EXAMINER                            Issue # 32       May 6, 1999

Monitoring Corporate Agribusiness From a Public Interest Perspective

A.V. Krebs

                                                 Editors Note
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In a major victory for the nation's independent cattle producers, after years of legal struggles by the plaintiffs to overcome numerous roadblocks, U.S. District Court Senior Judge, Lyle B. Strom issued an order April 28 certifying a national "class-action" of cattle producers against IBP (Iowa Beef Processors)

The original lawsuit --- Pickett vs IBP --- filed in July, 1996 by ten cattlemen plaintiffs --- Mike Callicrate, Henry Lee Pickett, Sam Britt, Paul Horton, Jim Bower, Pat Goggins, Johnny Smith, Stayton Weldon, Lovel Blain, and David Smith --- as representatives of the "class," charged that IBP violated the Packers and Stockyards Act (P&S Act).

"The entire cattle industry has been in an economic crisis ever since IBP and the other big packers schemed to fatten their profits by denying producers a fair price for their cattle, "Callicrate, a St. Francis, Kansas feedlot owner, emphasizes. "Our lawsuit contends that the method IBP uses is to set an unfairly low price it will pay for cattle, and when cattlemen reject that price because they will suffer a loss, IBP slaughters, or threatens to slaughter, cattle from its `captive supply.'"
"This illegal strategy," he adds, "leaves cattlemen without a buyer for their cattle. And because finished cattle must be sold quickly while at optimum weight, cattlemen are forced to accept that low bid, at a loss to themselves. This abusive market power profits IBP in lowering prices paid to cattlemen while consumes continue to pay record high prices for beef."

The cattlemen also allege, according to their attorney Randy Beard, that by contracting
"captive supplies" with certain preferred feedlots, the Dakota City, Nebraska-headquartered IBP reduces its need to participate in the cash market. As a result, he points out, these meatpacker agreements to take ownership of cattle weeks in advance violate the anti-competitive provisions of the P&S Act because they are entered into with the intent of, or having the effect of, reducing the cash market price.

Contrary to IBP's contention that low prices are the result of supply and demand, plaintiffs point out that IBP's profits have soared to record levels at a time when cattle producers are going bankrupt. They say that if IBP's defense were true, there would be no reason for them to pursue all these anti-competitive practices, and they would not resist eliminating them.

The lawsuit asks that the defendant IBP cease and desist from any further illegal activities in manipulating the price of beef cattle in violation of the P&S Act, and for compensatory and punitive damages, fees and expenses, and any other relief that the court deems appropriate.  Plaintiffs estimate that actual damages due cattlemen could approach multi-billions of dollars.

Grass-roots cattlemen's organizations, individual cattlemen, national farm groups, National Farmers Union, and a host of others concerned about the plight of the beef industry, submitted amicus briefs to the court supporting the plaintiffs against IBP, and urging "class-action" status, Callicrate said. "Even Canadian cattlemen, whose market is also dominated by IBP, supported us," he noted.

"At one point, the court asked Agriculture Secretary Dan Glickman to write an opinion as to whether we could pursue a private lawsuit under the P&S Act," Callicrate added. "In an extensively researched brief, Secretary Glickman gave us the green light to press our charges against IBP, he said that the U.S. district court was the only forum to pursue this claim, and allowed the court to fully consider our case and subsequent `class-action' status."

In a stunning May 3 report released by the European Union's (EU) Scientific Committee on Veterinary Measures the hormone 17 beta-oestradiol -- one of six growth hormones in American beef -- was characterized as being "considered as a complete carcinogen."

"It exerts both tumor initiating and tumor promoting effects," the report said. "In plain language, this means that even small additional doses of residues of this hormone in meat, arising from its use as a growth promoter in cattle, has an inherent risk of causing cancer."

There was inadequate data to make a definitive finding on the other five growth hormones used in U.S. beef, the scientific committee said. But it said exposure to small levels of residues in meat and meat products "carries risks."

While the The European Commission immediately ruled out ending a 10-year-old ban on hormone-treated beef, increasing the risk of escalating the current  trade war between the U.S. and the European Union, U.S. trade and agriculture officials sharply criticized the scientist's report.

