November 19, 2002   #203
Monitoring Corporate Agribusiness
From a Public Interest Perspective

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DAVID MIGOYA, DENVER POST: Last week's decision to shut down the former ConAgra slaughterhouse in Greeley because of recurring meat contamination may be an indication that a recent get-tough stance by federal food safety regulators is more than rhetoric, consumer groups say.

But they are only cautiously optimistic.

In a summer marred by two of the largest meat recalls in history, one of them by the plant in Greeley, the U.S. Department of Agriculture may have finally found itself able to crack down, according to Caroline Smith-DeWaal, food safety director for the Center for Science in the Public Interest.

"The massive recalls have proven to be a trial by fire for the feds in charge of meat safety," DeWaal said. "They're finally willing to take tough actions when the industry doesn't respond to violations."

The plant in Greeley, one of the nation's largest slaughterhouses and now owned by Swift & Co., was forced to close Friday when inspectors walked out after again finding feces-contaminated meat.

The Denver Post has learned the government had already cited the plant 19 times since late August for allowing meat to become contaminated with feces, the favored breeding ground for the potentially lethal E. coli bacteria. Inspectors said they had briefly shut down production several times in prior weeks because of contamination, each time allowing it to resume when plant officials promised violations would not recur.

Three of the 19 violations occurred in the past week, inspectors said. Finally, the USDA concluded that the plant's efforts to keep meat free of feces were "ineffective or inadequate," agency spokesman Steven Cohen said. "The number of violations show a breakdown with their program."

Slaughterhouses cannot produce or sell beef without federal inspection or the USDA seal of approval and are effectively shut down when the USDA withholds inspection.

The plant, partly owned by Vail investor George Gillett, is expected to remain closed at least until Tuesday, spokesman Jim Herlihy said. "We are negotiating with the USDA about when we can resume production," Herlihy said Friday. "This is a regulatory issue, not a food-safety issue. There have been no allegations of contaminated product in commerce."

The agency's actions come just two weeks after a new USDA food-safety administrator told meat industry executives to be prepared for tougher oversight. "Your system is broken, and it needs to be repaired," Garry McKee said at an industry convention on October 28 in New Orleans.

Plants without adequate plans to prevent meat from becoming contaminated would find themselves scrutinized more, he said.

On Friday in Greeley, the USDA backed up those words. "I'd call this a great step forward; we're glad to see it," said Karen Taylor Mitchell, executive director of Safe Tables Our Priority, a Vermont advocacy group representing the families of victims of food-borne illnesses.

Part of the problem has been the USDA's lack of enforcement when fecal-contaminated meat was at issue, known as "zero tolerance failures." Violations were written, sometimes dozens, but little else happened.

That occurred in Greeley, where inspectors found dirty meat nearly two dozen times before July, when the plant recalled nearly 18.6 million pounds of beef because of E. coli contamination concerns. Even right after the recall, when the government was scrutinizing ConAgra's every move, inspectors quickly found problems with feces-smeared meat again --- and did little more than produce more paperwork.

Since the recall, the plant has been operating under a USDA warning, called a "notice of intended enforcement." A threatened suspension was set aside to allow the plant to implement a plan that would keep meat free from fecal contamination, a normal process.

Recently the Government Accountability Project, a consumer group that has tangled often with the USDA over inspection enforcement, disclosed documents it acquired from a Midwest plant whose inspectors were told in writing not to enforce the zero tolerance rule vigorously.

"What they've done in Greeley is a welcome sign, that maybe they've not completely abandoned the zero-tolerance rule," said Felicia Nestor of GAP. "I really don't know if this is all that encouraging or just another blip on the screen."

USDA's Cohen wouldn't say McKee's promise of stronger enforcement prompted Friday's action in Greeley, but he agreed "it was consistent with the vision of food safety inspection recently laid out by the new administrator." Before his appointment this summer, McKee was director of Wyoming's health department.

Taking action against one of the country's biggest beef packers is a bold move that some say proves McKee wasn't just schmoozing in New Orleans. Still, others say, USDA didn't move on the Greeley plant until repeated violations had been noted, a chronic symptom of what's wrong the agency.

