April 12, 2002 #154
Monitoring Corporate Agribusiness
From a Public Interest Perspective
EDITOR\PUBLISHER: A.V. Krebs
ADDRESS: PO. Box 2201, Everett, Washjington 98203-0201
WEB SITE: http://www.ea1.com/CARP/
TO RECEIVE: Name and e-mail address
PENNSYLVANIA TOWNSHIP JOINS NINE OTHERS
IN BANNING CORPORATE AGRIBUSINESS OPERATIONS
Windham Township, Bradford County Supervisors have voted unanimously to become the tenth Township in Pennsylvania to adopt an Ordinance banning agribusiness corporations from operating in the Township. The Township --- the first in Bradford County to adopt the Ordinance --- joins nine other Township governments in Indiana, Cumberland, Fulton, and Bedford Counties that have adopted the Ordinance.
Specifically, the Ordinance prohibits agribusiness corporations from owning farmland or engaging in farming in the Township.
Windham Township is located within the Senatorial District of Roger Madigan. Senator Madigan is the primary sponsor of Senate Bill 826, which seeks to strip the power away from Township governments to adopt Ordinances to control factory farms and the corporations that run them. The Bill stalled in the [Pennsylvania] Senate Agriculture Committee after thousands of citizens and Township Supervisors announced their opposition to the Bill.
The adoption of the Ordinance by Supervisors in Windham Township reflects the targeting of rural Townships in South-Central and North-Central Pennsylvania by factory farm corporations. Statistics produced by the State Conservation Commission in 2001 revealed that those two regions --- comprising 29 Pennsylvania counties --- endure over 93% of all factory farms in Pennsylvania. Those statistics also revealed that over 94% of new factory farms were slated to be developed in those areas in the near future.
Tom Linzey, staff attorney for the Community Environmental Legal Defense Fund --- which drafted the Ordinance --- explained that "the failure of the legislature to take steps to protect citizens of this State from factory farms and the corporations that run them has led directly to local governments working to protect the health, safety, and welfare of their residents. Just because factory farm corporations now call the shots in the House and Senate Agricultural Committees doesn't mean that local democracies have sold out too."
Linzey noted that the Pennsylvania Farm Bureau and factory farm corporations
are leading the charge to strike down the Ordinance as it was adopted in Belfast
Township, Fulton County. Linzey stated that "this is typical behavior for an
organization --- the State Farm Bureau --- which no longer represents the
interests of family farmers."
LOCAL GOVERNMENTS ACROSS THE COUNTRY
SEEKING PROTECTION FROM FACTORY FARMS
ASSOCIATED PRESS: In Pennsylvania, five cities have banned large corporations from owning farmland or operating farms. Leaders in a Missouri county upset by a hog waste spill ordered a company to take its hogs and get out. In Iowa, two counties passed unprecedented bans on livestock farms.
Across the nation's farm country, local governments are raising a stink about corporate agriculture --- and in the process, stepping into a fight between large-scale farms and neighbors. Some farmers and corporate interests call the trend disturbing and warn that overregulation could drive up food prices and lead some livestock production to move out of the country.
But local officials are taking matters into their own hands because states haven't adequately enforced laws already on the books, said Melanie Shepherdson, an attorney for the Natural Resources Defense Council in Washington. "People are starting to realize that `This isn't just happening in my town. Other people are experiencing this, too,'" she said.
In February, officials in Iowa's Cerro Gordo County declared a one-year ban on the construction of new confinements. Days later, neighboring Franklin County followed suit. The bans were unparalleled in Iowa, which leads the nation in pork and egg production.
Though Franklin County officials later backed off their ban, saying they needed to discuss it further with their health board, Cerro Gordo's had an immediate effect. Sparboe Farms, a Minnesota company, quickly withdrew its proposal to build an egg-laying plant with 2.4 million chickens near Clear Lake and now is looking elsewhere.
Factory-style farms have been around since the 1970s, but they've become more common in the last 15 years. As they proliferate, so does concern that their concentrated manure is harming human health and environment, with its effects rippling as far south as the Gulf of Mexico, where manure runoff contributes to a dead zone in the sea.
