September 27, 2002   #193
Monitoring Corporate Agribusiness
From a Public Interest Perspective

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"The only time I felt truly comfortable about the food I put on my table was when I lived on the farm and grew most of my own . . . Now, I live in an apartment in the city, and am dependent on nameless, faceless strangers to grow, process and ship my food. It seems as if unethical and unsafe practices grow in direct proportion to how far we have lost the trail of accountability. So I don't always trust them to put my family's best interest over concern for their bottom line. I don't like feeling helpless, as if every trip to the grocery is a crap shoot. But I really don't know who to blame."

--- Vicki Williams, King Features columnist, USA Today, July 26, 1985.


PHILIP BRASHER, DES MOINES REGISTER: Farm groups are blocking efforts to develop a national system to trace food to its source because they fear lawsuits if consumers become sick.

In the wake of food scares, the European Union and Canada have started requiring farmers to put electronic identification tags on their livestock. Using numbers on the IDs, government food inspectors can trace meat that's contaminated with bacteria or drug residues back to the farmers who raised the animals.

A similar system could make U.S. food safer, say consumer advocates, but farm groups are fighting the idea because they don't want producers exposed to lawsuits. "What it would automatically do is ratchet up food safety. Suddenly, the companies and farmers and producers are no longer invisible," said Nancy Donley, whose son died after eating an E. coli-tainted burger.

She is president of Safe Tables Our Priority, a consumer advocacy group. The new farm bill that Congress passed this year requires all meat and produce to be labeled with its country of origin. However, a provision inserted in the bill at the insistence of farm groups bars the U.S. Department of Agriculture from setting up a tracking system to identify the farms where the food was produced.

"If you're running a small farm with 30 cows or 100 cows, would you want this liability on you, when every time something went wrong they came back to you?" asked Gary Weber, executive director of regulatory affairs for the National Cattlemen's Beef Association.

"I can't defend myself in court as well as the meatpacker or the wholesaler due to the cost of defense. The farmer has a smaller amount of resources to deal with," said Keith Van Waardhuizen, who raises cattle and operates a small feedlot at Oskaloosa, Iowa.

Advocates of tracing say it also could serve as a deterrent to unscrupulous farmers. They would theoretically be less likely to send sick or drugged animals to market if they knew the meat could be tracked back to them. "There is a lot of comfort in anonymity. You can hide behind it," said Donley, a Chicago real estate agent. Her son was one of four people killed in a 1993 E. coli outbreak linked to Jack in the Box restaurants. The source of the contaminated beef was never pinned down.

Nationwide, an estimated 79 million illnesses, 300,000 hospitalizations and 5,000 deaths annually are blamed on food-borne disease. Cattle can be tracked through the use of ear tags containing computer chips that can be read by special machines installed in packing plants. For crops such as grain, there is a uniform coding system under development for packaging similar to the familiar bar codes now used on nearly all consumer goods.

The European Union imposed its livestock ID requirement after the devastating outbreak of mad cow disease, also called bovine spongiform encephalopathy (BSE), a brain illness that can be transmitted from cattle to humans.

Mad cow hasn't turned up in the United States, but experts say an ID system will be needed if it does. Mandatory IDs also could help control the spread of other animal diseases, such as foot-and-mouth, as well as make it more difficult for farmers to get away with improperly using antibiotics or other drugs in their livestock.

"Concerns about BSE, other kinds of problems in the industry, cross borders," said Ray Goldberg, a Harvard University business professor who coined the term "agribusiness." "People really want to know what the animal was fed, what the breed was, who the farmer or rancher was and who took care of the animals."

Some tracking of food has already started in the United States without the government requiring it: A major fast-food chain has been experimenting with specific strains of wheat by having the grain tracked electronically from the farms in Colorado where it is grown to the flour mill and the bakery.

At Whole Foods supermarkets, a nationwide chain specializing in organic and natural foods, the butcher can find out the name of the hog farmer who produced the pork that the stores sell. That's because a special code is put on the meat the store buys from its supplier, Oakland, California-based Niman Ranch Inc.

The codes also are available to chefs in the high-end restaurants that use Niman Ranch pork. Pork that is tagged No. 1 comes from the farm of Paul Willis of Thornton, Iowa., one of 210 farmers who raise hogs for Niman Ranch. Niman Ranch uses the code primarily to control the quality of its meat. The pork is checked for color, marbling and other characteristics.

