The
AGRIBUSINESS
EXAMINER
September 9, 2002   #188
Monitoring Corporate Agribusiness
From a Public Interest Perspective

EDITOR\PUBLISHER: A.V. Krebs
ADDRESS: PO. Box 2201, Everett, Washington 98203-0201

COMMENTARY:
HEADING TOWARD THE LAST ROUNDUP

From time to time a reader will voice their concern that the AGRIBUSINESS EXAMINER devotes too much space to cattle and meat. Unfortunately, in voicing such concerns one misses seeing the forest for the trees.

No sector of our agriculture and food system has become more visible as the proverbial tip of the corporate agribusiness iceberg than the nation's cattle and meat packing industry and we ignore the lessons it provides us at our own peril.

As one can see in the accompanying articles, issues such as:

* the demise of the independent producer,

* the increasing industry concentration,

* the lack of a fair domestic price for the product produced,

* the race to the bottom by the processing sector in searching the world for the cheapest raw materials and human resources to produce the product,

* the incestuous relationship between the industry and the U.S. Department of Agriculture,

* the selling out of the cattle producer by the "enemy within" --- namely the National Cattleman's Beef Association and the American Meat Institute,

* and the consequences of a processing industry that cares more for its bottom line than the health and safety of its employees and consumers,

are all issues that our current agricultural and food manufacturing systems in general are confronting to varying degrees as the corporate state seeks to gain an ever-increasing stranglehold on our everyday lives.

Therefore, whether one is a grain or produce farmer, whether one eats meat or not, whether one is an organic devotee or not, serious attention must be paid to what is taking place in the cattle and meat packing industry because what we see currently taking place in this vital sector of our food system is like a cancer that unless immediately addressed, treated and stopped will soon spread with fatal results --- throughout our nation and the world --- unchecked.
 

GFI AMERICAN, INC.:
NINE TIMES COMPANY MIXES FRESH MEAT
SENT TO HOTELS AND RESTAURANTS IN 20 STATES
WITH 18-MONTH OLD CONTAMINATED MEAT

DAVID MIGOYA, DENVER POST: Federal investigators want to know how a Minnesota company nine times mixed fresh meat with 18-month-old contaminated beef planned for pet food, then shipped it to hotels and restaurants in Colorado and 19 other states. And why it took a month to catch the error.

Colorado health officials learned only last week that some of the meat made it to the state five days after GFI American in Minneapolis and the U.S. Department of Agriculture recalled 717,000 pounds of meat products that might contain potentially lethal E. coli bacteria.

Health officials do not know who in Colorado got the meat because federal law prevents the USDA from disclosing that information.

The August 22 recall is the 73rd announced by the USDA this year, and consumer safety groups say it raises additional questions about how the agency protects the public from contaminated meat.

"Clearly this shows the lack of USDA standards for ensuring contaminated meat is disposed properly," said Caroline Smith-DeWaal, food safety director at the Center for Science in the Public Interest in Washington, D.C. "If tainted meat is hanging around a freezer for a long time, it's bound to show up in the food supply somehow. The USDA has to develop a method to ensure mistakes like this one don't happen."

For now, GFI will say only that it was "inadvertent" that tainted meat stored in a freezer was mixed with fresh beef on nine days in June and July.

The 18-month-old tainted meat was miscoded on the company's computer system, GFI vice president Joe Goldberger said. The problem was discovered in August during a company audit of its inventory several weeks after the meat had been shipped to customers.

USDA regulations require contaminated meat to be segregated from edible products. Meat found to have E. coli must be labeled properly, and the USDA is supposed to ensure that it is destroyed or cooked so that the pathogen is killed. The recall affects a variety of raw products, such as Salisbury and veal steaks, and beef patties.

The USDA is partly responsible for monitoring what happens to tainted meat, so department investigators want to know how its inspectors, and GFI, lost track of this batch.

Also unclear is why GFI kept the meat so long after tests showed it contained the pathogen. "I'm sure that is one of the key questions to answer," USDA spokesman Steven Cohen said.

Goldberger of GFI refused to say how much contaminated meat was used, or how much had been sitting in a freezer since early 2001. He said the company regularly tests its products for E. coli and found none on the days the recalled meat was produced. No illnesses have been reported from the recalled meat.

Goldberger said the company had been "actively involved" in seeking a pet food company to buy the tainted meat. "Family members and the families of our employees are proud of our safety record and safely eat our products every day," Goldberger said. "In 26 years, we have never had a confirmed illness attributed to any of our products."

The recalled meat was sold to institutions such as hospitals, prisons, hotels and restaurants, the USDA's Cohen said, refusing to elaborate.  Federal law allows the USDA to withhold information on where meat was sent --- it's considered a company trade secret --- even if consumers demand to know.

State health officials said they don't know which Colorado companies received the meat, or which consumers might be at risk, because the USDA won't tell them. And it took the USDA five days to tell the state that much. That happened last Tuesday.

"All we know is it was shipped to two or three firms in Colorado," said Patti Klocker, the Colorado Department of Public Health and Environment's assistant director of consumer protection. A new USDA law allows states to learn where recalled products are shipped --- but only if state health officials agree not to disclose it publicly.

Colorado, however, cannot get the list because the state's open-records law would require it to be made public if anyone asked, The Denver Post reported last month. "This shows the USDA can't make the transition to being a public health agency," said Carol Tucker Foreman, director of the Food Policy Institute at Consumer Federation of America in Washington, D.C. "They think first of not inconveniencing companies and not letting product go to waste."

Problems with the nation's recall system were magnified in July during a massive recall by ConAgra Beef Co. in Greeley. The USDA for two weeks sat on news that the company's meat was suspect for E. coli contamination. The resulting recall became the second largest in U.S. history.

