Corporate Agribusiness' Main Man

Dan Glickman's critics have been speculating lately what might be the result if the USDA Secretary were to spend less time trying to sell the world on genetically modified organisms (GMOs) and moaning and groaning about the dollar losses to our nation's cattle producers owing to the European Union's ban on U.S.hormone-fed beef and more time doing some simple math.

Recently, Glickman was busy promoting GMO's to a two-day "World Congress" in St. Louis, Missouri, sponsored by the the World Agricultural Forum, a St. Louis-based group founded in 1997 to examine agricultural issues. The group's primary sponsor is the Danforth Foundation, a philanthropic group funded by the family that founded the St. Louis-based Ralston Purina Co.

Leonard Guarraia, chairman of the forum's board of directors, described the Congress "as the first ever meeting of all of global agriculture, from financing to the farm." Also sponsoring the event were Cargill and Monsanto. The group plans to hold a World Congress every two years in St. Louis, which is also world headquarters for the Monsanto Co. Regional meetings are also planned in Asia, Europe and South America.

Glickman told his fellow ag ministers that he saw a need for more public education on the biotech issue. "We cannot force GMOs on reluctant consumers," Glickman said. "Instead, we have to bring them along."

At the same time the former Kansas congressman was promoting GMOs he was also decrying the EU's unwillingness to abide by the decision of the World Trade Organization (WTO) Appellate Body last year that the Europeans' ban on U.S. imported hormone-fed beef violates WTO rules. The WTO gave the EU until May 13 to comply with the ruling.

However, on May 4, the European Commission at a meeting in Strasbourg, France, issued a written statement that a new scientific study allegedly showing a possible link between hormone-treated beef and risk of cancer in humans was reason enough for the EU to maintain the import ban. More than 90% of American cattle producers feed hormones approved by the Food and Drug Administration to make cattle grow faster and bigger.

The EU Commission, however, said that "[t]here can no longer be any question of lifting the ban on hormone-treated beef since the risk assessment has identified risks to health caused by hormones."

The U.S. has prepared a final list of European products that will be hit with 100% import duties, with retaliation coming by mid-July. A preliminary list covering imports worth more than $900 million a year, ranging from Roquefort cheese to motorcycles, was issued on March 22.

Ironically, the threat of the ban comes at a time when the Europeans' "mountain of beef" is back. As the Journal of Commerce's Aviva Freudmann reports, "only a few years after the European Union had finally exhausted huge surpluses that resulted from overproduction due to internal price supports, it finds itself sitting on big, publicly owned stockpiles of beef." These inventories, known as "intervention stocks" in the lingo of the EU's farm subsidy program, currently amount to 480,000 metric tons. They are causing a lot of distress to the continent's meat traders.

"These stocks weigh heavily on the market," Manfred Hartl, chairman of the German Association of Meat Wholesalers and Retailers, told the 12th annual World Meat Congress. The intervention stocks -- called that because they are purchased under EU market intervention programs -- are sold off periodically or given away free, for example as food aid to Russia.

Undeterred by such European scientific studies and production figures, however, Glickman points to the fact that the EU ban on U.S. hormone-fed beef is costing a potential $212 million in lost exports for U.S. cattle producers.

USDA's Study:
'Negligently Misleading'

In the midst of Dan Glickman's fretting over the Europeans' ban on U.S. hormone fed beef and the losses to cattle producers his own Economic Research Service (ERS) was releasing a study completed in January 1998 that analyzed annual data as to cattle price levels in the 1990s and concluded that the price levels during that cattle cycle were bad, but not the worst on record.

Curiously, the report, released May 4, some 16 months after it was completed and less than a week after the Pickett v. IBP price fixing suit received class certification, further concluded that there was no evidence of negative effects of packer concentration on cattle prices during the 1990s.

Rather than read his department's own economists conclusions, however, Glickman might well benefit from getting out pencil and paper and do some of his own calculations using his department's own statistics.

If the farm share of cattle, as reported by the USDA, is 44% and the average live price of an 1,150-pound steer is $63.00/cwt., or $724.50 per head, then the retail value can be calculated to be $1,646.91 ($724.50 divided by 44% equals $1,646.91) total retail value, not including the highest value cuts which go to the hotel, restaurant and institutional trade and export). Likewise, the USDA shows the producer has lost 22% of the retail dollar. Twenty-two percent times $1,646.91 equals $362.32 loss to the producer; $362.32/head times 38 million live cattle produced annually equals $13.77 billion per year, and the loss to U.S. cattle producers has been at these levels since the spring of 1994.

The USDA's own 1996 industry concentration study acknowledged that the beef packing industry is highly concentrated, with three packers -- IBP (38%), Excel (22%) and ConAgra (21%) -- controlling 81% of the market. Calculating a $13.77 billion annual loss to U.S. cattle producers and using the aforementioned market share figures, cattle producers' loss at the hands of IBP could be estimated at $5.23 billion, Excel (the Cargill subsidiary) at $3.02 billion and ConAgra (the nation's second-largest food manufacturer) at $2.89 billion alone.

