The
AGRIBUSINESS
EXAMINER                            Issue # 35      May 26, 1999

Monitoring Corporate Agribusiness From a Public Interest Perspective
 

A.V. Krebs
Editor\Publisher
 

                                                 Editors Note
Although there is no subscription fee for THE AGRIBUSINESS EXAMINER, donations will, as always, be gladly  accepted. One of my subscribers says he pays $30 a year for 12 issues of a Health  letter, and my weekly will hopefully go up to 52 so he feels it is worth at  least the cost of a monthly newsletter.  I hope you agree. Checks made out to A.V. Krebs, P.O. Box 2201, Everett, Washington 98203-0201 [NOT to "Agribusiness Examiner"] will continue to be received with much gratitude.

To those readers of THE AGRIBUSINESS EXAMINER who have already sent donations I want to express my sincere thanks for your continued support and interest in this venture. A reminder also to those who might wish to receive a weekly  e-mail edition of THE AGRIBUSINESS EXAMINER, please provide your NAME and E-MAIL ADDRESS. At this time THE AGRIBUSINESS EXAMINER is not available in printed form.
 

"SILENT SURRENDER":
HEART-WRENCHING BUT WOEFULLY FLAWED

A more heart-wrenching story of Minnesota farmer Lowell Nelson you could not have found, but as is the usual case with the main stream media these days ABC-TV’s "Nightline," with host Ted Koppel, totally missed the real story of our nation's family farmer's epic struggle to merely survive in the program's recent "Silent Surrender" essay.

Lowell Nelson was born, raised and had his own sons on his Red River Valley land, a fertile 400 acres he bought from his brothers 35 years ago after his father died. But this spring, he's not planting anything. When the program was originally filmed Nelson was already faced with financial ruin, but in the intervening weeks prior to the broadcast of the program, Nelson suffered a shredding of his aorta associated with heart disease. Five hours of surgery saved his life, but half his voice box is paralyzed  and he now walks only with assistance likely never able to take anything but a desk job.

Nelson's farming problems were blamed on El Nino, El Nina, wheat scab, the decline of the Asian market, Russia's economy, Canadian imports, high machinery costs, burgeoning debt, etc., etc, but never once was the corporate consolidation of agribusiness with its record corporate profits being registered almost monthly while farm commodity prices sink lower and lower, even mentioned or much less alluded to during the course of the essay.

Meanwhile, as ABC correspondent Kevin Newman, reported, the thoughts today in the heartland of suicide for many farmers is wide-spread. Interviewing Val Farmer, a local Midwest psychologist who counsels farmers on a national radio program he elicited this response to a question about depression

VAL FARMER: "Oh, yes, it's been a dramatic increase this summer and fall and spring. It's remarkable what's going on here.  It's a very common thing, even with ordinary depression in our society, suicidal thoughts are one of the main symptoms of depression. And so it just goes with the territory. How many people actually act out on the suicidal thoughts is probably pretty minuscule but in terms of a common thing out there, yeah, there's a lot of suicidal thinking going on."

KEVIN NEWMAN: "Among farmers?"

VAL FARMER: "Among farmers, right."

About the closest "Nightline" came to getting to the heart of the matter was in this exchange between Newman and John Everett, who left farming a few years ago and now heads an agency that helps farmers in the region, follow his path.

JOHN EVERETT: "You know, the estimates are that there's probably 50 percent of the farmers that are in serious trouble. Not that many are in foreclosure, but there certainly are that many who are considering trying to figure out whether or not they should, should find a way to exit and that certainly is a number that's probably double what it was a year ago."

KEVIN NEWMAN:  (on camera) "It's not just happening in this corner of America. Nationwide, farmers' incomes dropped an average of 12 percent last year. And it's happening at a time when the country as a whole is enjoying its longest period of prosperity in more than 30 years. Farmers see and hear that and it makes the sense of failure worse."

MIKE MAIDENBERG: "There is a great deal of bitterness in farm country about that."

KEVIN NEWMAN (Voice Over): "That's Mike Maidenburg, the publisher of the Grand Forks Herald."

MIKE MAIDENBERG:  "The booming economy, the Dow Jones at 10,000 and things like that, that really is not what is being felt in this area. You know, we look at the price of wheat, we look at the price of soybeans, we look at the export markets and we don't see that happening."