"It seems like 19 warnings is probably too many, given this plant's history," said Smith-DeWaal of the science center. "Any speeder who gets that many warnings before getting a ticket feels as if they can speed forever."

The slaughterhouse employs 2,500 people, processes 1.2 million cattle a year and produces several million pounds of beef a day, a lot of it shipped to Colorado stores.

Problems with contaminated meat aren't new to the plant. The Post in September revealed that violations for dirty meat were found there more than two dozen times in the months leading up to --- and soon after --- July's recall occurred. More than half of those violations since July 2001 were for allowing feces to contaminate beef.

Just two days before Friday's suspension, Swift officials said workers at the plant would have new authority to shut down production if they spotted potential food safety hazards. Previously only supervisors could stop production. The policy shift is indicative of the company's commitment to food safety, Swift's Herlihy said.

"We've been under intense USDA and self scrutiny since the recall," Herlihy said. "We have to find the best avenue from this point to move forward. With these new findings, we're taking every step possible to ensure it's minimized and that we produce nothing but safe, wholesome meat."

This is the first time the USDA suspended inspection at the Greeley facility, a move the USDA does not do easily, although it has done it frequently. Nationally, this is the 128th time the USDA has suspended inspections at a facility it oversees. Most suspensions were for a few hours, but some have lasted weeks.


DOUGLAS FARAH, WASHINGTON POST: For the past decade, one of the world's largest tobacco companies has illegally funneled millions of dollars worth of cigarettes into Iraq in direct violation of U.S. trade sanctions and has knowingly helped Russian organized crime and Colombian drug traffickers launder billions of dollars more, the European Union alleges in a lawsuit filed recently in New York.

The lawsuit alleges a vast conspiracy in which R.J. Reynolds Tobacco Holdings Inc. and its subsidiaries set up special operating units to help launder money for criminal organizations, using special accounting methods, offshore tax havens and false invoicing. In exchange, the suit says, the criminal groups pushed Winston and Camel cigarettes into markets the company was seeking to penetrate and helped RJR increase its profit margins by accepting sales and credit terms that paid far more than those for legitimate customers.

The 144-page complaint, filed on October 31 in the Eastern District of New York, alleges that RJR executives "at the highest corporate level" made it "part of their operating business plan to sell cigarettes to and through criminal organizations and to accept criminal proceeds in payments for cigarettes by secret and surreptitious means."

In a statement, RJR called the lawsuit "absurd" and said the company and its subsidiaries "operate their businesses in a legal, responsible manner. The plaintiff's allegations that any of these companies were either involved in or aware of money laundering, conspiracy or any other illegal activities are unfounded."

But European and U.S. law enforcement sources said the detailed allegations in the lawsuit were developed by the law enforcement resources of the ten European countries that filed the suit. Several, such as Italy, have been investigating cigarette smuggling for years.

Dean Boyd, a spokesman for the U.S. Customs Service, would not comment specifically on the lawsuit, but he said the agency is actively investigating organized illegal cigarette sales because "tobacco smuggling is a global, multibillion-dollar problem that involves any number of criminal organizations, ranging from terrorists to money launderers to drug smugglers."

U.S. officials said there is one ongoing criminal investigation of cigarette smuggling into Iraq, but they would not say which tobacco company is the focus of the probe.

Cigarette transactions have long been favored by drug traffickers as a means of laundering their illicit proceeds. It is often difficult for drug traffickers to move the money they make from the sale of drugs in the United States and Europe back to their homelands because law enforcement agencies have cracked down on wire transfers and the sheer weight of cash makes it difficult to transport.

Instead, drug traffickers often buy millions of dollars worth of cigarettes with the proceeds, smuggle the cigarettes into their home countries and resell them to recoup their profits.

A lawsuit against several tobacco companies filed by the EU in the same jurisdiction was dismissed in February because it sought to recover billions of dollars in tax revenue lost to cigarette smuggling. U.S. District Judge Nicholas G. Garaufis ruled that such claims were improper, but he said he would consider a suit based on money laundering allegations. If the current lawsuit goes forward, sources close to the case said, similar ones will be filed against other major tobacco companies.