A joint venture that involves food tracing has been established between meatpacker Excel Corp. and a group of 75 ranches and feedlots known as Ranchers Renaissance to produce a line of steaks that are guaranteed to be tender. Computer chips are implanted in cattle so they can be tracked from the farm to the slaughter plant, and then Excel uses special electronic devices to analyze the tenderness of the beef.

The Holstein Association, a Vermont-based trade group, has worked with the USDA to develop a cattle-tracking system known as National Farm Animal Identification and Records, or FAIR. Six packing plants, 2,300 farms and 200,000 cattle, mostly dairy cows, are participating in the program in such states as New York, Pennsylvania, Michigan, Wisconsin and California.

The electronic ear tags are decoded as the cattle walk past flat-paneled scanners at the slaughterhouses. "Every beef producer should be proud of his product and not afraid to let somebody know where it comes from," said Alfred Cisco, a beef producer in Lindley, New York, who participates in the program. "Someday we're going to have a (mandatory) national system, I'm sure," he said. "I just got on the bandwagon."

Canada started its ID system last year and began issuing fines to violators in July. Every head of cattle must be given an ear tag with a special number when it leaves its herd of origin. Slaughterhouses report the numbers to federal inspectors, who can use the data to investigate cases of animal diseases or illegal drug residues.

Packing plants are barred from finding out the identity of producers. So far, the tracking data have been used primarily to investigate suspicious cases of bovine tuberculosis, a cattle disease that isn't harmful to humans, officials said. Sheep will be added to the program, and there are discussions about extending it to hogs.

Opposition to Canada's ID system eased last year when Britain's meat industry was devastated by an outbreak of foot-and-mouth disease and producers saw the potential benefits, said Mabel Hamilton, who breeds Angus cattle north of Calgary, Alberta. "I'm feeling now that we're having some grudging acceptance. Some of our progressive producers understood right from the beginning that it was necessary," she said.

In Europe, all livestock must have a "passport," or ear tag, within a few days of birth. Codes are put on meat packages identifying the lot of animals the meat came from. Investigators can go to the slaughterhouse and, using the package code, identify the farm where the animals originated.

Sen. Charles Schumer, Dem.-New York, introduced food-safety legislation this year
that would require the government to set up a system for tracing all cattle, hogs, sheep and poultry. The meat industry --- packers and processors --- supports the idea. The Senate Agriculture Committee, of which Sen. Tom Harkin, Dem.-Iowa., is chairman, has not acted on the bill. Harkin has no position on the issue, an aide said last week.

Sen. Charles Grassley, Rep-Iowa, also has not taken a position on the bill. "I'll be studying the research to see how a trace-back system could make things better for consumers and producers, and to see where it might cause unnecessary problems," Grassley said.

U.S. producers say they fear getting blamed for contamination problems that aren't their fault, and they question whether the trace-back system would be of that much use to investigators. Some germs that are dangerous to humans, such as Listeria monocytogenes, don't get on food until it's in processing plants. Others, such as a certain strain of E. coli, are spread through cattle in feedlots and would be difficult, if not impossible, to trace to an individual farm or ranch, experts say.

"The only food-safety issue today that would warrant tracing is going to be an antibiotic issue," said the National Cattlemen's Weber, referring to the improper use of antibiotics in livestock. His group opposes a mandatory tracking system like Europe's or Canada's and doesn't want one permitted under the country-of-origin labeling law.

But advocates of food tracing say it is in the best interest of farmers. For one thing, processors are paying more money for commodities that can be traced to the farm, said Bill Jorgenson, a former Quaker Oats executive who founded a company called eFarm Inc. that is developing tracing systems for the food industry. "What I tell the farmers," he said, "is that for once in your lifetime, you're an important part of the supply chain."


BILL MCALLISTER, DENVER POST: The U.S. Department of Agriculture ordered a series of new food safety steps Tuesday after acknowledging that the potentially fatal pathogen believed to have tainted 18.6 million pounds of meat in Colorado is "more prevalent than previously estimated."

Food safety experts applauded Agriculture Secretary Ann Veneman's actions, saying they clearly were designed to prevent a repeat of an E. coli outbreak that has been linked to meat from the ConAgra plant in Greeley.

Since last summer, when the USDA announced what was the country's second-largest recall. The E. coli sickened at least 47 people in 23 states, including 22 in Colorado.

