FACTORY FARMING

Some have suggested the remedy for what ails the cattle business is a dose of rancher owned co-operatives. But that too has been tried. The fourth largest beef packer in the country is a co-op. We´ll let you decide whether it´s a cure or a curse.

Farmland Industries is the largest farmer-owned co-operative in North America. A member of the Fortune 500, the co-op´s 1998 sales were $8.8 billion, derived from 50 states and 90 countries around the world. You can add in another $4 billion in sales earned from Farmland´s "strategic alliances." The highly diversified company is owned by 600,000 farmers and ranchers in the U.S., Mexico and Canada and has major business interests in crop production, livestock feeds, petroleum, grain processing, pork and beef packing.

The Farmland co-operative System encompasses 1,500 local co-operatives, acquired since 1929 when Farmland originally set up shop as the Union Oil Company. Some would have you believe that "strategic alliances" are new in the world of business but Farmland had its beginnings as a strategic alliance when six farmer-owned petroleum co-ops joined together. In 1935 the conglomeration of co-ops became known as the Consumer Cooperative Association with 239 co-ops under its ever expanding umbrella. By 1950 the company had become a powerful force in agriculture selling herbicides, insecticides and chemicals to its farmer-members.

Today Farmland has an asset base estimated at $3 billion which includes fertilizer plants around the world, the largest petroleum refinery in the Midwest, grain elevators, feed mills, beef and pork plants and a transportation fleet that includes more than 4,400 rail cars, 1,060 trucks, interest in 100 dry cargo barges and several ocean going vessels. Farmland markets and trades agricultural products around the world through a partnership with more than 60 other firms. In 1966 Farmland Industries acquired it´s present name, became North America´s largest farmer co-op, and proclaimed they were..."Proud To Be Farmer Owned ."

A Producer Owned Brand

One of the goals of Farmland is to shorten the distance from the ranch to the consumer´s plate. With their purchase of National, they became the fourth largest beef packer, handling 2 million head annually at plants in Dodge City and Liberal, Kansas. Farmland was already working with local and regional co-ops to produce branded pork products that sell in stores such as Food 4 Less, Price Choppers, and through food service companies like Sysco. With the purchase of National, Farmland hoped to duplicate their success in pork with consumer friendly beef products.

Farmland National Beef Packing, as it is now known, packs 4 million pounds of top quality beef per day into 50,000 boxes for sale to over 600 customers. Farmland National Beef exports Prime and Top Choice beef to 38 countries around the world including Japan, who buys 1.5 million pounds of their boxed beef monthly.

The backbone of Farmland´s cattle program is Farmland Supreme Beef Alliance. Established in 1995, it is a collaborative effort of three agribusiness entities: Farmland Industries, Farmland National Beef and Agri Beef. The latter is a family held business begun in 1968 that is a highly diversified agribusiness with emphasis on cattle feeding. Highly respected in cattle circles, Agri Beef operates in 18 western states with ranch and feedlot operations, feed supplements, a veterinary supply distribution company, mineral exploration, livestock trading and exporting. With their expertise in cattle feeding it was only natural that Agri Beef became the managing partner of Supreme Cattle Feeders, which is where all the cattle for Farmland´s branded beef program are currently being fed.

Farmland merchandises the beef produced by Farmland Supreme Beef Alliance (FSBA) through their own Farmland Black Angus Beef label and through Certified Angus Beef (CAB). FSBA claims to supply the only producer-owned brand in the meat case, although other regional firms might justifiably dispute that claim.

To qualify for the Farmland program every animal must be at least 50% Black Angus: All English crossbreds are allowed. The only continental breeds accepted are Charolais, Simmental and Gelbvieh. Brahmans and dairy cattle are excluded. Farmland claims they, "Ensure quality by raising our Angus cattle in the Midwest where we produce a consistently marbled selection of Choice Black Angus Beef."

Formula Feeding

Like most strategic alliances currently being pitched to cattlemen, FSBA claims that their program rewards ranchers for producing a superior end product. Cattle enrolled in FSBA are sold under a value-based marketing formula to Farmland National Beef. Their pricing structure guarantees "the western Kansas practical top cash price the week of sale, less $1, with a carcass base point of Select, Yield Grade 3 with incentives for higher quality carcasses that grade Prime, CAB and Choice. To date FSBA producers have captured premiums as high as $53 per head."

Those taking part in the FSBA program don´t have to retain ownership, they can also sell direct to Farmland. The feeder cattle price for contracted producers is based on the Cattle Fax price for the week prior to shipping. Cattle must be of uniform weight in load lots. Premiums are paid on a four tier preconditioning program with higher premiums paid to ranchers who retain at least 50% ownership. It costs $2.50 for every head enrolled in the program and if detailed carcass information is desired an additional $1.50 per head is assessed. Like similar programs, Farmland has a list of preferred purebred suppliers that includes some of the best Angus breeders in the country such as Gardiner, Sitz, N-Bar and others.

The Farmer´s Friend?

Farmland goes out of its way to portray itself as the farmer´s friend. They made headlines in December when they announced an unprecedented move to establish the first ever floor price for the market hogs it purchased. As the sixth largest pork processing operation in the country, with four packing plants and 9 processing facilities, Farmland expects to process 8 million hogs this year, which is about 15% more than last year. In the midst of the worst meltdown in the hog industry in forty years, Farmland established a $15 per hundredweight floor for market hogs that met its specifications. Only producers who had previously sold hogs to Farmland were eligible. "We are deeply concerned about the farmers who supply us with market hogs," said Gary Evans COO of Farmland Meats Group. "Establishing a floor price is an essential step to help our farmer-owners through one of the toughest economic periods in the history of the pork industry. This floor price is proof positive that Farmland is... "Proud To Be Farmer Owned ".