In its statement, RJR said it believes the new lawsuit should also be dismissed. "However, if this case ever goes to trial, it will be the burden of the plaintiffs to prove their allegations, and they will be unable to do so because their allegations are simply untrue," the statement said.

While the suit does not specify the damages sought, sources familiar with the case said they would amount to hundreds of millions of dollars.

The new EU lawsuit goes far beyond any previous allegations, accusing RJR of direct complicity in facilitating not only money laundering schemes but also other criminal enterprises.

According to the lawsuit, RJR maintained lists of "direct customers of RJR," which "included special handling instructions for shipments designated for RJR customers that RJR knew were involved in criminal activities." The special handling, the suit said, included making sure some cases of cigarettes that criminals did not want traced would be "neutralized and decoded" -- meaning marks and numbers that make the tobacco traceable would be removed.

"These direct customer lists clearly demonstrated that the RJR defendants knew they were selling to criminal customers and thereby demonstrated that RJR knew that they were receiving criminal proceeds in payment for their product," the lawsuit alleges.

As part of the scheme, the lawsuit says, RJR companies constantly switched banks where they received payments for illicit sales to make it impossible for U.S. and EU investigators to detect the transactions. "This process was known within RJR as `musical banks,'" the lawsuit says.

The suit also alleges that Iraqi President Saddam Hussein and his son, Uday, reaped millions of illicit dollars from the sale of cigarettes in Iraq by RJR, as did the Kurdistan Worker's Party (PKK) --- a group that has carried out bombings and kidnappings in Europe in its bid for an independent Kurdish homeland and that was designated a terrorist entity by the United States in 1998. The group controls parts of northern Iraq and extracts a fee for each container of cigarettes it allows to pass from Turkey into Iraq, the lawsuit alleges.

RJR knowingly sold billions of cigarettes to Iraq in violation of U.S. and United Nations sanctions, the suit alleges, by setting up a special operation in Cyprus. Part of the plan included creating false paperwork that would misstate the destination of the cigarettes, usually listing Russia instead, the lawsuit says.

Sales of the cigarettes brought millions of dollars to Hussein's regime and specifically to Uday Hussein, who "oversees and personally profits from the illegal importation of cigarettes into Iraq."

The suit alleges that RJR knew that the PKK charged a fee for each container of cigarettes and that, by paying the fee, the tobacco company and its co-conspirators "have provided direct benefits to the PKK and other terrorist groups."


Once again the world's largest grain trader --- Cargill Corp. ---- led Forbes Magazine's list of the top U.S. private corporations. In fact, as the chart below shows, eight of the top 15 U.S. private corporations were corporate agribusiness related enteprizes.

RANK    NAME                     STATE                 INDUSTRY                     REVENUES ($mil)

1             Cargill                      Minnesota             Crops                               $50,826

2             Koch Industries        Kansas                  Oil & Gas Operations       $40,000

3             Mars                        Virginia                 Food Processing              $17,500

5             Publix Super
               Markets                    Florida                 Retail (Grocery)               $15,370

7             Meijer                      Michigan              Retail (Grocery)               $10,600

9             HE Butt Grocery      Texas                   Retail (Grocery)                $9,9002

11           C&S Wholesale
                Grocers                   Vermont               Retail (Grocery)               $9,700

14           Swift & Co               Colorado              Food Processing               $7,733


NEIL WEINBERG & BRANDON COPPLE, FORBES MAGAZINE: Down a two-lane highway that winds through oaks and evergreens 25 miles west of Minneapolis, a secluded access road turns off to the south and is marked only by a small sign: "Cargill Lake Office." There near the shores of Lake Minnetonka, amid the sedate elegance of an antique French-style mansion, Warren Staley plots a revolution at the most dominating--and obsessively private- --- company on the planet.

On the face of it Cargill looks like the last business in need of a shakeup. Earnings more than doubled last year. At $50 billion-plus in annual sales, Cargill is twice the size of its closest rival, Archer Daniels Midland, and bigger than Procter & Gamble or AOL Time Warner or Merrill Lynch.