Under Veneman's actions: All processing plants must revise inspection plans based on the assumption that E. coli 0157:H7, the suspected Colorado pathogen, "is a hazard reasonably likely to occur in their operations, unless they can prove otherwise."

Small meat-processing plants will no longer be able to bypass federal inspections by "self-testing." USDA meat inspections will be increased to ensure compliance. USDA will direct grinding facilities to avoid mixing ground meat from different suppliers "to reduce the chance of cross-contamination."

The policy changes are significant, consumer food safety groups say. Had the new policy been in effect six months ago, E. coli issues at the Greeley ConAgra plant may have been caught earlier and the public health effects minimized.

ConAgra Beef initially recalled 354,200 pounds of ground beef because of E. coli contamination. Three weeks after the June 30 recall, ConAgra expanded it more than 50-fold because company tests found E. coli in beef trim 34 times between April 12 and July 11. While the company recorded the test results when they happened, the USDA didn't get to see the information, even though the company uses the tests to exempt it from USDA testing.

The policy has some flaws, the groups point out. Currently the agency conducts about 5,000 random tests for E. coli, which do not include the businesses that do their own pathogen tests, such as ConAgra.

Also significant is the recommendation for beef processors, such as Galligan's Wholesale Meat in Denver, to keep their beef sources separate as a way to help the USDA track the origins of E. coli.

The USDA often cannot determine the source of E. coli contamination, most often from the slaughterhouse, because grinders such as Galligan's generally combine meat from two or more sources to make their ground-beef products.

The E. coli trail to ConAgra began in May with USDA tests at Galligan's. The grinder eventually separated the two sources of his ground beef so the USDA could determine whether the E. coli problem was at the company or was contained in the meat Galligan's was buying.

The American Meat Institute, the industry's trade group, disputed Veneman's statement that the risk of E. coli infection has increased. "We have not seen any data to support the statement that E. coli 0157:H7 is becoming more prevalent," said AMI president J. Patrick Boyle. He said the Veneman plan was "like banning the common cold: It's an admirable goal, but does not appear to be achievable given the state of the science."

Some food safety experts, however, were delighted. "The USDA program has been under tremendous attack and the ConAgra recall clearly indicated that their policies were not working to control E. coli 0157:H7," said Caroline Smith DeWaal, food safety director for the Center for Science in the Public Interest.

Carol Tucker Foreman, director of the Consumer Federation of America's Food Policy Institute, said she was surprised. "I thought they had started ... . . to abandon the E. coli 0157:H7 standard and this looks like they are going the other direction," she said. "And I applaud that." . . . .

Chris Kircher, vice president of communications for Omaha-based ConAgra, which ran the Greeley plant until last Thursday, said the company is reviewing the new rules. "I don't think we have much to say about it, except that food safety and product quality are our highest priority," he said.

Jim Herlihy, a spokesman for Swift & Co. which took control of the plant last week, said "our initial reaction is that we are doing all the things that USDA is talking about and have been doing them since July 22."

The contamination of ConAgra meat has prompted calls from lawmakers for tougher inspection standards and raised questions about why the E. coli contamination was kept secret from federal health officials. The USDA found E. coli May 9 during a random test at Galligan's but ConAgra officials have said they weren't notified until June 27 and the first recall was ordered June 30.


GUY  GUGLIOTTA, WASHINGTON POST: The United States is highly vulnerable to terrorist attacks on its livestock and food crops and needs a national plan to identify threats, direct research, gather intelligence and respond to outbreaks, a committee of experts said [September 19].

A report by the National Academy of Sciences said that while agricultural bioterrorism was "highly unlikely to result in famine or malnutrition," it could have "major direct and indirect costs to the agricultural economy."

The report also cautioned that there could be "adverse health effects" caused by agents --- such as anthrax --- that can move from animals to humans, as well as "loss of public confidence in the food system . . . and widespread public concern and confusion."

The report, titled "Countering Agricultural Bioterrorism," was prepared over the past three years by the academy's National Research Council at the behest of the U.S. Department of Agriculture. Parts of the original report dealing with specific case studies were put in a classified annex withheld from the published study.

"We thought about it all along --- whether we were giving anybody a recipe for how to mount an attack," said David R. Franz, a bioterrorism expert and NAS panelist who is vice president of the Southern Research Institute. "You always have to weigh your vulnerability against the need to educate people about what they're up against and to overcome their natural reticence."

