EXAMINER                            Issue # 40      July 5, 1999

Monitoring Corporate Agribusiness From a Public Interest Perspective

A.V. Krebs

                                                 Editors Note
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Taking of hostages by international terrorists is a story that still assuredly attracts world-wide attention and immediate condemnation by the family of nations. Community hostage taking by multinational corporations, however, seems to make few headlines unless it happens in the community in which we or our families live.

Throughout the nation's heartland the latter form of hostage taking has become almost standard corporate operating procedure usually always done in the name of "corporate efficiency" and improving the transgressor's bottom line.

The nation's meatpacking industry, led by its number one packer IBP,  has practically written the text book on how to institute, carryout  and conduct this form of economic violence.

The most recent victim of such community-trust busting is New Hampton, a small northeast Iowa community of 3600 in the state's Chickasaw County. Some 651 of New Hampton's residents work at the local Sara Lee bakery plant,  five percent of the county's 13,000 residents.

In the early 1970's as New Hampton's farm economy began to show signs of deteriorating the town's local business community raised $285,000 to entice Sara Lee to open a bakery manufacturing facility.  In 1997 as Sara Lee threatened to leave, New Hampton the State of Iowa came up with another $1 million to help it renovate the bakery. Company executives said they would stay for five years at least, and the town threw a celebration beneath banners proclaiming, "Here Comes More Sara Lee Love."

After a month of rumors on April 29 this year plant managers told union leaders Sara Lee would announce within 30 days that it would close the plant unless the union found an alternative. "We had 30 days to come up with quote something unquote," Mary Rosonke, the business agent here for the Bakery, Confectionery and Tobacco Workers union, which represents about 470 of the 651 workers at the bakery, told the Chicago Tribune's R.C. Longworth.  "We tried to figure out what `something' was."

Chicago's Midwest Center predicts the loss of another 581 jobs in the region through the "ripple effect," and a total cost to government of $9.6 million through lost taxes and increased welfare costs over the next two years and while new jobs should be relatively easy to find, given the local unemployment rate of only two percent, they are unlikely to be as well-paying and steady as the lost jobs at Sara Lee.

Sara Lee, the union points out, claims it needed to save money by closing one of its three U.S. bakeries. Part of New Hampton's output, where employes were earning an average of $11.25 per hour, it said, would be shifted to a plant in Traverse City, Michigan., but most would go to a non-union and lower-wage bakery in Tarboro, North Carolina.

The plight of New Hampton appears part of Sara Lee's new strategy of selling off plants and outsourcing production, to concentrate on marketing. The company has called this three-year program "doing more with less," and says the policy, aimed at saving $3 billion, is a reaction to globalization and the demands of global capital markets.

What has distressed the workers and citizens of the town, however, is the company's absolute silence on the matter for while Sara Lee may be dealing openly with potential purchasers it has kept the town in the dark.

Herman Meyer, the town's economic development director, who calls New Hampton "a town that leads with its pocketbook," is eager to subsidize a purchase of the plant and help keep its jobs here. But Sara Lee executives have refused any information, including its price tag on the plant. They have not even told the town officially that they might be moving out.

Longworth reports that Sara Lee reportedly has ruled out a sale to at least one close competitor. But it has been vague about the possibility of outsourcing its production to the New Hampton plant, which is considered essential to give a purchaser time to find new markets. Meanwhile, Sara Lee refuses all interviews or any statement on the New Hampton plant, other than to say it is "not going to comment about any rumors or speculation."

"They never told us when they're going to close, how much they want for the building, are they going to knock the building down, whether they're going to leave the refrigeration," Mayor Klenske said. "We're just a little bitty community," he said, "but this is half of our industrial workforce. That is a hell of a dent. For what we've given them, we're entitled to a phone call from Chicago."

The New Hampton situation also appears to be yet another public relations gaffe by Sara Lee. The company likewise stonewalled the press and public last winter when a fatal outbreak of listeria was traced to a company meatpacking plant in Michigan.

