EXAMINER Issue # 38 June 17, 1999
Monitoring Corporate Agribusiness From a Public Interest
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"INHUMANE AND UNSAFE WORKING CONDITIONS"
"The most extraordinary aspect of the national furor over The Jungle, with its international repercussions, was that public attention was concentrated almost exclusively upon material regard by Sinclair as incidental, mere background and local color for his major theme which was the oppression of the Packinghouse workers." --- "Afterword," by Robert Downs, The Jungle by Upton Sinclair, Signet Classic, N.Y.,N.Y.: 1906.
Concerning such initial public reaction to The Jungle, Sinclair later wrote in keen disappointment, "I aimed at the public's heart and by accident I hit in the stomach." Today, nearly a century later since the publication of The Jungle, with the nation's attention again concentrated on contaminated meat, e-coli scares, "mad cow disease," etc., the meat packing industry continues to show little empathy for its workers as a consuming public has become indifferent to the plight of the industry's workers and producers.
Protesting what they claim are "inhumane and unsafe working conditions" some 1300 immigrant workers at IBP's Pasco, Washington plant have now gone on strike. The workers, while represented by the Teamsters Union, walked out on their own on June 4 after IBP's plant managers refused to slow down the facilities assembly production line. A strike vote was called for and approved on June 9.
Current starting pay for the workers, many who have been recruited from Los Angeles and Orange County in California, largely through Spanish-language media with a majority of them immigrants from Mexico and Central America, is around $7 an hour. In demanding better wages and working conditions, such as more frequent bathroom breaks, David Martinez, a spokesperson for the workers, said "what they want most is dignity and respect."
Currently, IBP is the nation's largest meat packing company with some 45 production facilities in the Midwest and Pacific Northwest. IBP spokesman Gary Michelson said the company had already shifted some of the Pasco slaughtering operations to other plants. He denied the workers' allegations. For "competitive reasons," IBP declined to say how much of its total production the Pasco plant accounts for saying only that it is a medium-size plant, smaller than some of the company's Midwest facilities.
Curious, in reporting the news of the strike the Dow Jones Newswire made no mention of the workers concerns for their working conditions, but choose to frame the entire situation in terms of better wages.
IBP and Teamsters Local 556, which represents the unionized employees, have been involved in negotiations on a new contract since March, Mickelson said. He said the previous contract expired May 30 and that since then union members were working without a contract while negotiations continued.
As reported in Issue #34 Operation Vanguard, the federal government's effort to cleanse the nation's packinghouse work force of illegal immigrants, has already slowed down the slaughter of beef as hundreds of workers, many with questionable immigration papers, are fleeing their jobs to avoid interviews with the Immigration and Naturalization Service (INS).
Thus, notorious in their efforts to sabotage organized labor and its efforts to insure just wages and working conditions for packing house workers, the nation's beef packing industry, led by IBP, its leader, is currently beginning to live a nightmare of its own making.
At the same time, the nation's cattle industry which has lost a reported $2.5 billion from late 1997 through 1998 because of low prices is also suffering from the slowdown, while the nation's major meat packing companies such as IBP, Excel (the Cargill subsidiary) and ConAgra have been reporting record profits achieved primarily through cheap labor and pricing schemes like captive supplies and formula pricing.
Operation Vanguard is a program initiated by the INS to solve a longtime problem of undocumented immigrants, most of them from Mexico, who in some cases have been actively recruited in Mexico by corporations like IBP. It is an attempt by the INS to tackle the problem through "cooperative efforts," rather than raiding plants and arresting workers by the hundreds, sometimes causing shutdowns.
Packers claim it will take months to recruit and train new
workers to replace those who left. The nations beef packing
industry already has the highest rate of turnover in the U.S.
than any other industry.
LOW CATTLE PRICES DUE TO POOR BEEF DEMAND
"Next time you hear an industry person or some economist or forecaster say the problem is beef demand, you call him a liar. Beef demand is excellent and continues to improve. The thing we have worked so hard to make happen is happening, but we are not receiving the rewards. Your Check-Off dollars are at work making the meat packers of this country wealthier."
In charging that so-called "supply and demand" no longer exists in the cattle market Max Thornsberry, President of the Missouri Cattlemen's Association, refuting industry arguments that because demand is slow prices for cattle remain low, recently pointed out that "demand for beef is excellent.
