted government auditing standards . . . .
Director, Natural Resources and Environment
General Accounting Office
CONCEPTUAL MARKET STRUCTURE AND FIRMS’ BEHAVIOR FACTORS
* Pricing coordination is easier if few firms control most of the market share. The FTC\Justice 1992 Horizontal Merger Guidelines regard markets with an HHI (Herfindahl-Hirschman Index) above 1800 as "highly concentrated."
* High concentration would tend to limit competition
EXISTING MARKET STRUCTURE AND FIRMS’ BEHAVIOR IN ETHANOL MARKET
* High industry concentration of production capacity based on these standard measures of industry concentration for 2002
> HHI = 1866
> CR4 (Market shares of top four firms) = 58%
> CR8 (Market shares of top eight firms) = 71 %
> Largest firm has 41% market share.
* Some large producers may have partnered with smaller producers or coops to market the smaller producer's supplies of ethanol, thus, the concentration ratio may underestimate the actual market concentration. However, the market share of the large producers is projected to decline.
EXISTING MARKET STRUCTURE AND FIRMS’ BEHAVIOR IN ETHANOL MARKET
* MTBE and ethanol are the two primary oxygenates; however, MTBE is being phased out in California. There are other oxygenates, but because of environmental concerns about some of these, the extent to which they can substitute ethanol is not clear.
* Ethanol products are generally homogeneous. From the customer's point of view, ethanol produced from different plants are indentical. Customers buy the products primarily based on the price.
* Some customers we interviewed indicated that switching from one ethanol vendor to another was not feasible for them. Other customers typically have contracts with multiple ethanol suppliers (about two or three suppliers) and do not incur significant costs in switching to other suppliers.
--- GAO-02-44OR MTBE Ban in California
SEN. DIANNE FEINSTEIN:
"TERRIBLE MISTAKE TO PLACE CALIFORNIA
AT MERCY OF GIANT OUT-OF-STATE CORPORATION"
ASSOCIATED PRESS: A General Accounting Office study has found that ethanol supplies around the country are adequate to meet California's demand should Gov. Gray Davis ban MTBE, the gasoline additive blamed for contaminating water supplies.
But the GAO, Congress' investigative arm, warned that the reliability of ethanol supplies could be compromised --- and ethanol prices could spike --- if more states outlaw MTBE and replace it with ethanol, a corn-based additive.
Sen. Dianne Feinstein, (Dem.-California) who requested the study, said Congress should proceed carefully before enacting energy legislation that calls for a large increase in the use of ethanol, which has the support of farm-state lawmakers.
Davis in 1999 proposed banning MTBE by the end of the year, but has said recently he will decide by April 1 whether to stand by his decision. State officials contend that oxygenates such as MTBE and ethanol are not needed to make cleaner gasoline, but they have failed to convince the federal government to waive the oxygenate requirement.
The GAO study said the ethanol industry is controlled by a small number of companies, led by Archer Daniels Midland (ADM).
"If we have learned anything from the energy crisis and the Enron debacle, it's that it would be a terrible mistake to place California at the mercy of a giant, out-of-state corporation," Feinstein said.
A compromise by oil, farm and environmental interests under consideration in
Congress would end the oxygenate requirement, get rid of MTBE and call for a
tripling of ethanol usage over 10 years. Monte Shaw, spokesman for the Renewable
Fuels Association, said the ethanol industry could quickly increase production
to meet expected demand.
FARM STATE LEGISLATORS
FAVOR ENERGY LEGISLATION PORK
SHAILAGH MURRAY, THE WALL STREET JOURNAL: The Senate energy bill
includes a tax package with the expected perks for oil and coal. But
Among the tax provisions are credits to reward southern Iowa farmers who sell prairie grass from their idle land to a local power plant. They also include incentives for using cattle and pig waste to generate electricity. And the nation's 930 rural electric cooperatives would reap two energy-tax credits --- even though they don't pay federal taxes.
While the broader energy bill is described as an effort to reduce reliance on foreign energy sources, protect the environment and restructure the electricity market, the tax provisions are a testament to the Senate's enduring loyalty to farm interests: Even as the nation grows increasingly urban, the farm lobby remains powerful, thanks to each state's constitutional claim to two senators, no matter how large or small the population. But its strength is magnified in this Senate, due to the interests of both its leader, South Dakotan Tom Daschle, and of a solidly rural Senate Finance Committee, where the tax package originated.
Farmers, then, are well-positioned these days to turn their weeds and manure into energy ---- and, in turn, into cash in their pockets. The Senate's energy bill includes a tax section with incentives valued at $16 billion over 11 years. About half of its provisions would encourage the use and production of alternative vehicles and fuels, renewable energy, and conservation and energy-efficiency incentives.
