OCM-N-02 Newsletter, April, 1999

Referendum on pork checkoff

 A coalition of farm and rural groups operating as the Campaign for Family Farms have gathered the required signatures to force a referendum on the pork checkoff program.  The coalition asserts that the checkoff funds the efforts of the National Pork Producers Council to promote the biggest hog corporations, as well as meatpacker interests, at the expense of the independent producers.

 According to federal law, the groups needed to gather signatures from 15% of the total hog producers and importers nationwide - or about 14,986.  On April 15, they announced that they had collected 16,500 signatures.  The signatures have not yet been verified.  In a referendum, a simple majority vote of pork producers will determine whether the checkoff program will continue.

 The campaign groups are Iowa CCI, Missouri Rural Crisis Center, Land Stewardship Project, Illinois Stewardship Alliance, Wisconsin Rural Development Center, Indiana Campaign for Family Farms, and Community Farm Alliance.

 The Livestock Marketing Association, an association of stockyards and auction yards, is gathering signatures to force a similar referendum on the beef checkoff program.  In early April, the LMA claimed to have 85,000 out of the required 108,000 signatures necessary.  The current deadline is May 15, 1999 but the LMA has requested an extension from the USDA's Agricultural Marketing Service.

Government report faults crop insurance

 Congressional agriculture committees and the American Farm Bureau Federation have been leaning heavily in favor of crop insurance as a means to help farmers through the current crisis.  However, a March 15 report by the USDA's Office of Inspector General (OIG) determined that the crop insurance program provides more dollars to insurance companies than producers.

 The federal government's Risk Management Agency (RMA) administers the crop insurance program which is delivered by private reinsured companies. Consistent with the belief of many that government programs promote big business and not independent agriculture, the OIG found that the insurance companies benefit more than the farmers.

The OIG also found that insurance company staff violated conflict of interest guidelines in delivering the crop insurance program.  The report is available in .pdf format at www.usda.gov/oig/ auditrpt/auditrpt.htm.

Congress has recently been ignoring ag consolidation and fair marketplace issues and promoting crop insurance.  Congress needs to refocus on the three top issues:  (1) price, (2) price, and (3) price.

Corporate Welfare for Seaboard

 A new report by the North Central Regional Center for Rural Development found that the vertically integrated hog factory Seaboard Corporation in Texas County Oklahoma benefited from lax anti-corporate farming laws, weak environmental regulations and permissive groundwater access laws, coupled with generous corporate welfare subsidies.  The study found that state and local government units in Oklahoma provided $60.6 million in assistance to Seaboard to help finance their operations.The argument that factory farms are more efficient becomes less and less credible.  A synopsis of the report is available on the internet at www.ncrcrd.iastate.edu

State inspected packer/processors

As the federally inspected major meat packers either drive smaller competitors out of business, or buy them and shut down the plants, only state inspected plants are left to compete.  However, state inspected plants are hampered by federal rules prohibiting out-of-state sales of meat processed in these plants.

 Freeing the state inspected plants to compete on a national basis may be one of the best ways to reinvigorate competition in the meat industry.  Niche markets, brand-name promotions and local market ad campaigns could result as groups of farmers or ranchers produce for a non-major-packer driven market.  By allowing state inspected packer/processors to compete on a national level, they may be more likely to challenge the cumbersome Goliaths in the industry.

 OCM members adopted a policy supporting repeal of the ban on interstate meat sales by state-inspected plants given that food safety standards were adequate.  It may be time to focus on these smaller outlets to restore price competition to the packing industry.

Cargill admits wanting lower commodity prices

 Whitney MacMillan, past Chairman of Cargill, told an audience in Morehead, Minnesota that the farm economy will not improve until the country lowers its ag commodity prices. Lowering commodity prices would make American products more competitive in the world market according to MacMillan. He didn't mention that lower prices would enhance Cargill profits.  The statement was made in the mid-1980's

 Few statements skewer arguments for agricultural globalization more directly than this statement.  MacMillan's statement is especially damning for two reasons.  First, a Cargill executive was the chief ag trade negotiator for the United States in the last round of World Trade Organization talks.  MacMillan's philosophy undoubtedly played a major role in those talks.
 Second, the troubling Cargill-Continental merger will put even more market clout in the hands of MacMillan's Cargill.  Not only will we have less competitors, but the global marketplace will be more controlled by the Cargill Corporate Culprits whose goal is to drive commodity prices even lower.