"Boxed beef prices last year were about $102.00 per hundred weight and live cattle prices were about $66.00 per hundred weight. Last week boxed beef sold for $110.00 to $111.00 per hundred weight. The very best market ready steers averaged $63.50 per hundred weight. Those in the know keep telling us who produce that the problem is demand. Get the demand up and the price will go up! What is good for the packer is good for the producer. Not so!! "
Quoting Les Messinger, a well-known futures trader from Chicago. "We also continue to hear a good deal of garbage rhetoric about how our main problem is poor or reduced beef demand. Beef demand remains so poor that retailers continue to show record profits while the world's largest beef packer [IBP] showed a first quarter profit increase of slightly over 400%. Demand remains so poor that during the past six weeks of very heavy cattle slaughter (over 680,000 per week average) packers received an increase on light weight choice boxed beef of $6.08 per hundred weight.
"The price on March 31 was $104.11 compared with the price today of $110.19 per hundred weight. Despite this increase in wholesale beef prices, we see that not only has none of it been passed on to the producer, but rather the producer is now looking at a live market that is $2.00 per hundred weight lower than it was a month ago."
"The packer," Thornsberry adds, "is paying $2.00 to $3.00 less per hundred weight for market ready cattle while he receives an additional $8.00 to $9.00 for boxed beef due to increased demand. Has any of `what is good for the packer is good for the industry' been passed on to producers who are losing their livelihoods? No!!! The president of the National Cattlemen's Beef Association, Mr. George Swan, wrote a letter to beef packers requesting they pass some of the profits from increased beef demand on to the producer. They thumbed their noses at Mr. Swan."
Thornsberry points to a severely limited market for fed cattle where no longer is there a ready market for steers and heifers, but one where simply producers must simply ask what the packer will pay in which the buyer hasn't even seen the cattle, but rather wants only to know how long they have been on feed.
"Gone are the days when several buyers would look at the pen on Monday or Tuesday morning and offer to bid on the cattle. Now the live cattle market is only open for a short period of time on Wednesdays, and it is not a market. You offer the cattle as ready for slaughter with no position for negotiation. The demand for beef has raised the wholesale price of boxed beef enough for market ready steers to bring $68 to $70 per hundred weight, but the one or two offers you receive are for $63.50. There is not enough competition," Thornsberry adds.
"There is no alternative for you. The cattle are ready.
You have to move them or they will get too big. It is the most
frustrating thing in the world to have a good set of market ready
steers that you know the packer will make another $100.00 of profit
per head on and none of it will be passed on to you."
ANOTHER CORPORATE HOG TO FEED AT THE TROUGH ?
Archer Daniels Midland (ADM) "Supermarkup to the World" is about to assume a major role in the U.S. pork industry, according to Betsy Freese, Livestock Editor of Successful Farming.
Currently, ADM now owns half of Consolidated Nutrition in Omaha, Nebraska, which has 14,000 sows in production in Colorado, Minnesota and Wyoming and the feed company MoorMan's, as well as ADM Animal Health and Nutrition, both now located in Quincy, Illinois. To top it off, ADM owns 13.3% of IBP and analysts, Freese reports, predict that share will get larger.
In mid-1997 ADM began its entry into the nation's meat industry by first purchasing ten percent of the stock of IBP, the nation's leading meat packer. Coupled with its surprise buy-out of MoorMans Manufacturing, a large, reputable animal feed producer in mid-September, 1997, ADM gained what the Agribusiness Council Inc. called a "jugular hold" on many IBP's suppliers. Today, for hundreds of miles encircling its processing centers, IBP finds itself in a "cozy relationship" with ADM, which controls the supply and price of animal feed.
Whether ADM would in fact outright purchase IBP is somewhat in doubt, however, based on a revealing conversation on October 13, 1994 when Mick Andreas, the company's vice president was discussing with fellow ADM executives Terrance Wilson and Mark Whitacre his father's [Dwayne O. Andreas] feeling regarding the possible purchase of IBP.
Andreas: Well (unintelligible). We had (ui) fifteen dollars a share, its now thirty. We had it offered to us but I turned it down , but the reason we turned it down was they had twenty, no fifty, twenty-seven thousand employees and all the OSHA and all the (ui) . . .
Whitacre: USDA and . . .
Andreas: Oh dad said you really want Randall (ui) twenty-seven thousand fuckin' wetbacks, OSHA, [ed. note: referring to the large numbers of Mexican workers hired each year by IBP and the various Occupational Safety and Health violations by IBP. At the time of this conversation James Randall was president of ADM and was later granted immunity during the government's lysine price fixing trial.] so I thought the thing to do, I thought was to buy it and then sell half of it to the Japanese sometime when your makin' money, like now, they're gonna import beef . . .