The USDA kept secret the names of companies that sold the tainted meat, preventing consumers from learning whether they had any of the product in their freezers. Forty-seven people were sickened and one died after they were infected with the same E. coli found in the meat. ConAgra eventually gave the list to state health departments that asked for it.

"It's very troubling that the USDA delays in alerting state public health officials that they have recalled product," said Smith-DeWaal of the Center for Science in the Public Interest. "The USDA relies on companies to voluntarily disclose this information, and we're seeing over and over how that just isn't working."

FROM VICIOUS CIRCLES:THE MAFIA AND THE MARKETPLACE BY JONATHAN KWITNY (W.W. Norton & Co,:1979) (Pages 311-312)

"Anyone who was in the Armed Forces in the late 1940s and who thought the food wasn't very good, or who was bothered by stomach trouble, would be interested in Sam Goldberger. Goldberger's American Packing Corp, had a major contract in those years to supply meat to the Army, not only for its own troops but also for the Navy supply depot in Newport, Rhode Island, and Pennington and Norfolk, Virginia. In 1952, Goldberger was sentenced to three years in prison (he served 14 months) for swindling the government out of a fortune by bribing Army inspectors to approve millions of pounds of meat far inferior to contract specifications. There was also meat in `unsanitary and unsound condition,' charges said.

At the trial, one meat inspector testified that Goldberger `told me in the boning room that it would be worth my while to play ball with them --- that's just the words he used.' A former employee testified that `there was some meat there that smelled awful bad' and that two nearly successful attempts were made to kill him after he had agreed to talk to the FBI. There was evidence that 280 veal sides the Army had rejected because of their `defrosted, unsanitary, and unsound condition' were simply reshipped, passed (or overlooked) by friendlier inspectors, and wound up on the mess tables at Fort Bragg, North Carolina."

FROM FAST FOOD NATION:THE DARK SIDE OF THE ALL-AMERICAN MEAL BY ERIC SCHLOSSER (HarperCollins:2002) (Pages 162-163)

"The real costs of this migrant industrial workforce are being borne not by the large meatpacking firms, but by the nation's meatpacking communities. Poor workers without health insurance drive up local medical costs. Drug dealers prey on recent immigrants, and the large transient population usually brings more crime.

"At times, the meatpacking firms have been especially brazen in assuming that public funds will cover their routine business costs. In September of 1994, GFI American, Inc. --- a leading supplier of frozen hamburger patties to Dairy Queen, Cracker Barrel Old Country Store, and the federal school lunch program --- needed workers for a plant in Minneapolis, Minnesota.

"It sent recruiters to Eagle Pass, Texas, near the Mexican border, promising steady work and housing. The recruiters hired thirty-nine people, rented a bus, drove the new workers from Texas to Minnesota, and then dropped them off across the street from People Serving People, a homeless shelter in downtown Minneapolis.

"Because the workers had no money, the shelter agreed to house them. GFI American offered to pay the facility $17 for each worker and to donate some free hamburgers, but the offer was declined. The company's plan to use a homeless shelter as worker housing soon backfired. Most of the new recruits refused to stay at the shelter; they had been promised rental apartments and now felt tricked and misled. The story was soon picked up by the local media. Advocates for the homeless were especially angry about GFI American's attempt to misuse the largest homeless shelter in Minneapolis. `Our job is not to provide subsidies to corporations that are importing low-cost labor,' said a county official."
 

ATTORNEY OUTLINES
PICKETT VS. IBP STRATEGY,
TELLS CATTLEMEN "IT'S YOUR MONEY,
IT'S YOUR INJUNCTION WE'RE FIGHTING ABOUT"

DAVID BOWSER, TEXAS LIVESTOCK WEEKLY: A Nebraska lawyer is berating Texas cattlemen for their timidity.

David Domina, lead attorney in the Pickett-IBP case, was in Amarillo this summer at what was billed by the Organization for Competitive Markets and R-CALF, the hosting organizations, as a Price Crisis Meeting, one of a series of such meetings being conducted across the nation this summer.

"I have been told by three or four people that the turnout in the heart of cattle country --- that's a tough concession for a Nebraskan --- is a little light," Domina says of the 100 or so cattlemen who attended. Each person apologizing for the light attendance gave him the same explanation, he says.

They told him that they were sorry the turnout was light, but the reason, they said, was fear. They said their friends told them that they didn't want the packers to know they were at the meeting. Still, there were several managers from reputable feedyards and at least two former presidents of the Texas Cattle Feeders Association. "It's your industry," Domina told them. "It's your money. It's your injunction we're fighting about."

He commended five of the cattlemen in the audience who were among those who filed the original lawsuit in 1996. "All of them are still alive," Domina said. "None of them have curiously died with cars going off cliffs." He added that they probably haven't suffered financially any more than anyone else in the cattle business, although they stood up and they got counted."

Pickett v. IBP hasn't been nor will it be an easy case to win, Domina indicated, but he said it can be won.

"Pickett against IBP is a lawsuit," Domina said, "originally brought by ten people, then extended to 12; now there are six plaintiffs. The six who remain are all cattle feeders or people who fed cattle commercially in feedyards." They sued only one company, the biggest, not all of the packers. They alleged that IBP used captive cattle supply and its position in a concentrated market to depress the cash price.

Domina said they didn't sue the other major packers that with IBP dominate the market because of the power a united packer front could muster. "If you've got an army of 10,000 soldiers," Domina explained, "and you've got three enemies with armies of 8000 apiece, how would you want to fight them?" Domina said anyone who thinks about the litigation dynamics involved could understand the strategy.

"Pickett v. IBP is the first lawsuit in history, the history of the country, that has been certified as a national class action in which the operative statute is the Packers and Stockyards Act of 1921," Domina says. "It is the only case in the history of the United States in which the statute that was passed under Warren Harding as trade protection legislation for your industry has been invoked for you en masse. The only one."

The U.S. district judge hearing the case, Judge Lyle Strom, is from Omaha, even through the case was filed in Alabama.