Iowa Farm Bureau lobbies for Cargill

 A bill was presented in this past session of the Iowa legislature to strengthen existing law which prohibits packer-owned livestock feeding.  At issue were certain packer arrangements, by Cargill's Excel and others, whereby the packer provides feeder pigs to a farmer and the farmer signs a marketing agreement with the same packer guaranteeing that the market hogs will be sold to that packer.  The pending legislation would prohibit such arrangements because the farmer owned the hogs in name only.

 According to Iowa state government staff, Cargill contacted the Iowa Farm Bureau regarding their complaints about the proposed bill.  Iowa Farm Bureau swung into action and was effective in killing the bill. Although a few state Farm Bureau affiliates are beginning to voice their opposition to ag consolidation and vertical integration, the Iowa affiliate does not appear to have gotten the message from the grass roots farmers.

Biotechnology and European consumers

 Europeans are loathe to accept U.S. grains and oilseeds because both conventional and genetically modified organisms (GMO's) are included in most shipments. Although Europe would accept non-GMO products, the multinational grain merchandising cartel has not invested in identity preserving GMO and non-GMO commodities to a great extent.

 This is even more significant now that European countries are requiring that consumer food products be labeled as to whether they contain GMO products.  For example, in Britain, supermarket giants Marks & Spencer, Safeway and J. Sainsbury have pledged not to sell any food containing GMO products.  This move comes in the midst of consumer surveys that reveal that customers prefer non-GMO food by a large majority.  Additionally, all European Union food shops are subject to fines if they fail to label GMO foods.

 Vertical integration proponents like Monsanto, DuPont and Novartis are against labeling GMO products because consumers will be less likely to buy them.  However, labeling and identity preservation could provide a higher value to non-GMO crops grown by family farmers.

Supply and demand

 The disperse structure of production agriculture has always complicated efforts to reduce supply when demand slows.  Each farmer/rancher has an incentive to grow as much as possible because individual supply reduction has a small affect on the overall supply.  Now, however, the two phenomena of factory farms and international trade have complicated domestic supply-demand reactions.

 First, individual corporate decisionmaking at big factory farms can drastically increase supply in short order.  For example, although some economists say that hog prices will rise due to decreasing sow numbers, Oklahoma has 41 pending applications for new sow barns which have a capacity of 500,000 sows.  Seaboard has just received approval for a 25,000 head sow barn in Oklahoma while Bell Farms is building a 25,000 head sow barn on the Rosebud Indian Reservation in South Dakota.  Family farm decisions to reduce hog numbers are overwhelmed by such a supply increase.

 Second, imports of livestock by packers mask reductions in domestic supply.  For example, IBP will close its cow processing facility in Palestine, Texas due to low cow supplies.  The U.S. cow kill has decreased industrywide nearly 17% since 1996.  However, imports of Mexican, Argentine, and other cattle keep cattle prices low in the face of domestic supply reduction.

 Small farm supply decisions thus become irrelevant.

Government report faults NPPC and NPB
 A March, 1999 report by the USDA's Office of Inspector General (OIG) found that there was a significant lack of accountability in the use of pork checkoff funds.  The National Pork Board (NPB) was established by the Pork Promotion, Research and Consumer Information Act of 1985 to collect and administer pork checkoff funds.  Since the inception of the checkoff, the National Pork Producer's Council (NPPC) has been the primary contractor under the program.

 The OIG evaluated whether there were effective controls about the use of checkoff funds.  OIG found that the NPB: (1) needed to improve accountability and regain control over the NPPC's influence on Board decisions; (2) lacked management controls over NPPC subcontracts to state pork organization's use of funds; (3) failed to perform compliance testing at checkoff collection sites; and (4) failed to ensure that pork producers are allowed complete and equal access to national pork delegate elections.

 A copy of the report is available at www.usda.gov/oig/auditrpt/auditrpt.htm
 Both the NPPC and the NPB - which share the same offices in Clive, Iowa and the same website at www.nppc.org - denounced the report in a press release.

Corporatization of Land Grant Universities

 In March, OCM general counsel Michael Stumo presented testimony to the Missouri legislature arguing that the University of Missouri needs to focus its efforts on small to mid-sized family farm viability.  He made the case that, currently, the University of Missouri is dominated by big agribusiness interests such as Monsanto which, by its own admission, has a goal of vertically integrating agriculture.

 The drifting of universities from serving the public good to serving the profit goals of corporate America is a growing concern.  The American Association of University Professors (AAUP) has established a committee to draft recommendations relating to preserving academic independence in the face of corporate money and power.

 Examples of problematic relationships include:  university scientists publishing articles about research results in which they have a direct financial interest through corporate affiliations or patent rights; university academic environments which may discourage criticism of large corporate donors; corporate donors which expect to review or influence research findings before they are published; and corporate executives exerting influence over the overall direction of university research.