"We need to protect the health of the public, at the same time create an environment that's conducive to agricultural growth," said Ron Osterholm, a member of the Cerro Gordo health board. Osterholm and county supervisor Bob Amosson said they're prepared to be the target of possible lawsuits. Worth County, to the north, has been sued for making strict air and water pollution rules. The case is pending. Michelle Nowlin, an attorney who often handles such cases at Southern Environmental Law Center in Chapel Hill North Carlina, said one argument for local rules is that communities and counties vary in their economies and topography. Federal and state standards don't consider those differences, she said.
"Only the people in that county are able to take a position in order to safeguard those natural features," Nowlin said. Several North Carolina counties restrict how close livestock farms can be to water wells and homes, as do many Pennsylvania townships.
Don Parrish, spokesman for the Washington, D.C.-based American Farm Bureau Federation, said the trend toward local regulation threatens the nation's livestock industry. Rules can drive up farmers' expenses, leading to higher prices that could compel U.S. consumers to buy cheaper foods made overseas, Parrish said. Large farms, he said, are satisfying American consumers' hunger for cheap, lean meat. "I would hate knowing that this country is as dependent on Brazil and Argentina for food as we are on Saudi Arabia for oil," Parrish said.
The Cerro Gordo moratorium means Randy Nuehring's family in Rockwell can't expand their 3,000-hog operation. "It's not a good deal," Nuehring said. "We would have to leave if we want to expand." Amosson and Osterholm say they want to collaborate with farmers to develop fair restrictions.
While farmers may be skeptical that it can be done, Whatcom County, Washington found a way six years ago when runoff from dairy farms' manure threatened a nearby harbor. After the Environmental Protection Agency warned farmers to clean up or face penalties for violating the Clean Water Act and harming shellfish, Whatcom County officials worked with farmers on an ordinance that prohibits manure spreading during Washington's wettest months.
Since the rule was adopted, water samples from Whatcom's Nooksack River and
Portage Bay show that levels of toxic bacteria are dropping. "After they
understood the issue, they were by and large eager to comply and help," county
supervisor Ward Nelson said of farmers. "I mean, they live here, too."
IOWA AG ECONOMIST URGES FARMERS
TO RESIST TALK OF INEVITABLE LOST INDEPENDENCE;
"IF WE WANT, WE CAN CHANGE THINGS"
ASSOCIATED PRESS: There are fewer farmers in Iowa, but the demise of the independent farmer could be stopped, an Iowa State University researcher says.
"Don't listen when somebody says it's inevitable," Mike Duffy, an economist at Iowa State University's Leopold Center, said [last] Friday at a summit sponsored by a national environmental group, Waterkeeper Alliance.
"If we want, we can change things. We are where we are today because of decisions that we've made," Duffy said, referring to the increased use of factory-style livestock farming. "We can make a change, and we can make a difference."
Iowa had nearly 64,000 hog farms in 1980, but that number shrank to 12,300 in 2000. "The situation is very serious, and it's getting more serious," Duffy told nearly 300 people at the meeting. Several of the people at the meeting have been fighting large-scale farms owned by corporations in their rural communities, including members of the grass-roots organizations Iowa Farmers Union and Iowa Citizens for Community Improvement.
Robert F. Kennedy Jr., who leads Waterkeeper Alliance, said it's actually cheaper to raise animals through traditional farming practices than it is to raise them in confinements. "The traditional farmer can produce pork chops cheaper and more efficiently than the integrators can, and agricultural economists will support that," Kennedy said.
Corporate producers today must depend on subsidies, so it is costing them more to raise the animals, he said, adding that the companies also avoid incurring environmental expenses by illegally dumping waste or over-applying it to grain fields as fertilizer. Several Iowa pork producers have said they prefer to raise pigs using confinements because it doesn't require as much labor and the animals are kept in heated buildings.