In making the announcement Evans said, "The concept of establishing a floor price was developed after the co-operative´s leaders studied several ideas put forth during their annual meeting. Farmland typically buys hogs at competitive prices, markets pork products under the Farmland brand and then pays out its profits to livestock producers and local co-ops in the form of patronage refunds. "Because we are the nation´s only producer-owned pork processor, we felt a moral obligation to attempt to provide assistance to our producers," said Evans. "We need a stable supply of high quality hogs over the long haul If this helps producers weather the economic storm, then we´re doing our job"

"We recognize that a floor price is not the total solution, said Henry Fehrenbacher, an Illinois pork producer and Farmland member. "Nevertheless, for hundreds of producers it could mean the difference between staying or leaving."

Left Out In The Cold

Some in the meat trade weren´t overly impressed by Farmland´s gesture. Mike Callicrate, a Kansas cattle feeder and industry observer, scoffs at a $15 offer for hogs considering the high retail price of Farmland´s hams and bacons. Callicrate thinks that with the current industry structure even a co-op like Farmland can´t help ranchers much. "The co-op becomes the greedy corporation," he contends. "Consider Farmland´s recent announcement of investing in a export grain elevator in Argentina. I wonder where they are going to ship the grain from Argentina or what U.S. farmer market they are planning to displace?" asks Callicrate. For sure, Farmland makes no bones about exploring growth opportunities around the globe.

Even if Farmland National Beef would like to be known as the rancher´s friend, they can´t give away the farm and expect to survive. IBP, ConAgra, Cargill and Farmland control about 87% of the nation´s beef slaughter. As the world´s biggest packer IBP is known to provide price leadership. With one look at the numbers you can see why. IBP has a daily beef kill capacity of 38,000 head in 13 plants. ConAgra can process 23,600 a day in 8 plants; Excel, (a division of Cargill) can kill 21,800 cattle per day in 5 plants and Farmland has a daily kill capacity of 8,700 in just two plants. Even though Farmland National is number four they are a long way back of the pack and therefore must abide by the informal guidelines established by IBP.

According to Callicrate, "Court documents show IBP´s captive supplies, the cattle available to the packer without bidding or negotiating price, to be as high as 122% in recent years. This, in addition to the packer´s willingness to co-operate with each other rather than compete (IBP trades cattle with other packers) has virtually eliminated the market that producers depend on for a fair price."

"Court reports also indicate that now Farmland National Beef, like the other packers, is virtually absent for extended periods from the cash market," says Callicrate. "Before National Beef was purchased by Farmland, National was considered a premium quality packer and the last of the cash market traders. IBP, Cargill and ConAgra all had large captive supply inventories to draw from thereby disadvantaging National in the market. Independent feeders who have long depended on National Beef to buy their cattle are now being left out in the cold unable to sell their cattle. These are the same cattle, the cash market cattle, that set the base price for nearly all the packer´s captive supply deals."

Musical Chairs

"It was common knowledge in the industry that Farmland National was on the brink, a victim of IBP´s death march, "contends Callicrate, "when much needed producer capital was raised in a deal with U.S. Premium Beef (USPB). "The deal appears to be a win-win for Farmland and a lose-lose for producers, considering the new money came with the much needed price lowering captive supplies."

"Falling for a sales pitch sounding like the old days of the penny stock brokers," says Callicrate, "many desperate farmers and ranchers scratched, borrowed and leveraged their last precious belongings to buy into what many felt was their only hope of salvation... U.S. Premium Beef." But when USPB then signed on to Farmland National´s program it allowed Farmland to capture captive supplies and then act just like the big boys. According to Callicrate, "USPB now has the potential of providing half of Farmland National Beef´s cattle needs from outside the competitive market." And that is how a co-op became what Callicrate calls, "Just another market crushing, packer empowering captive supply deal."

Mike Callicrate contends that in such arrangements "cattle feeders have come up short after paying significant premiums for higher quality cattle, only to receive the same and at times less than what the lowest quality cattle were bringing in the cash market. Additionally, these feeders say they are forced to feed genetically poorer performing cattle (higher grading English cattle versus faster growing crossbred cattle) and must feed their cattle longer, incurring higher feeding costs in order to collect razor thin premiums while at the same time trying to dodge the deep discounts of the price determining grid."

Callicrate contends that Farmland is, "Not a friend of the farmer." The problem is that no matter how well intentioned Farmland may be, in today´s cattle industry they are forced to play the captive supply game. Either that or disappear, and then what good could they possibly do? At least Farmland is rebating to their members a patronage refund, some eighty million at this point in their fiscal year. That´s not much on sales of 9 billion but it´s more than you´ll get from IBP.

In quoting a cattle feeder Callicrate sums up our dilemma as we experiment with co-ops, strategic alliances and other means of surviving current economic conditions. "The last few years it´s been like a musical chairs game. Everyone is rushing to the empty chair, not realizing that the chairs are in the gas chamber."