As Longworth writes: "For New Hampton, this is a new and strange world. Like many Midwest farm towns, it sought industry 20 or 30 years ago to combat the decline of farming. Now it finds itself at the mercy of outside global forces that are becoming ever more distant and impersonal. Both workers and townspeople believe the plant is profitable, especially after the renovation two years ago, and are convinced that Iowa employees, imbued with the Midwestern work ethic, can outproduce North Carolina workers any day. They are baffled that this cuts no ice with Sara Lee."

"One role of small towns now is to subsidize Corporate America," New Hampton's senior city attorney Michael K. Kennedy said."We're so terribly vulnerable, when the bean counters are not located in New Hampton."


After learning of the news that Sara Lee planned on closing its New Hampton, Iowa bakery facility the Bakery, Confectionery and Tobacco Workers union, which represents about 470 of the 651 workers at the bakery, contacted the University of Iowa Labor Center, which immediately put it in touch with the Midwest Center for Labor Research in Chicago.

The Center quickly hired a consultant, David Pfleger, who came up with a potential buyer named Robert Kallen, a member of a Chicago bakery family, who went to New Hampton. Kallen told Sara Lee he needed more time to explore financing and come up with a marketing plan to sell the millions of pies, croissants, Bavarian pastries and other caloric products after Sara Lee leaves New Hampton.

Sara Lee gave him an extra seven days.

The union then sought help from Iowa's congressional delegation and the state government. Sara Lee agreed to another 30-day extension, reportedly after Republican Sen. Charles Grassley personally contacted Sara Lee Chairman John H. Bryan.

On July 1 the deadline passed with no word whether the company will close the plant, as threatened, or help sell it to another company, as its workers and the town hope. The question whether Sara Lee would hold firm to a deadline giving potential purchasers time to arrange a sale is also still open.

David who is trying to find a buyer, said he planned to keep working over the long 4th of July weekend, in hopes of having something firm to present to Sara Lee officials this week.

For New Hampton, the ties with Sara Lee are personal. Not only has the town twice subsidized the company, but James A. Schlindwein, who was president of Sara Lee when it opened the bakery here, is a native of New Hampton. Schlindwein, now retired and living in Houston, Texas is scathing about Sara Lee's plans to move out, about company arguments that the plant is outdated and about its backhanded treatment of New Hampton.

"Something's silly here," he said. "The equipment there is great. I visited the plant in 1997 and it looks like it was just built in the last five years.

"I think Sara Lee has a lot of responsibility to the community," Schlindwein said. "Any time Sara Lee wanted anything, the city was already there. I think they owe them a hell of a lot. It's horrible that they're not talking to them."

As David Greising, the Chicago Tribune's Business Columnist has adroitly noted that when Ed Haft, a top Sara Lee executive, came to the town's celebration two years ago celebrating the 25th anniversary of Sara Lee Corp.'s presence in the town, the locals bearing $1 million in aid to help Sara Lee build a new production line at the plant, he vowed  "We will make New Hampton the showplace of Sara Lee Bakeries.”
"Now," Greising writes, "Chicago-based Sara Lee has told its New Hampton workers that it is prepared to walk away from its commitment to stay there at least five years. It would leave behind a $4 million power plant expansion and a $2.5 million renovation of the sewage treatment plant --- both projects New Hampton earmarked for Sara Lee.

"Sara Lee is set to turn New  Hampton into a showplace, all  right. But not the kind of showplace the company talked about two years ago. New Hampton could become a showcase for the fly-by-night  trend of major companies in the modern economy," he adds.

"Companies come, hat in hand, to towns like New Hampton. They promise to bring jobs if the locals can just help out. They promise to become part of the community. They promise, as Sara Lee did, to make the city a showplace. They talk real nice to get what they want. Then at the slightest hint of trouble they blow out of town."


Continuing to practice its own tried and true form of corporate terrorizing, the nation's major meat packers, in an effort to destroy a newly passed South Dakota price reporting law, have stopped making cash livestock purchases in the state.