The summit comes at a time when several of the Iowa groups are focusing on
the Statehouse, awaiting word of whether the Legislature will pass a measure
regulating livestock farms to reduce pollution. Nearly 1,000 farmers and Iowa
Agriculture Secretary Patty Judge protested several provisions in the proposal
Thursday. Judge also criticized Waterkeeper and its effort to help farmers sue
large corporate farms.
CANADIAN FARMER WINNING CLASSIC
"DAVID VS GOLIATH" PR STRUGGLE AGAINST MONSANTO
KRIST FOSS, TORONTO GLOBE AND MAIL: Monsanto did not know what it was getting into when it tried to teach Percy Schmeiser a lesson.
Two years after losing a patent dispute with the biotechnology giant, the 71-year-old grain farmer from Bruno, Saskatoon., has taken his story --- and his message about farmers' rights --- from Brazil to Bangladesh, from Australia to Austria.
He has at least as many international gigs as boy band 'N Sync this year, yet the jet lag is not slowing him down. In the fall, he visited South Africa. In March, he was in Thailand. This week he kicks off a tour that will take him through Europe. Then he's off to Seattle, followed by a spin through South America. "It has been pretty hectic," he said recently.
Farmers groups, environmentalists and United Nations policymakers all want to hear Mr. Schmeiser's tale of being taken to court over the kind of canola found growing in his fields four years ago. Some will pay his air fare and expenses to have him tell it in person (he doesn't charge speaking fees.)
And the next time this grandfather of 14 will be back home in Saskatchewan is mid-May, when a Saskatoon judge is to hear his appeal of the March, 2000, ruling that made him an international folk hero.
"Monsanto couldn't have picked a worse person to get into a fight with," said Pat Mooney, the executive director of the Winnipeg-based technology watchdog group ETC, who has seen Mr. Schmeiser speak at international forums. "He's articulate and emotional, and he always creates a stir when he tells his story."
Born and raised in Bruno, a farming community 90 kilometres northeast of Saskatoon, Mr. Schmeiser has grown canola, wheat and legumes on 1,400 acres of land for the last 47 years. In the last two years, it has become increasingly difficult for him to maintain his packed travel itinerary and his grain farm. This year, he will rent out most of his land to neighbours and cultivate just 300 acres himself with the help of family.
In 1998, Monsanto informed him he was infringing on their patent for a herbicide-resistant strain of canola, called Roundup Ready, because they had found it growing in his fields. He had not paid the necessary fees to cultivate it. Mr. Schmeiser argued that the seed had blown into his field or had been dumped there by accident, and that made Monsanto's patent invalid. Monsanto wanted to settle out of court, but Mr. Schmeiser refused.
A federal court judge ruled in March, 2000, that it was unlikely the patented canola ended up growing in Mr. Schmeiser's fields by accident and that he must have knowingly harvested the patented strain without informing Monsanto. "What the judgment said was it doesn't matter how Monsanto seeds get into your fields; it's their property. All the farmers' rights go out the window," Mr. Schmeiser said.
The case cost Mr. Schmeiser and his wife Louise $200,000 in legal fees. To pay, they mortgaged their land and gutted their retirement savings. But the judge also awarded costs to Monsanto, which this fall asked for nearly $1-million. "Sometimes we wake up in the middle of the night and ask ourselves, 'What did we get ourselves into? We could lose everything we worked our whole lives for,'" Mr. Schmeiser said. But rather than sit at home and fret, Mr. Schmeiser has turned himself into a global poster boy for the rights of small farmers.
Through his web site
which touts his story as "the classic David vs Goliath struggle," he has raised tens of thousands of dollars to pay for next month's appeal. The site sports a photograph of him holding the Mahatma Gandhi award, presented to him in Delhi in 2000 for his work promoting non-violent improvement of humanity.