Reticence, however, is no longer a problem, said Iowa State University veterinarian Harley W. Moon, chairman of the 12-member NAS panel.

"September 11 fixed that," Moon said. "People became so urgent that they went ahead on their own." But while "there's increased general awareness and agency interaction," he added, "we need a national response, as well."

In one sign of increased intensity over agricultural bioterrorism, the Agricultural Department's Animal and Plant Health Inspection Service early this week was able to enlist the help of veterinarians, hog farmers, state officials and veterinary labs across the country to watch for evidence of swine disease from genetically altered bacteria cultures stolen from a Michigan State University lab a week ago.

The genetically altered bacterium, Actinobacillus pleuropneumoniae, can cause pneumonia, encephalitis and death in pigs but is not dangerous to humans and is hard to spread. "If you were going to pick a pathogen, this would not be high on the list," said Ron DeHaven, deputy administrator at APHIS.

Nevertheless, because of "the potential of it to be a bioterrorist event," DeHaven held a conference call to enlist help from stakeholders at all levels of the pig farming industry. "If this had happened 13 or 14 months ago, we probably wouldn't have thought twice about it, but we have to assume the worst and be prepared," he said.

According to the NAS panel, preparation requires a national coordinating center. Panelist R. James Cook, a Washington State University plant pathologist, said the participants wanted to make the Centers for Disease Control and Prevention their model. The CDC is a research center and early warning system for outbreaks of human disease.

"We don't know what will happen or whether there will even be bricks and mortar," Cook said. "We just need to be able to do what the CDC does -- get the information we need in real time."

The panel noted that the Agriculture Department already has a well-developed infrastructure to deal with plant pathogens and animal diseases that come into the country accidentally. These have included San Francisco's Mediterranean fruit flies, in the early 1980s, to Florida's citrus canker in the 1990s and today's mosquito-borne West Nile virus.

But the panel cautioned that deliberate infestation demanded a far more extensive menu of precautions, including stringent border monitoring, better overseas intelligence and research to develop resistant plant strains and assemble genetic libraries of likely "threat agents."

Agriculture Secretary Ann M. Veneman noted in a statement that the department has several initiatives similar to those outlined in the report, including identifying a priority list of threat agents, allocating increased funds for bioterrorism research and strengthening its laboratories.

"Because of these aggressive efforts, our nation's food and agriculture infrastructure is stronger today than a year ago," she said. "However, threats remain, and we must work in a responsible and aggressive manner to continue strengthening these programs."

The NAS panel's Moon praised USDA for increasing funding to establish a network of diagnostic labs -- five for livestock and five for plants -- that could be called on to make quick assessments of dangerous pathogens even as they are discovered.


CASEY LANGAN, COUNTRY TODAY: "Traumatic" is how Jim Harsdorf describes the financial situation on Wisconsin's dairy farms. As an $18 billion chunk of the state's ag industry, dairy's financial downturn has severe impacts on the full economy of the state of Wisconsin, said Mr. Harsdorf, Secretary of the state Department of Agriculture, Trade and Consumer Protection.

The downward pressure on the domestic dairy market may be due to iimported ultra-filtered milk (Milk Protein Concentrate) displacing domestically produced milk used to make cheese.

Mr. Harsdorf, who is also a dairy farmer, recently convinced Gov. Scott McCallum to issue a letter to the U.S. trade ambassador to the World Trade Organization that requests getting a handle on how much MPC is being impored, where it's going and its effect on the domestic market.

"As the leading dairy state in the nation, Wisconsin strongly supports efforts to expand markets for our products both domestically and through international trade," Gov. McCallum wrote to U.S. Trade Representative Robert B. Zoellick. "However, free trade must also mean fair trade for our Wisconsin dairy producers." Mr. Zoellick is the nation's chief trade negotiator and is responsible for developing and implementing U.S. trade policies.

"I believe your office has an obligation to determine if bad-faith foreign MPC exports are cutting into sales of domestic nonfat dry milk and other dairy products, pushing down prices for American dairy producers," Gov. McCallum wrote. "These foreign exports also may be increasing taxpayer costs due to higher milk price support program purchases."

Currently there are virtually no import restrictions on MPC and duties are low because it was a relatively new product when the Uruguay Round World Trade Organization agreement was concluded in 1994, after nearly eight years of negotiation.