KEVIN NEWMAN (Voice Over): "Here's what many farmers see happening, the prices they can sell their crops for falling and predicted to stay low for the next few years. Tonight, wheat prices are down 42 percent from their 1995 high. Corn prices are down 38 percent. Oats and barley down 32 percent. These are levels even lower than the last farm crisis in the mid—'80s."

Despite the fact that the "Nightline" report obsessed over the symptoms of the latest chapter in America's permanent  agricultural crisis and not its root cause there came at the end of Newman's report a rare moment of candor.

KEVIN NEWMAN: "Farmers have weathered these cycles before, but this is the first time without a safety net since the Depression. In many ways, a restructuring is underway every bit as severe as industrial America endured a decade ago. But this one has gone largely unreported."

MIKE MAIDENBERG:  "Maybe it's compassion fatigue. Maybe it's, you know, other things. I've been struck by the fact that our national, the national media, The New York Times, The Washington Post, neither of them have correspondents anymore that cover agriculture."

KEVIN NEWMAN (Voice Over): "And among the three major network newscasts last year, out of 1,569 economy related stories, 389 of them tracked the surging stock markets but only 17 talked about the severe recession hitting farmers."

MIKE MAIDENBERG:  "Until the crisis comes at the retail level, the food price level, which it has not happened, then, you know, then there isn't a popular understanding of what is going on."

Yes indeed, Bill Robbins and Ward Sinclair, we mournfully miss you and  your reporting skills.
 

DAN GLICKMAN EXPLAINS THE FAMILY FARM CRISIS:
"THE PLAGUES OF THE WORLD HAVE HIT THESE PEOPLE"

As if the American family farmer's plight was not tragic enough to add insult to injury in the last part of ABC-TV's "Nightline" essay on "Silent Surrender," Ted Koppel interviewed USDA Secretary Dan Glickman and Glickman managed to give probably one of the sorriest performances ever seen by an Agriculture Secretary on national TV.

Time after time Koppel fed Glickman questions, originally designed by Koppel assuredly as establishment softball questions, but nevertheless within their framework were the seeds for Glickman to state a forceful and forthright case for the nation's family farmers and time after time he totally whiffed.

To cite some examples:

TED KOPPEL:  "Even as we have had this booming economy, there has been a sagging economy in Asia, as Kevin mentioned. Has the worldwide economy had a terrible impact on American farmers and how widespread has that impact been?"

DAN GLICKMAN:  "It is widespread although it tends to affect the row crops and livestock more than it affects, let's say, fresh fruits and vegetables in let's say California, Texas or Florida, although they have not gone unescaped from the dangers as well. But look, we've had three record years of world grain production—1996, 1997 and 1998 were all record years. Then you have this Asian collapse. Then you have Russia, which used to be a big market for us in grains and in poultry and China, which used to be a big market in corn and soybeans and other commodities and all this happened at the same time. Then underlying this all is a farm bill that was passed in 1996 which does not provide the safety net during down years like the old farm bill did . . . "

TED KOPPEL: "You're talking about the farm subsidies?"

DAN GLICKMAN:  "That's correct."

Rather than correct Koppel and emphasize that what was taken away from U.S. farmers in 1996 under the guise of the Freedom to Farm bill were not "subsidies," but instead price supports which had been allowing the nation's farmers to continue producing food for consumers while corporate agribusiness at the same time continued to pay ever-increasing below cost of production prices for the farmer's raw material production, Glickman only perpetuated the myths surrounding  farm subsidies.

TED KOPPEL:  "In the, in the sort of clinically emotion—free way that we have of talking about economic things, is this a cleansing process? In other words, are we eliminating the less successful farmers so that perhaps two years, three years, five years from now farmers in general will be doing better?"

DAN GLICKMAN:  "Well, we thought that was what would happen in the late '70s and early '80s. But what's happened since the Second World War is there's been a massive consolidation in agriculture and farmers and ranchers have become bigger and bigger and bigger and to some extent that is the economics of the modern age at work. But what it has also done, it has produced a depopulation of rural America. You have vast segments of rural America and small town America that have just, people have left in great numbers. Now, I don't think that's good for the social structure of the country, as well.  In addition to that, the fact of the matter is even with all of our farm programs, we still have the cheapest food in the world per capita in the United States. We're below anyplace else in the world. The programs that we have had over the last 50 or 60 years."