"He's a senior status judge," Domina noted. "That means that he doesn't have to be on the bench, and he doesn't have to be on the bench much to collect pretty much all the benefits of being a senior status federal judge. He can work where he wants, as hard as he wants, when he wants, pretty much. Some senior status judges spend their time in the Virgin Islands, where there is a need for their service, or in the wintertime in Florida where there is a need for their service."

Strom, Domina said, was born in 1945 and raised in Omaha. He grew up at a time when the biggest industry in Omaha was the Omaha Stockyards. He lived through a time when the only train that had ever existed to serve urban Omaha ran from the Livestock Exchange Building to the front door of the Omaha National Bank. Domina said Strom saw it go. He also saw the stockyards go, and the Packers and Stockyards Administration's only Nebraska office go. Strom, Domina continued, watched the livestock pens get ripped out and read in the paper this summer that the Livestock Exchange Building, now renovated for an office building, has been leased to an office tenant that has nothing to do with agriculture.

"It is his choice that he has volunteered to try a case involving your industry," Domina continued. "You hear lots of things about federal employees and federal agencies and the Department of Justice and the Department of Agriculture and cabinet members. I'm telling you that the most important federal employee to your industry is the Honorable Lyle Strom, United States District Judge. I don't know that he's going to rule for us, but he's going to give you a fair chance to have your case heard. He's not ducking it, and that's important."

The lawsuit, now a class action, asks whether IBP depressed the price it pays for cattle in the cash market by using captive supply in the form of forward contracting, marketing agreements and joint venture agreements.

"If the answer is yes," Domina said, "we're entitled to the jury's verdict, and you're entitled to damages as a class member. In addition, if the answer is yes, we're entitled to an injunction, and you're entitled to a changed market. The person who will write the injunction, if we get there, and I believe we will, is the Honorable Lyle Strom, United State District Judge."

Domina said about 95 to 100 depositions have been taken, ranging from economists in the 42nd story of a building in downtown Manhattan in New York City to economists on the campus of MIT in Boston to producers and packers on the northwest coast of the United States to Texas and up through the middle of the country. "The travel is hundreds of thousands of miles," he said. The documents would fill a large ballroom. Five lawfirms are involved, four from Alabama and one from Nebraska.

The case turns on whether the plaintiffs can prove that captive supplies depressed the cash market. Domina contended that the expert witnesses can prove it economically and econometrically. "The equation of the case is as simple as this," Domina said. "If you're in business and you need 100 of something to conduct your business and you've already got 50 of them, will you work harder to get the other 50 than you have to work to get all 100?"

The question, he continued, is whether or not having the captive supply of 50 when you need 100 gives you more or less compulsion to be in the market, aggressive and competitive. He insisted they can also prove it through the testimony of cattlemen who have lived through the markets of the past decade.

About 70 producers from Nebraska, Kansas, Texas, New Mexico, Wyoming, Colorado and Iowa have given depositions concerning markets for their cattle and how that has changed. "One of them, a fellow from Rocky Ford, Colorado, told it better than I've heard anybody else tell it," Domina said. "It's a story that will surely turn the jury's head."

The cattle feeder testified that he never really wanted to own a cell phone, but he bought his first cell phone when a buyer for a packer said to him that if he didn't get one and missed the buyer's call, he'd be out of the market for a week.

Domina said the market is different now than in 1996 when the lawsuit was first filed. "You may not know that the lawsuit goes back to February of 1994," he added. "We're talking about eight and a half years of time in this case." During that time, IBP has killed 10 million head of cattle a year. That's 85 million head of cattle, Domina pointed out.

"Assume that half their cattle came from the cash market," he continued. "That's 42.5 million head of cattle." Assuming that the captive supplies adversely impacted the price an average of $50 per head, that's $2.125 billion without interest. That is a hypothetical scenario, Domina conceded. He added that he can't give the exact figures until the trial begins.

Domina said IBP's case rests essentially with an economist who knows nothing about the cattle industry and has not been impressive in his depositions. The other is a Kansas State University professor who is critical of the idea that the cattle market is a national market, but he published several papers in the 1980s saying it was a national market. His testimony is expected to be weak, Domina claimed. "That's IBP's case."

When Tyson bought IBP, it bought a lawsuit that was in this condition, Domina said.

"All the discovery in the case was finished," he explained, "The final witness and exhibit lists of the parties under the court's scheduling orders were submitted. The class certification arguments had been made and were under advisement with the court. The briefs were in. There was no more arguments remaining to be conducted. The transaction closed. IBP lost its class certification motion and lost the appeal."

IBP, even with a new owner, cannot add a new witness. "They can change lawyers," Domina said. "That would be it, and they haven't done that so far." They are waiting now for cattlemen to be notified that under the class action, they are entitled to a claim. "This lawsuit is not an idea that was born yesterday and given life with a $105 recent filing fee," Domina insisted. "It's mature. It's ready to go to court, and it is in very, very good shape."
 

SOUTH DAKOTA RANCHER TESTIFIES
BEFORE SENATE JUDICIARY COMMITTEE
EXPLAINS HOW PACKERS IMPACT CATTLE PRICES

Belle Fourche, South Dakota, rancher Tom Connelley was one of two independent cattlemen invited by the United States Senate Judiciary Committee to be a witness at the Committee's Field Hearing on "Ensuring Competitive and Open Markets in Agriculture: Are Meatpackers Abusing Market Power?"

The hearing was held August 23, 2002, in Sioux Falls, South Dakota. Connelley, also an order buyer, cattle feeder, and member of R-CALF United Stockgrowers of America, explained how packers are reducing market competition clear down to the producer level. He described three cattle marketing techniques used today and how the packer has unparalleled market power in each of the transactions.