In sales Cargill is the 19th-largest company in America. Its 97,000 employees run more than a thousand production sites and operate out of 59 countries. They feed the world's herds and fertilize its crops. They store the harvest, process it and transport it around the globe. They finance and hedge the risk.

Cargill, or farmers working for it, raise 17% of the world's turkeys. In the U.S. it controls 22% of beef production and 25% of grain and oilseed exports. Its vast financial trading arm is a leading commodity broker and a heavyweight in sovereign debt, having reportedly controlled one-quarter of Russia's bond market. Is this behemoth too damned big for its own good? Is it too big for the good of the country?

Such suspicions run deep because Cargill goes to such lengths to keep its profile low. Some foreign outposts bear no company shingle. Its annual report contains no financial tables. Discretion is so deeply woven into the company that even former Cargillites shy away from public comments about their old employer --- compliments included. Cargill has been incomparably adept at growing without having to go public and making all the compromises that would entail.

"I'd hate to have to manage this company worried we'll miss an earnings forecast by a penny a share and have 40% clipped from our value," says Staley. "It's a great advantage being private, with shareholders who understand agriculture is cyclical, returns are lumpy and not every risk will go our way."

C. Daniel Clemente, a Virginia lawyer who is a Cargill family trustee, says the company is a paragon of how to stay out of the public equity markets for generations. "Cargill should be the Harvard Business School model for how to stay private," he says.

Cargill, founded in 1865 by William and Samuel Cargill, sons of a Scottish sea captain, started out as a lone grain-storage flat house in a frontier town in Iowa. Over the decades Cargill grew like bamboo, silently snaking its roots below ground only to shoot up in unexpected places and redraw the landscape.

Sprouting from the grain trade, it spread its tendrils into farming, milling, flavoring, a fleeting stab at energy trading and a bizarre global mishmash of seemingly unrelated ventures, from steelmaking to viatical financing to ownership of a casino in Las Vegas. Cargill let these businesses operate separately and autonomously, each one unaware of (or unconcerned with) goings-on elsewhere in the empire.

No more. Staley, 60, chief executive since 1999 and five years from company-mandated retirement, wants to reshape Cargill into a more sensible giant with a sharper focus on its origins --- the food business --- and new cooperation. "To grow our opportunities we have to shrink our sandbox," Staley says in a rare interview. "That means telling our businesses, `We won't starve you, but we may shoot you.'"

That is a stunning threat in a firm where lifetime employment is the norm, especially in the highest echelon, and where employees boast that their blood runs Cargill green. Staley is shaking the place up. He has bumped dozens of managers. He is drawing new talent via acquisitions and new hires. "Making sure the right people are on the bus and in the right seats" is how he puts it.

In three years Staley has jettisoned $2 billion in businesses, from steel-pipe making to coffee trading. He has spent a few billion dollars buying competitors in key markets, building up Cargill's position as the nation's biggest flour miller and number-two turkey producer, and as the largest grain merchant and among the biggest producers of vegetable starches in the world. Staley's shopping spree will continue for a while, bankrolled by more asset sales, $700 million in cash and annual cash flow from operations of $2.3 billion. "We're keeping things bubbling," he says. "Fortunately, cash is king, so it's a very interesting time for people like us."



William W. Cargill begins operating grain-storage flat house in Conover, Iowa Expands to 71 grain elevators, two flour mills

Willliam's son-in-law John MacMillan Sr. takes over after rescuing firm from near-bankruptcy.

Sets up first foreign operations in Canada, Italy

Barred from futures trading at Chicago Board of Trade.

Becomes Navy shipbuilder, enters soy-processing business

Loads first bulk corn shipment in Brazil's interior.

Sets up financial unit in Geneva

Enters Korea and Taiwan.

Gets into steelmaking, cattle feedlot businesses.

Cargill, MacMillan families sell 17% of firm to employees.

Launches drive to develop high-value-added foods



ANN ZIMMERMAN, THE WALL STREET JOURNAL: Despite a slowdown in sales, Wal-Mart Stores Inc. posted a 23% jump in fiscal third-quarter profit as strong food and clothing sales at home and abroad helped offset struggles at the company's Sam's Club unit.

