Where Goes the American Food Dollar? Guess

As the nation's 1,925,000 farmers seek to survive punishingly low commodity prices, more drastic and widespread than it was in the 1980s with the price of corn, the nation's biggest crop, down 60% from two years ago, and the price of soybeans, the No. 2 crop, down one-third, major food retailers like Kroger, Safeway and Albertson's, according to industry analysts, are likely to maintain double-digit earning increases that they've posted so far in recent months.

Kroger, which will report fourth-quarter results at the end of January, according to a consensus of analysts surveyed by First Call Corp., should earn 66 cents a share, compared with 56 cents a year ago. The same analysts look for Safeway's earnings to be 48 cents a share, compared with last year's 43 cents and Albertson's, with a January year-end, according to First Call, should expect to earn 77 cents per share, compared with 71 cents in the fourth quarter of fiscal 1998.

According to Forbes Magazine the five-year average annual return on capital for both Safeway and Albertson's was 19.5%.

Analysts also expect American Stores, with its year-end in January, to show a strong quarter, with earnings per share at 44 cents a share, compared with 35 cents the previous year. The $11 billion merger with American Stores Co. already approved by shareholders, is expected to be completed soon, once the Federal Trade Commission gives its approval on the deal.

Major changes in the current earnings picture for supermarkets will most likely come from the many mergers affecting the industry, according to analyst Meredith Adler at Lehman Brothers, who describes the future of the industry as an "oligopoly," a marketplace driven by a few dominant companies.

"Kroger and Safeway will continue to be very strong," she said. "If Albertson's handles its acquisition of American stores well, it can do extremely well. ... Food Lion and the smaller regional stores just don't get any respect from investors."

The supermarkets, however are not the only benefactors when it comes to profitability. Forbes reports spectacular five-year annual average returns on capital for such food, drink and tobacco giants as UST Inc. (92.1%), Coca-Cola (49.9%), William Wrigley Jr. (31.1%), Campbell Soup (28.3%), Philip Morris, the nation's largest food manufacturer (23.3%), Pioneer Hi-Bred (22.3%), and General Mills (20.9%).

Meanwhile, farmers find themselves earning less and less each year. Since the institution of the so-called "Freedom to Farm" legislation in 1996 per bushel prices on soybeans have dropped 39%; corn, 69%; wheat, 57%, and milo, 67%.

Thanks to the figures compiled by Brownsville, Nebraska, farmer Corky Jones, we also learn that in September, 1998 in a loaf of whole wheat bread that sold for $1.79 there was three cents worth of the farm commodity. In a 12-oz. box of Kellogg's Corn Flakes that sold for $2.15 there was two cents of the commodity and in a 12-oz. box of General Mills Wheaties, selling for $2.77, there was 2.75 cents of the commodity. Kellogg Co., incidentally, in an attempt to boost earnings and finance what it terms costly "restructuring initiatives," has announced recently that it is raising prices an average of 2.7% on about two-thirds of its cereal brands.

If farmers were to have received a price based strictly on the selling price, according to Jones, they would have received $125.30 per bushel for wheat on the loaf of bread, $161.00 per bushel for corn on the box of Corn Flakes, and $221.00 per bushel for the box of Wheaties. In September, 1998 wheat was selling at $3.20 per bushel and corn was selling at $1.60.

Sorry Michael,
No New Trial

"The degree to which the conspirators concealed their scheme with sham meetings propped up with phony agendas while secretly haggling over price dispels any plausible claim that [Michael] Andreas was unaware that he was breaking the law."

With those words U.S. District Judge Blanche Manning, who presided over the price-fixing trial of three former executives of Archer Daniels Midland Co. declared in a 41-page opinion that she was refusing to reverse their convictions or grant them a new trial.

In seeking to have the court reverse the jury's verdict, Andreas claimed that allocating sales volume isn't a crime under federal law. Judge Manning, however, rejected that argument, pointing out that sales volume allocation was merely one method of illegally fixing prices. She also rejected Andreas' argument that he hadn't been informed that sales volume allocation is against the law.

"There is an abundance of evidence to support conviction," she declared.

Michael Andreas, 49, currently on leave as executive vice president of ADM; Terrance Wilson, 60, retired head of ADM's corn-processing unit; and former ADM biochemist Mark Whitacre, 41 were convicted last year by a Chicago federal jury of conspiring with competitors to fix the price of the feed additive lysine.

They face a maximum three-year prison sentence and at least a $350,000 fine. Sentencing is expected in late February.

"This was a crime of greed--a crime by an extremely large corporation that wanted to make even more money at the expense of their customers," U.S. Attorney Scott Lassar told the Associated Press at the conclusion of the trial.

After hearing six weeks of testimony, the U.S. District Court jury deliberated four days before returning the guilty verdicts. Andreas is the son of Dwayne O. Andreas, the long-time "friend" of the politically powerful and chairman and founder of ADM, "Supermarkup to the World," headquartered in Decatur, Illinois. In 1995, the company itself pleaded guilty to price-fixing involving lysine and another substance, citric acid. It paid a $100 million fine, the largest in U.S. history.

Arguing that they did not receive a fair trial Andreas and Wilson contended that the evidence was insufficient and selective, particularly that evidence supplied by FBI mole Whitacre, who had secretly videotaped incriminating conversations concerning price fixing. Claiming that Whitacre was just trying to save his own skin on embezzlement charges, the two former ADM executives argued, his price-fixing tapes were suspect.

Judge Manning rejected the argument noting that both defendants had been given ample opportunity to challenge the reliability of the tapes during the trial.