IBP, the nation's largest meat packer, and the John Morrell & Co.'s action came in defiance after U.S. District Judge Charles Kornmann of Aberdeen refused to grant an injunction against the law, which was passed by the state Legislature earlier this year. It requires packers to pay uniform prices for comparable-quality livestock and make those prices public.

The American Meat Institute, which represents U.S. meatpackers and processors, claiming the new law (South Dakota Senate Bill 95) in addition to other reasons, is "an unconstitutional attempt by the State of South Dakota to directly regulate interstate commerce…," sued the state last week to stop the bill from taking effect. Judge Kornmann set a July 26 trial date in Aberdeen.

A key point in the American Meat Institute lawsuit will be the interpretation of one sentence in the law which reads: "A packer purchasing or soliciting livestock for slaughter in this state may not discriminate in prices paid or offered to be paid to sellers of that livestock." The sentence is being interpreted in dramatically different ways. Morrell officials believe it could apply to livestock purchased in South Dakota, other states or Canada if the animal is to be slaughtered in South Dakota.

IBP contends that the law is vague enough that it could be applied to livestock purchases in South Dakota, regardless of where the livestock is slaughtered.

Critics of the law say it is poorly written and that imprecise language leaves it open to interpretation and, ultimately, to legal action. South Dakota Attorney General Mark Barnett, who will defend the law in court, said he couldn't discuss the intent of the law because of the court suit.

State Democratic Sen. Frank Kloucek, a Scotland hog farmer who helped win legislative approval for the law, said the packers are trying to strong arm farmers. "This is just a pressure tactic. but what the heck, we're going to stand up to the bullies," Kloucek told the South Dakota Argus-Leader's Kevin Woster. "It just shows their true colors." Kloucek was hesitant, however, because of the lawsuit, to offer his interpretation of the language. "No language is perfect, but it's clear enough," he said.

"How is South Dakota any different than Kosovo?" Kloucek asks. “Powerful corporations are committing genocide (defined as: the elimination of a culture). We are being bankrupted by the unfair, abusive and anti-competitive practices of the meat packer monopoly. While consumers pay record high prices for food and these giant corporations steal what we produce, we, the providers of America's food, are cleansed from the land."

Herman Schumacher, one of the leaders in the successful legislative effort said, "I am amazed at the patience of the farm families in South Dakota. They have fought hard, working through the legislative process to implement mandatory price reporting for livestock in an effort to uncover the anti-competitive and highly preferential and discriminatory deals that are eliminating our markets. We know this new law is only one small step in restoring fair markets. In view of the recent backlash I believe it will become clear to everyone, who has the say so in this country, our government or a few big corporations.

"The big packers are now in total control. I believe it is now time to ban packer ownership and control of livestock and to break up the packer monopoly as was done in 1921."

IBP spokesman Gary Mickelson said the company made the change because cash purchases could leave it open to penalties under the new law. "When purchasing cattle and hogs on a live basis, our buyers estimate livestock quality," he said. "If a producer believes the buyer's estimate is wrong, they now have a means of taking legal action against the company."

Dismissing such rhetoric the Cattleman's Legal Fund charges that "the big meat packers IBP, Smithfield Foods and Farmland Industries are responding with threats of leaving, boycotting or otherwise discriminating against the South Dakota markets continuing to leave producers without a viable market for their livestock, all in violation of the Packers and Stockyards Act (P&S Act)."

The P&S Act basically says that if what a packer is doing has the "effect" of reducing competition, they must stop. The Secretary of Agriculture has the power to impose immediate injunctive relief in the event of a violation but not surprisingly Secretary Dan Glickman has so far, failed to act.

"Farmers and ranchers are not asking the government to provide their living," the Fund asserts, "only asking as provided for in the Declaration of Independence, to enforce the laws that protect their freedoms. Without access to fair and competitive markets, there is no freedom for farmers and ranchers, and as agriculture goes, so goes the economy and the food supply. As in previous times in our history, abusive corporate power is now being exerted throughout the economy and particularly in U.S. agriculture."