Besides Sen. Daschle, other Democratic members from rural America who sit on the Finance Committee include Chairman Max Baucus of Montana, Budget Committee Chairman Kent Conrad of North Dakota and Energy Committee Chairman Jeff Bingaman of New Mexico. The committee's senior Republican is Charles Grassley, an Iowa soybean farmer.
Mr. Grassley's contributions to the bill include the first-ever tax break for so-called biodiesel, an alternative fuel made from soybean and other oils, along with an incentive for small producers of ethanol, the long-subsidized corn-based fuel. Ethanol, meanwhile, gets the backing not only of rural-state senators, but of anyone --- Democrat or Republican --- who aspires to be president by first reaping votes in Iowa's early presidential caucuses.
In Iowa, Mr. Grassley says, "Ethanol and biodiesel are like mom and apple pie. To the average farmer, it's a no-brainer." Another Grassley measure would expand an existing chicken-waste credit to apply to bovine and swine waste. Hog and cattle lots in Iowa generate enough waste to power 107,000 homes a year, he estimates.
Finance approved the breaks on an easy voice vote. The House's energy-tax package is much richer, but reflects its GOP majority's emphasis on fossil-fuel production incentives as opposed to the Democratic Senate majority's greater interest in alternative energy sources. If the narrowly divided Senate can pass its own energy legislation, the two bills will have to be reconciled in a conference committee.
The Senate bill does have its rural dissenters, who criticize the incentives as wasteful subsidies. "There's all kinds of yuck in there," says Sen. DonNickles of Oklahoma, the Senate's No. 2 Republican.
The bill holds several sweeteners for rural electric cooperatives, which date to the New Deal and are as integral to the farm economy as grain elevators. The customer-owned entities provide 10% of the country's electric power and average about five or six customers per mile, compared with 50 or 60 customers per mile for more-urban utilities.
The co-ops built support from a wide array of Democrats, including Sens. Daschle, Baucus, Bingaman and Tom Harkin of Iowa, the Agriculture Committee chairman. Sen. Conrad, the Budget Committee chairman better known for his lectures against deficits, got 17 lawmakers to sign a letter endorsing the co-ops' case.
Their fund-raising political-action $2.1 billion committee-called ACRE, or
Action Committee for Rural Electrification, doled out about $1 million for
campaigns in 2000 and has given more than $455,000 this year, with slightly more
$2.4 billion going to Republicans, according to the Center for Responsive
Politics, a nonpartisan campaign-watchdog group here.
The co-ops already enjoy favored status: They don't pay corporate income taxes, and they can get low-interest, government-backed loans.
"THE NATURE OF THINGS TO COME"
AN "ENRON IN AGRICULTURE" ???
NICHOLAS E. HOLLIS, AGRIBUSINESS COUNCIL (ABC): The Enron Scandal is casting a long shadow across the land. As the top media story drives other worthy topics off the agenda for public policy consideration, virtually nothing is immune from the "Enron insight" or the "Enron angle". [Recently] at a high-powered breakfast chaired by former ag secretary Clayton Yeutter the topic was the stalemated farm legislation --- but Enron was lurking. Amidst the orange juice and muffins, lobbyist conversation turned to the latest twist in the collapse of the giant Houston energy trading company, which rose out of obscurity to become the seventh largest US corporation last year.
Policymakers are running scared and trying to distance themselves from the Enron "taint" but it runs deep. And there are rumblings of another imminent meltdown among the corporate high flyers: Archer Daniels Midland (ADM) the Supermarkup to the World. Still controlled as a family fiefdom, ADM has outraged huge state pension funds in Florida and California which hold millions of shares of the company's stock, by failing to provide transparency in accounting during the long, drawn out price fixing scandal .
ADM stock prices nose-dived from the mid 20's into the single digits, missing the entire bull market, while unseen millions were spent to mount an enormous legal counterattack which aimed at stalling the government investigation and maintaining ADM's contracts with USDA (even after a guilty plea).
These contracts including Food for Peace, school lunches and other programs were maintained --- along with a campaign contribution greased subsidy for a fuel additive called "ethanol". worth hundreds of millions to ADM. Coupled with the sugar subsidy which props up a phony market for high fructose corn syrup, --- another major ADM product, the inquiring mind wonders if ADM could survive without massive government subsidy --- which is rather entangled with the larger farm subsidy issue currently before Congress. The answer on the street is "NO."