Perpetuating still more wornout cliches and myths --- the disappearance of "inefficient" farmers and the "world's cheapest food" --- Glickman again totally abrogated his responsibilities as a public servant to speak the truth.

Clearly, the so-called "inefficient" family farmer has long since disappeared from the American agricultural scene for in large measure those farmers that are being forced out of agriculture today are the same ones that only a few years ago were being called our most efficient farmers while at the same time they were being led down the primrose path by the "conventional wisdom" of USDA's policies, land-grant college research and corporate "bottom lines."

Similarly, the myth that the U.S. has the world's cheapest food repeatedly ignores the fact corporate agribusiness have become masters at externalizing their costs, making the public pay additionally for its food through the tax structure, through untold costs to the environment and through, as "Silent Surrender" clearly illustrated, human suffering.

At the outset of his Koppel interview Secretary Glickman commented that "It's almost like all the plagues of the world have hit these people."  Those "plagues of the world" are not, however, what Glickman choose to characterized as "weak wheat prices . . .  the influence of Canadian grain imports . . . natural disasters, floods, droughts . . .  a fungus, a disease that strikes the wheat called scab,” but rather go by the names of Cargill, Continental, ConAgra, ADM ("Supermarkup to the World"), Chiquita, Monsanto, Tyson's, IBP, Smithfield Foods, etc., etc.
 

TELLING THE "BIG LIE" ON "NIGHTLINE"
AN OPEN LETTER TO SECRETARY GLICKMAN

At the conclusion of ABC-TV's recent "Nightline" essay on "Silent Surrender," host Ted Koppel ended the program stating:

TED KOPPEL: "Secretary Glickman, thanks very much. A very depressing story, actually, and nothing you said made it sound any better."

DAN GLICKMAN: "Well, we'll keep doing our best, Ted."

For thousands of our nation's family farmers, independent cattle and pork producers, farm workers, food industry workers Glickman's "best" has been a woeful failure. His appearance also enraged many of those same people, including Mike Callicrate, a St. Francis, Kansas cattle feedlot operator. In a poignant and straight forward letter the following day Callicrate told the USDA Secretary bluntly what he thought of his performance:

Dear Secretary Glickman:

ABC's May 18th Nightline episode "Silent Surrender" accurately portrayed the condition of farm and ranch families. Agricultural producers are not only feeling hopeless, helpless, depressed and are not just thinking about suicide, they are committing it. As Secretary of Agriculture you would know this if you read your own recent Small Farms Commission report, which contains many solutions to this now critical agriculture and human crisis. In fact, as your report describes, suicide is the leading cause of death among farmers and ranchers.

Mr. Glickman, the loss of American agriculture has not been caused by El Nino, wheat scab, bumper crops and other "plagues of the world," as you described. No, Mr. Glickman, it's not God's fault. Such excuses as told to "Nightline" are only a cover up and spin for inaction.

This human catastrophe is man's fault. It is a failed and deeply flawed agricultural policy. It is a total failure of law enforcement in regard to market protecting antitrust laws. It is your government policy of promoting the elimination of "excess human resources" (farmers), through bankrupting low commodity prices. It is your government's promotion of agricultural concentration, industrialization and the corporate control of our food system. It is the totally flawed concept of free trade and globalization. China is now becoming a major food exporter, the opposite of the great export market the USDA has promised.
 
Today, consumers are paying record high food prices as the farmers who produce the raw commodities with 1999 expenses go broke receiving 1930's crop prices. Meanwhile, the middleman processor and distribution companies are posting record profits. Mr. Glickman, these campaign contributing, twenty five percent return on investment, multi-national corporations are stealing from the farmer and the consumer as you and others in the administration stand by and do nothing.

With clear evidence to the contrary, USDA has recently reported that the meat packing monopoly is not depressing livestock prices. Continuing the war on the family farm, USDA allowed independent pork producers to be virtually eliminated by predatory meatpackers during the last year, and now USDA's Steve Martinez reports that this transition to vertical integration, as with poultry, is good. Poultry farmers are now describing themselves as indentured servants to their corporate slave masters.