Meanwhile, IBP recently reported earnings up 307% over the same period last year for the first quarter of 1999, which comes on top of the company's second-best ever year in 1998. More than 80% of IBP's huge earnings came from its fresh meats division, which had triple the earnings of the previous year.

At the same time ConAgra's profits for its fiscal third quarter were $171.4 million, up 44% from a year earlier. Company CEO Bruce Rohde said ConAgra's refrigerated foods segment, which includes its Monfort meatpacking and processing operations, was "driving earnings growth this year." Likewise, Cargill's net income of its fiscal third quarter was $192 million, up 53% from the previous year, and like its "competitors" claimed that its beef and pork operations were key to its profit picture, yet furnished no details.

Commenting on these figures, Mike Callicrate, a St. Francis, Kansas, feedlot owner, charged that "the abusive market power of the packer is the reason for the loss. With concentration, cooperation and captive supplies, it is easier for the packer to buy cattle cheaper that to sell meat higher to the also powerful retailers. Retailers are doing less today for their share."

The ERS study was also challenged by agriculture economist Dr. John Helmuth, former chief economist to former Rep. Neal Smith's House Committee on Small Business. Noting that the current ERS methodology was only suited for comparing present cattle cycles with past ones, he charged that it is "negligently misleading" for the ERS to even address the further question of negative packer concentration effects because the publicly available annual data are in no way suited to address that issue.

Or as he concluded rather sardonically: "Asking USDA researchers to address the question of the exercise of market power in the beef industry using annual, public data is the equivalent of asking NATO air forces to hit precise military targets in Serbia using only National Geographic maps from five years ago."

Or current CIA maps!

IBP Sabotages
Cattle Price Bill

In what can only be described as the exercise of blatant corporate power IBP, the nation's largest meatpacker, recently withdrew from the effort to get legislation which would attempt, even though already a flawed attempt, to establish a price reporting consensus in livestock sales. The company claimed that such reporting would be too burdensome, particularly in the case of pork.

While turning its back on what both independent cattle producers and farm state legislators believe a just law requiring complete and timely price transparency in an effort to restore a fair and equitable market for cattle and pork, IBP left Senate Agriculture Committee Chairman Richard Lugar holding the bag on this vital issue, although he has vowed to get some form of federal legislation in place in the near future

Even before IBP's action, however, livestock producer, Bob Mack of Watertown, South Dakota, testified before the committee that he and many fellow producers were not even supportive of the reporting proposal essentially drafted by IBP and the National Cattlemen's Beef Association (NCBA) and its proposed modifications.

"We continually hear talk about the 'market,'" he observed. "But the cattle market is not a market at all. It is just a price that the big packers have arbitrarily forced upon producers, and which the packer-biased media have conditioned them to accept. The market today is only an illusion. It's essentially whatever IBP, ConAgra, Cargill, and others say it is, whatever they think they can get away with paying."

It is evident, say the cattle producers, including Mike Callicrate, that price reporting must be made mandatory. It should not be compromised, as was the proposed bill, and most certainly the big meatpackers should not have a say in their own regulation by government. The producers again emphasized that today the situation is one of thousands of separate and disorganized cattle producers at the mercy of prices set by a monopoly of a few big, well organized packers. Without true price reporting there is no way, they believe, that they can possibly know what their cattle are really worth

The Cattleman's Legal Fund has also called the present "Packer-NCBA proposal a disgrace and disservice to cattle producers and should be completely discarded. In some ways this proposal is worse than the current voluntary reporting system. Today, sellers have immediate access to whatever voluntary information is available. Under the Packer-NCBA proposal, information would be old news, and would be available only at the packer's control, most likely after the week's trade is over. The Packer-NCBA proposal still maintains secrecy of the terms of formula, contract and other possible anti-competitive packer supply control methods."

The Fund stresses that "the goal of a mandatory price reporting bill should be to establish special rules and regulations for only the big packers now controlling the markets, and to dissipate that control," such as:

* Restoring price discovery and a more fair and equitable distribution of the consumer meat dollar back to the producer.

* Providing full and complete, timely, on-the-spot market information on a daily basis of all purchases or sales of cash cattle, beef and beef by-products whether imported, exported or domestic.

* Providing full and complete, timely, on the spot market information on any and all contract, formula, captive or otherwise packer controlled cattle supplies beyond seven days of delivery.

* Providing all details of the agreement to the public on any captive supply, formula, contract or otherwise packer controlled supplies of cattle.

* Providing the public and law enforcement officials better access to information, enabling more effective enforcement and prosecution of applicable antitrust laws.

* Providing enforcement officials with clear and mandated orders to guarantee strict adherence to the law.

* Providing strong penalties and deterrents for noncompliance.

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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