In 1971, when I returned to the ranch after serving in Vietnam, we were selling our wheat for about $2.70 per bushel. A bushel of wheat weighs sixty pounds and will make forty-five loaves of bread. Back then bread sold for around thirty cents a loaf, so we were receiving six cents out of a thirty-cent loaf, or 20% of the retail value of our product. Today, we now can get about $2.50 per bushel or five to six cents out of a $2.10 loaf, or 2.5% of the retail value. Tiger Woods gets paid ten cents for having his picture on each box of Wheaties, and the farmer gets five cents for raising the wheat.

Some say producers are in this crisis because we simply produce too much wheat. In fact, world grain stocks are less now than in 1970. At the same time, the US population has grown from 200 million in 1970 to 260 million today. And the world population has grown from 3.7 billion in 1970 to six billion now. So, I do not believe there is a glut of wheat in the world nor in the US. If there was, and if the marketplace was truly competitive, farmers should receive more for wheat and consumers shouldn´t pay so much for bread. If you´ve ever played the board game "Monopoly,"* you can understand the situation. The winner is the one who controls the marketplace, sending losing players to the couch to pout and eventually squeezing everyone else until they go broke.

Today, three or four companies control most of the processing and distribution of all beef, pork, chicken, and grain in the US. In addition, there are only a few companies that control the US grocery industry. These companies have stolen the farmers´ and ranchers´ share of the retail dollar, draining the lifeblood from the family farm and threatening our safe, sustainable, and dependable food supply.

What high school or college graduate would be willing to come back to the impoverished farm or ranch when so many better opportunities are out there? That must be why the average age of the US farmer is fifty-eight.

Slaying this "Monopoly" dragon will require a massive effort. Producers, consumers, and our environment will be better off when we do. Like most worthwhile endeavors, however, it will be neither quick nor easy.

-- Jerry Sikorski, Willard, Montana, 406-775-6535

* General Mills, a major cereal manufacturer, owns the board game "Monopoly." A recent study by Bhuyan and Lopez shows the "market power" of food companies. The study shows breakfast cereal prices are seventy-two percent (72%) higher than a competitive market would allow.

According to news reports, at a White House ceremony Vice President Al Gore, the man who would be President, let his true colors show. And they weren´t red, white, and blue.

It seems Gore was presenting an award to a Colorado FFA member when he asked what field the honoree intended to go into. Upon hearing the young student wanted to go into production agriculture Gore reportedly implied that field wasn´t too fertile. He allegedly suggested that the FFA member should develop other plans "because production agriculture is being shifted out of the U.S. into the third world."

We shouldn´t be too surprised at Gore´s statement, after all, he helped write the United Nation´s Agenda 2000 which calls for just such an outcome.

Sadly, much of what we do in agriculture is effected by politicians and bureaucrats in Washington. If that isn´t depressing enough, consider these recent actions that will go a long way towards deciding if Gore´s career advice was prophetic.

The Road Not Taken

On October 13 Bill Clinton attempted to paint himself as a "Green President" by prohibiting road building on 40 million acres of U.S. Forest Service land. According to the White House, "these remote lands produce high quality drinking water, provide critical wildlife habitat and offer extraordinary recreation opportunities for hikers, campers and anglers." Who, by the way, will have a much more difficult time gaining access to such areas without any roads.

In addition, Clinton called on Congress to fully fund his Lands Legacy initiative which would have taxpayers spend between one billion and $2.3 billion per year, presumably forever, to buy up private lands that need protecting. This despite the fact the federal government already owns one third of America´s land mass and state government´s own another 12%. And the feds aren´t doing a very good job of managing the land already under its control. Currently there is a backlog of $10 billion worth of "to do" work on the land it´s already responsible for.

And We All Lived Happily Ever After

When measure HR 1906 was sent to Clinton for his signature it contained a lengthy provision that would require mandatory price reporting for cattle, swine and lamb. The NCBA trumpeted its victory and emphasized that mandatory price reporting never would have happened without their efforts on behalf of cattlemen. End of story?

Not quite. Unfortunately, the legislation if approved, will preempt state laws passed earlier in the year which were much tougher. NCBA´s bill requires daily reporting of cash or spot market prices while allowing packer procurements through forward contracts to be reported weekly. Dr. John Helmuth says that NCBA´s bill creates a strong incentive for packers to shift even more towards captive supply because the reporting requirements are less stringent.

Someone once said you never want to see sausage or laws being made because it´ll make you sick. In an interview in Lobbyists and Advocates, NCBA´s Washington lobbyist, Chandler Keys III, described how the mandatory price reporting bill came to be. "While the packers initially abhorred the idea of mandatory federal price reporting system, they were faced with a growing number of state reporting laws. So the cattlemen (NCBA) eventually found the packers open to their suggestion that the groups work out an agreement." According to Lobbyists and Advocates, "After months of negotiation the two sides hashed out a deal they took to the staff of the Senate Ag Committee." Keys said the effort "was aided by the fact that lobbyists could tell that both producers and packers supported the reporting requirement."

The Grease of Politics

In the same article Keys described NCBA´s lobbying effort. He said the NCBA has increased the amount of contributions to federal candidates from about $140,000 during the 1983-84 cycle to about $368,000 during 1997-98. More than three fourths of the contributions went to Republican candidates. Keys told Lobbyists and Advocates that his lobbying budget consisted of three million dollars and a staff of 23.

Pulling A Babbitt Out Of The Hat

More than 20,000 public lands ranchers won a huge victory in October when the Supreme Court agreed to hear their challenge to Clinton´s 1995 regulations relating to 170 million acres of federal range land in 13 states. The regulations became known as "Rangeland Reform" and the 1996 case against them as "Public Lands Council vs. Babbitt". The Tenth Circuit Court originally upheld the constitutionality of Rangeland Reform but this action by the Supreme Court means the issue will be revisited.