"The supposed new claims are nothing but misleading allegations," said Peter Scher,           America's trade negotiator on agricultural matters. He called the report a "blatant attempt" by the EU to delay abiding by its trade obligations. "If the EU does not lift this ban, we will retaliate this summer," Scher told a Senate subcommittee.

USDA Secretary Dan Glickman and U.S. Trade Representative Charlene Barshefsky charged that the EU had issued "yet another misleading report. It repeats the same unsubstantiated arguments that the EU has already made before the World Trade Organization (WTO) panel of experts, which were flatly rejected by the panel," they declared in a joint statement. "The issue is the EU's refusal to comply with the WTO rulings and its unwillingness to honor its international obligations."

Answering the U.S. denials that there were any dangers to U.S. exported beef to the EU the Union's commission  slammed U.S. criticism of the scientific report. In its statement, the commission accused the U.S. of trying "to belittle the risk" identified by the scientists. "The commission cannot understand why the U.S. has not reacted in a more responsible way to the conclusive findings of the scientific committee,especially as the scientists said children are most at risk from the hormones."

Some 90% of American cattle producers now feed hormones approved by the Food and Drug Administration to cattle to make them grow faster and bigger. In 1998 the WTO ruled that the EU ban on hormone-treated beef was illegal and must be lifted by May 13. It said the EU's ban was not supported by the proper risk analysis.

After the WTO ruling, the EU ordered 17 studies on risks linked to the use of hormones in meat, some of which were carried out in the U.S. Sixteen of these have yet to be completed.  The EU's recent scientific committee report based its opinion on interim findings and the one completed report. The document, which has been sent to Washington for comments, said U.S. regulatory controls on the use of hormones in meat are "deficient" and Canadian controls are "insufficient."

Since 1989, the U.S. has exported only hormone-free beef to the EU because of the ban. The U.S. industry has put the lost export sales at $500 million annually. The Clinton administration is threatening to impose 100% tariffs on more than $900 million worth of European products in retaliation for the ban.


In a surprise move the nation's largest corn processor,Archer Daniels Midland Co. (ADM),  has announced that it will follow its cross-town Decatur, Illinois competitor, the U.S.'s third largest corn processor A.E. Staley Manufacturing Co., and will only accept corn varieties approved by the European Union

"ADM supports the position of the Corn Refiners Association and the National Grain and Feed Association in regard to transgenic corn by not participating in the commerce of the varieties that are not approved by the EU," said ADM spokesperson Carla Miller. "If and when the varieties are approved by the EU, we will  participate in the marketing of those grains."

"The timing of the announcement couldn't come at a worse time," Doug Wilson, president of the Illinois Corn Growers Association told Dow Jones Newswires. "Most  producers have their seed in their shed and it's hard to make adjustments. We're in prime planting time."

"Both of those products (Roundup Ready and Bt) are going to be planted by  a lot of producers," said Illinois Corn Growers Association spokesman Mark Lambert. Asked if the announcements were bad news to producers, Lambert replied, "Sure it is from the perception standpoint. People are going to see that they're not accepting the product and they're going to assume that it's  something wrong with it."

Following initial conflicting press reports Cargill Inc., the world’s largest grain trader,  reassured U.S. corn growers that it will be accepting delivery of genetically modified corn that has not yet been approved for shipment to the European Union.

After it was initially reported that Cargill had joined other industry players in boycotting the genetically modified products, Linda Thrane, with Cargill, reconfirmed that the company will be accepting delivery of genetically modified corn, such as hybrids developed to withstand post-emergent applications of certain chemicals like Monsanto's Roundup.

There are also some Bt corn varieties that aren't currently accepted by the EU. The Bt variety is named for the naturally occurring bacillus thurgiensis toxin that is lethal to corn borers and other caterpillars. Genetically engineered to contain Bt, the plants kill many pests as soon as they chew  into the stalk.

While Cargill is concerned about keeping the GMO product out of supply pipelines that send processing byproducts to Europe, Thrane noted,  the company's grain buyers would be able to work with farmers to buy the corn for domestic uses, including animal feed.

Meanwhile, Monsanto Inc., which entered into a marketing "alliance" with Cargill in 1998, announced that it  plans to help U.S. farmers market the genetically modified corn that has not been approved by the EU.

"We would like to eliminate any confusion that exists regarding biotech  seed varieties which are approved for export," the company said in a letter to producers. "Following is the approval status of genetically enhanced corn products in the industry to ensure you have the most current  and accurate information. We also want to update you on the marketing  options for our corn products which must be used or marketed domestically  in 1999."