Wal-Mart, Bentonville, Arkansas, said that despite the challenging economic environment, it was optimistic about the holiday season. The discount retailer forecast sales at stores open more than a year to rise 3% to 5%, ahead of analysts' predictions. Wal-Mart also said it expects to achieve its previously stated earnings target for the year of $1.76 to $1.78 a share.

"Although the increase in spending is less than anyone would like, we expect to get our fair share and maybe a little more" during the holidays, Lee Scott, Wal-Mart's chief executive, said in a recorded statement.

But the company voiced caution about the economic climate, saying they expect consumers to continue trading down to the lowest-priced brands, even in food categories. "When they are talking about shoppers switching from Tree Top apple juice to Sam's Choice, you know there is serious concern about the consumer," says Emme P. Kozloff, retail analyst at Sanford C. Bernstein & Co.

For the period ended October 31, Wal-Mart reported net income of $1.82 billion, or 41 cents a share, up from $1.48 billion, or 33 cents a share, a year earlier. Revenue rose 12% to $59.33 billion from $53.19 billion, and sales at stores open at least a year rose 3.5%.

Reflecting the speed of the consumer-spending slowdown, same-store sales at the Wal-Mart division rose 4.2%, compared with a second quarter increase of 7.1%. Operating profit in the division rose 16% to $2.68 billion from $2.32 billion. Wal-Mart achieved the profit growth by reducing markdowns and losses from damaged or stolen merchandise, and by increasing sales of higher-margin goods, particularly apparel.

Results at the Sam's Club warehouse division lagged behind, posting just a 0.4% increase in same-store sales, although total sales rose 6.1% to $7.7 billion. Memberships jumped a healthy eight percent during the quarter as Sam's Club reduced fees and streamlined the process for signing up new members. But competition and sluggish spending by        families and small businesses has taken a toll on sales this year, analysts say.

"I do believe that we have identified the steps necessary to return this business to acceptable profit," Mr. Scott said of the Sam's Club division. "However, there are no quick fixes, and sales and earnings will probably remain under pressure well into next year."

Wal-Mart's international segment saw its operating profit surge 42% to $447 million. In its German operation, losses were in line with Wal-Mart's plan. Same-store sales were down from a year ago, but expenses were cut and inventory was better managed, Wal-Mart said. At Wal-Mart's Asda unit in the United Kingdom, comparable sales were up in the high-single digits, buoyed by sales of Wal-Mart's George apparel line, which jumped almost 30%.


PAUL SCHNITT, SACRAMENTO BEE: If Dan Gerawan wasn't a patient man earlier in life, he's probably learned to be one by now.

In 1988, the Fresno fruit grower was among a group of Central Valley fruit growers and packers who sued the U.S. Department of Agriculture. They claimed the government's fruit marketing programs violated their free speech rights because they were forced to pay for advertising plums, peaches and nectarines whether or not they agreed with the message.

The California Tree Fruit program is one of many campaigns run by commodity boards throughout the country. The boards' advertising has spawned catch phrases such as "Got Milk?", "It's the Cheese," "Beef, It's What's for Dinner," and "The Incredible, Edible Egg."

But nearly 15 years after the fruit growers' suit, Gerawan and others still battle the marketing boards in the courts, and the constitutional issue remains unresolved. Courts have ruled both for and against the mandatory assessments of farmers.

An estimated ten current lawsuits around the country target these marketing programs set up by Congress and the USDA to promote farm products. And in California, 11 cases have been brought against state commodity programs. Although the U.S. Supreme Court has taken up the commodity board issue twice, its rulings have been somewhat contradictory and left things muddled.

"It's been a long fight," says Gerawan. He likes the ruling last week by a federal district judge in Michigan that found unconstitutional a National Pork Producers Council promotion program funded by mandatory assessments of hog farmers. "Momentum is in our direction," Gerawan says.