As the current debate over farm policy makes clear --- ADM and its phalanx of controlled ag groups, such as the corn and soybean growers associations, Farm Bureau and others, DO NOT want to break the subsidy-riddled status quo --- even as smaller farmers and many others, realize the current programs are dysfunctional and unsustainable. These groups have managed to infuriate the Administration and the farmers by appearing opportunistic and greedy while other Americans were willing to tighten their belts.
The White House now recognizes that behind the facade of phony ag association managers pressing for more subsidy - is the Ethanol King himself. Yep, the same miserable Pied Piper,who has practically single-handedly led American agriculture over the cliff, while enriching himself and family with grotesque offshore bonuses only slightly less generous than the "campaign finance" he doles out regularly to both sides of the political spectrum.
No one wants another tragedy to engulf the country like Enron --- but no one has really wanted to look into ADM either. When the price fixing scandal first broke in mid-1995, the Department of Justice started an investigation into multiple fraud evidence (on tape) and allegations, but this soon dissolved under political pressure into a bizarre, laser beamed criminal takedown of the government's primary informant. Key higher ups, such as Dwayne Andreas, received immunity as part of a $100 million plea agreement/fine. The public is watching Ken Lay now, but the real question may be which motorboat makes it to the Cayman Islands , or Cuba first.
If Enron's corrupting senior management had been confronted earlier --- even by a few braver accountants --- perhaps much of this fiasco could have been avoided. But perhaps not when you look at all those phony subsidiaries. In ADM's case it might be less complicated --- and, maybe this Administration will take a "big stick" to the management in Decatur. Thus averting a crisis while helping the farmer. Timing seems propitious, but action will be needed soon to avert an "Enron in agriculture."
Reprinted from Issue #142
CORN GROWING IN MEXICO
"HAS BASICALLY COLLAPSED"
AS U.S. IMPORTS FLOOD COUNTRY
TIM WEINER, NEW YORK TIMES: For many generations, corn has been the sacred center of civilization in Mexico, the place where the grain was first cultivated some 5,000 years ago.
Gods and goddesses of corn filled the dreams and visions of the great civilizations that rose and fell here before the Spaniards came five centuries ago. Today the corn tortilla is consumed at almost every meal. Among the poor, sometimes it is the entire meal.
But the modern world is closing in on the little patch of maize, known as the milpa, that has sustained millions of Mexicans through the centuries. The powerful force of American agribusiness, unleashed in Mexico by the North American Free Trade Agreement (NAFTA), may doom the growing of corn as a way of life for family farmers here, agronomists and economists say.
Lorenzo Rebollo, a 53-year-old dirt farmer, works two and a half acres of corn and beans here on the slopes of the eastern state of Michoacýn, in Mexico's central highlands, where corn was first grown as a food crop, archaeologists say. Mr. Rebollo is one of about three million Mexicans who farm corn and support roughly 15 million family members.
His grown sons have left for the United States to make a living, and Mr. Rebollo says he may be the last man to farm this patch of earth. It is the same story all over Mexico: thousands of farmers pulling up stakes every year, heading for Mexico City or the United States. Some grew coffee or cut sugar cane. But most grew corn.
Roughly a quarter of the corn in Mexico is now imported from the United States. Men like Mr. Rebollo cannot compete against the mechanized, subsidized giants of American agriculture.
"Corn growing has basically collapsed in Mexico," Carlos Heredia Zubieta, an economist and a member of Mexico's Congress, said in a recent speech to an American audience. "The flood of imports of basic grains has ravaged the countryside, so the corn growers are here instead of working in the fields."
The facts are stark. Since NAFTA took effect eight years ago, imports of corn to Mexico from the United States have increased nearly eighteenfold, according to the United States Department of Agriculture. The imports will probably keep growing for the next six years as the final phases of NAFTA take effect. In the United States, corn growers receive billions of dollars a year in subsidies from Congress, much of it going to huge agribusiness operations. That policy fuels huge surpluses and pushes corn prices down.
Free trade and Mexico's own farm policies "threaten the ability of Mexican farmers to continue to grow corn," said Alejandro Nadal, a professor at the Colegio de M*xico and the author of a study on the issue.
In Mexico, NAFTA did away with many traditional subsidies and generous price supports. Some contend it is doing away with small farmers. About 90% of Mexico's corn farmers work fields of five acres or less, and their survival instincts are driving them farther and farther up Mexico's mountainsides as they strive to grow enough to get by. "We work the land all our lives," Mr. Rebollo said. "But the farmers are growing more and getting less."
Under a slowly lifting ceiling, the United States will be able to export all the corn it wants to Mexico, duty free, by 2008. NAFTA's drafters told Mexico's farmers that as the ceiling lifted, the price of corn in Mexico would slowly fall toward United States and international prices over the 15-year period.