The Supreme Court voted to study the appeal on the basis that Rangeland Reform violated a 65 year old law and threatened the livelihood of thousands of public lands ranchers. Arguments in the case will be held this winter with a ruling expected by late June. "If successful this case will send a strong message, " said the California Public Lands Council, "that regulations cannot be used as a tool to circumvent Congress or existing law." It is expected to cost $250,000 to litigate the case.

Sound Familiar?

The Justice Department is busy investigating more than two dozen price fixing cases, most of which involve food additives, supplements and vitamins. According to Purdue´s John Connor, an expert on price fixing, we can expect more of the same in the future as monopolists conspire to set artificially high prices for their products.

In 1996 Archer Daniels Midland paid a $100 million fine for fixing prices of feed supplements. In the same year Bayer was fined $50 million for fixing the prices of food additives and this year BASF AG, a German company, paid $225 million for fixing the price of vitamins. Connor said the nature of food additive business lends itself to price fixing cartels because the smaller number of companies can organize easily. "There are just two, three or four producers worldwide for each of these chemicals," said Connor. Adding to the ease of price fixing is that prices for food additives are priced in individual contracts, not the open market. "Creation of International trade associations is another cause of price fixing," said Connor. "These trade associations provide data about their industry to association members. That information can lead to a cartel being established."

Own A Pig, Go To Jail

Four members of the Senate have sponsored a bill that would ban packer ownership of livestock. Senator Tim Johnson´s (SD-D) bill is designed to stop the trend toward vertical integration. Johnson says the current situation is anti-competitive. "Packer ownership of livestock increases the likelihood of price manipulation in the marketplace. As a result of having slaughter livestock supplies locked up through captive supplies, meat packers do not have to bid competitively for all of their slaughter needs."

The Johnson bill would require retroactive divestiture of packer ownership in livestock. Johnson says that there would be no Constitutional problems with a retroactive ban on livestock ownership as long as the packers are given time to divest of their ownership positions. Pork packers would be given 18 months to phase out of hog ownership. His bill would make the proposed merger of Smithfield and Murphy, the marriage of the largest packer and grower, illegal.
The bill would allow packers to own animals up to 14 days in advance of slaughter in order to insure an adequate supply, and it does not outlaw forward delivery contracts between producers and packers. It exempts poultry and would apply only to cattle, hogs and sheep. Another exemption applies to producer-owned co-ops that are also in the packing business, as long as the co-op is controlled by livestock producers who deliver their own livestock to the marketing organization.

The AMI, the packers trade group responded: "We are opposed to that kind of government intervention in the marketplace. Telling packers what they can own would make meat more costly to consumers and hurt the U.S. in world trade."

Tim Johnson feels that current anti-trust laws fail to address the concerns of livestock producers in the marketplace. "We are at a crossroads in the structure of agriculture," Johnson said. "We face a choice between the corporatization of agriculture and a fight for free enterprise. I gladly and proudly cast my lot with the free enterprise of family agriculture that has served our country so well."

Down But Not Out

In October Senator Byron Dorgan of North Dakota and Senator Paul Wellstone of Minnesota each introduced bills in the Senate that would temporarily ban agribusiness mergers. The Agribusiness Merger Moratorium Act of 1999 would declare a moratorium of at least 18 months, or until Congress enacts legislation that specifically addresses the concentration of agriculture, whichever comes first. Both bills were introduced as a result of Cargill being allowed to swallow up Continental´s grain division. Dorgan said, "When Continental Grain and Cargill are allowed to merge something is wrong with our antitrust laws, and I want to fix it."

Tom Harkin of Iowa joined Wellstone in support of his bill and compared market concentration to a boxing match "Where one contestant has their hands tied behind their back and they are being pummeled. That´s sort of what the farmers are like now with the agribusiness concerns. The Justice Department is supposed to be the referee and for some reason they are not stepping in aggressively enough, or perhaps the rules are not quite fair."

Food Fight

USDA officials have devised a plan that will allow the American meat industry to resume shipping "hormone free" beef to Europe. The plan requires American producers to develop "written programs" based on USDA guidelines to document that no hormones were used in the beef´s production. The U.S. had an annual quota to ship 11,000 metric tons of hormone free beef to the EU since 1989, when the EU first banned beef from cattle raised with hormones. Last April the EU reported that their tests revealed that 12 percent of the shipments of so called "hormone free beef" actually contained residues of artificial hormones. The U.S voluntarily suspended shipments because of the deficiencies. At the same time we retaliated for the ban on American beef by imposing punitive duties on $117 million worth of EU goods.

The Terminator Lawsuit

A Washington DC group founded by Jeremy Rifkin is putting the final touches on a multi-BILLION dollar lawsuit against companies like DuPont, Monsanto and Novartis for their role in producing genetically altered food crops. It promises to be the largest antitrust suit ever brought, with the possible exception of the Microsoft case.

This action represents the first global challenge to controversial genetically altered seeds and modified crops. Several citizen groups and twenty American law firms have joined together in their resistance to "terminator seeds" and genetically altered foods. The lawsuit will no doubt feature a lively debate on how our food is produced, including topics such as industry concentration and the ability of multinational companies to take over world food production.

Don´t Cry For Me Argentina

Brazil is expected to be able to comply with U.S. sanitary restrictions and begin exporting fresh beef to the United States and Japan by early next year. They are currently in the process of negotiating a quota with the United States.