But  . . .  a federal judge in Montana ruled that assessments levied by the beef promotion board were constitutional. "The outcome is not clear. We have miles to go," says George Soares, partner in a Sacramento law firm that represents more than 20 farm commodity groups. He says about two-thirds of California's nearly $30 billion agriculture industry is covered by one of the state's 51 commodity boards.

The first boards were created during the Great Depression to promote agriculture products when most farmers couldn't afford marketing on their own. Nationwide, the boards' mandatory assessments bring in more than $1.2 billion a year that is used for promotions and product research. The marketing campaigns feature the product without using brand names.

Steve Weaver, who raises about 1,000 hogs each year in the Elk Grove area, was one of those disappointed by the ruling that threw out the promotional efforts of the national pork group. He hopes the decision will be appealed. "The act has done more to promote pork in the United States and to promote the value of pork worldwide than anything else that has been done," says Weaver, who is president of the California Pork Producers Association.

A decade ago, the pork industry was stagnant at a time when the poultry industry was doing an effective job promoting its product, Weaver says. Then along came the advertising campaign, "Pork, the Other White Meat." Weaver says that campaign has been primarily responsible for increasing pork consumption in the United States by at least five percent each year.

Gerawan, who has vast fruit orchards in the Central Valley, is in a different position and he argues that he has the right to run his own advertising campaign promoting his Prima brand of plums, peaches, nectarines and fresh grapes. "I believe advertising should be voluntary," Gerawan says. "Call me a radical. People should decide for themselves whether to advertise or not on their own without being compelled to do so."

Gerawan estimates he is assessed about $500,000 a year by commodity marketing groups for their generic advertising. Pushing his own brand is an additional cost.

Joseph Gallo Farms, a large dairy operation in the San Joaquin Valley, shares Gerawan's philosophy. While most dairy farmers sing the praises of the "It's the Cheese" campaign, Gallo officials have called the ads "corny and even idiotic." The company saw the assessments as a free speech issue and filed a lawsuit in federal court.

Gerawan and the other fruit farmers lost their original lawsuit in a 5-4 decision by the U.S. Supreme Court in 1997. The court ruled that joint advertising campaigns are constitutional in heavily regulated industries, such as plum production.

But last year, the high court, by a 6-3 vote, ruled that in less-regulated markets some advertising funded by compulsory fees violated free speech rights. That case involved the Dublin-based Mushroom Council. The two seemingly conflicting opinions beg for further clarification from the Supreme Court, agree those on both sides of the issue.

Undaunted by defeat in the federal courts, Gerawan took his case to the California state courts. Two years ago, the California Supreme Court concluded that Gerawan's freedom of speech may have been violated by his being forced to pay mandatory fees for advertising plums.

The state's highest court sent the case back to a lower court to set standards for measuring whether the grower's constitutional rights were violated. A final decision is pending.

Gallo, which initially lost a free-speech challenge in federal court, was encouraged by Gerawan's outcome and has now taken its case to a state court. Even if the assessments are declared, once and for all, unconstitutional, farm interests could push for legislation that would set up marketing fees.

Meanwhile, Gerawan fights on. He's challenged the compulsory fees he pays for selling peaches and nectarines. "I've started over again what we started 15 years ago, and we're back there," he said. "We hope to prevail, but that's a long way off."


STEPHANIE HOOPS, , TUSCALOOSA NEWS: A group of Alabama Sierra Club members and residents concerned that Alabama is on the verge of being inundated by industrial hog farms is taking a tour of communities in northeast Alabama affected by hog factories.

Dubbed the "Tour de Stench," the trip is an effort to bring attention to the growing number of industrialized hog farming facilities in Alabama .. . . .  Peggie Griffin, conservation organizer for the club, said the hog farms are moving into Alabama at a growing rate because other Southern states, such as Mississippi, have established moratoriums on new hog farms.

"This is a real concern for residents of Tuscaloosa County because straight west on Highway 82 in West Point, Mississsippi, is the Bryan Foods meat packing company, and we are definitely in range of that meat-packing company," Griffin said. "They tend to locate the hog factory farms in close vicinity to the meat-packing companies, and our water supply in Tuscaloosa covers a vast area, and it would be very easy for a hog industry to locate near our drinking supply."