But instead, prices plunged quickly, converging with the free-market price by 1997. This was good news for big companies in Mexico importing corn for animal feed and processed food. But it was hard on the farmers, who have little political clout under the government of President Vicente Fox, an ardent free-trader.
The effect of American imports on Mexican agriculture was not unforeseen. "Integration into the global economy will also accelerate the social dislocation that rapid modernization inevitably brings to a developing economy," Bernard Aronson, a former assistant secretary of state for Latin American affairs, wrote eight years ago as the trade pact took effect.
But some things were not predicted. One unforeseen result of the collapse of corn farming, Mr. Nadal warns, will be the loss of genetically unique kinds of corn. As imports grow and farmers give up their fields, he said, ancient varieties like the succulent blue corn used for tortillas may be endangered. Some may already be lost, he said.
"If traditional growers abandon corn production --- as the NAFTA strategy foresees --- then even more significant genetic erosion will occur," he said.
The importation of bioengineered corn from the United States is a separate but heated issue. Mexico's government does not permit the planting of genetically modified corn. But the new modified breeds can be imported as food or feed. The science journal Nature and Mexico's government published findings last year showing that bioengineered genes from American imports have invaded ancient varieties of corn in the state of Oaxaca.
NAFTA has had demonstrable benefits for many sectors of the Mexican economy that have become competitive, and Mr. Fox says it is no longer possible for the government to step in and assist farmers.
State legislators who want Mexico to protect its corn the way Japan protects its rice have had no luck swaying him. Mr. Fox's agriculture minister, Javier Usabiaga --- a highly successful exporter known as the Garlic King in Guanajuato, his home state as well as Mr. Fox's ---- says that a farmer who cannot survive in the 21st century is simply "going to have to find another job."
Farmers like Mr. Rebollo are regarded as artifacts of an earlier, simpler
age. "I have this little bit of land, and I work it, and it's good hard work,"
he said as he walked his fallow field. "But I think when I go it will go too."
GRAIN EXPORTS CONCENTRATED IN HANDS
OF U.S. CORPORATE AGRIBUSINES GIANTS
"The same three grain giants -- Cargill-Continental Grain, Archer Daniels Midland (ADM) and Zen Noh (a Japanese company) --- were shown in the study to control 81% of the corn exports and 65% of the soybean exports. ADM and Cargill were also among the top four in terminal grain handling, flour milling, soybean crushing and ethanol production.
"`Concentration of Agricultural Markets' the concentration ratio (relative to 100%) of the top four firms in specific food industries include:
* Terminal Grain Handling Facilities: 60% (Cargill, Cenex Harvest States,
ADM, and General Mills)
* Corn Exports: 81% (Cargill-Continental Grain, ADM, and Zen Noh)
* Soybean Exports: 65% (Cargill-Continental Grain, ADM, Zen Noh)
* Flour Milling: 61% (ADM Milling, ConAgra, Cargill, General Mills)
* Soybean Crushing: 80% (ADM, Cargill, Bunge, and AGP)
--- National Farmers Union-commissioned study conducted by Drs. Mary
Hendrickson and William Heffernan from the University of Missouri.
"ETHANOL ??? GREAT !!!
BUT IS NOT A SUBSTITUTE
FOR SENSIBLE, FLEXIBLE FARM POLICY"
"Before farmers get too giddy, an unadulterated view of reality is in order.
"First, according to USDA's Office of Energy, each 100 million bu. of corn made into ethanol boosts U.S. corn prices two to four cents per bushel. If oilman Bush favors farmers . . . . California's ethanol needs could raise corn prices a modest five to 10 cents per bushel.
"Second, if oilman Bush fails to deliver California --- a state he lost in the last election, wants to win in the next one and holds 10 times more votes than farmers hold nationwide --- today's massive ethanol production expansion looks like a prelude to an industry shakeout.
"Third, global economics and geopolitics, not just U.S. ag economics or California politics, heavily influence ethanol's long-term profitability. The production and price of crude oil, the president of Venezuela, some billionaire Arab sheik, a European recession, new technology to make oxygenated fuel, China and South America's growing corn production, U.S. tax policy and a continuation of an unchanged Freedom to Farm after 2002 are all downward price pressures that will easily --- as easily as today's price shows --- suppress some or all of ethanol's upward price push on the U.S. corn market.
"You want to make ethanol? Great. But it is just a part, a small part, of a sensible, flexible farm policy that would lift U.S. corn prices substantially and consistently higher than today."
--- Excerpt: Alan Guebert, Farm and Food File, May 20, 2001
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