Brazil has the largest commercial cattle herd in the world at 170 million head and was previously denied access due to health restrictions. Brazil has more cows than people and produced 6.3 million tons of beef last year, tripling Argentina´s output. The USDA´s Animal and Plant Health inspection Service has already made its final visits to Brazil in preparation for their lifting of restrictions.

Brazil hopes to be the largest beef exporter in the world by the year 2002.

Not On Their Christmas List

On September 20, Federal District Court Judge John Tunheim, issued a temporary restraining order ordering USDA NOT to release the names, addresses and phone numbers of those people who signed petitions seeking a referendum on the mandatory pork checkoff. The National Pork Producers Council requested the list and appealed the judge´s decision. The USDA has basically said they would not release the names until the courts have made their final ruling. By then the issue could be resolved by a referendum. (Even with the USDA dragging their cumbersome feet on the vote).

The Livestock Marketing Assn. filed a Friend of the Court brief supporting the Campaign for Family Farms which did not want the names released. The LMA did so in part because they felt the NCBA would ask for the list of 140,000 names, addresses and phone numbers of beef producers who have reportedly signed the petitions for a referendum on the beef checkoff. Our best information suggests those names should be handed over to the USDA about the time you read this article.

America´s farmers and ranchers have an inferiority complex. We feel we must have done something wrong to merit a fat cattle price that is 18 percent less than last year. Our farmers must be second class because they cannot survive on a two buck a bushel support price that is the same price corn sold for 30 years ago! We are not worthy. At the same time retailers must deserve to be selling beef for nine percent more than a year ago. Beef packers must be entitled to a 300 percent increase in their margins since the early 1990´s because they are the survivors in an industry that has gone from four companies controlling 20 percent of the market in the 1970´s to more than eighty percent today. The giant food conglomerates have somehow earned their massive profits while ag producers have not. They are right and we are wrong. We can´t compete because we´re not efficient with beef producers the world over. That´s what we´re told anyway.

All hogwash, by the way. There are reasons why mega-retailers and packers are able to hold this nation´s farmers and ranchers hostage. They have courted favor in Congress, bought influence, tiptoed around the edges of the law and THEY CHEAT!

Nothing New

According to Eric Schlosser in his book, Fast Food Nation, our Immigration and Naturalization Service estimates that one quarter of the meat workers in Nebraska and Iowa are illegal aliens. "Many meat workers are lured to the U.S. from Mexico by Spanish radio advertisements paid for by U.S. meat companies, which bus the workers to factories in the rural United States," says Schlosser. Even if the CEO´s are not there to welcome the immigrants when they get on the bus they have been the major benefactors. According to Schlosser "the wages in one Greeley, Colorado meat packing plant are now 30-40 percent lower than when the plant opened in 1961."

The credibility of Schlosser´s book increased dramatically recently when the Justice Department indicted Tyson Foods, now owner of IBP, on charges of conspiracy to smuggle illegal immigrants into the U.S. to work at its poultry plants. The 36-count indictment comes as a result of a two-and-a-half year investigation. Fifteen plants in nine states were charged and six Tyson employees were indicted.

According to the the Justice Department, "Tyson Foods cultivated a corporate culture in which the hiring of illegal alien workers was condoned in order to meet production goals and cut costs to maximize profits." Justice officials described a scheme by which Tyson and its managers requested delivery of illegal aliens to work at Tyson plants and aided and abetted them in obtaining false documents.

Naturally, John Tyson says the charges are "absolutely false." This is the same guy who went to the Nebraska Cattlemen´s convention and said Tyson has plans to apply lessons learned in the chicken business to the beef business. Tyson would like us to believe that plant managers, acting on their own, concocted and implemented the scheme without any knowledge of upper management. Just to show how enraged he was at such behavior, Tyson fired four mangers named in the indictment and put the other two on administrative leave. That´s the thanks they got for being company guys!

What happens when meat workers try to unionize? A year ago an administrative law judge ruled that managers at the Smithfield packinghouse in Tar Heel, North Carolina, the world´s largest pork processing plant, "committed egregious and pervasive labor law violations during two unionizing campaigns in the 1990´s." The Judge said Smithfield workers were intimidated by management and were illegally fired for backing the union. The company warned of layoffs and a possible plant closing if a unionization campaign was successful. The Judge also said that company officials had sought to scare the plant´s sizable Hispanic work force by warning that if a union was approved they would report illegal workers to the INS. Wouldn´t that seem to indicate that Smithfield knew there were some illegals in their work force?

Documents presented during the hearing also showed that several large companies kept two sets of records about injuries: one for themselves and another for OSHA. Another investigation revealed that one plant was shown to have a 100% annual turnover rate with many workers being let go just prior to six months, when their health insurance would have kicked in. The Judge also said that several of the Smithfield lawyers and managers had lied under oath while on the stand.

Incestuous Relationship

After Tyson took over IBP a couple of former IBP Board members were added to the Tyson Board. Former IBP Chief Bob Peterson and former NCA President Joanne Smith. After her tenure as NCA president Joanne became Undersecretary of Ag, and then on to IBP. Her career path is illustrative of the incestuous relationship between trade group officials, the USDA and BIG business.

Sometimes the relationship is exposed as when top Tyson executives were accused of providing illegal gratuities to former U.S. Agriculture Secretary Mike Espy and to Espy´s girlfriend. Tyson agreed to pay a $6 million fine in 1998 to settle allegations that it provided thousands of dollars in gifts to Espy while he served under Clinton. Espy resigned in 1994 but later a federal jury acquitted Espy on all charges of improperly accepting gifts and travel from firms he regulated.