However, nonfat dry milk imports are strictly regulated and carry higher tariffs. In March 2001, a General Accounting Office report suggested that foreign exporters might be circumventing trade rules by adjusting the protein content of nonfat dry milk in order to bring it into the United States as MPC.

The GAO reported that "MPC imports grew rapidly from 1990 to 1999 --- from 805 metric tons to 44,878 metric tons --- and nearly doubled between 1998 and 1999. Six countries --- New Zealand, Ireland, Germany, Australia, the Netherlands and Canada --- accounted for 95% of the imports in 1999."

"Wisconsin dairy producers are concerned that imported ultra-filtered milk may be displacing domestically produced milk used to make cheese," Gov. McCallum wrote. "Should you determine that foreign MPC exports are negatively impacting domestic milk prices, I strongly urge you to pressure our trading partners into closing the loopholes that allow these virtually unregulated exports into our market."

The nine-member DATCP board approved a resolution in support of the governor's letter. Due to the financial crisis dairy producers are facing, the resolution also added a request that: "Wisconsin financial institutions and ag supply and support industry work with Wisconsin dairy producers to assist them in getting through this period of low farm prices."

Pete Knigge, an Omro dairy farmer and DATCP board member, expressed frustration with the lack of what the state board can do about the price of milk, but called the resolution a statement of recognition of the situation.

"For Wisconsin, the all-milk price for August is expected to average $10.90 per hundredweight," said Bob Battaglia, of the Wisconsin Agricultural Statistics Service. "This is the lowest price for the month of August since 1978, and $5.40 below a year ago.

"The August 2001 price averaged $16.30, near the record for the month set in 1999," he said. Mr. Battaglia also said storage cheese and butter stocks are up ten and 58%, respectively, from a year ago. In his report to the DATCP board, he noted increased amounts of beef, pork, turkey and chicken are all going into cold storage.


GENARO C. ARMAS, ASSOCIATED PRESS: The U.S. poverty rate rose for the first time in eight years and household income fell last year, a double dose of bad economic news that coincided with the first recession in a decade, the Census Bureau said Tuesday.

There were 32.9 million Americans living in poverty last year, up from 31.6 million in 2000. The rate of 11.7 percent was up from 11.3 percent the previous year, which was the lowest level since 1974. The median household income in 2001 declined 2.2 percent to $42,228, after remaining flat the previous year, according to the bureau.

Many analysts had predicted that the poverty rate --- which is calculated annually by the Census Bureau --- would rise in 2001 as unemployment rose and the economy slipped into recession. The figures come from a survey of 78,000 households taken in March. Census officials say all the figures are estimates that could vary slightly from actual values.

Daniel Weinberg, chief of the Census Bureau's economic statistics division, said every region saw a decline in median household income except the Northeast, where it was flat. Median income refers to the point at which half of households earn more and half earn less.

President Bush, addressing the overall economy, said after a Cabinet meeting Tuesday that he remains upbeat.

"I'm optimistic about America in general. I mean, the American people are resilient. They're strong. We got the best workers in the world. Inflation's down. Interest rates are low," he said. "And so when you combine the productivity of the American people with low interest rates and low inflation, those are the ingredients for growth . . .  But I understand we got a lot of work to do. And we will. We will continue to work hard to make sure that people can find work."

The poverty threshold differs by the size of the household. The bureau calculated that for a family of four, the level in 2001 was $18,104, up from  $17,603. The poverty rate rose for every racial group, while the median income fell.

Blacks had the highest poverty rate --- 22.7 percent, up from 22.5 percent -- and income fell from $30,495 to $29,470, the largest decline in 19 years. The poverty rate for whites increased from 7.4 percent to 7.8 percent, while income fell 1.3 percent, to $46,305. The number of Asian-Pacific Islanders living in poverty rose from 9.9 to 10.2 while income fell more than six percent to $53,635.

Hispanics, which the Census Bureau classifies as an ethnic group rather than a racial category, had a slight decline in poverty --- 21.5 percent to 21.4 percent --- but income also fell, from $34,094 to $33,565.


PETER S. GOODMAN, WASHINGTON POST: From the half-acre plot where his family has grown wheat for two centuries, Liu Shubing watches the construction of a superhighway with equal parts concern and calculation. The price of his crop is falling, and those six concrete lanes are part of the reason. They will link this village [Taihe] on China's central plain to the port of Shanghai, then to the enormous farms of the United States, where grain is cheap and abundant.

