CALAMITY HOWLER/A.V. Krebs
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.
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
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
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
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
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!
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.
Cattle Price Bill
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
"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
* 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: email@example.com
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