“Many people believe America has now returned to what Upton Sinclair described in his book, "The Jungle"  states Mike Callicrate, one of the Fund's original plaintiffs in an ongoing price fixing lawsuit against IBP. "This shocking expose of dirty packing plants, worker abuse, and producer and consumer exploitation of the early 1900's meat packer monopoly led to the passage of the Packers and Stockyards Act of 1921 and the breakup of the meat packer monopoly. Today, meat packing house workers are being abused, injured and mistreated, food safety has declined to new lows, and producers and consumers are being cheated. Today the packer monopoly is far more powerful than in 1921 and now, as then, the food security of America is in danger."


Western Washington State is rapidly becoming one of the nation's foremost corporate grain exporting enclaves, a who's who of the world's elite traders.

Recently, the Japanese newspaper Nihon Keizai Shimbun reported that Mitsubishi Corp. a leading Japanese trading company, announced it has acquired about a 10% stake in the Kalama Export Company LLC equally owned by Conagra Inc. and Archer Daniels Midland Co. ("Supermarkup to the World").

Kalama Export Company LLC operates a grain elevator along the Columbia River in Washington State, with hourly shipping capacity of around 3,000 tons and storage capacity of about 50,000 tons. It also plans to increase storage capacity to 90,000 tons by the end of 2000.

While Mitsubishi has not disclosed the value of its investment in the grain elevator company, the Japanese trading house aims to secure a U.S. base to export locally produced farm products such as corn and wheat to Japan and other Asian  countries. It also hopes to deepen relations with the major U.S. grain companies, the newspaper said.

To the north of Kalama in the Seattle-Tacoma area Cargill, the world's largest grain trader, has becoming preeminent.

Current over 45% of all Cargill's corn shipments currently pass through its Pier 86 elevator at the Port of Seattle. The elevator, which has a capacity of 4.2 million bushels, also handles soybeans. It can handle 185 rail cars, unloading 3000 tons per hour by rail and 250 tons per hour by truck. It can also load from shipping bins to vessel cargo holds at 3000 tons per hour. The elevators are adjacent to a 1000 foot long loading port that is 70 feet deep.

Although the Port of Seattle built the elevator at a cost of a reported $17 million derived from tax-exempt revenue bonds the elevator's sole lessee in the past 30 years has been Cargill ; the original lease being for 20 years with options for six extensions of five years apiece --- the current option to expire in November 2000.

In 1998 Cargill threatened to abandon the Pier 86 elevator unless the Port commissioners agreed to relinquish the Port's share of the dockage fees, reported at $580,000. Don Vogt, a Cargill vice president, told the commissioners that dockage fees claimed by the Port hindered his company's ability to be competitive in the wake of lagging demand from Asian markets.  Subsequently, the commissioners in a 3-0 vote agreed to waive six month's worth of docking fees on the condition that Cargill renewed its lease for at least five years. If they failed to do so they would be required to forfeit the fees to the Port.

Shortly thereafter Cargill announced that it was purchasing the grain merchandising division of Continental Grain which currently is part of the TEMCO three million bushel grain elevator at the Port of Tacoma. TEMCO or Tacoma Export Marketing Corp. operates the terminal as a joint venture for Continental and Cenex Harvest States Co-op, the latter recently announcing that it plans to merge with Farmland Industries, forming the nation's largest agricultural cooperative.


Judge Antonio Souza Prudente of the 6th Circuit Court of the Federal Justice system in
Brazil's capital city, Brasilia handed down a ruling on June 18 that prohibits the planting and/or marketing of genetically modified Roundup-Ready soybeans in the South American country.. The judge required the Monsanto and Monsay corporations to submit an environmental impact study prior to any commercial-scale release of the product into the environment.

The ruling came in response to a suit by the Brazilian Institute for Consumer Defense and was hailed as a major victory for consumer groups and ecologists who have been seeking caution in the introduction of genetically modified organism (GMOs) in plants and foods.

"We believe this decision is a huge victory for those who are concerned with the impacts of trangenicos in the environment and public health," said Karen Suassuana, from Greenpeace Brazil. "This fact opens now a world-wide precedent for the necessity of an environmental impact assessment of the GE crops."