 We need to keep our academic institutions, especially land grant universities, focused upon serving the public good.  In agriculture, that means re-inventing land grant universities so their considerable intellectual and financial resources are directed towards reinvigorating strong rural communities and family farms.

Holding Politicians Accountable

 Kansas State Senator Steve Morris, chair of the senate agriculture committee, has been blocking legislation beneficial for small farmers by listening to industry groups which favor big agribusiness.  There was a groundswell of citizen criticism, especially in Sen. Morris' hometown.  As a result, Sen. Morris admitted that he made a mistake and pledged to work for farmers, ranchers, and rural communities.  We will see.

 This scenario is played over and over.  A powerful committee member holds up legislation beneficial to the general public at the behest of special interests.

 The above anecdote shows the effectiveness of revealing cozy relationships between interest groups and politicians to the public, especially citizens in the politician's home town, so that full discussion, criticism or support can occur.  Direct democracy is sometimes amazing.

Proposed FDA antibiotic rules

 The federal Food and Drug Administration (FDA) has proposed rules which would restrict the use of certain antibiotics.  The concern is primarily two-fold.  First, farm use of antibiotics at sub-therapeutic, or growth promotion, levels does not kill most bacteria, but rather allows them to live and mutate to become resistant.  Eighty percent of animal antibiotics are used to promote growth.

 Second, farm use of antibiotics which are similar to human antibiotics poses a special risk of creating resistant microbes which could not be treated in a hospital setting.  Some farm and industry groups have criticized these proposed rules.
 There is an argument that family farmers and ranchers should support antibiotic restrictions.  Besides the public health concerns in which we all have an interest, the biggest factory farms would be less able to function effectively without consistent administration of preventative antibiotics.  Perhaps such regulations would be a competitive advantage for small to mid-sized conventional producers.

 Additionally, reduction in antibiotic use may correlate with a reduction in supply.  Not only would the biggest farms be hindered, but livestock would not reach the market as fast thus reducing numbers.  Economic history is clear that overall farm income increases when there is a shortage of supply resulting in increased prices.  We may be shooting ourselves in the foot to push for more efficiency, whether through antibiotic use, growth hormones, etc. because market prices fall disproportionately.

 Lastly, the Europeans have banned certain antibiotics and may restrict more.  Thus, identity preserved meat products produced without antibiotics could be exported to Europe.  The result would be increased demand and higher profits for that product.  There are many small scale examples of antibiotic free meat commanding high prices domestically.  Consideration could be given to expanding that model to the export trade for the benefit of independent producers.
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OCM NEWS

Annual Meeting Set

 The OCM Annual Membership meeting will be held on August 20 and 21, 1999 in Omaha, Nebraska.  Omaha is the 1998 birthplace of OCM.  It is also geographically closest to the most OCM members at the current time.

 The first day of the meeting will include panels of experts discussing agricultural consolidation, anticompetitive practices, and other marketplace topics.  The second day will be the membership business including adoption of bylaws, resolutions and organizational direction.

 Members may wish to consider making travel plans now, especially if airline travel is necessary.  For more information, call Fred Stokes (601-476-5568).

National Antitrust Conference

 The OCM is working to put together a National Conference on Agricultural Antitrust.  This move was decided upon by the Board of Directors during the March meeting.  The conference will be in Washington, DC and bring together top national experts on antitrust law, policy and enforcement in light of the effect of consolidation on farmers, ranchers, rural communities and consumers.  The planning process is underway and more details will be available soon.

NFU Agriculture Summit

 OCM will be represented by Max Waldo, Fred Stokes, Steve Cady, Brother David Andrews and Mike Callicrate at an "Agricultural Summit" sponsored by the National Farmers Union.  The Summit will include 200 representatives from agriculture organizations and will be held in St. Louis, Missouri on April 27, 1999.  Focus topics will be: (1) Concentration, (2) Trade, (3) Safety Net and (4) Risk Management.  The intention of the NFU is to pursue consensus on ag issues to address the current crisis.  OCM representatives will focus on promoting a competitive marketplace for independent agriculture while at the meeting.

Antitrust Division Hearing

 OCM members Mike Callicrate and Linus Solberg spoke at an ag crisis hearing with Joel Klein, head of the U.S. Department of Justice Antitrust Division, and Mike Dunn, Assistant to the Secretary of Agriculture in St. Paul, Minnesota on April 18.  They addressed the failure of Washington to curtail the power of the agribusiness cartels which are destroying fair markets and independent agriculture.  The hearing room was packed with citizens from all across the nation.
 

[Compiled by Michael C. Stumo]