Meanwhile, Monsanto Canada is resigned to losing the public-relations battle, as long as it wins in court. "We knew going into this that this was a no-win situation for us in the public's eye. It has all the classic things that people can take a spin on," said Trish Jordan, Monsanto Canada spokeswoman. "The bottom line is that this case for us is about protecting intellectual property. There are 30,000 farmers who use this technology in Canada and pay to use it." Ms. Jordan said the company is not at all worried about Mr. Schmeiser's appeal and she noted he has not paid "one cent" of the costs owed to Monsanto.
But high-profile lawsuits against Monsanto are not likely to end with Mr. Schmeiser's appeal.
Earlier this year, the Saskatchewan Organic Directorate launched a class-action suit against Monsanto and Aventis claiming that pollen drift and contamination from their genetically modified strains of canola have made it impossible for Saskatchewan farmers to grow certifiably organic canola.
Mr. Schmeiser has also registered a lawsuit against Monsanto for damages
related to alleged contamination of his fields by Roundup Ready canola, a suit
he hasn't yet had time to pursue. "My wife said we won't live long enough to see
the end of it," he said.
FIVE GENE GIANTS
IN CORPORATE EQUIVALENT OF "UNPROTECTED SEX"
CREATING NON-MERGER MONOPOLIES
ETC GROUP: Rather than enter into a marriage that even the U.S. Government would find unpalpable, the world's two most powerful Gene Giants have decided to live in sync by sharing their proprietary agricultural biotechnologies with one another. Unless the two titans are committing to long-term monogamy, such a tech-swap is the corporate equivalent of "unprotected sex." It seems the risks in this particular union will be offloaded on farmers with fewer choices and higher prices --- the corporate notion of "Fee Love"?
Corporate Coupling: The low-key announcement by DuPont and Monsanto (85% owned by Pharmacia) April 2nd was presented as a "win" for farmers who, the companies' joint statement claimed, will have access to more technology choices. The companies are not proposing to merge. Instead the world's first and second largest seed enterprises are agreeing to swap their key patented technologies and to drop a bushel of outstanding patent lawsuits that have festered for years. The agreement creates the kind of non-merger monopoly that is overlooked by government regulators.
The DuPont -Monsanto alliance does not extend to the whole range of products and processes controlled by the two companies. Only agricultural biotechnology patents are involved but the companies' roles in crop chemicals as well as in seeds are implicated since the lion's share of their biotech activity relates to herbicide-tolerant and insect-resistant transgenes.
DuPont is the world's largest seed company with sales of more than $1.9 billion in 2000. Monsanto ranks a close second in the global seed trade with 2000 sales of $1.6 billion. Together they account for almost 15% of annual world commercial seed sales. In the lucrative U.S. seed corn market, the companies control 73% of sales. More to the point, the two Giants together command 41% of all significant agricultural biotechnology patents* and share about 93% of the GM seed market worldwide. In addition, Monsanto is number two in global sales of crop chemicals and DuPont is number five. In 2000, their combined sales amounted to $6.6 billion or 22% of global agrochemical sales.
For further details, please see ETC Communique, "Globalization Inc.",
September-October, 2001, at
"Unprotected Sex"? The deal gives both titans cross-licenses to technologies for maize, canola (edible oilseed rape) and soybean crops.
In their joint statement on the alliance, a DuPont VP said, "farmers can use the best of what both companies have to offer." Monsanto's spokesperson added, "This is a win for farmers."
Among the particulars of the deal: DuPont wins a royalty-bearing license to Monsanto's latest Roundup Ready maize and soybean technologies, and DuPont's current license for Monsanto's corn borer technology will be opened up to allow DuPont greater geographic coverage and better terms In return, Monsanto wins "freedom to operate" access to DuPont's maize transformation technologies.
Most significantly, the two giants have struck a deal on access to their proprietary germplasm for plant breeding. "Exactly why this should thrill farmers is not clear," Pat Mooney, Executive Director of the ETC group, says, "The agreement appears to encourage the two corporations to extend the use of existing technologies rather than to invent better ones and it cuts the number of major players down from five to four. This means less choice and less innovation for the same or higher prices." Mooney concludes.
