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!
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.
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.