Connelley first described how cattle are marketed in the cash market explaining that in the 70's he bought cattle for the American Beef Packers while competing with 23 other packing companies to fill his packer's orders. "If the owner [cattle owner] didn't think my bid was high enough, he would turn me down and for sure, within a few hours, another buyer from a different plant would be there to estimate the cattle's value and would offer the owner a new bid."

But Connelley said the marketplace changed radically over the past eight to ten years.  Speaking of today's market, "I do not receive any bids on my cattle at the beginning of the week because the packers are either killing their own cattle or the cattle they control through contracts," he said.  Connelley added that either on a Thursday or Friday, he may get a single bid from one of the packers usually on a take-it-or-leave it basis or he may be given an hour to consider the offer.

But Connelley said if he doesn't accept the first bid, he usually has to wait until the following week before another offer is made. "And, the following week's bid is typically lower than the initial bid because the packers know my cattle will depreciate in value if I don't sell them when they reach their optimum weight," he added.

Connelley then described how forward contracting works in today's marketplace.  "Forward contracts became popular because the lack of competition for live cattle ready for slaughter caused cash prices to be depressed and producers were looking for a means of beating the depressed cash market."

He explained that a "basis the board forward contract" was a common form of forward contracting. With a "basis the board forward contract," the producer agrees to deliver cattle to the packer in the month stipulated in the contract.  Between the time the producer enters the contract and before the month the cattle must be delivered, the producer selects a live-price based on the Chicago Mercantile Exchange  (CME) futures market.

This price the producer selects is not negotiated and depends on the reported futures price on the CME. "This means a producer is at the whim of the CME Board for a price determination, and the producer is completely excluded from any negotiation or input into price," said Connelley. But the packer has the upper hand in forward contracts because they know that in an uptrending market, many producers will price their cattle too early, "fearful that the market might weaken."

In a downtrending market, however, the packers know producers will wait until the very last day to set a price and packers use this knowledge to drive down prices.  Conelley provided the Committee with historical charts showing how the cash market miraculously rallies after the last day producers can price their cattle under their respective contracts. Connelley said all cattle committed under "basis the board futures contracts" are "inherently taken off the cash market and become a part of the packer's captive supplies."

Connelley said over the past two years he has sold most of his cattle on a grid basis, where the base price is determined either on the average Nebraska beef price for the week or the average live price in Kansas for the week.  Once Connelley selects either the Nebraska or Kansas market base, his base price is then subject to discounts and premiums depending on yield, grade, and cutability.

"I do not advocate this way of selling but it's the only way I have to get some form of premium for higher grading cattle," Conelley testified.  He said this pricing method is flawed because he has to commit his cattle to the packer before he knows what the basis price is. "If I didn't like the price they established after I committed my cattle and refused to deliver, I guarantee they would not let me commit cattle ever again," he said, adding, "No, I don't like to commit my cattle before I have a base price, but I have no alternative given today's market structure."

Connelley explained this type of pricing method encourages packers to strategically use captive supply cattle to keep the cash market low.

"It is the combination of the packers' control of a large portion of their needed inventories (captive supplies), the packers' dominant position in the futures market, and an established deadline that gives packer's the tools they need to gain a tremendous economic advantage over producers in the marketplace," Connelley testified.

Connelley urged the Committee to act immediately to begin enforcing the Packers and Stockyards Act and the Sherman Antitrust Act, which he said were written to prevent the present monopolistic practices of the packers. He urged Congress to pass the ban on packer ownership of livestock, to prohibit packers from contracting cattle without a firm base price at the time the contract is executed, to investigate the futures trading activities of the packers 15 days prior to each contract delivery month, and to take any additional steps necessary to prevent the packers from interfering with the competitiveness of our live cattle markets.  All of these actions are being called for by R-CALF United Stockgrowers of America.
 

MIKE CALLICRATE:
REPLIES TO BEEF MAGAZINE'S
SLANDEROUS ATTACK
"STATEMENTS ARE MY OPINION.
THEY ARE ALSO THE FACTS"

Dear R-CALF and Kansas Cattleman's Association

My comments were correctly stated in the Denver Post article, "Just cook the crud out of it," by Diane Carman. Make no mistake --- those statements are my opinion. They are also the facts.

The attack by Beef Magazine and it's editor, Joe Roybal [see below], mouthpiece for the beef industry (not to be confused with the cattle industry), in last weeks Cow-Calf Weekly ["R-CALF Shafts Beef Producers"], is expected considering our progress in addressing concentration and consolidation, which if remedied, would significantly reduce the beef industry's unfair profits.

At the1996 South Dakota Governors Beef Conference, Kathleen Kelley and I presented our view of the cattle industry: many independent cattlemen producing a high quality product for consumers, selling into a widely diverse, efficient, and innovative packing, processing and distribution system via open competitive markets, sensitive to supply and demand.

An economic system in which economic predators and law-breakers, like IBP, are regulated and restrained by a corrupted USDA. IBP president and CEO, Bob Peterson, explained that IBP's highly concentrated system wouldn't deliver the best beef but it would all be the same. After contentious debate on what the beef industry should look like, Peterson asked the 1000 plus in attendance, "Who do you want to follow, Mike Callicrate and Kathleen Kelley or IBP?"

Now, six years later, we have a much clearer perspective for making that decision. Poultry, pork and beef giant, Tyson/IBP and their cartel partners, NCBA, Cargill, ConAgra, Farmland/National, and mega-retail are nearing completion of their plan to "chickenize" (enslave) the cattle industry. They have eliminated our markets and are stealing our production, bankrupting us and turning our communities into ghettos.

They continue to promote the false benefits of their destructive, centrally planned, highly concentrated, vertically integrated business model. They refuse to pay full cost of production for cattle, living wages for production, packing, and processing labor, plus many other high costs that they externalize onto society.