Farming The Government

Financially strapped family farmers have about given up hope on receiving help from an obviously corrupted USDA and a federal government bent on destroying home-grown agriculture. The Freedom-to-Farm Act, which Giles Stockton has called "Farming for Free," has tipped the playing field in favor of corporate agriculture so dramatically that independent family farmers can no longer compete. Large firms are making pigs of themselves at the government trough. We know this because a recently published Web site has made public for the first time every farm subsidy payment received by every farmer since 1996. The web site, www.ewg.org, belongs to the Environmental Working Group and the information was received through the Freedom of Information Act.

The Associated press did an analysis of the more than 22 million checks sent out by the USDA in fiscal year 2000 and found that 63 percent of the money went to the top 10 percent of recipients. At least 20 Fortune 500 companies and more than 1,200 universities and government farms, including state prisons, were on the list of those who received subsidies. Subsidies also went to real estate developers and absentee landowners in big cities from Chicago to New York. Former Chase Manhattan Bank chairman David Rockefeller, grandson of famed oil tycoon John D. Rockefeller, received subsidies, as did Ted Turner.

These subsidies, and our current free trade policy, keep commodity prices artificially low by encouraging overproduction. How ironic that family farmers are being driven out of business by subsidies that were initially designed to save them. The big winners are the multi-national grain raders and food companies who can buy cheap grain subsidized by the taxpayer and then trade it, or further process it and increase its value exponentially. Large farmers, because they receive the majority of the subsidies, can afford to buy up all the smaller family farms and ranches and have it all subsidized by the USDA.

Should a huge corporation ever get in trouble they can expect a bail-out from the federal government because they are deemed too big to fail. Witness the $20 billion recently given to the airline industry or our bailout of Chrysler years ago which is now German owned. Think a family farmer or rancher can expect that kind of help?

Keeping Others Out

The devious and questionable tactics don´t end with packers or food processors. They, in turn, are put upon by the huge retail chains. The top twenty retail chains now control more than 50% of the market and experts estimate that the grocery business will be controlled by only five companies within the next decade. Already 21 million people work for Wal-Mart and its subsidiaries and within the next five years the behemoth is expected to surpass the government as the nation´s largest employer.

One of the things helping retailers get bigger are slotting fees paid by food firms to retailers to gain shelf space for new products. They even have to pay for old and proven products with "pay to stay" fees. Slotting fees are just one more barrier to entry to independent food companies. If an independent company wants to get their product on a large chain´s shelves they usually have to strike up some sort of "strategic alliance" with a processor or retailer. Have you heard those words before?

Interestingly, slotting fees started spiraling out of control about the same time chains started merging with vigor. Our government estimates these fees range from one billion to nine billion dollars annually, but no one really knows. USDA says that "tracking their history is nearly impossible since the fees are negotiated privately and terms of the transactions between retailers and suppliers are confidential."

Officials of some food companies appearing at hearings last year on the subject of payola in the grocery business testified from behind screens or wore masks. That´s how much they fear the conglomerates. All the while the consumer is told that one of the benefits of all this concentration is cheaper food. But that does not explain why some chains have found it necessary to conspire to fix prices, as they were found to do with eggs.

Could it be that concentration keeps retail prices artificially high? That may explain why Tiger Woods gets more from a box of Wheaties for having his picture on the box than the farmer who grew the grain in the first place.

The Common Good

The processors and retailers have been able to expand so rapidly, not necessarily because they are the most efficient, but because they have gained market power bordering on monopoly. In some of their businesses the giants have virtually no competitors and at least once, that we know about, when Archer Daniels Midland did have a foreign competitor they conspired with that competitor to fix prices.

One of the methods they have used with great success is to contract ag production where they tie up farmers and ranchers in a given area close to one of their huge processing plants. It is estimated that already 70 percent to 80 percent of this country´s agricultural production is being produced in one of forty "cluster areas."

One of the similarities between these clusters is the environmental damage they can cause: hog lagoons in the Carolinas or poultry waste in Arkansas. Large firms and farms go where environmental laws are the weakest, and are often paid to do so by local governments that expect high paying jobs to come along with the company. More often they get increased crime and disease, and higher costs for education and health care. These big firms are not paying anywhere near the cost to solve these problems nor are they paying what a smaller operator would to negate odor, waste and pests. Premium Standard Farms was recently ordered to spend $50 million to clean up their environmental messes and Smithfield has a long history of environmental damage. And who will clean up these messes if they go broke or relocate to another country?

David Pimental, a Cornell University professor who has studied the environmental impact of industrial agriculture says, "Every credible study of on-farm performance that I have seen shows that mid-sized farms, not mega-farms, are most efficient. But even those studies don´t give us a good picture, because they measure efficiency only in terms of production; they do not consider other contributions that farmers make to our common good."

A Stacked Deck

Meat packers would not have grown like they have just by mis-weighing some chickens on occasion, as at least one big three packer was found guilty of doing. The biggest thing going for them has been a free trade policy that benefits multinationals, huge feeding concerns and factory farms. They outsource the production of the necessary raw materials to the cheapest supplier. U.S. feedlots get cattle from Mexico, Canada, and Australia if they could, processors buy honey from China and retailers buy fruit and vegetables from all over the world. According to R-CALF "our tariffs are one fifth those of our trading partners, making the U.S. the most accessible market in the world for other countries overproduction problems."