ETC group, and many scientists monitoring the world's rapid decline in crop genetic diversity, have argued that corporate concentration and technology monopolies destroy diversity. Commenting on the woes of maize genetic diversity late last week, Cornell's Dr. Jeffrey Bennetzen told The New York Times, "I personally do not believe that we can rely on the private sector to maintain genetic diversity. In fact, we can rely on them not to."
Rites of Spring-Starlinked lovers: The DuPont-Monsanto alliance comes just as another biotech union is nearing consummation [as] Bayer will seek European Union approval to acquire Aventis Crop Science. The merger was proposed last fall for $6.65 billion. Aventis is seeking a safe suitor following the famous "Taco Debacle" --- the escape of a restricted GM maize technology known as StarLink that somehow seeped into the human food chain in the USA and quickly spammed the Pacific Rim.
The merger may only be blessed in Brussels and Washington if the new entity divests some of its agricultural products. On the eve of DuPont's purchase of Pioneer Hi-Bred (then the world's largest privately-held seed enterprise), Wall Street was actually expecting DuPont to make a bid for Monsanto. Once Pioneer was absorbed, however, there was no way that U.S. regulators were going to allow a DuPont -Monsanto merger.
DINCs (Double Income - No Controls): This is why some giants are favouring alliances over wedding bells. After more than a decade of frenzied merging, global corporations are discovering that marriages aren't all they're cracked-up to be. When titans mate, the commotion embarrasses even the most sanguine anti-combines regulators.
Some multinationals have reached a size now where they must either not grow further or they have to enter into what polite society euphemistically terms "liaisons." "We used to talk about the worry-free `DINKs'," Mooney explains, "Double Income - No Kids. For DuPont and Monsanto, this is `Double Income - No Controls - `DINCs'."
According to The Economist, between 1996 and 1998, the world's biggest multinationals established over 20,000 such liaisons. The top 20 life industry companies more than doubled their number of liaisons with biotech enterprises in a single decade. More than one-fifth of multinational revenues are now drawn from these alliances --- double their share from a decade ago.
One of the major pressures to establish liaisons comes from the ambiguity and costs of patent litigation which has tied even the biggest companies up in knots for years at a time. Often it is cheaper and faster to establish an alliance than it is to continue courtroom battles. "The Gene Giants are being allowed to create global technology cartels that run below the radar screens of anti-trust regulators," Hope Shand, ETC group Research Director, concludes, "Patented technology monopolies need to be stopped at the international level."
UN Conventional Action: The ETC group is urging governments to monitor corporate technology transactions that could impact on the environment and on biodiversity through the UN Convention on Biological Diversity. . .
In addition, ETC group is calling for an International Convention on the
Evaluation of New Technologies (ICENT). Agreement to negotiate ICENT should be
reached at the "Rio+10" (World Summit on Sustainable Development) that will be
held in Johannesburg, South Africa at the end of August. Finally, the group
believes that the issue of proprietary biotech monopolies should be incorporated
into the work underway at FAO (UN Food and Agriculture Organization) to
establish a Code of Conduct on Biotechnology. An intergovernmental meeting will
discuss the Code in Rome in October. However, most civil society organizations
including ETC group, agree that the code must not be voluntary.
"WORLD'S LARGEST PROTEIN PROVIDER" PROVES
"MEDICORE MANAGEMENT CAN RUIN ANY BUSINESS"
KEN KURSON, ESQUIRE MAGAZINE: In Vegas, there's a saying: "Sometimes the lamb rises up and slaughters the butcher. But generally, bet the butcher."
In the case of meatpacker Tyson Foods, however, the butcher is the underdog. The company owns the dominant share of its enormous market. It has a ferocious competitive instinct. Many of the numbers (including the low stock price) look as tasty as a bloody steak. The lesson: Mediocre management can ruin any business.
Just about everything you need to know about Tyson can be gleaned from its ugly little catchphrase, "The world's largest protein provider." And 2001 was an awful year. High inventory pushed poultry prices down, depressing earnings. The wholesale price of beef fell 14% in the three months after September 11 as the restaurants that account for 40% of sales took a recreational hit.