Andreas: Mitsubishi come in and say (ui)
ADM is "a network facilitator in many pork systems that own sows," says an ADM source who asked to remain anonymous. The company has agreements with several producers to purchase early weaned and feeder pigs, and arranges network producer purchases to disseminate the pigs.
For example, Freese points out, ADM guarantees a contractual price for the pigs from nearly 30,000 sows in Nebraska, Iowa, Illinois, Indiana and Ohio. The sows are all owned by independent producers, and ADM facilitates the placement of pigs on independent farms and does marketing arrangements on the back side.
With ADM's entry into the pork market it would be joining a who's who of U.S. corporate agribusiness since the top ten pork producers in the nation now include, according to Successful Farming: Murphy Family Farms, Carroll Foods, Continental Grain Co., Smithfield Foods, Seaboard Corp., Prestage Farms, Tyson Foods, Cargill, DeKalb Swine Breeders and Iowa Select Farms. Likewise, five firms --- Smithfield, IBP, Swift, Excel (the Cargill subsidiary), Farmland Industries and Hormel --- control 75% of the pork slaughter business.
With 2.6 million sows, the 50 largest producers now market
or will market by 1999 half of the pigs in the U.S. figuring
their sows each produce 20 pigs a year.
ST. LOUIS, MISSOURI TO WASHINGTON, D.C.:
YOU CAN'T TELL THE PLAYERS WITHOUT A PROGRAM
With each passing day it is getting harder and harder to distinguish who is working for the U.S. Federal Government, headquartered in Washington, D.C. and the Monsanto Co., headquartered in St. Louis, Missouri.
The latest individual seen going through that revolving door is Dr. Michael A. Friedman who will leave his post as deputy commissioner of the U.S. Food and Drug Administration (FDA) July 16 to head clinical research at Monsanto Co.'s G.D. Searle & Co. unit. Friedman, who served as the FDA's acting commissioner from early 1997 until the end of last year, will be responsible for directing and implementing clinical research strategy at the company.
Friedman's move is only the latest on a trail that has seen Mickey Kantor, former U.S. Trade Ambassador join the Monsanto Board of Directors; Patricia Kenworthy, former legal counsel and Monsanto Washington lobbyist now working for the National Environmental Trust; Carol Tucker Foreman, who in recent years has been an outspoken lobbyist on behalf of Monsanto's rBGH, now returning to the Consumer Federation of America (CFA) to become director of a new Food Policy Institute for CFA, and Michael Taylor, a highly successful Washington lawyer at King and Spaulding, a premier D.C. law firm representing corporate clients including Monsanto, becoming associate FDA commissioner for policy and then rejoining his old law firm where within months Monsanto hired Taylor to direct its corporate strategy in Washington. [See Issue #37]
It it is with considerable irony that Dr. Jane Henney, FDA Commissioner said of Friedman's leaving that "the nation [Monsanto?] owes an enormous debt of gratitude to Dr. Michael Friedman."
Friedman, 55, also served as the FDA's lead deputy commissioner and deputy operations commissioner. He came to the FDA after 12 years of directing cancer research and therapy programs at the National Cancer Institute and worked with Congress on the agency's Modernization Act of 1997, Henney said.
"We are delighted to welcome Dr. Friedman to Searle," said Dr. Philip Needleman, Searle's co-president and chief scientist for Monsanto.
On another front John Stauber of PR Watch reports that the far-right Competitive Enterprise Institute (CEI) is launching a new campaign to defend the biotechnology industry against bad press, scientific and activist critics and government regulation. The campaign will be headed by Michael Gough, former manager of the Biological and Behavioral Sciences Program at the (now defunct) congressional Office of Technology Assessment. Gough is also co-author with former Monsanto lobbyist Steve Milloy of the book Silencing Science.
CEI will, in their words: "Cement alliances with scientists . . .; entering legal actions, and regulatory proceedings... and appearing at public meetings on biotech to counter outrageous claims about risks; monitor the activities of environmental and other organizations that call for more regulations; publicize that some of the greatest opportunities for achieving the goals of the environmental movement ... is the use of biotech.
Stauber adds that "CEI is well funded by the usual
array of industries and right-wing foundations. They
are well interwoven with their brethren in the Cato Institute,
the Hudson Institute, Heartland Institute, Consumer
Alert, and the other industry subsidized libertarian free
market anti-regulatory lobbies. They are very skilled at
media work and should definitely not be dismissed or taken lightly."