It´s not that we can´t compete with farmers and ranchers in other countries. We taught the world how to farm. You may be able to raise productivity levels on your ranch but what good does it do when you have no control over monetary exchange rates? These rates are part and parcel of a government policy to keep the dollar high, which makes imports cheaper and reduces our ability to export. Since Freedom To Farm was enacted our trade surplus has declined by 57%. This has been the policy of the federal government and continues to be: to favor farmers and ranchers in other countries over our own. Exchange rates make many foreign ag products cheaper to the processor and retailer, even after being shipped across large oceans, than the same product grown right next to an American grocery store.

So, don´t be too hard on yourself if you have to sell out and move to town or open a bed and breakfast to keep the ranch in family hands. It´s not all your fault.

In 1862 our Congress passed the Morrill Act which gave every state some federal land which the states were then free to sell. As with all things regarding the federal government, there were a couple strings attached to the gift. The proceeds from the land sales were supposed to be used by the states to educate their residents in agriculture and mechanical arts. (Each state got 30,000 acres per Congressman). The other stipulation was that the work of the land grant institutions, created with the money from the sale of federal lands, must primarily benefit America´s family farmers. I wonder how those Congressmen would feel now when their beloved land grant system is often used against the very people it was intended to benefit.

Big Man On Campus

Perhaps David Harvey summed up the problem best four years ago in his book, University Inc. Harvey wrote, "A revolution is a foot in higher education. Those who pay the piper, (corporations and governments) will surely call the tune. The relevance of universities is on the line. And a recent flood of books, commentaries and reports all depict the University as a deeply troubled institution."

Along with everything else these days, the cost of upkeep on the old Ivory Tower has skyrocketed, while federal formula funding has decreased eight percent in the last ten years. As federal and state funding went steadily down, college administrators were forced to find new revenue streams. They found the best fishing in the big corporate pond.

The cost squeeze has wreaked dramatic changes on college campuses across the country. Professors who used to teach three classes per quarter or semester can often be found these days teaching only one class: The rest of their time is spent researching, submitting grant proposals or working with the private sector to raise cash. The big man on campus these days is a fund raiser. Step foot on almost any large university and you´ll find the place has been sold to the highest bidder. Either Coke or Pepsi, but not both, might be sold in campus vending machines because they bought exclusive rights. Buildings are named after big benefactors. In Berkeley, Laura Tyson, previously of the Clinton cabinet, is now known as the BankAmerica Dean of the Haas Business School. Corporate logos can be seen everywhere. It has gotten so out of hand that the University of Missouri is derisively called the University of Monsanto. In some universities signage space in lecture halls and on computer screens is sold to corporate sponsors. Colleges in need of new labs work with corporations to build new buildings. Naturally, such benefactors expect to have input as to what is taught inside those hallowed and corporate- sponsored halls.

The universities have proven to be good fund raisers. In 1985 about $850 million was given by corporations to universities. In less than ten years that figure was multiplied by a factor of ten. The universities have now come to depend on that money and if it comes with strings attached, well then, so be it. That´s a price they´re willing to pay. The academics know which side their bread is buttered on and the result has been the creation of what critics call "The Academic-Industrial Complex." And they don´t mean it as a compliment.

The financial figures don´t begin to tell the whole story. As I travel around I´m often given the opportunity to speak to classes of college students. I am always amazed at how little they know about concentration, captive supply and globalization. It seems they are being taught so that they may be plugged right into the system: The corporate system. And most students I visit with see nothing wrong with that.

Research This

In 1980 this country´s politicians were concerned that we were not keeping up with the Japanese. So, they changed the ground rules. The Bayh-Dole Act was offered as an incentive, paving the way for universities to patent the results of federally- funded research. Lobbying on the bill was intense and the day was won by the Business and Higher Education Forum, a group of captains of industry who saw the universities as a cheaper alternative to building their own research labs. The Bayh-Dole Act allowed universities to subsidize big business by doing a lot of their research. More laws have since been passed that allow corporations big tax breaks for investing in academic research. The Bayh-Dole Act, and a continued lack of government funding for ag research, has forced colleges to make countless deals with private companies to the point where 60 percent of all funds for ag research now comes from corporations.

From 1980 through 1998 industry funding for academic research expanded at a rate of 8.1 percent each year. Before the Bayh-Dole Act was passed professors and researchers at universities produced about 250 patents per year. In 1998 they filed 4,800 patent applications. According to the Chronicle on Higher Education, in 1998 the top ten research universities held 1,921 patent licenses which earned the schools $370 million per year in licensing income. Universities started up 78 for-profit companies and many professors used their research to lay the foundation for their own new companies when they left campus to try their hands in the real world.

Familiarity has bred some contempt. At a conference several years ago a poll was taken of the researchers in attendance and the result was that the professors thought that 10-15 percent of the work being reported at universities was fraudulent, tipped in favor of the corporations or the entity sponsoring the research. It´s like beef checkoff money being given to a professor to research how successful the checkoff is. If you want to continue to receive those research funds in the future you´d better come up with a favorable report. Act on behalf of your benefactors and you are apt to be rewarded with lucrative speaking engagements and more research money.