Those are the things Tyson couldn't control. But the worst hit the company took came when it tried to marry competitor IBP. Obsessed with gaining share in the more prestigious beef and pork businesses, poultry titan Tyson carelessly reviewed its target's books. After the deal was struck, accounting irregularities and awful performance emerged at the blushing bride.
When Tyson tried to call off the engagement, the Delaware chancery court played the role of shotgun daddy, requiring completion of the $4.6 billion takeover that was universally acknowledged to be overpriced.
Finally, the Immigration and Naturalization Service and the Department of Justice accused Tyson of separate acts of wrongdoing, and two company executives and four managers were indicted for conspiracy to smuggle illegal immigrants to work at fifteen plants in nine states. Early this year, a Tennessee grocer pleaded guilty to smuggling charges and is expected to testify for the government when Tyson and its six employees go on trial next year.
By January 2002, Tyson traded at $12 --- just over half its mid-1999 levels. Some investors consider this a buying opportunity. After all, Tyson is a behemoth, controlling 33% of the poultry market, 30% of the beef market, and 18% of the pork market. Its "value added" strategy ---which improved profit margins for poultry not by merely killing, gutting, and cutting up chickens but by turning them into adorable nuggets --- could create giant profits for its larger-revenue/smaller-margin IBP subsidiary.
Although company defenders will say Tyson was the victim of bad judges, bad weather, a bad economy, and bad politicians, the real culprit was bad management.
Consider the mess Tyson made out of the IBP acquisition. Tyson claimed it should be allowed to back out because IBP's DFG subsidiary overstated results, a charge the SEC was investigating. However, according to the court, the undisputed facts showed that Tyson was "apprised of fraud by the highest level executive of DFG and that the business had serious problems."
Tyson also failed with its ridiculous claim that it was blindsided by IBP's admission that it would be unable to meet projections for 2000. Investing would be easy if you could undo purchases whenever they didn't perform as you'd like. Further, the court concluded that Tyson was "oblivious to the obvious warnings in the IBP third quarter 10-Q that IBP was well behind the run-rate needed to meet the projections."
Unrelenting regulatory problems also proclaim bad management. In January 2001, the Labor Department announced it was investigating Tyson and others for cheating workers out of an estimated $340 million in back wages. In December, the Justice Department threatened to indict the company for polluting Missouri water.
Meat processing is a dirty business. When live animals come in one door and hot dogs, pork rinds, and cowboy belts are wheeled out the other, you're going to have noise, smells, contamination, grisly disposal, and dangerous working conditions. That is supposed to be offset by the beauty of being in a business whose product resupplies itself and is demanded ever more loudly by a fatter and fatter republic. At Tyson, however, the numbers don't add up.
From 2000 to 2001, revenues increased a whopping 46% (from $7.4 billion to $10.8 billion), mostly on the back of acquisition. And yet profits fell 42%, from $151 million to $88 million. To me, the single most interesting number in evaluating a low-tech established business is operating margin, derived from dividing a company's operating income by its raw sales (revenue).
Since you're not expecting big leaps in technology or startling new products, you're basically counting on management to find new ways to do more with less. Here, you've got an OM plummeting from 4.7% to 2.9% --- a 38% drop in efficiency. It'd be tempting to blame that drop on the problems of 2001 detailed above, but here's the thing: In 1999, OM was 6.6% on roughly the same revenues as 2000. In other words, the company's management has grown less adept three years running.
If you think management will reverse course, you are in for a rude surprise. Tyson has an odious two-tiered voting structure common to many family-dominated public companies. Retired senior chairman Don Tyson controls a third of the stock, with the deck further stacked because his class of stock gets ten votes per share.
Think that carries weight? Well, Don and his son, current chairman and CEO John Tyson, actually received bonuses for 2001 performance. Although the company failed to meet financial goals, the board excused this because of the "extreme challenges" of 2001 and gave them $825,000 apiece. Outrageously, the board also decided John Tyson deserved another $1.3 million because, as it explained in a recent statement to shareholders, "The acquisition of IBP, which had the effect of the Company becoming the world's largest protein provider, was an accomplishment which warranted a bonus payment in excess of that determined pursuant to the Senior Executive Performance Bonus Plan."