Monsanto's Roundup Ready corn has not been approved by the EU, but the company said in its letter that it has identified more than 1,500 U.S. locations "including elevators. feed mills and feed processors, that utilize grain for domestic purposes."

In the letter, the company said it was committed to finding domestic uses for non-EU approved corn varieties. "Today, nearly 80% of U.S. corn is used domestically, with 61% used for feed," the letter said. "We are committed and will find a destination for  our products not yet approved in the EU Growers can market their grain  from these corn technologies by feeding the grain on-farm, selling the  grain to livestock producers, and selling the grain to local elevators for  domestic use."

The EU imports up to 2.5 million metric tons of corn a year. The U.S. grows about 30 million acres of genetically modified corn, of  which five million to six million acres aren't approved by the EU, said Iowa-based consulting firm Pro Farmer.

Thrane said Cargill is also backing a plan developed by the U.S. corn industry, which includes seed manufacturers and national producer groups. The program will educate producers about what types of genetically modified corn aren't approved yet by the EU.

A limited release of Roundup Ready corn was available in 1998, but this is the first growing season where it will be widely available to U.S. farmers. Corn processing industry officials have expressed concern the EU will limit imports of U.S. corn gluten livestock feed if non-approved varieties show up in shipments. The market for the byproduct is worth about $600 million annually.


Impatient and frustrated with what it sees as the European Union's feet dragging on the authorization of imported U.S.-produced genetically modified organism (GMO) food products, the U.S. is currently searching for a way to put the GMO issue on the World Trade Organization agenda at the next round of global trade talks.

At the same time, however, the U.S. is continuing bilateral talks with the EU to
accelerate the Commission's approval of genetically modified corn developed by Monsanto Corp., Novartis of Switzerland, and Hoechst Schering AgrEvo GmbH of Germany.

Faced with the fact that it has no specific plan to raise the GMO issue at the WTO because there are no grounds for a trade dispute right now, unlike the cases of suspect beef growth hormones and Carl O. Lindner’s banana exports to the EU - U.S. sources insist that genetically modified crops "will have to be addressed somehow in the next round of talks." Consequently, the U.S. is now looking for a proper way to tackle the issue and define its position ahead of WTO meetings in Geneva this month and in Seattle in November.

Currently, the U.S. faces the prospect of being shut out of the EU corn market this year because of EU delays in approving the sale of genetically modified corn varieties grown in the U.S. At  least two gene-modified corn varieties grown in the U.S. have yet to be approved for sale in the EU.

The U.S. is anxious to see changes in the EU's approval procedure, known as the 90/220 process.  Under that process, scientific reviews take years while equivalent U.S. scientific reviews take only months, according to U.S. sources. In addition the U.S. is also frustrated with what it calls the "effective collapse of the EU's regulatory process for new genetically engineered plants and an incomplete and unworkable food labeling regulation for foods containing  genetically modified corn and soybeans," according to Peter L. Scher of the Special Trade Negotiator Office of the U.S. Trade Representative.

U.S. officials also blame European consumers' reluctance to accept food made with genetically modified produce on scare-mongering by Europe's media and ineffective public relations strategies by firms like Monsanto.

In the "life sciences" industry and the halls of the USDA, GMO crops are at least as safe as traditionally bred crops. "We're talking about tens of thousands of field trials and millions of people who have ingested these foods safely," Carl Feldbaum, president of the Biotechnology Industry Organization (BIO) in Washington, recently told the Washington Post’s Rick Weiss. "And before people ingested the foods, we're talking about agencies highly respected by American citizens -- the FDA, the EPA, the Department of Agriculture -- all signing off on the safety of these plants."
Philip S. Angell, director of corporate communications for Monsanto Co., blames Europe's rejection of biotechnology on a lack of public trust in food safety agencies there. In particular, he singles out the still-simmering "mad cow disease" fiasco, in which British government officials insisted for years that there were no human health risks from the bovine disease -- only to have that assurance disproved.
Yet, a continuing series of public relations disasters by Monsanto have also added to the problem. For example. according to a preliminary ruling by Britain's official Advertising Standards Authority last month, a $1.6 million Monsanto advertising campaign sought to deceive the public by expressing opinions as accepted fact and making scientific claims that were "wrong" and "misleading."