A spokesperson for Bryan Foods could not be reached for comment.

Griffin said the proposed zoning laws in the November 5 election could have offered some protection for Tuscaloosa County, but voters rejected the measure. She said people living in the vicinity of the hog farms in the northeastern part of the state wish they had zoning restrictions.

A tour van and car pools [left] Tuscaloosa at 7:30 a.m. [November 16] and will stop in Birmingham on the way to the affected communities.

The visitors will make three stops: one near a sow operation where baby pigs are handled; a second one near a confined animal feeding operation, where the pigs are grown to market size; and a final stop at a home near a hog processing plant. "This plant is located in a neighborhood, and were going to visit a family that has to look into the hog processing plant," Griffin said. "They can hear the squealing pigs as they're being dragged to slaughter and being slaughtered."

The Sierra Club's position is that small farmers who raise hogs in a natural environment are being pushed out of Alabama by contract farmers who keep thousands of hogs confined in buildings, bringing industrial stench to communities and disrupting the air, water and property values. They claim the industry has set up 35 such operations in Alabama in the last six years in places such as Sumter, Greene, Pickens, Dallas, Jackson, DeKalb and St. Clair counties.


SAM SMITH, UNDERNEWS: While [Nancy] Pelosi was being characterized as a latté liberal, a real progressive entered the race at the last minute, Rep. Marcy Kaptur of Ohio. She got little attention from the media. In the Washington Post, she was mentioned in passing in the 9th graf. In fact, what she had to say was far more interesting than most of the words spewing out of the capital that day.]

REP. MARCY KAPTUR: "I realize that Congresswoman Pelosi has commitments from a majority of the Democrats, but I think it's important to offer a choice and to give voice to the `reform wing' of the Caucus. Members need to talk to each other, compare notes, and assess last Tuesday's elections, with a particular eye to the outrageous campaign spending that is corrupting our Republic. We have plenty of time to organize for the 108th Congress.

"To win, our party must adopt a reform paradigm. We will never raise more money than the Republicans- --- never. We must elevate the non-money wing of the Democratic Party and create populist symbols to convey our message.

"We should hold up key Republican fundraisers, such as Jack Welch and Kenneth Lay, as the `poster boys ' for the failed GOP economic strategy.  We should hold the Republicans' feet to the fire on rising bank fees, skyrocketing insurance rates, tax breaks skewed to the richest Americans, and a failed deregulation strategy.

"But we Democrats have to articulate an alternative for America's families and workers. We should work with Democratic governors and state legislatures to push prescription drug initiatives. We should propose a federal national health insurance plan for small businesses. We should propose a national service program to help students pay off their college loans.

"We should propose a counter-cyclical economic stimulus plan that includes visionary projects such as high-speed rail to get our country out of recession. And we should champion an energy independence plan that would liberate our foreign policy and help solve our balance of payment problem.

"We should stand up not only for the steel industry, but also the textile workers in the Southeast, the auto parts industry in the Midwest, and the small businesses such as tool and die shop owner and the family farmer all around the country. They're all in trouble, and nobody's standing up for them because they're not giant multinational corporations pumping money into the political system."


DAN LOOKER, BUSINESS EDITOR, SUCCESSFUL FARMING: Harold Breimyer has been dead more than a year. And he's still right. It's uncanny.

Born on a modest farm in Ohio in 1914, Breimyer was a brilliant economist who began a long USDA career by driving country roads to sell New Deal farm programs in 1933. He retired as a nationally respected professor at the University of Missouri in 1984. Almost to his death in 2001, Breimyer wrote a clear, blunt newsletter called On The Economy.

Years ahead of Ken Cook

His newsletter recognized the stock market bubble early and predicted failure for the Freedom to Farm bill. Breimyer called the 1996 Farm Bill the worst ever. "What is worst of all . . . and indefensible, is the paying out of big bucks (1) irrespective of the level of market prices, and (2) without necessarily requiring performance on the farmer's part. The former is often put in terms of seriously weakening the safety net that has long been a distinguishing feature of farm programs."