Predictably, Peterson's packer/retailer cartel is now delivering us the lowest producer share of the consumer beef dollar in history, consumers are getting the lowest beef quality in history at the highest prices, kill chains are moving the fastest (IBP president and CEO, Bob Peterson's bonus was calculated based on the number of cattle processed), the worker turnover and injury rates are the highest, meat recalls have never been bigger or more frequent, and we are importing more low quality foreign beef than ever before.

Not since the great depression has the U.S. cattle industry and the rural communities supported by cattle production been under more stress, both economic and social. The poorest counties in America are rural Midwest cattle producing counties.

I've always said, the more pressure we apply to make packers compete, the more resistance we will face. The packers, retailers, NCBA, and the establishment press (Beef, Drovers, Beef Today, Feed Stuffs, etc.), dependent on the checkoff for ad dollars and support, are now pulling out the stops on their misinformation and propaganda campaign (as evidenced by the NCBA, Walt Barnhart emails and the Beef editorial) by smearing Colorado rancher, Kathleen Kelley, R-CALF and myself. They have little truth to stand on, so they resort to lies and deception.

Think how they look now, having caused the current state of decline and despair we are in. Today, packers are bigger, more powerful, and more concentrated than in the early 1900's when Wyoming Senator John B. Kendrick fought to restore competition. In support of the new Packers and Stockyards Act, he said, "The big packers, so called, stand between hundreds of thousands of producers on one hand and millions of consumers on the other. They have their fingers on the pulse of both the producing and consuming markets and are in such a position of strategic advantage they have unrestrained power to 99% of the people of the country." Soon after the passage of the P&S Act, an estimated 2000 packing houses were operating throughout the U.S.

About six years ago, I presented a program to the Kansas Livestock Association cow-calf council showing how today's packer concentration and abusive control of our markets resembled the monopolistic "Beef Trust" of 1921. KLA has worked relentlessly, misusing producer dues dollars along with NCBA, with the big packers, and retailers to implement
their no-choices-no-freedom "Vision."

Responding to my presentation, past KLA president, Jon Ferguson said, "That was 1921, today is today." I answered, "Unfair market power is unfair market power. Stealing is stealing. It doesn't matter if it's 1921 or today." This is the same Jon Ferguson, as newly elected 2000 chairman of the Beef Checkoff division of NCBA said publicly, "Grassroots cattlemen aren't smart enough to protect their own livelihood."

Dr. John W. Helmuth, chief economist for the U.S. House of Representatives Committee on Small Business from 1979 through 1987, (also a person who drew slanderous attacks from the packers and their minions) succinctly explained the essence of the problem:

"When a few large firms buy, slaughter and sell the meat products from most of the livestock produced by farmers, those few firms are in a position to control the price they pay for livestock, control the quality of the meat produced, and control the price of the meat products they sell.

"Such firms are motivated to pay the lowest possible price for farmers' livestock, produce the minimum quality meat product that consumers will accept, and charge the highest possible price for the meat products they sell. All such activities harm livestock producers.

"In such an environment livestock producers receive less than a competitive price for their animals, consumers receive a less than competitive quality product, and pay a more than competitive price for it. In such an environment consumers eat less meat, further harming producers because of shrinking demand.." Unfortunately for us and consumers, Congress ignored Iowa Congressman Neal Smith's Committee on Small Business and Dr. John Helmuth.

President John F. Kennedy said, "To ignore what we know is true, but are too afraid to admit --- therein lies unatonable sin."

Think how ridiculous and ignorant these members of the beef cartel establishment look now having promoted their scandalous corporate dictated "Vision" for the beef industry. . . .their so-called "long range plan" that has deceived producers into destructive alliances and vertical supply chains that transfer their assets to the packer and retailer via deeply
discounted and manipulated markets for their cattle.

The "long range plan" is based on the outrageous lie that beef demand, rather than packer price fixing, was the reason for low cattle prices. The long-range plan has resulted in low quality and inconsistency being the standard, requiring our beef to be "manufactured" to make it edible. It's now a plan complete with the very same name branded products (monopolists from 1921), that didn't taste very good in the early 1900's, and still don't, but still serve the same purpose of the industrial model, that of increasing packer and retailer profits at the expense of the producer, while circumventing the grading system and distorting and confusing the value discovery system.

R-CALF and KCA must continue to be that bold and powerful force standing strong for open, fair, and competitive markets...the reason your membership is growing so rapidly.  We want and need strong leadership, especially at critical and contentious times such as these. We don't want to stand on the neck of our neighbor, leveraged and divided, one against another, to make a dollar.

We want safe, friendly, prosperous communities in which to live and raise our families . . . just some of the benefits that a fair market place provides. R-CALF, KCA, and many other grassroots producer and consumer organizations are making a real difference, pulling together, leading correctly, aggressively, with courageous and extraordinary leadership.

This is a well-orchestrated smear campaign launched against us, financed with our own NCBA dues and checkoff dollars. The NCBA crafted attack letters that are being signed by Colorado Cattlemen's Assoc. President-Elect Roger Evans and their other blind followers calling us "radical, renegade, beef-bashing, industry-destroying, ranting, garbage-spewing demigods, vegetarian, members of PETA," are being distributed in the "beef" press.

At the very least, I would expect the leader of a state cattlemen's association to be capable of writing his own letters to the editor. This is an attack against what we stand for; the principles this country was founded on: equal opportunity, economic fairness, and social justice.

Beef Magazine's editor, Joe Roybal, in suggesting that we espouse communism, in addition to printing other NCBA slander, is surrendering his and the integrity of his publication to big money and power. He is caving under the pressure imposed by fewer advertisers and a declining readership.

Even though farm publishing is playing the same musical chairs game as cattle feeders trying to survive the shrinking market, he should still stand for the truth at all costs. Personal attacks and smear campaigns only mean they are out of bullets. We have plenty left. God's supply line never runs short.

Congratulations and thanks to two great organizations that represent my interests, other cattlemen, rural communities, and the well being of consumers!