Another factor, David Atkinson, vice principal for research at the Scottish Agricultural College in Edinburgh, pointed out to the Post’s Weiss is that Europeans are more attuned to what's happening in the countryside than Americans are. "Look," he said, pointing out the window of his second-story campus office. "Edinburgh is the fifth-or sixth-largest city in the United Kingdom, and we can look out the window and see countryside and see farming. . . ."


Citing the failure to comply with federal safety codes the Brazilian government recently
destroyed a test plot of genetically modified rice in the southern state of Rio Grande do Sul operated by the local unit of AgrEvo, the agrochemical joint venture between Germany's Hoechst AG and Schering AG.

"The whole rice crop will be destroyed. The secretary is already on site and is overseeing the operation," a spokeswoman for the state's Agriculture Secretary Jose Hermeto Hoffamann told Reuters Phil Stewart. Authorities began ripping the crop out of the ground on April 22 she said. The crop would later be burned.

Andre Abreu, who head's AgrEvo's Brazilian biotechnology program, said the test plot was a key step in the company's long-term plan to sell LibertyLink rice in Brazil.

Currently, Rio Grande do Sul's government, is seeking to ban all transgenic crops, having already previously threatened to destroy the 2-hectare AgrEvo test plot as well as Monsanto's 435-hectare plot, where its local unit is reproducing herbicide-resistant Roundup Ready soybean seeds while the company is currently wading through the legal process of registering them for domestic sale

When Brazil's Commission for Biological Security (CTNBio), which has been criticized for being too friendly to multinationals, broke Brazil's historic ban on transgenic crops in 1998 by approving the safety of Monsanto Co.'s Roundup Ready soybeans it opened a floodgate of controversy in Latin America's agricultural giant. Environmental groups led by Greenpeace have been teaming up with farmers worried about losing business to transgenic-wary European consumers to oppose the testing.

CTNBio, however, gave its first-ever authorization to destroy a transgenic test crop. It argued AgrEvo did not provide the necessary covering or buffer zone to prevent contamination of nearby non-genetically modified crops.


With years of experience in selling and distributing perishable products , strong brand recognition, and existing "relationships" with supermarket chains Dole Foods and Sunkist Growers Inc. are about to enter the $15 billion floral business.

Currently the U.S. is the largest market of worldwide fresh flowers although it ranks 13th in capita consumption just behind Slovenia.

Risking, according to industry sources, the reputation of their overall brand names in pineapples, bananas, oranges and other fruits the two companies will be faced with maintaining the quality and freshness of their flowers. Floral industry surveys, according to the Los Angeles Times, show that Americans limit their floral purchases because they consider fresh flowers a poor value--too expensive and not long-lasting enough.

Sunkist flowers, therefore, will come with a seven-day replacement guarantee, and packaging is stamped with a sell-by date, like milk, while Dole will time its delivery schedules to supermarkets so that its flowers never sit on supermarket shelves for more than two or three days.

Some supermarkets --- Ralph's, Albertson's, Von's, Safeway ---  already sell their own house brand of flowers. The move into branding, according to the Times, is part of a larger trend of consolidation in the highly fragmented floral business, one of the last still dominated by mom-and-pop businesses and with few national brand names.

Dole and Washington-based U.S.A. Floral Products Inc., a flower wholesaler that has licensed the Sunkist name, are buying up growers, importers, wholesalers and bouquet makers--consolidating what insiders say is a diffuse distribution system. The companies have been able to trim costs and the time it takes to get flowers to market--factors which will be essential to the potential success of the Dole and Sunkist brands.

The latest move to brand-name flowers is also a challenge to the nation's some 40,000 independent florists who will more than likely be faced with the choice of selling out their business or closing their doors rather than compete with the supermarkets, while others, according to industry sources, will benefit from the increased awareness of flowers generated by increased supermarket advertising.

Although supermarkets will offer consumers a convenient place to shop for flowers, the one big hurdle facing Sunkist and Dole is that they must rely on supermarket employees to properly maintain flowers and remove old bouquets from the shelves. Dole and Sunkist are currently training supermarket employees on flower-handling.


"It is one thing to say with the prophet Amos,
'let justice roll down like mighty waters,'
and quite another to work out the irrigation system."
--- William Sloan Coffin