CALAMITY HOWLER/A.V. Krebs

Defenders against food insecurity

In a world growing by 80 million people a year, improvements in living standards are putting pressure on food stocks while there are no prospects of another green revolution to increase agricultural yields, according to a report prepared by the International Food Policy Research Institute in Washington.

"The World Food Situation: Recent Developments, Emerging Issues and Long-Term Prospects," a survey of what people will be eating and feeding their animals between now and 2020, reveals that problems from rising consumer demands to falling water tables could create huge food disparities in the poorest countries despite their economic growth.

The report was prepared for the Consultative Group on International Agricultural Research at the World Bank. Ismail Serageldin, the World Bank's vice president for environmentally and socially sustainable development and chairman of its agricultural research group, told the New York Times' Barbara Crossette that stocks of surplus food for use in emergencies should be increased as insurance against future disruptions in supplies. Aid groups also should try to speed up help to the poorest subsistence farmers, he said.

"We have to do the hard work of dealing with the problems of the small-holder farm in remote areas," he said. "They are the real defenders against food insecurity."

Copies of the report are available free from the Consultative Group on International Agricultural Research, 1818 H St. NW, Washington, D.C. 20043.

Ordure Happens

Animal manure produced in the United States is 130 times greater than the amount of human waste and 60 percent of U.S. rivers and streams already are "impaired," with agricultural runoff the largest contributor to that pollution. Those are the two key findings of a recent study by the Democratic staff of the U.S. Senate Agriculture Committee.

Sen. Tom Harkin (D-Iowa), the ranking Democrat on that committee, called the study "the first comprehensive report to illustrate the magnitude of environmental problems caused by animal waste." He is using the study to support the push by Midwestern senators for national environmental standards for livestock producers so states won't undercut each other in efforts to lure the livestock industry.

In 1996 alone, more than 40 animal waste spills killed 670,000 fish in Iowa, Minnesota and Missouri, the study reported. That was up from 20 spills in 1992, and the risk increases each year as more large-scale corporate livestock operations take hold.

For example, a single 50,000-acre hog farm being built in Utah by Circle Four could potentially put out more waste than the city of Los Angeles. Circle Four is a joint venture among Murphy Family Farms, the nation's largest pork producer, and three other large Eastern U.S. pork producers -- Carroll's Foods, Prestage Farms and Smithfield Farms.

In the largest pollution penalty in U.S. history, Smithfield Foods, one of the nation's largest pork producers, was recently fined by U.S. District Judge Rebecca Beach Smith $12.6 million for dumping excessive levels of hog waste into a Chesapeake Bay tributary in violation of the Clean Water Act.

In Utah's Circle Four, the nation's four industry leaders have established a hog operation on the sage flats 10 miles south of Milford. Currently, there are 250,000 pigs. The operation eventually is expected to handle 1.2 million hogs.

In seeking to "minimize its impact" on Milford, which occupies a simple, beautiful desert valley between the Wah Wah and Mineral mountain ranges, Circle Four Farms built its facilities three miles from the nearest house in the hope of keeping the smell from its open lagoons of hog waste away from Milford's inhabitants. In so doing it failed to take into account the desert's cool nights, which have caused the hog odors to lie close to the ground. Owing to the fact that Milford is usually downwind from Circle Four's hog farm, the odors now drift into the small town's populated areas.

Premium Standard, Doing the Continental

Long rumored to be interested in becoming a major player in the nation's hog producing and processing market Continental Grain, already one of the world's largest grain traders, has announced that its purchasing 51 percent of Premium Standard Farms, one of the "new breed" of corporate piglet-to-pork companies.

While both privately-held companies have declined to disclose the terms of the definitive agreement some industry analysts, according to the Wall Street Journal, figure half of Premium Standard could be valued at a few hundred million dollars, making the deal "one of the biggest" by Paul J. Fribourg since he became chief executive of Continental, his family's New York-based multinational company, in April 1997.

"With Continental Grain behind it, Premium Standard will have the resources to be a major player," said David Nelson, an analyst at Credit Suisse First Boston Corp., New York.

Currently, Premium Standard owns 105,000 breeding sows in Texas and Missouri, where it also operates a meatpacking plant with a capacity to kill 7,000 hogs a day. Those operations will be combined into a new company that will make Continental Grain one of the five biggest U.S. hog producers.

Continental now processes and trades crops, raises chickens and engages in consumer lending. It has been building a swine-production business for five years in Missouri, where it owns 20,000 sows. After fattening the offspring it delivers the mature swine to meatpackers such as IBP.

Premium Standard, based in Kansas City, Mo., has been the object of many recent protests in Missouri as it has sought to establish corporate hog factories in the rural counties of that state, usually adjacent to the plentiful corn producing areas of neighboring Iowa. In Missouri and elsewhere such protests have been centered around the issue of protecting family farmers from corporate competition.

Currently heavily leveraged, Premium Standard was hit two years ago by a sudden drop in hog prices, which cut its cash flow, coupled with a big jump in grain prices swelling its costs of fattening its pigs.

Consequently its major financial backers, Morgan Stanley Group Inc. and its merchant-banking fund partners saw Premium Standard seeking protection under Chapter 11 of the federal Bankruptcy Code in July 1996. Three months later, however, Premium Standard paid its creditors in full and emerged from bankruptcy protection, a spokesman said.

Corporate Mania: Eat Before Being Eaten

"There is also a real bandwagon effect, people want to eat before being eaten."