This agricultural tragedy is avoidable. It is truly suicidal and disastrous for our country to lose our safe and dependable food supply in the interest of political gain and the corporate pirates of global free trade. Adequate food reserves are also a national security issue. It is wrong to call these reserves "oversupply," and use them to depress prices paid to farmers. USDA must stop promoting overproduction and stop their policy of force feeding unwanted commodities onto the world market. This policy not only devastates U.S. producers but also the developing agriculture and independent producers from other countries. This policy does not promote peace, but fuels hate and discontent. We don't need to feed the world; the world just needs to be fed.

It is within your power as Secretary of Agriculture and additionally with the U.S. Justice Department's Antitrust Director, Joel Klein, to immediately enforce current antitrust laws restoring fair markets to producers. You and Joel Klein can stop the corporate theft and eliminate price fixing and market manipulation. Mr. Glickman: the enforcement of these antitrust laws will restore competitive markets, thereby fairly distributing the consumer food dollar throughout the food system and back to the farm. Farmers don't want your taxpayer-funded handouts; they want fair markets and sound agricultural policy. You have the solution within your hands. It just doesn't make sense to forego it with the "Big Lie." Farmers and ranchers all across America are looking to you for immediate corrective action.

Sincerely,

Mike Callicrate
St. Francis, Kansas
 

"IT'S TIME TO RESIGN, MR. SECRETARY"

Readers of Issue #15 of THE AGRIBUSINESS EXAMINER will recall at that time, given the current crisis in American agriculture, we believed it was time that USDA Agriculture Secretary Dan Glickman step down and give the Clinton Administration the opportunity of placing a person in that office who will not be afraid to speak truth to corporate power.

As we wrote then:  "`The husbandman that laboreth must be the first partaker of the fruits' is the inscription from St. Paul that appears over the portico of the USDA headquarters in Washington, D.C. Unfortunately, however, the principal occupant of that building USDA Secretary Dan Glickman has not only ignored St. Paul's charge but has in the past five years repeatedly exhibited an inability to stand up to the self-interest motivated policies of corporate agribusiness.

"When one reviews Secretary Glickman's tenure in office it is clear that his record is strewn with the`sins of omission,' unlike those `sins of commission' that has become the hallmark of the President who appointed him to head the huge government agency."

In a  "Bill of Particulars" we cited how Glickman has vacillated, hedged and ignored vital farm and food issues during his tenure such as: refusing to act on the question of captive supplies and formula pricing in the cattle market; failure to enact adequate food labeling; championing the bioenginneering of unlabeled food products; encouraging research on and promoting terminator seed technology; endorsing poorly-tested rBGH, the bovine growth hormone, in cows; ignoring inadequate animal and plant health safety measures; allowing watered-down, corporate agribusiness friendly organic food standards to be considered; brushing aside human rights violations in China while seeking to promote trade with that country; subsidizing corporate agribusinesses, such as rewarding felonious corporations with USDA contracts, and general inaction in the marketplace as the urge to merge continues unabated.

One also wonders, for example, why if Glickman was as adamant in fighting the U.S. food conglomerates as he is currently in fighting the European Union (EU), we wouldn’t have some tough  anti-trust enforcement. While USDA estimates the EU ban on U.S. imported hormone fed beef costs a potential of $212 million in exports other department figures have estimated that the current concentration in the U.S. beef packing industry is costing the nation's cattle producers  an estimated $10 billion a year in revenues.

Clearly, we noted, "the nation's farmers, consumers and taxpayers need a Secretary of Agriculture who will serve their best interests and not one so beholden, as has Secretary Dan Glickman been to the corporate elites who today shape much of our farm, food  and agricultural trade policies.

"Alma, Kansas farmer Stephen Anderson got it right recently in a letter-to-the-edtitor to his local paper when he wrote that `Glickman has clearly demonstrated incompetence to act decisively with positive measures of relief for America's disastrous farm economy,' his `refusal to enforce federal law on monopolies has allowed the meat packing cartel to virtually destroy the family-farm sector of the livestock industry' and with Depression era buying power of grain prices, `the announced further consolidation of the grain trade has only elicited more perfidious pandering to the agri-giants and  the elimination of competitive markets by the Secretary of Agriculture.'