Wait a goddamn minute here! Wasn't that the exact deal Tyson embarrassed itself trying to squash? John Tyson couldn't lose. Had he succeeded in backing out, he surely would have gotten a bonus for his frugality with company funds. Tyson should at least split the money with Delaware chancery judge Leo Strine. And as a thank-you to Don Tyson, the company awarded its former CEO a million shares of stock (in addition to the pile of one hundred million shares he already had) for a ten-year consulting contract. That's $12 million at current TSN prices --- must be awfully good counsel coming out of ol' man Tyson.
Tyson will kill millions of cows, chickens, and pigs in 2002. Even an
investor untroubled by that carnage ought to take pains to make sure his
portfolio isn't bloodied as well. Don't bet the butcher.
DESPITE CALIFORNIA GAS ADDITIVE DECISION
ADM SAYS ETHANOL PRODUCTION PROFITABLE
MICHAEL MCHUGH, DOW JONES NEWSWIRES: The production of ethanol remains profitable for Archer Daniels Midland Co. (ADM) despite a California decision to delay the phasing out of a rival gasoline additive that has helped cut the price of ethanol almost in half.
G. Allen Andreas, ADM's chairman and chief executive, said he was disappointed with California Gov. Gray Davis' decision to defer the banning of methyl tertiary butyl ether, or MTBE, from gas for one year to December 31, 2003. But Andreas, speaking at the Banc of America Securities Consumer Conference in New York, which was Web cast, said there still could be more demand for ethanol than expected out of California despite the delay of the ban.
He said ethanol production remains profitable, and the company plans to stay in the business it's been in for 24 years. He said the corn-based product has become economically attractive as a fuel additive, particularly as oil prices have risen recently. That will generate interest from oil companies to add ethanol as an additive to replace MTBE, even though they won't be forced to until 2004.
Furthermore, he said the use of MTBE is not only costly, but the discovery of MTBE in California groundwater, and its potential as a carcinogen, will put pressure on oil companies to limit potential liability. He also said that Washington lawmakers are looking at a federal ban of MTBE. "We see a great future ahead of us in this business," he said.
ADM has about 40% to 45% of the two billion-gallon market for ethanol.
Gov. Davis extended the ban on MTBE for a year in mid-March after a report from the California Energy Commission said the state could face a 5% to 10% gasoline shortfall if the ban wasn't deferred. "Although this was a disappointing development in our business, we will continue to operate our ethanol facilities," Andreas said.
As a result of California's decision, Credit Suisse First Boston Corp. analyst David Nelson lowered his fiscal 2003 earnings estimates for ADM on March 18 to 90 cents a share from 97 cents, and reduced expectations for the fiscal third quarter, ended March 31, to 15 cents from 20 cents.
Ethanol is a byproduct of the wet milling of corn. The starch produced in the process can either go into ethanol or into high fructose corn syrup (HFCS) --- another recently problematic area for ADM. Starting January 1, 2002, the Mexican government imposed a tax of up to 20% on soft drinks sweetened with HFCS in an effort to aid its ailing sugar industry.
Early last month, the Mexican government suspended the tax until September, but not before soft drink makers switched to sugar and canceled orders for HFCS, hurting U.S. producers such as ADM and Corn Products International Inc. (CPO). In response to these developments, Andreas said ADM sought out new customers that could absorb the additional HFCS as it was negotiating contracts for 2002. The company also switched some starch production into ethanol and then stored it.
He said the HFCS tax has not produced the type of problems for ADM, Decatur,
Illinois, as it has for its competitors, but he did not elaborate.