Monsanto will have the right to ask for the court to review the Judge's decision decision, by presenting new arguments."I think it is almost impossible that the judge will change his mind. His position is clear in the statement," Suassuna adds. "Monsanto certainly will not have time to change the decision in order to plant its RR soya for the new growing season."

In his strongly worded opinion defending the principle of precaution, Judge Prudente states: "The questions raised by genetic engineering will not be resolved by the laws of market alone, rather they will resolved by the rigorous respect to the legislation which protect life, as established by our laws and Constitution."

The court order determines that: Monsanto do Brazil Ltda. And Monsay Ltda must submit an Environmental Impact Sudy prior to any approval of the product, in the form determined by Article 225 of the Federal Constitution, as a prerequisite for commercial scale planting of Roundup-Ready soy;  the companies are prohibited from marketing genetically modified soybean seeds until such time as the competent public authorities issue technical regulations for biosafety and for labeling of genetically modified organisms;

In addition all commercial-scale cultivation of the product is suspended, until such time as the technical concerns expressed by renowned scientists with regard the possible deficiencies in the analysis by the National Commission on Biosafety (CTNBio) of the administrative petition for deregulation of the product, are duly clarified; the sued companies were required to submit, within ten days, a certificate of Quality in Biosafety  of Brazil's laws on Biosafety, and the CTNBio must submit copies of the Curriculum Vitae of all of its members for judicial verification of the qualifications required in the Biosafety laws, as well as copies of all of the documentation in the relevant administrative files.

Also the court required that the Ministers of Agriculture, Science and Technology, Environment, and of Health be personally served with court orders that they may not authorize the sued companies to  engage in the planting or marketing of these products until such time as these judicial requirement are fully met, and suspending any such authorizations which may have been issued to date and decreed that  a fine of 10 minimum wages per day (US$80) if these requirements are not met , to be paid by the infractors, be they public or private.

Based on figures provided by Glenn Switkes, Director, Latin America Program, International Rivers Network, four companies today process more than 60% of the soy that is sold in Brazil, moving $1.8 billion in grain purchases. They are Ceval, of the Bunge group, that just transferred its administration to the United States; the U.S. companies Cargill and ADM; and the French Coinbra/Dreyfus. The concentration in the soy market, relatively recent in the country, is expected to increase.

The initial step in fusions and acquisitions in the soy market was in 1996, according to Switkes, when Anderson Clayton, owned by Gessy Lever, was bought by the French company Dreyfus, which in Brazil is called Coinbra. The process continued with acquisitions of middle-level companies by Cargill and Bunge culminating in the large buyout of Ceval by Bunge in 1997. Also in that year, ADM bought Sadia's soy holdings for $165 million.

The current processing capacity of the Brazilian soy industry is 30 million tons/year, 30% of the global capacity. Of last year's harvest of 31 million tons, 20 million were processed in Brazil and the rest imported as grain. Of the oil produced, one-third is exported and of meal, two-thirds.


Tying the corporate noose tighter and tighter around the neck of family farm agriculture the Wall Street Journal's Scott Kilman reports that Archer Daniels Midland Co. (ADM) is talking with DuPont  Co. about marketing more of the novel crops coming out of DuPont's fledgling specialty grains business.

"We continue to talk about future products," ADM Senior Vice President  Burnell Kraft told Dow Jones Newswires in the wake of ADM's earlier announcement that it has agreed to market to its overseas customers DuPont's high-oil corn, which  is used to make high-energy livestock feed.

ADM expects to initially export roughly 75 million bushels of DuPont's high-oil corn annually to markets such as Mexico and Taiwan. The corn, which was created through traditional plant  breeding, has a higher oil content than conventional corn.

DuPont, the Wilmington, Delaware, chemical company, has been spending billions of  dollars to become a crop biotechnology power. Its biotechnology joint venture, Kilman reports, with seed concern Pioneer Hi-Bred International Inc., for example, is raising the levels of important amino acids such as lysine and methionine in corn. DuPont's plan is to fine-tune grain for the nutritional needs of specific animals, and collect a premium above the price of conventional crops.