"`No amount of white washing or hyperbole,' Anderson concludes, `can conceal the disastrously dismal record of Glickman's tenure as Czar of American Agriculture.'"

After reviewing Glickman's recent performance on "Nightline" this editor can only once again ratify Anderson's call and as forcefully as one can say it: "It's Time To Resign, Mr. Secretary."
 

BAD AND GETTING WORSE

USDA's Chief Economist Keith Collins has told CongressDaily that the situation for American agriculture "does not look promising for the 1999 to 2000 period. There is no evidence that the recovery in Southeast Asia is making any meaningful kind of impact on export numbers in 1999.

"With no acreage controls and [agriculture] operating at full capacity, you need export growth," Collins added, "It's shocking when you look at the level of ending stocks," referring to commodities on hand that depress prices. The wheat situation may improve slightly, he said, due to lower plantings this year, but the only commodity price that may substantially rise is beef - and even then not before the fourth quarter of 1999 or possibly 2000. Collins concluded, "An optimist would say consumers will get food at cheap prices."

Based on trendline yields and intended acreage, USDA believes soybean production has the potential of 2.88 billion bushels this season. Given usage projections for that crop, that could still result in a record amount of carryover on September 1, 2000. Carryout this September 1 is projected at 430 million bushels; 16 months from now, 595 million bushels. The previous carryover record was 536 million bushels.

Such a large supply cushion would allow for substantial crop problems to occur in the summer without creating much market activity. The average price received for the 1998 soybean crop sits at $5.05. But with a monster soybean crop anticipated this year, the initial price range for the 99-00 marketing year is a mere $3.95 to $4.75.

Corn production potential is estimated at 9.445 billion bushels with carryover increasing a year hence to 1.829 billion bushels.  The September 1 estimate for this current marketing year is 1.774 billion bushels). By "growing the crop on paper" and making usage assumptions up to 16 months in advance, USDA anticipates an average price range for corn in the next marketing year of $1.80 to $2.20. The range for the current marketing year now ranges from $1.95 to $2.05.

Based on actual yields and current conditions, USDA thinks all winter wheat production could be 1.615 billion bushels; near pre-report estimates, and reflecting a 14% drop in production from last year. Wheat acreage for HRW, SRW and White winter production is about 9% less than last year. Average wheat yield, based on May 1 conditions, is now forecast at 44.4 bushels per acre. That is about 2.5 bushels per acre less than 1998 record high yields.

Faced with such huge carryover supplies, a lack-luster export market and continuing below cost-of-production prices family farmers also are learning, as Gannett News Service's Ellyn Ferguson reports, that many of those farmers who survived the 1980s debt crisis thanks to a federal program that forgave their loans could be forced to sell their land to honor an agreement they signed.

The 10-year agreements, which are starting to come due, obligate farmers to pay the government 50% of the appreciation on the value of their farms.

Both farmers and their public interest advocates say this is not the time for the government to collect as farmers and ranchers continue to struggle financially with across-the-board low prices for their products and a weak export market. "Ten years ago, they thought farmers would be better off now. They were wrong," Harris Stevens, a farmer from Garden City, Missouri., who owes $100,000, told Ferguson.

Under terms of the agreements, an appraiser hired by the Farm Service Agency  determines the current value of the farm. The Agency takes the difference between the value of the land at the time a farmer received a loan writedown and the current value. The farmer then owes 50% of the increased value to the agency.

Farmers who sold their farms before their agreements matured paid the federal government 75% of their land's appreciation. Over the life of the program, the Agency has collected $34 million. Farm advocates say they have heard from few producers because the notices only recently started going out. But the farmers who have contacted them are worried they can't pay unless they sell their farms.

In character, Agriculture Secretary Dan Glickman has said he is "sympathetic" and has offered qualifying farmers up to three years to defer payments.
 

STILL ANOTHER MEGA MERGER
"AN AWESOME COMBINATION" WITH "GLOBAL HEFT"
 
A sure economic barometer one can usually use to measure the health of American agriculture is the farm machinery market and if recent events are any indication the evidence is quite clear family farming as the term is widely used today is currently in critical condition.