ACCUSE STARBUCKS SELLING GOURMET COFFEE
TO VERY PEOPLE WHO ARE UNDER-PAID
FOR HARVESTING COFFEE BEANS
SHIREEN DEAN, VALLLEY ADVOCATE: By the end of the year, Starbucks will increase its ever-growing empire by opening a coffee shop in Mexico City --- the first Starbucks in Latin America. Ironically, Starbucks will soon be selling gourmet coffee to the very people who are under-paid for harvesting coffee beans. It's a little bit like dumping leftover pork chops into the pig trough.
News of the Mexico City shop came as Starbucks was presenting its first Corporate Social Responsibility report at its annual shareholders' meeting in Seattle last month. The report emphasized the company's claimed commitment to doing business in socially, economically and environmentally responsible ways, to benefit the communities around the world where it does business.
But according to activists, Starbucks isn't doing enough. They charge that while Starbucks claims to be green, in fact, it has done little to keep genetically engineered ingredients out of its foods and beverages or to promote Fair Trade, shade-grown coffee.
Coffee plants naturally grow in the shade, under the cover of a diverse biosphere. But unless your coffee says "shade grown" on the bag, it was probably grown in a field for easier harvesting and greater profit margins. The clear cutting of land to create these fields eliminates many edible plants that locals live on. "Fair Trade," meanwhile, means that the farmers who grew the beans were paid a living wage for their work. There are several organizations that certify goods as "Fair Trade," including Equal Exchange and Tranfair.
Recently, activists across the world gathered at Starbucks shops to leaflet and protest the company's hypocrisy. The organized action, spearheaded by the Organic Consumers Association, ran from February 23 to March 2 and was timed to coincide with Starbucks' annual meeting. Early on the brisk morning of March 1, Debbi Shoval and her partner stood outside of a neighborhood Starbucks and handed out leaflets.
Shoval explained that there are several complaints against Starbucks. The first: Most Starbucks still use milk from cows that have been injected with rBGH --- Monsanto's sketchy bovine growth hormone --- which unnaturally forces cows to produce more milk. The resulting milk contains bacteria, antibiotics and pus. That's right. Pus.
In addition, Starbucks will not guarantee that the beverages and food it sells are free of genetically engineered products, according to the OCA. Although Starbucks now offers the option of organic milk and soy milk, in reality, the offer is pretty pathetic: Starbucks does not publicize these alternatives in its stores, and even if you do request some organic milk in your latte, you'll have to pay a hefty 40 cents extra.
Shoval also worries that if Starbucks uses genetically engineered milk, genetically engineered coffee beans may not be far behind. "The reason coffee is genetically engineered is so the coffee fruits will all ripen at the same time," she said. "Right now, they ripen at different times, so it has to be hand-picked. But if they're sprayed with ethylene, they will all ripen at once." According to the OCA, a move from hand-picking to machine harvesting could put more than 50% of coffee farmers and harvesters out of work.
That would only add injury to insult: Most coffee farmers do not receive a living wage for the coffee they produce. Though consumer pressure has encouraged Starbucks to sell Fair Trade coffee in bulk, Starbucks will not brew it as its coffee of the day more than once a month. And of the bulk coffee that Starbucks sells, less than one percent will be Fair Trade coffee this year, claims the OCA.
Although in 1995 Starbucks promised to pay a living wage to the workers who produce the coffee it sells, the company has done little or nothing to live up to this pledge, OCA charges. Right now, though Starbucks claims to pay $1.25 per pound of coffee, most of that goes to middlemen. Coffee growers are making less than 40 cents per pound of coffee, about one-fourth what they earned five years ago.
No one from Starbucks' corporate headquarters returned calls for interviews.
The OCA encourages Starbucks coffee drinkers to talk to the managers at their local shops and demand Fair Trade coffee and rBGH-free beverages and foods. Tell Starbucks --- and while you're at it, tell other eateries you frequent --- that you just don't find pus in your milk as appealing you used to.
Shireen Deen can be reached at email@example.com
Above story distributed by AlterNet --- the independent news and syndication service.
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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
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
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,
Simply by clicking on either of the addresses below all the aforementioned
information are yours to enjoy, study, absorb and sow.