But the road will also tie his village to processing plants churning out french fries for McDonald's Corp., giving local farmers a chance to supply the potatoes. It will cut the time needed to truck vegetables to the east coast for export. Liu is taking tentative steps toward those new markets. A corner of his land now sprouts spearmint destined for a toothpaste factory. If the experiment works, his family will have a little less wheat and a little more money.

"We farmers think about filling our bellies first, and if our bellies are full we're reluctant to change," Liu said. "When you grow something you've never grown before, there's risk. But we know change is unavoidable. We have to adjust."

As China continues its wrenching transformation from a walled-off, centrally planned economy into one defined by market forces and global trade, its stability is likely to depend on how its 500 million farmers navigate the complex mix of new threats and opportunities that confront them.

Throughout China's history, the country's fate has been linked to the fortunes of its farmers. When the Communist Party took power half a century ago, farmers provided crucial support for the revolution. Now China's senior officials and policy advisers are increasingly worried about the state of the country's farmers.

Their incomes are stagnating in many areas and falling in some. Their taxes have increased significantly, prompting scattered protests. The gap in income between China's fast-growing cities and its rural areas --- where 900 million people still live --- is larger today than when the Communists took power. In a speech this spring at the National People's Congress, Prime Minister Zhu Rongji called raising farmers' incomes his "biggest headache."

China's leaders worry that economic reforms could be placing more burdens on farmers than they can bear. Farmers are on the receiving end of the earliest and sharpest changes from the new policies that China agreed to implement to gain entry to the World Trade Organization, the body that sets the rules for most global trade. Protective tariffs must be lowered. Foreign foods must be allowed into the country to compete with local produce.

China's leaders see those concessions as worth it, to make it easier to export products. They also see greater competition from abroad improving the efficiency of China's companies. But such changes are likely to be devastating in some areas, particularly in China's northeastern grain belt.

The breakup of agricultural collectives in the 1980s unleashed a wave of increased production, as households responded to the incentive of having their incomes tied directly to their harvests. But it also chopped land into plots so small that they cannot compete with farms covering thousands of acres in North America and Australia. China's wheat, corn and cotton prices are generally between one-tenth and one-third higher than world market prices. Moreover, the United States subsidizes grain production. As more imports arrive in China, prices will drop, and farmers' incomes will fall.

According to a report by China's State Council, the equivalent of the U.S. Cabinet, the country's WTO commitments are likely to wipe out the livelihoods of 13 million farmers who grow wheat, rice and cotton, while creating new ones in non-grain crops for only about 1.5 million. Some economists reckon that China will eventually need to find jobs for about 200 million farmers as its market reforms continue.

"The Chinese farmer is in a very unenviable position," said Ke Bingsheng, director general of the Research Center for Rural Economy, which is part of China's Ministry of Agriculture. "The impact of reforms on agriculture is profound."

Still, Ke and other policymakers stress that the situation is sufficiently complex to mitigate fears, with new opportunities being created alongside new pressures. China's WTO obligations continue reforms begun two decades ago that brought great change. From 1992 to 2001, China dropped its agricultural tariffs from 42.5 percent to 21%. They are set to drop to 17% by 2004 under the WTO. Only limited quantities of foreign goods must be admitted under the lowest tariffs.

"Compared to our reforms in the past, it's not that dramatic," said Huang Jikun, director of the Center for Chinese Agricultural Policy, a government-affiliated research institution in Beijing.

The government is hoping the WTO will provide further momentum toward shifting farmers engaged in uncompetitive crops into those with which China has a clear global advantage: fruits, vegetables, nuts and livestock, as well as fish and shrimp farming. Those areas are labor-intensive. In China, labor is cheap and plentiful.

In Shandong province on the east coast, grain farmers have moved into vegetables for export. China supplies more than 40% of Japan's vegetables, according to various estimates. Overall, China exported more than $8 billion worth of agricultural products during the first half of this year, according to the Ministry of Agriculture.

The pain of some enables gain for others. A drop in corn prices may hurt corn farmers, but it boosts the livestock business by cutting costs because most corn is fed to animals. Still, two-thirds of China's farmers grow grain.

Taihe, a town of 150,000 in northern Anhui province, amounts to a laboratory for the changes at work, a place that could go either way. It is still dominated by wheat and corn, but its climate is warm enough to grow vegetables. Unlike the northeast, it is within reach of ports.