Mike Callicrate
St. Francis, Kansas 67756

R-CALF Shafts Beef Producers

Why bother with a surgical strike when you can use a thermonuclear device and leave a wasteland as big as the U.S.? That's essentially what a pair of R-CALF principals accomplished when they talked with a Denver Post columnist following ConAgra's recall in early July of 19 million lbs. of ground beef due to potential contamination with E. coli 0157:H7.

In the process of banging their well-worn drum about packer concentration, the pair --- R-CALF vice-president Kathleen Kelley and St. Francis, Kansas, cattle feeder Mike Callicrate --- managed to lay to dust 15 years of beef industry efforts to rebuild positive consumer perceptions of U.S. beef in domestic and foreign markets.

The article by Denver Post columnist Diane Carman was entitled "Just cook the crud out of it." . . . .

The piece revolved around ConAgra's July recall but its hyperbolic message was that packer greed and slack government oversight had conditioned consumers to almost ignore recalls. Instead of producing wholesome ground beef, government and packers have shifted to consumers the responsibility for product safety by cooking "the crud out of it," as she put it.

Among the statements that Carman offers to support her thesis were these gems from Kelley and Callicrate:

Kelley, she reports, "is exasperated with `lazy' American consumers who don't have a clue about the source of their food, much less the shameless exploitation of humans, animals and the environment involved in its production. There is no reason for people in this country to have E. coli poisoning," she  quotes Kelley as saying. "It's entirely a by-product of industrial meat processing."

This, of course, runs counter to the message delivered recently by world-renowned epidemiologist Mike Osterholm, who said that it isn't possible, even with billions of dollars and using surgical suite technology and personnel, to guarantee that meat is free of food-borne pathogens. Irradiation, he says, is the only real solution at this time.

Meanwhile, Callicrate is quoted as saying: consumers are "paying the highest prices in history for the dirtiest product since 1906 when Upton Sinclair wrote The Jungle."

This novel written by Sinclair, a prominent Socialist of the time, is considered an expose of the turn-of-the-century packing industry, and its details did lead to government investigation and greater regulation of meatpacking, including child labor laws. But it's really a novel aimed at denouncing capitalism while promoting socialism and communism.

Are these folks off their rockers? What would leaders of a producer organization promising to bring its constituency back to profitability and prosperity possibly hope to accomplish with such statements in such a consumer venue? Few people outside the Denver metro area probably read the column by Carman. Within the beef industry, however, the story received wide dissemination via a letter from Colorado producer Roger Evans.

Besides questioning how R-CALF officials could possibly envision such pronouncements in a major consumer newspaper as helpful to the grassroots producer, Evans also pointed out some questionable R-CALF ties to anti-meat groups. His basic question essentially was: "Why would a grassroots producer want to be affiliated with an organization whose leadership goes in front of its consuming market and tells them the product they eat is crap?" That's the same question every producer should be asking as well.

Evans' letter must have put a serious tweak to R-CALF's nose because its executive director John Lockie later dashed off an e-mail to BEEF magazine and other industry media. Included was a response by Leo McDonnell, Jr., R-CALF president, trying to distance the organization from Kelley and Callicrate's remarks.

McDonnell points out that the duo's comments were "personal opinions" and not official R-CALF positions. Hmmm. Interesting defense. I wonder if the anti-meat and animal rights groups, as well as our foreign competitors and those foreign markets trying to prevent U.S. beef imports into their countries, will take that into consideration when they use the statements to undermine U.S. beef producers?

That lame excuse aside, it's another example of R-CALF "scorched earth" campaign. And the anti-meat, animal rights and environmental zealots must be howling with delight over this one. One would think that an organization so hell-bent on becoming a dominant spokes group for U.S. producers would at least have enough foresight to try to preserve the industry it wants to represent.

Joe Roybal
 

SMALL CATTLE RANCHERS:
"THE STATE OF THE INDUSTRY
IS PRETTY MUCH A DISASTER"

JUDD SLIVKA & ROCKY BARKER, THE ARIZONA REPUBLIC & THE (BOISE) IDAHO STATESMAN: The small cattle rancher in the United States is on a long, slow trip to the slaughterhouse. Since 1970, the number of ranches nationwide has declined by more than half, and the continuing trend is a downward spiral.

"The state of the industry is pretty much a disaster," said Randy Kieser, a longtime rancher. Three years ago, he turned his land near Guernsey, Wyoming into a guest ranch.

Although more beef is being eaten today than ever, that's a function of having more Americans around to eat it. Most Americans eat less beef than they did in 1970. Per-capita consumption has fallen 11%, while chicken consumption has gone up 68% and the demand for turkey has gone up 74% Americans are also spending less on beef. Adjusted for inflation, Americans spent $355 per capita on beef in 1980. In 2001, they spent $200.

There's a herd of other problems, too.

The feedlot industry can bulk up a calf to slaughter weight much faster and more efficiently than a rancher can. The court system is enforcing long-standing but often-ignored environmental laws. People who want ranchers off public lands are more willing to offer money to keep them off. All of that leads to this: There's no middle in Western ranching anymore. You can ranch 1,000 head and make a living or you can ranch less than 100 and make it a hobby.

At the fourth-generation WY Bar Ranch on the Arizona-New Mexico border, the Marks family raises cows that it sells to a feed-lot, where the cows will eat and eat at a fantastic pace, growing bigger at a rate that makes it commercially feasible to sell beef.

Arizona had seven feedlots in operation last year, with 335,000 head of cattle. The feedlots' economies of scale make it easier to make money. And that makes life hard for small ranchers like the Markses.

In the early part of the 20th century, it could take a calf five years to reach its slaughter weight. In the 1950s, advances in feed science made it possible to bring a calf to slaughter in two or three years. Today, the combination of 100 years of research into bovine growth and a better-living-through-chemistry attitude makes it possible to get a calf to
slaughter at 16 months.