DuPont plans to complete later this summer the $7.7 billion acquisition of  the 80% of Pioneer Hi-Bred that it doesn't already own.

Kraft also said ADM is considering whether to have its extensive grain elevator network in South America begin selling DuPont's seeds and chemical poisons to farmers there. ADM operates about 130 grain elevators in countries such as Brazil and Paraguay.

DuPont and ADM have also been working together hoping to cash in on Europe's growing demand for non-genetically engineered soybeans, ADM this spring began offering farmers a premium to grow for it a DuPont soybean. The soybean, which was created through conventional plant breeding, tolerates exposure to DuPont's herbicide Synchrony.

In his report, Kilman claims that herbicide-tolerant crops are "wildly popular" with U.S. farmers because they make it much easier to chemically weed a field, although he adds Monsanto Co.'s herbicide-tolerant soybean, which is designed to tolerate exposure to its Roundup herbicide, has run into "resistance" in Europe because it was created through genetic engineering.


A Campaign to Reclaim Rural America has announced keynote speakers for its July 9th protest rally and border blockade at the Sweetgrass, Montana port of entry north of Shelby.

The Sweetgrass rally, which will start at noon, is part of a national day of protest organized by family farm supporters who are calling on Congress to enact trade and market reforms to reverse the economic crisis in rural America. Simultaneous events will take place in at least nine other states, including a rally and border blockade at Portal, North Dakota.

"We hope rural citizens across Montana and many other states will dedicate that day to stand together and speak out against policies that are forcing farmers and ranchers off the land and destroying our communities," said campaign spokeswoman, Helen Waller whose family farms near Circle.

"When Rural America loses, all of America loses. We lose family and friends. We lose our schools and churches. We lose the very way of life that Montana folks hold dear. It has been snatched from us through deliberate policy decisions and trade agreements made far from the fields and grasslands that once sustained thriving communities."

Keynote speakers at the Montana rally will include representatives of groups that are working for reforms to rein in a cartel of giant U.S.-based corporations that they say are manipulating commodities markets and abusing trade agreements to depress prices paid to producers.

Included among the rally's speakers will be Mike Callicrate with the Kansas-based Cattlemen's Legal Fund and who is currently fighting a class action lawsuit charging beef packing giant IBP with illegally manipulating cattle prices and Bill Klinefelter, Legislative Director of the United Steel Workers of America will speak about why steel workers' want to work for solidarity and cooperation with family farm agriculture producers in a nationwide campaign for fair trade.

Like the farmers and ranchers protesting cheap imports that don't meet U.S. standards for food safety, environmental and worker protection, American steelworkers are currently fighting to stop the dumping of imported steel at below the cost of production.

A third speaker will be Cory Ollikka, President of the Canadian Farmers Union. Rally organizers have stressed that although they will be protesting imports coming across the Canadian border, the rally is not a protest against Canadian farmers who, they say, are also struggling for fair prices in commodities markets dominated by the same cartel of giant agribusiness corporations.

A spiritual perspective on the rural crisis will be provided by Bishop Mark Ramseth and Brother David Andrew of the National Catholic Rural Life Conference.

All of Montana's Congressional Delegation, as well as all announced Congressional candidates have also been invited to give short speeches addressing where they stand on the Campaign's eight-point platform. All candidates and Delegation members who attend the rally will be presented with signed copies of the Campaign to Reclaim Rural America's petitions calling for market and trade reforms, enforcement of antitrust laws and a safety net ensuring that until reforms are in effect, family agriculture producers will receive at minimum the cost of production for their products. Since Spring, Campaign volunteers have collected over 13,000 signatures from Montana and other states.

Following the rally, there will be a peaceful, border blockade that will stop all trucks carrying agricultural products.

The Campaign has established a network of over 50 volunteers in communities across Montana to coordinate turnout and transportation to the rally. Additional information can be obtained through the Northern Plains Resource Council office at (406) 248-1154.