SUPER VALU'S "URGE TO MERGE"
SuperValu Inc., the nation's largest distributor of food to supermarkets, has agreed to buy Richfood Holdings Inc., the largest distributor in the mid-Atlantic region, operating about 100 supermarkets in states such as Virginia and Maryland, for approximately $858 million in cash and stock paying $18.50 a share, half in cash and half in stock, for each Richfood share.
The Minneapolis-based SuperValu said the combined company would have about $20.8 billion in annual sales and would operate stores under names including Metro, Farm Fresh, Shoppers Food Warehouse, Cub Foods and Shop 'n Save. The purchase gives Supervalu, whose 345 stores are now concentrated in the Midwest, a powerful presence in the mid-Atlantic and a springboard for expansion in the Baltimore-Washington market as Richfood's 55 Shoppers Food Warehouse and Metro stores in the region, as well the company's 38 Farm Fresh stores in Tidewater, Supervalu would boost its annual retail food sales by about 35%, to $7 billion.
Currently, Supervalu, which had $17.4 billion in total sales last year, operates stores under the Cub Foods, Shop 'n Save and Bigg's banners. Its closest stores to Washington are the Shop 'n Save supermarkets in Pennsylvania, a company spokesman said.
Competitors Giant Food Inc. of Landover and Safeway Inc., the top two grocery chains in the Washington area, according to the Washington Post's Stephanie Stoughton were not surprised by Supervalu's announcement. But they acknowledged that Supervalu's deep pockets would make the continuing fight for market share here even more challenging.
"The supermarket industry is very competitive, and we continue to see consolidation in every sector, from wholesalers to retailers to brokers," Gregory TenEyck, a spokesman for Safeway, told Stoughton "We feel we're well positioned in this market."
"We're not afraid of competition," said Hans Gobes, a spokesman for Royal Ahold NV, a Dutch grocery conglomerate and the world's largest supermarket chain and owner of Giant Food, the region's largest supermarket chain.
Currently, according to Food World, an industry publication four chains now control 88.77% of the Washington D.C. area supermarket trade (Giant 45.25%, Safeway 25.35%, Shoppers 12.57% and Food Lion 5.6%).
Michael W. Wright, Supervalu's chief executive, said
in a Post interview that he has been eager to gain a foothold
in the Baltimore-Washington market. And already, he is looking
to step up expansion plans for the Shoppers and Metro
chains. "Our intentions are to grow them at a significantly
faster pace than Richfood, simply because we have a larger
capital base," said Wright, who added that it was too early
to provide details.
TODAY THE U.S. AND EUROPE, TOMORROW THE WORLD ???
Faced with Europe's tight zoning regulations, which make it almost impossible to build big, new stores, leaving entrants into the businesses of supermarkets and large mass convenience stores known as hypermarkets no option but to acquire existing chains, Wal-Mart, the world's largest retailer, has announced plans to buy Asda Group PLC, Britain's third-largest supermarket chain for $10.8 billion in cash.
The purchase is expected to ignite a potentially devastating price war in the United Kingdom as Wal Mart's announcement came only days before Asda, the dominant low-cost discount market in Britain, had been set to conclude a $9.6 billion all-stock deal announced April 16 with Kingfisher PLC, Britain's sixth-largest retailer. Kingfisher, however, says it will not sweeten its offer, but left it formally on the table.
Asda, with its 229 British stores generally 50% bigger than those of its competitors, works on low margins and sells a wide range of discounted, general goods. In 1998 it earned 317 million pounds, or about $512 million, on sales of 9.8 billion pounds.
"We are dealing with Asda as a company that is very similar to ours in culture," Donald Soderquist, senior vice chairman of Wal-Mart, which is based in Bentonville, Arkansas, told the New York Times Alan Cowell. He acknowledged that the Kingfisher-Asda deal had spurred Wal-Mart's bid: "From time to time in the past, we've held talks, but not about an offer. The Kingfisher merger created the opportunity to look at it and become serious about it."
Allan Leighton, Asda's chief executive, said: "The way we operate is based mainly on ideas we pinched from Wal-Mart. So from a colleague point of view, this is pretty much the perfect deal."
Wal-Mart's announcement follows its acquisitions in Germany, where it bought the Wertkauf chain in 1997 and the Spar Handels hypermarket chain last year, seeking to spur new growth in Europe as the United States market becomes saturated.
The Asda acquisition, however, will still leave Wal-Mart
considerably short of a commanding position in the European market
that would enable it to squeeze concessions out of suppliers.