Once a calf enters a feedlot, it's subjected to massive feedings of corn, protein supplements and growth hormones. The result is business that, like your local discount superstore, makes its money on the volume. The faster a calf hits the market, the faster a profit can be turned and the fewer costs are incurred. It's the present and the future of the cattle business. But the factory-style method of raising cows has hurt the small rancher.

J.R. Simplot of Boise, Idaho, is a good example. The Simplot family runs its cattle on nearly 2 million acres of state and federal grazing land. Each year, between 20,000 and 25,000 head of cattle from those lands are sent to the company's three feedlots in Idaho, Oregon and Washington. There, they join nearly 500,000 other head of cattle consuming the waste of Simplot's French-fry processing plants.

Add in other factors, such as Canadian and Mexican ranchers who gain an advantage with a favorable exchange rate, or Midwestern beef growers who can feed their cattle heavily subsidized corn that's cheaper than hay, and the small rancher in the West has his back against a barn wall.

Three decades ago, Jim Salmond had 20 neighbors ranching near his place close to Chouteau, Montana where his great-grandparents staked a claim in 1886. Now he has two, and one of them is David Letterman. "It's for the rich and famous now on the Rocky Mountain front," Salmond said. His brother sold 2,600 acres to Letterman a few years ago. Salmond wants to hold on, but he's not sure how long he can.

Although environmental laws have been on the books since the 1960s, only in the past two decades have the nation's court systems really begun enforcing them with regularity. The Clean Water Act, passed in 1972, affected where ranchers could graze their cattle, depriving many ranchers of their lushest forage areas: creek bottoms.

The Endangered Species Act has also affected ranchers. Each part of the West has its own endangered species. In South Dakota, it's the black-tailed prairie dog. In Idaho, it's the sage grouse. For Salmond, it's the wolves and the grizzlies. A new wolf pack has moved into the mountains west of him. He figures he's losing five percent to eight percent of his 800-head herd each year. Defenders of Wildlife, a Washington, D.C.-based environmental group, will pay for any damage caused by the animals, but his losses are sometimes difficult to prove.

"The species are just a tool, a surrogate," said Jim Chilton, owner of the Flying X ranch near Arivaca, Ariz., about 20 miles north of the Mexican border. "(Environmental groups') sole objective is eliminate grazing from Western states and land use that's been, in our area, in existence for over 300 years. It is outrageous that a surrogate would be used to destroy our customs, our traditions."

"A surrogate?" asked John Horning, a watershed-protection specialist with  Albuquerque-based Forest Guardians, an environmental group. It has sued the Forest Service multiple times over Endangered Species Act violations and has five pending lawsuits that could change the face of public-lands ranching in the Southwest.

"Sure. We're using the species as a way to represent the entire ecosystem that we're looking to restore. If we can make that ecosystem healthy for that species, than we've made that ecosystem healthier in general," Horning said.

The Grand Canyon Trust, a Flagstaff, Ariz.-based environmental organization, has been quietly trying to retire grazing allotments on the Colorado River plateau for the past three years. The trust has been moderately successful at it, retiring more than 325,000 acres of public land from grazing.

On April 10, a coalition of environmental groups proposed that Congress allot money to retire any grazing allotments ranchers want. The groups that proposed it want to offer $175 per animal-unit-month to ranchers, the amount of forage required per month to feed a cow and her calf. The average market value for a grazing allotment in the West usually runs between $50 and $75 per animal-unit-month.

The proposal took the ranching world by storm. Western members of Congress responded by vowing to kill the proposal. Many ranchers in the West are looking at it with suspicion. Environmentalists see the proposal's lack of acceptance as more evidence that ranchers are their adversaries.

Bill Marks saw the environmental changes coming back in 1975. But his efforts to help the land didn't help. "I've mortgaged my entire property to buy another allotment and didn't put more cattle on it, just absorbed it into my operation. So I took a place that had 144 cattle on it all year and replaced it with 65 cattle there for half the year, with nothing on it the other half. And I still got hammered."
 

SAFEWAY STORES REFUSAL TO PAY
SEVEN CENT INCREASE PER POUND
FOR FUTURE BEEF FORCES COMPANY
INTO BANKRUPTCY, NO MORE BANK LOANS

JAMIE LANE: Seven cents. Seven cents per pound increase in certain products from Future Beef could have saved them from liquidation. But Safeway grocery stores refused and therefore lenders pulled the plug on any future loans that perhaps could have afforded Future Beef the time needed to reorganize and restructure.

Future Beef filed Chapter 11 bankruptcy in early March and since that time has received several operating loans to continue operations. In Federal Bankruptcy Court, the last week of July, Future Beef was told they would receive no more loans, in part because Safeway refused to agree to spend an extra seven cents per pound. That seven cents could have equated to an extra $3.5 million per year increase in revenue. The court gave Future Beef until August 15 to find new financing. Shortly after that ruling, operations ceased at the Future Beef packing plant.

The late July ruling was based on a comprehensive report compiled by a bankruptcy consultation firm. According to the Winfield Courier (local newspaper of the Future Beef processing plant) the report concluded, in a nutshell, "continued operation is not recommended." The report elaborated on several areas where the company failed and without the price increase from Safeway, "there is little prospect for Future Beef to break even over the short term.."

The ideology behind Future Beef was exciting and aggressive. While not all cattle producers may have agreed with all the standards and methods used to achieve those standards, it is hard to argue with what Future Beef was trying to accomplish, and that was to regain a higher percentage of the actual value of the animal for the producer. Future Beef was an integrated company that controlled the product from the genetics to the retail counter.

Future Beef had the steak on the plate in mind and worked backwards to the genetics that could produce that steak the most consistently and efficiently. Future Beef defined the type of genetics that would work the best for their program, including seedstock producers who could provide those animals. After an animal was born with the acceptable "Future Beef genetics" it would be sent to a Future Beef approved feed yard to be fed.