Candid in his appraisal of the record number of corporate mergers that took place in 1997, San Francisco, California management consultant Mitchell Marks, who has just published, Joining Forces: Making Mergers Work, points out "only about one in five mergers is financially successful. Many executives and their advisers conclude it is cheaper and safer to buy than to build, but they often overestimate the synergies and underestimate the costs," he says.

Marks' reservations notwithstanding, 1997 was a remarkable year for mergers and acquisitions as deal makers completed 7,772 transactions in the United States with a total value of $653.5 billion. That was a third more deals and 40 percent more dollars than the previous record set in 1996, according to Houlihan Lokey's Mergerstat in Los Angeles.

The sum is greater than the combined net worth of all Forbes 400 companies and represents $1.79 billion worth of deals per day or $1.2 million per minute.

"Mergers and acquisitions are perceived as a way to generate value, just as creating conglomerates was seen as a way to diversify risk in the 1970s," according to Scott Adelson, Houlihan Lokey's managing director.

An average transaction jumped to $284.5 million in 1997, from $172.9 million the year before. There were 120 megadeals valued at $1 billion or more, with the biggest deal of 1997 and all time being WorldCom's $35.3 billion acquisition of MCI Communications.

Seven of the top 10 deals last year involved financial services companies. Banking, brokerage, investment banking and insurance transactions accounted for nearly one-third of all the activity in 1997. Communications, utilities, leisure and entertainment mergers also were strong.

In addition to fear, Marks told San Francisco magazine's senior writer Peter Sinton, ego often plays a role in such megamergers. Many CEOs wonder why they should head a $1 billion-a-year company when it could be $2 billion.

Consolidation, meanwhile, is occurring at a record pace not only in the United States but around the world. Securities Data Co. reports worldwide deals topped $1.6 trillion last year, up more than 45 percent from $1.1 trillion in 1996. The U.S. share was 10,700 transactions valued at $919 billion, up from $626 billion the year before.

So You Want To Buy An Agriculture Secretary!

Pleading guilty to giving former USDA Secretary Mike Espy $12,000 in illegal gratuities, Tyson Foods, the nation's largest poultry producer, has consented to pay the federal government $4 million in fines and $2 million in costs. While granted immunity from further prosecution, company chairman Don Tyson and his son John Tyson could be called to testify at Espy's upcoming trial.

In addition, in the plea agreement obtained by independent counsel Donald C. Smaltz and approved by Judge Ricardo M. Urbina in Washington, D.C. U.S. District Court, the company also said it would comply with ethics requirements in dealing with federal officials, and as a result will not be subjected to a potentially costly ban on doing its $200 million in yearly sales in programs managed by the Agriculture Department.

Tyson Foods admitted to giving gifts to Espy -- including football tickets, airline trips, meals and scholarship money for his girlfriend -- at a time when the USDA was considering action on several matters affecting the company's business..

According to court papers, at the time it was bestowing gifts on Espy, Tyson Foods was urging USDA to go slow on imposing new meat and poultry handling instructions. Smaltz's office said prompt imposition of the new rule would have cost Tyson Foods $30 million, although ultimately a court order blocked enforcement of the rule.

While Smaltz has been warring with lawyers in the Justice Department who contend that he has ranged too far afield from his original mission of investigating gratuities to Espy, Democrats have likewise charged that three years and $8.5 million is too much time and money devoted to investigate what they have termed petty corruption.

Smaltz, however, has achieved a substantial tally of convictions and penalties. His investigations have so far resulted in criminal convictions of seven individuals, five corporations and a law firm. Three people have been cleared and three cases -- including the one against Espy -- are pending. With the Tyson plea, Smaltz has won a total of $10.5 million in fines and penalties.

Smaltz, in a statement, noted that the investigation has shown unlawful gift-giving by prohibited corporate sources to a sitting member of the Cabinet. "Such conduct must continue to invite outrage, never passivity, from those who are regulated, the public and our lawmakers," Smaltz said. "... Our government is a government of all the people and not just the privileged few who seek to buy their way into regulatory grace."

Although the White House had no comment on the Tyson plea, many of the Arkansas company's officials have long-standing ties to Bill and Hillary Clinton. When the Tyson family appeared in court they were accompanied by James Blair, Tyson's corporate counsel and a close friend of the Clintons who "advised" Hillary Clinton in 1978 on cattle market futures trades that earned her her "miraculous" $100,000.

GOP Bu$ine$$

Business interests in the 1995-96 election cycle made $653.4 million in soft money, political action committee and individual contributions, more than 11 times the $58.1 million that came from organized labor, according to a recent study by the Center for Responsive Politics. Sixty percent of all business contributions went to Republicans, while 93 percent of labor's giving went to Democrats.

The nation's largest corporate giver -- soft money, political action committee, and individual donations by employees and their immediate family members -- was also the nation's largest food manufacturer, Philip Morris, Inc., with $4.2 million in contributions in the last election cycle, with 79 percent going to Republican incumbents and candidates.

Other large food corporations which were among the top 18 contributors included Joseph E. Seagram and Sons, $2,555,836, which contributed 67 percent to the Democrats, and RJR Nabisco, which spent $2,300,336 with 80 percent going to the Republicans.

The defense industry showed the biggest change in contributions, rising from 39 percent Republican in 1993-94 to 70 percent in 1995-96. Energy and natural resources increased from 57 to 77 percent Republican while lawyers and lobbyists, traditionally Democratic donors, upped their Republican giving from 27 to 38 percent.

A.V. Krebs is editor/publisher of the Ag Biz Tiller Online, a newsletter monitoring the activities of corporate agribusiness from a public-interest perspective. See http://home.earthlink.net/~avkrebs/CARP/tiller/.