"They have a huge way to go," said Richard Perks, a
retail analyst with Corporate Intelligence, a consulting
firm, echoing the views of other analysts. "In the U.K. they
bought a business. In Germany we are going to see them create
a business." And, because of strict European zoning laws,
he said, "if Wal-Mart wants to expand elsewhere in
Europe, it's going to have to do so through acquisitions."
GREEN GROW THE PROFITS
Long believed to be the case, a recently released study by the Henry A. Wallace Institute for Alternative Agriculture confirms that "farm profits from organic cropping systems can equal or exceed profits from conventional rotations in the Midwestern United States, and is consistent with the recent increase in Midwestern (and national) acreage under organic production."
The study, "The Economics of Organic Grain and Soybean Production in the Midwestern United States," was designed to help farmers, policy-makers, and others better understand the profitability of organic agriculture. Rick Welsh, Wallace Institute policy analyst, analyzed a set of diverse academic research studies comparing organic and conventional grain cropping systems. Following a comprehensive review of the "best science" available on the subject, Dr. Welsh provides an assessment and summary of the conditions under which growing organic crops is profitable.
The Henry A. Wallace Institute for Alternative Agriculture is a nonprofit, tax-exempt research and education organization established in 1983 to encourage and facilitate the adoption of low-cost, resource-conserving, and environmentally sound farming systems.
When organic systems were more profitable than conventional rotations, according to the study, it was due to one or more factors, including:
* lower production costs;
* higher net returns for crops grown in the organic rotations; and
* drought hardiness, allowing higher performance in drier areas or during drier periods.
In recent years, the study notes, there has been dramatic growth in the U.S. and worldwide in the production of and demand for organically produced food and fiber. In addition, a growing number of consumers have been willing to pay premium prices for organic products, which has induced processors, in many cases, to pay premiums to farmers for organic grains. Nonetheless, the study found that premiums are not always necessary for organic systems to outperform conventional systems.
Beyond the economic benefits of organic systems in the U.S. Midwest, there are potential health benefits provided to farm-level workers and the natural environment. According to the report, "[g]iven the potential economic, health, and environmental benefits of organic production, a greater public policy commitment in research, investment, and education is needed." The author concludes with recommendations for state and federal agencies and private sector firms to advance organic agriculture.
Copies of "The Economics of Organic Grain and Soybean
Production in the Midwestern United States" are available
for $15 each from the Wallace Institute, 9200 Edmonston Rd., #117,
Greenbelt, MD 20770-1551. The report is also available online
at the Institute's Web site:
AT LAST !!!
& CALIFORNIA DANCING RAISINS DECLARE TRUCE
An "historic" peace agreement (no, not THAT one!) was reached last week in California and North Carolina, if not throughout Europe and the world, with the announcement that the Tar Heel state's Sweet Potato Commission had agreed Spencer Sweetpotato would forego his shades and saxophone in deference to the California Raisin Marketing Board and its dancing raisins.
"I love Spencer," said Sue Johnson-Langdon, executive director of the Sweet Potato Commission. "I loved the saxophone image. But it's not worth $100,000." That's what court costs would have run, according to the Associated Press, had the commission decided to take on the California Raisin Marketing Board.
Prior to California's protest, North Carolina's sweet potato promoters had used Spencer as its marketing mascot for two years without a word of protest. Last fall, however, the keen eye of the Raisin Board spotted Spencer with his saxophone and sunglasses in two trade newspapers, complained that he looked suspiciously like its raisins, which the board spent $100 million promoting in the late 1980s, and warned the commission in North Carolina, the nation's biggest producer of sweet potatoes, to cease and desist.
"One guise of our ex-grapes is playing the saxophone with high-top sneakers," said raisin board spokeswoman Kathy Moulthrop. "We have that trademarked."
"We never did think Spencer looked like the dancing raisin," said Johnson-Langdon, but the Sweet Potato Commission decided Spencer's image wasn't worth diverting one-fourth of the commission's entire yearly budget for legal fees.
After the raisin lawyers talked to the sweet potato lawyers they came to an understanding and instead of a saxophone, Spencer will not sport boxing gloves and become a cancer fighter.Celia Batchelor, whose 1995 fourth-grade class at the former Elvie Street Elementary in Wilson, North Carolina helped persuade lawmakers to make the sweet potato the state vegetable, admits she thought the sax-playing Spencer looked like the raisins.
"But I thought, hey, if you can get away with it, go for it."