At finishing, the Future Beef cattle were sent to the Future Beef packing plant in Arkansas City, Kansas to be processed. Also at the plant were value added divisions including a pet food processing division, pre-cooking division as well as case-ready capabilities that were used to provide a final product to Future Beef's 15% equity holder Safeway.

However, the connection with Safeway could have ultimately been the demise of Future Beef. Most seemed to think a relationship with the number three grocery retailer was a good idea as it provided a guaranteed retail market for the product. But, Safeway actually eliminated some competition by removing any other retailers from Future Beef's possible
"sell to" list because of a contract that was signed with Future Beef.

The contract essentially said that Future Beef could not sell certain meat products to any other retailer who is in an area with Safeway stores. This included Safeway's two other stores, Dominick's and Tom Thumb. During the short duration of Future Beef, approximately 51% of their sales went to Safeway.

The contract with Safeway was not the only concern cited in consulting firm's report. One easily observable and understandable contribution to the debt is the cattle feeding situation this spring in the U.S. Very few feeders have enjoyed a profitable 2002 thus far and couple that with the premium paid by Future Beef last fall for feeder cattle it is easy to understand how a considerable amount of money has been lost.

The report showed that Future Beef, at times, paid a $150 per head premium for feeder cattle over the market and since their Chapter 11 filing in March have lost more than $12 million on these cattle. Another concern noted in the report was the transportation costs to get the cattle to the packing plant. They estimated the average cost for Future Beef to be $17-$18 per head compared to an industry average of $8-$10 per head. This added cost equated to an extra $3.3 million to $3.7 million per year.

There is still a chance Future Beef can withstand the bankruptcy situation it faces, although time is quickly running out. However, even for those who never thought Future Beef would make it, the financial struggling of Future Beef and their almost certain liquidation, does not provide a lot of hope or options for producers to try to regain more value for the cattle.
 

CARGILL'S EXCEL AND HORMEL FOODS
IN JOINT VENTURE TO MARKET BEEF\ PORK
PRODUCTS TO SUPERMARKETS AND CLUB STORES

DOW JONES NEWSWIRES: Hormel Foods Corp. agreed to form a venture with Cargill Inc.'s Excel Corp. to market and distribute beef and pork products to U.S. supermarkets and club stores. Financial terms weren't provided, and Company representatives weren't immediately available to provide further details.

In a press release Thursday, Hormel said Excel will supply fresh, case-ready pork and beef for the joint venture, Precept Foods LLC, to distribute under Hormel's Always Tender national brand name. Currently, the Always Tender brand features primarily pork.

Reached later, a Hormel spokeswoman said her company will own 51% of the Precept Foods LLC joint venture, and Excel Corp. will own the remainder. Financial projections aren't being made available yet, she said.
 

CORPORATE AGRIBUSINESS RESEARCH PROJECT
WEB SITE INITIATES RENEWED SUPPORT EFFORT

It is rather curious that as more and more people from literally around the world request
to regularly receive THE AGRIBUSINESS EXAMINER, lavish in their much
appreciated praise for the work it seeks to do, fewer and fewer people seem willing to
financially contribute to its support.

Those handful of regular contributors who have earned the editor's undying gratitude
over the past four years and the few other occasional welcome individual supporters
stand in marked contrast to those many who obviously have believed during that time
that their aid could be better applied elsewhere, particularly when it comes farm and
rural  organizations. Such neglect, however, when it comes to rural concerns is
recognized  from this desk as not uncommon in our modern affluent and well fed
society.

Since the AGRIBUSINESS EXAMINER first appeared some 187 issues ago it has been
the publisher's intent to make the work of the Corporate Agribusiness Research Project
(CARP) and the monitoring of corporate agribusiness from a public interest perspective
available to the widest possible audience, seeing that those few and available publications
that still concern themselves with corporate agribusiness are so prohibitively expensive,
to say nothing of their pro-corporate bias.

But, because there is a more a need today than ever before to make corporate
agribusiness more accountable to the common good, it is the wish and hope of THE
AGRIBUSINESS EXAMINER to continue to play a major role in that effort. Your
contributions will go far in helping to perpetuate that hope. Such contributions may be
sent to the editor at the above address.

As part of a major effort to keep those committed to bringing economic and political
democracy to rural America informed, educated and updated the Corporate
Agribusiness  Research Project is happy to point out that its web site has been updated
and  streamlined.
http://www.ea1.com/CARP/

Among the sites many features are:

> A complete index of THE AGRIBUSINESS EXAMINER'S  first 162 issues with a
"Search" engine to provide easy access to the subject matter of each edition.

> new edition of THE AGBIZ TILLER, the progeny of the one-time printed
newsletter, featuring the essay "The Merchants of Greed," an in-depth essay dealing with
today's corporate agribusiness. Likewise the "Search" engine is also available for past
editions of THE AGBIZ TILLER.

> In "Between the Furrows," besides a modern "Search" engine, there is a wide range
of  pages designed to inform and educate readers on the inner workings of corporate
agribusiness. They include:

* CARP's "Mission Statement," "Overview" and THE AGRIBUSINESS
EXAMINER'S  Editor\Publisher's "Resume."

*  "Fact Miners," an effort to assist the reader in the necessary art of researching
corporations

*  "Quotable Quotes" pertaining to agribusiness and corporate power

*  "Links," a page which allows the reader to survey various useful public interest,
government and corporate web sites;

* "Feedback" an opportunity for reader input:

* The Corporate Reapers: The Book of Agribusiness, a page where readers can order
directly the editor's 1992 published book from Essential Books.

The CARP web site was designed and produced by ElectricArrow of Seattle,
Washington.
http://www.electricarrow.com

Simply by clicking on the address below all the aforementioned features and information
are yours  to enjoy, study, absorb and sow.

http://www.ea1.com/CARP/