Anhui has a tradition as a pioneer in economic change: It was the first place the state formally broke up the old collective system. Now, the federal government is staging a taxation experiment here that has eliminated a series of fees levied on farmers. Not least, the town has the new superhighway. "It's delivering the outside world to Taihe," said Jim Lambert, who is producing a film documentary about roads in rural China. "Life has been irrevocably altered."

The town and the villages around Taihe seem to be straddling eras. Its main shopping street sports a Giordano clothing outlet and stalls selling pirated DVD versions of Hollywood movies. The grounds of a former center for Confucian studies, where scholars once took tests needed to gain entry to the bureaucracy, have been leased to an entrepreneur who has set up a roller-skating rink and pool hall.

But news about the rest of the world is scarce. Some farmers said they had never heard of the WTO. Most were unaware of how it works and what it could mean. They do know that their incomes have not kept pace with increases in the cost of living, as health care and school systems that were once free for all now force many to pay for services.

He Hui, a wheat and bean farmer, said he and the four others in his family live on the same income they had five years ago --- about $120 a year. Like many here, he abandons his village for six months a year to supplement his earnings with construction jobs in cities.

He has thought about planting something with greater potential for profit. But, like millions of rural Chinese, he remembers days of famine. His wheat may decline in price, but it will sustain him. "I've never grown anything else," he said. "I have no experience. I don't know how to sell anything else but grain." Fan Hengjin has heard that refrain. It prompts him to proselytize for his vision of the future, one in which local farmers stop planting wheat and start planting potato seeds --- seeds that he produces.

Twenty years ago, Fan, now 36, traveled to neighboring Henan province and came back with the knowledge that Taihe's agricultural practices were backward. Little attention was being paid to matching seeds with local soils. Everyone was growing grain in accordance with China's national policy, which aimed to make the country self-sufficient.

"Our farms were tiny and our living standards were lousy," he said. His family survived on about $35 per year. In 1984, Fan sold his family's wheat crop for about $28. He spent $17 on a bicycle and the rest on high-quality vegetable seeds. He pedaled through the villages of Taihe selling seeds.

The business blossomed. Then, four years ago, Fan researched the crop now at the center of his empire. "I figured out that potato chips, french fries and snack foods are a huge market, but China's producers were importing potatoes from the United States," he said. Alongside his family's three-quarter-acre plot, Fan now farms another 40 acres via leases. Farmers working under contract to him plant them over 660 more acres.

Today, his Hengjin Seed Co. employs 28 people in a three-story office building. A laboratory upstairs holds racks of seedlings for new stock. A wall shows photos of Fan shaking hands with the provincial governor and of Fan and dozens of other "model farmers" mugging with President Jiang Zemin. Nine greenhouses in the fields in back hold young potato plants. Fan said his company earned more than $800,000 last year.

At harvest time, trucks come from Beijing and Shanghai to take the potatoes to a Lay's factory and to processors for fast-food chains. But the road is long, and parts of it are still rough. In summer, the potatoes spoil along the way, lowering what the processors will pay. "Sometimes loads are rejected," Fan said.

From his office, he can see an overpass for the partially completed highway spanning the fields. He can see the future. "Before, it took me 24 hours to get to the factory," he said. "Now I can get there in 15 or 16 hours. That road will make us accessible to any market. It also opens up our thinking."


MARTHA MCNEIL HAMILTON, WASHINGTON POST: Dole Food Co.'s chairman and chief executive, David H. Murdock, has offered to buy out other shareholders in the world's largest grower of fruits and vegetables in an unsolicited offer valued at about $2.2 billion.

Murdock made the offer Sunday, proposing to pay $29.50 a share for the 76% of the company that he and his family don't already own, or $1.2 billion, and to assume $916.8 million in debt. The Westlake Village, California-based company said its board will consider the offer over the next few days.

But if some analysts are right, they will soon have other offers to consider. "He might be doing it to flush out some other bids or trying to buy it very cheap," said Terry Bivens, an industry analyst with Bear, Stearns & Co. The offer was 20.5 percent higher than the stock's closing price of $24.49 a share on Friday, and the stock price climbed rapidly [Monday], trading as high as $30.99 and closing at $28.99.