This has created some doubt as to the reliability of corporate sponsored research. According to the New York Times, "Scientists who report research findings are expected to divulge any financial ties that might influence their work. But often they do not, according to the first comprehensive analysis of disclosure policies in science and medical journals. In reviewing 61,134 scholarly articles published in 181 academic journals in 1997, researchers at Tufts University and the University of California at Los Angeles found just one half of one percent detailed personal financial interests, including consulting agreements, honorariums, expert witness fees, company equity and stock and patents. It is possible," said the New York Times, "that scientists have few conflicts to report. But experts say previous studies have shown that as many as half of all academic researchers consult with industry, and roughly eight percent have stakes in biomedical companies related to their research."

This leads some to wonder: Is the university research system being compromised and were ag schools meant to become profit centers for universities?

Gentlemen: A Little Decorum Please

The debate over the corporate/college relationship is heating up, sparked by comments like those of Jim Minert of Kansas State University. He allegedly referred to R-CALF, the grass roots organization for cow-calf producers, as "a radical fringe organization." Minert writes a column twice a month that urges producers to contract their production and thus become part of some packer´s captive supply. Minert also made the comment that "from a long-term perspective, concentration of the ag sector has provided innumerable benefits to society."

We do not know if recent million-dollar donations from Archer Daniels Midland and Cargill to Kansas State for a new grain center might have influenced Minert´s statements. Another Kansas State professor, Roger McEowen, said "I am concerned research results are skewed on the side of the hand that is feeding them."

Fred Stokes, President of the Organization for Competitive Markets, has long been critical of the role of academics in pushing us toward a world dominated by multinational conglomerates. Even before his organization was formed Stokes talked to this reporter about how universities were taking too much money from big business to develop new seeds, chemicals and genetically modified organisms. "I believe this violates the mission of our land grant institutions, promotes concentration of agriculture, and contributes to the de-mise of the family farm," says Stokes. "At land grant universities today the guy who puts up the loot is the guy who benefits, and that´s not always farmers and ranchers."

Professor Luther Tweeten struck back at Stokes during A Debate on the Structure of Agriculture, at Iowa State in September 2001. "When we pass around innuendo," said Tweeten, "as the Organization for Competitive Markets (OCM) does, for example, as to agribusiness, for people who are on the edge, that is enough to throw them over the edge. In a bunch of cases bankers were killed by farmers because of that atmosphere of innuendo and fear and hate and so we´re creating left-wing hate groups such as the Organization for Competitive Markets, that I think is very damaging to the country."

If this reporter knows anything it is that the OCM is NOT a left wing hate group!

Bought And Paid For

This brings us to the latest salvo from academia. Senator Tim Johnson (D-S.D.) introduced an amendment, which passed the Senate 51-46 on Dec. 13, that would prohibit beef and pork packer ownership, feeding, or control of livestock for more than 14 days prior to slaughter. An analysis regarding the amendment was issued by eight economists from seven land-grant universities. They were: Dillon Feuz, University of Nebraska; Glenn Grimes, University of Missouri; Marvin L. Hayenga, Iowa State; Stephen R. Koontz, Colorado State; John D. Lawrence, Iowa State; Wayne D. Purcell, Virginia Tech; Ted C. Schroeder, Kansas State and Clement E. Ward, Oklahoma State.

The group came to several conclusions about the bill, that in this reporter´s opinion could go a long way towards fixing the problems created by captive supplies. Here´s a sampling of the professors´ almost laughable conclusions.

• The proposed legislation would constrain the ability of packers to accomplish the coordination and quality control they need for new branded products and put these important investments at risk.
• The new legislation would block independent livestock producers from access to new branded product lines that offer producers a larger share of the consumer´s food dollar and better profit opportunities. If contracts that specify genetics, weight ranges, feeding regime, slaughter intervals, etc. would be banned because they constitute packer "control", producers would have less access to these developing product lines and the added margins coming from them.
• The bill would limit the role and diminish the gains carcass merit pricing has made. Carcass merit pricing is possible without contracts and marketing agreements. However, part of the benefit of carcass merit pricing for buyers and sellers is having supplies of known quality committed well in advance of harvest. Gains in product development and consistency, meeting consumer demands, are clearly related to the use of carcass merit pricing.
• Johnson´s legislation would threaten the viability of current and future investments in areas that produce fewer cattle or hogs than needed to maintain efficient and viable packing-processing operations. In deficit producing areas, packers attempt to control supplies of cattle or hogs to keep stable flows of the correct raw material through the plant. This legislation could threaten the future of processing operations in the very areas where producers have access to fewer buyers.
• The bill would make it more difficult for producers to obtain financing for their operations. Many financial institutions require a marketing contract for a producer to acquire financing to grow and become more efficient.
• The bill would restrict producer access to packer contracts and other risk management tools. By partnering with processors, producers can diversify their risk and share in the processor´s return.
• The professors say prices for cattle would not increase as a result of passage of the bill. They say "There is almost no scientific research concluding packer ownership of cattle or packer actions through forward contracting and control of ownership of cattle hurts producers. It is a popular belief that concentrated processing industries have market power enabling processors to reduce livestock prices. But there is almost no evidence of this in the output from a broad and comprehensive research review on this subject." (Whose review, we wonder?)

Pat Goggins, President of the LMA and one of the men bringing a class action suit against IBP says, these professors all have something else in common besides their opposition to banning feeders from owning cattle just prior to slaughter. According to Goggins all of these professors, and 30 more, were on a list as to receiving grants from the various packers. They could not testify in the IBP case, says Goggins, because "They had already been purchased."

I´m not saying these are evil people. No, not at all. But I am saying they are reacting to current market forces within the university system. Anyone reading their comments would be well advised to remember the old adage: You get what you pay for.