In denying a new trial, Judge Manning wrote, "A picture is worth a thousand words, but is nothing when compared to a videotape, and the government has Andreas on the video haggling with Kazutoshi Yamada (former managing director of Ajinomoto, a Tokyo competitor of ADM) over how much market share the individual competitors deserved within their price-fixing scheme, based on their respective market dominance."

Arriving at Agribusiness-Friendly Language

Thanks to a conspiracy between the chemical poison industry and its government regulators--the Environmental Protection Agency--a new pamphlet about to be issued soon will be titled "Pesticides and Food" as opposed to its original title "Pesticides on Food."

But that is only one change in a brochure that is to be distributed in grocery stores by the EPA under a food safety law that Congress passed unanimously in 1996. In addition the pamphlet has been modified putting less emphasis on the health risks posed by chemical poisons used on food and barely mentioning organic foods as an alternative to foods grown using chemical poisons.

Although the final version of the pamphlet does not completely ignore organic foods, advising that "your grocer may be able to provide you with information about the availability of food grown using fewer or no pesticides," John H. Cushman Jr. in the New York Times reports that last August seven food, farm and chemical poison industry groups called on the Clinton Administration to eliminate any references to organic foods and to make other changes.

A final draft of the pamphlet was provided to the Times by Consumers Union, an advocacy group that publishes the magazine Consumer Reports. The consumer group has long been critical of the EPA for not writing a tougher pamphlet to begin with.

"Fundamentally, EPA took what could have been a really good brochure and turned it into a propaganda piece for the food industry, which has always denied that there is a problem with pesticides on food," said Jeannine Kenney, a policy analyst in the group's Washington office who said she had obtained the pamphlet from a government official.

"We had very exhaustive consultations," said Loretta Ucelli, a spokeswoman for the agency, told the Times, "and I think there are and have been concerns about giving consumers the information they need but not causing alarm or indicating that food that is not organic is not safe. We believe that we have arrived at aggressive but consumer-friendly language that will give people the information that they need to make their own choices."

Despite the changes, Gene Grabowski, a spokesman for the Grocery Manufacturers of America, said his group continues to oppose the reworded pamphlet. "Even with the change in the language, it still promotes organic foods in a brochure that was to be about pesticides," Grabowski said.

Examples of how the final draft differs from an early draft illustrate how the pamphlet not only seems to make less of the health risks of pesticide residues on food, but as environmental and consumer advocacy groups contend does not even refer to pesticides as poisons.

While the new version says that "while pesticides have important uses, studies show that some pesticides cause health problems at certain levels of exposure," it omits the details listed in the earlier version, which said, "Some pesticides have been shown to cause health problems such as birth defects, nerve damage, cancer and other toxic effects in laboratory animals."

Likewise, in a section about washing, peeling and cooking food, which used to be called "Tips to Reduce Pesticides on Foods," is now entitled "Healthy, Sensible Food Practices." It emphasizes in bold type the importance of eating at least five servings of fruits and vegetables daily.

The controversy is only the latest in the government and corporate agribusiness's efforts to sabotage the organic food industry. In July 1998 Secretary of Agriculture Dan Glickman announced that the USDA would accept the National Organic Advisory Board's (NOSB) recommendation that only substances currently approved for organic use will be used on organically grown plants. Now the USDA has added three new issues to the proposed national organic standard and is requesting comments on them.

The three new proposals would a) permit indoor animal confinement, b) permit use of animal medications including antibiotics, and c) eliminate the ability of organic certifiers to prevent the sale of mishandled or fraudulent organic products.

These proposals would give the USDA a "legal monopoly" over the term organic as only one organic label, "USDA Organic," would be allowed. In addition USDA would have complete control over appointments to the NOSB; suggesting if history is any teacher that once the board was appointed USDA could and more than likely would weaken the NOSB by appointing people sympathetic to corporate agribusiness, food irradiation and genetic engineering.

While the new proposal would also make it illegal for private, nongovernmental organic certifiers to uphold higher standards than the standards set by the USDA it would also ban "Eco-Labels," making it illegal to even imply through labeling or advertising that a product exceeds USDA standards. By prohibiting stricter standards, this provision would strip organic consumers of freedom of choice, and would in all likelihood stop so-called "sustainable agriculture" dead in its tracks. Farmers likewise would have no incentive to grow food in ways that are more sustainable or safer than the USDA permits.

Finally, the new proposals, unless changed, could allow intensive confinement, non-organic feed, antibiotics, additional synthetic chemicals, etc.

To vent your spleen on pesticide matters, contact Robert J. Knox, Acting Director, EPA Office of Environmental Justice, Mail Stop 2201-A, 401 M Street, SW, Washington, DC 20460; phone 1-800-962-6215; fax 202-501-0740. And/or Carol M Browner Administrator, Environmental Protection Agency, 1101 USEPA Headquarters, 401 M Street, S.W., Washington, DC 20460; (

On organic food, contact Eileen Stommes, Deputy Administrator, USDA-AMS-TM-NOP, Room 4007-S, AG Stop 0275, P.O. Box 96456, Washington, D.C. 20090-6456; fax 202/690-4632; e-mail: And/or contact The Honorable Dan Glickman, Secretary of Agriculture, USDA, 200-A Whitten Bldg., 1400 Independence Ave., SW, Washington DC 20250; e-mail; tel: 202 720-3631; fax: 202 720-2166

A.V. Krebs is director of the Corporate Agribusiness Research Project, P.O. Box 2201, Everett, Washington 98203-0201 e-mail:

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