The offer comes at a time when the company's cost cutting and adjustments to operations have produced higher earnings. In the second quarter, net income from continuing operations was $66.8 million, up from $33.3 million in the same quarter a year earlier. But sales have been flat.

"It's a slow-growth business," said Tim Drake of Banc One Investment Advisers, which includes about 1.35 million Dole shares in its assets. Dole has been discarding some businesses and expanding into products such as bagged salads. That type of business is "higher-margin than just delivering pineapples and bananas," Drake said.

In January 2000, when the European Union was engaged in a trade war with the United States over bananas and Dole's earnings and stock price suffered, Dole hired Goldman Sachs Group Inc. to help it explore "strategic alternatives," including the possibility of selling part or all of the company. But two months later the company said it had decided against a sale.

At the time analysts noted that the already-high level of concentration in the fresh produce industry might make it hard to find a buyer that could pass antitrust muster. In addition to Dole, the big players in the industry are Chiquita Brands International Inc. and Del Monte Foods Co.

The billionaire Murdock has controlled Dole since 1985, when his Flexi-Van container-leasing company took over financially troubled Castle & Cooke, which included the company founded in Hawaii by James Drummond Dole in 1851. Flexi-Van was separated and taken private in 1988. Castle & Cooke was spun off, initially as a public company, in 1995 and taken private in 2000.

Murdock said in announcing his offer that he expected to reach a binding agreement by November 6. He said he had engaged Deutsche Bank to advise him on the transaction. The investment bank had provided him with a "highly confident" letter about the prospects of financing the portion of the transaction that would not be funded by Murdock himself. A spokesman for Murdock said he was not available for comment because he preferred to let his announcement and the documents accompanying it speak for themselves.


REUTERS: Shares of Dole Food Co. surged Monday, a day after the top executive of the world's largest producer of fresh fruits offered to take Dole private with a $1.26 billion cash bid.

Real estate magnate and Dole Chairman David Murdock said he would pay $29.50 a share for the 76% stake he and his family do not own in Westlake Village, California-based Dole. That pushed the company's stock up as much as $6.50, to $30.99, before it closed at $28.99, up $4.50, or 18.4 percent, on the New York Stock Exchange.

Analysts and investors said it seemed likely that shareholders would like Murdock's offer, which is a 20.4 percent premium over Dole's closing stock price of $24.49 on Friday.

"The man has a lot of dough and seems like he wants to spend it," said Kevin Johnson, partner in Aronson + Partners, a Philadelphia fund that holds about 827,000 Dole shares. "This thing is up 20% and still looks cheap."

EDITORS NOTE: Murdock, 79, who has headed Dole Foods for 17 years was recently ranked 149th in the Forbes list of the 400 richest Americans, with wealth estimated at $1.3 billion.wealth is a familiar figure in corporate agribusiness.

In 1987, 49% of the stock in IBP [now a subsidiary of Tyson Foods] was sold to the "public" by Occidental Petroleum. Prior to its takeover by Occidental in 1981, IBP's corporate power was solidly interlocked in a labyrinth of economic decision-making and corporate ownership. The largest single block of the company's stock (18%) was held by the California-based Pacific Holding Corp. Pacific Holding Corp., at the time was a wholly-owned private company held by Murdock, who had previously made millions off a multitude of real estate deals, acquiring a vast fortune by also taking over firms with undervalued assets.

When Occidental bought IBP for $800 million, Murdock became the $15.8 billion petroleum conglomerate's single largest stockholder. In fact, as IBP's leadership spoke of the "benefits" that the company's thousands of stockholders would derive from the Oxy sale, three corporate executives Robert L. Peterson, Dale C. Tinstman, and Perry V. Haines collected a reported $5.6 million while Murdock reportedly made a $35.2 million gain from the sale.

In 1984 after a feud with long-time friend the late Oxy chairman Armand Hammer, Murdock sold his holdings to Hammer for a $100 million plus profit. Subsequently another Murdock enterprise, Flexi-Van Corp. had merged with Castle & Cooke, the giant California agribusiness firm which then became the owner of Dole food products and other vast agribusiness and real estate holdings in Hawaii and California, including the Bud Antle Corp., one of the world's largest grower-shippers of lettuce.

Later, Castle & Cooke would become a private and essentially real estate and home building corporation with large holdings in the Hawaiian Islands while Dole Foods would become a public corporation. Both firms, have been primarily owned and under the direction of Murdock.


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