He wrote that back in March 1996, before grain prices collapsed and long before Ken Cook's Environmental Working Group put your USDA payments on the Internet.

Don't think Breimyer was a mystical seer who could predict the future. He was a smart man who saw through political BS and kept his Jeffersonian dream of opportunity for farmers. I can imagine what he would say about the latest farm bill. He might like its new conservation emphasis and efforts to protect you better from low prices.

Yet, I'll bet the plainspoken Missouri professor would give it a D.

The reason? There's no food security in the Farm Security and Rural Investment Act of 2002. Breimyer knew that conservation and food reserves are crucial to gaining public support for help for farmers. Just as our federal government has been filling the Strategic Petroleum Reserve to ready for war with Iraq, corn supplies are shrinking. Even with a normal 2003 crop, Iowa State University economist Bob Wisner expects a corn carryover below 700 million bushels by next September.

The coming food crisis

The 1996 Farm Bill killed the farmer-owned reserve that used to pay you to store grain. The federal government no longer controls big supplies as it did during the early 1980s. Like the rest of our economy, agriculture has gone to a just-in-time delivery system. It sticks farmers with the cost of being the nation's granary. This year is a taste of what's to come. If we have another drought as bad as the one of 1988 --- when some Iowa counties had the least rainfall in recorded history --- watch out.

Prices could get so high that you'll finally have something to put in the bank. Hang onto it.

Those prices will also hurt your customers --- cattle feedlots, ethanol, and ultimately, consumers. After the 1988 drought, the Food and Agriculture Policy Research Institute estimated what would have happened if USDA hadn't had 4.3 billion bushels of corn on hand. With just 2.3 billion bushels in storage consumers would've paid $40 billion more for food from 1989 through 1996. (September corn stocks this year were just 1.6 billion bushels.)

University of Tennessee economist Daryll Ray shares Breimyer's view that reserves of grain make good sense. As he said in his July 22 column .. . . .  "Low grain prices appeal to livestock feeders, and high prices appeal to crop farmers. But could it be that we are better off with relatively stable prices that moderate the booms so that busts are less likely to follow?"

Junking a divine inspiration

Mandatory set-asides in the old farm program didn't work well. (I like the idea of voluntary set-asides.) But we ditched the farmer-owned reserve at great risk. What if we had a drought worse than 1988? Civilizations have fallen to climate change before.

Breimyer's Depression-era contemporary, Agriculture Secretary Henry Wallace, got Congress to create his "ever-normal granary" in 1938. His idea of storing surplus crops for lean years came from Joseph's advice to the Egyptians in the Bible.

The Chinese had a similar system of paying farmers for surplus grain to store for lean times. It lasted 1,400 years. Congress killed our food security after just 58 years. Angry consumers may one day ask why.

                                     EDITOR'S NOTE

Preparing to post this 203rd edition of THE AGRIBUSINESS EXAMINER it is
gratifying to know that over 1100 people throughout the world are currently receiving it

on a regular basis and judging from comments received feel it is a valuable source of
information. However, it is also quite troubling to realize that less than 4.5% of that
readership has ever seen fit to make any contributions toward its continued existence.

To that small cadre of contributors this editor can only express his profound gratitude
and appreciation for I realize that in some cases even a small donation was a sacrifice for

From the outset it was never the purpose of THE AGRIBUSINESS EXAMINER to
charge a subscription fee for the original intention of this newsletter was to get it into as
many hands as possible as a vehicle for monitoring corporate agribusiness from a public
interest perspective, just as was the establishing of a web site
[] to provide facts, background, analysis and educational
information on corporate agribusiness.

Thanks to the generosity and creativity of the editor's oldest son David and his business
colleagues at ElectricArrow in Seattle, Washington that sight is being maintained on a
virtual pro bono basis.

Having said all this, may I repeat CONTRIBUTIONS FROM READERS are always and
will always be most welcomed for editors of such publications as THE AGRIBUSINESS
EXAMINER can not always live on bread and water alone. Such checks made out to
A.V. Krebs can be sent to P.O. Box 2201, Everett, Washington 98203.