While Case Corp. and New Holland NV, two of the world's largest makers of farm and           construction equipment have become the latest effort in corporate agribusiness’s rush to consolidate, Deere & Co., has reported a 59% plunge in fiscal second-quarter net income as demand for farm equipment  continues to wilt.

Deere also warned that demand will fall further this year, and the company will have to shutter its factories for longer than expected to reduce inventory.

Case and New Holland officials, reports the New York Times David Barboza, believes that new synergies and productivity gained by their merger will create "an awesome combination with the kind of global heft" that would make the new entity a strong rival to Deere & Co., the world's largest maker of farm equipment.

Suffering through what analysts say is a nearly 25% drop in the sales of farm equipment in the last year, with little expectation that the farm economy would improve much this year stocks of both companies had been sharply depressed in recent months.

This merger deal calls for New Holland, which is 71% owned by Fiat of Italy, to pay about $4.3 billion, or $55 a share, for Case, creating a new company which is projected to have combined sales of nearly $12 billion. It will be based in Racine, Wisconsin, where Case is now headquartered. Jean-Pierre Rosso, the chief executive at Case who will head the new company, told a recent news conference here that he expected the company to save up to $500 million annually within the next four years.

The company will sell both the Case and New Holland lines of tractors, combines and construction equipment, however, administrative and other operations will be fused and financial services outfits united in a company that will soon be renamed.

"This is all about cutting costs," said Lisa Shalett, who covers the farm equipment industry for Sanford C. Bernstein. "This is a huge deal, but we won't see one of these for a while. This was the last stroke in an evolutionary consolidation of the farm equipment industry."

Wall Street analysts say that because the agriculture industry is already so highly concentrated and because the Justice Department is scrutinizing (?????) this concentration, it is unlikely there will be other such deals.

Don’t bet on it!!!!!

Todd Duvick, a food industry analyst at Bank of America, observed to The Times that low commodity prices and pressures from big retailers are squeezing farmers and middlemen, thereby reaching suppliers of farm products and equipment. And that, he said, was what led to the Case-New Holland deal, which was brokered by Credit Suisse First Boston; Goldman, Sachs, and Lazard Freres. "All of this is tied together," Duvick said. "This is a new era in agriculture, one in which we've already seen a major consolidation of the industry."

Meanwhile, Deere said it sees demand for farm equipment in North America down between 25% and 30% this year. At the beginning of the year, Deere said demand would fall by 20%, and in February, revised that to predict a 25% drop. Their most recent warning  indicates that the situation is worsening. Demand in other markets is seen dropping between 5% and 15%.

As a result of weak demand, Deere's major U.S. agricultural-equipment manufacturing facilities are scheduled to be shut down for about 25% of the working days during the second half of fiscal 1999, compared with 11% in the first half of this year and 5% for the second half of 1998.
 

"FAMILY FARMING CANNOT SAVE DEMOCRACY.
ONLY DEMOCRACY CAN SAVE THE FAMILY FARM"

A. Whitney Griswold, a political scientist and former president of Yale University, in a 1948 book, "Farming and Democracy," properly warned,

"We can expect no democratic miracles from agriculture or any other particular part of our economy. We can expect them only from democracy itself . . . The only sure source of democracy in any of these is a national well-spring that feeds all of them, not just a source among farmers, or, as we should say, among some farmers. The lesson is plain in history. Family farming cannot save democracy. Only democracy can save the family farm . . . "

Griswold also expressed the belief that the family farm's strongest claim on democracy, "the one by which it will either stand or fall as democratic political theory," is that for all its `corruption' by industry, business, and government, it is still "the outstanding form of individual economic enterprise."
 
He goes on to note,
 
"A family farm of the type and dimensions stipulated by our theory --- one `on which the operator, with the help of his family and perhaps a moderate amount of outside labor, can make a satisfactory living and maintain the farm's productivity and assets' --- affords scope for a citizen to live and work more or less on his own terms, to develop the initiative and resourcefulness, the sense of responsibility and the self-respect that have always and everywhere been considered among the greatest assets of democracy."
 
And, in concluding this thought, Griswold poses the quintessential question:

"If we still count them as such, not symbolically, but concretely and instrumentally, like our physical resources and our geographical position, we will support family farming as we will all socially constructive individual enterprise. The question is, do we really believe in free enterprise in these vital terms?"