July 2009

One important victory in the farm bill was a provision requiring the Secretary of Agriculture to define the term “unreasonable preference” in the Packers and Stockyards Act. The act prohibits packers from giving any “undue or unreasonable preference… in any respect whatsoever” to any producer or class of producers.

For decades USDA has failed to enforce that provision of law, in part because an “unreasonable preference” was never defined, allowing packers to develop livestock procurement practices that clearly discriminate against smaller, family farm livestock producers. Our discussions with Secretary Tom Vilsack and USDA personnel charged with writing the rule defining an “undue or unreasonable preference” have focused on 3 points.

• Purely volume based preferences – premiums or favorable terms that are provided to large-volume producers simply because of their size – should be considered a violation of the act. We take no issue with premiums for quality or preferences that result from real and verifiable differences in transactional or procurement costs. But purely volume-based premiums should be disallowed.

• A “bright line” should be drawn at the packing plant door, and preferences resulting from so-called operational efficiencies within the plant should be disallowed unless packers are willing to open their doors and allow UDSA and producers to examine their volume-based operational efficiency claims.
   
• Current procurement practices which clearly violate the act but have not been challenged should NOT be legitimized by regulatory language that seeks to make past violations allowable in the future.

Read our full letter providing input to the Packers and Stockyards Administration of input on “unreasonable preference” rulemaking at www.cfra.org/09/livestock, and find out more about how you can make your voice heard as well.

JBS, the world’s largest beef packer, has transferred ownership of cattle in its Five Rivers Cattle Feeding subsidiary. Five Rivers is the largest cattle-feeding enterprise in the world with an annual capacity of 1.5 million head.

Interestingly, in making the decision, JBS officials said that risk of potential legislation aimed at reducing or eliminating packer ownership of cattle was a determining factor.

Under terms of the deal, J&F Oklahoma will assume ownership of the Fiver Rivers cattle. J&F will sell at least 500,000 head of finished cattle to JBS-Swift annually through 2011. JBS will operate Five Rivers as a commercial cattle-feeding company.

According to a 47 state survey of 2,000 dairies conducted by the National Milk Producers Federation, U.S. dairies rely so heavily on immigrant labor that losing 50 percent of foreign-born dairy workers would force 2,266 dairies to close, culling 670,000 cows from the U.S. herd and decreasing American milk production by 14.7 billion pounds.

The survey, entitled The Economic Impacts of Immigration on U.S. Dairy Farms (see www.nmpf.org), found that 41 percent of 138,000 full-time workers in U.S. dairies were immigrants. The survey made no distinction between legal and undocumented workers.

The survey also made no attempt to determine impact on large vs. small dairy farms. But common sense tells us that the impact would not be scale neutral.

Contact: John Crabtree, johnc@cfra.org or 402.687.2103 x 1010 for more information on Corporate Farming Notes.

June 2009

Dairy magnate A.J. Bos lost another court battle over a massive industrial dairy near Nora, Illinois (see www.cfra.org/blog/2008/09/03/insult-injury-megadairy-style). A local grassroots organization – Helping Others Maintain Environmental Standards (HOMES) – prevailed in Bos’ attempt to move the case to federal district court. (The case was remanded to Jo Daviess County Circuit Court in Galena.) HOMES had already won a temporary injunction halting construction.

When I spoke at a HOMES forum in April they were excited about their victories. But they wanted to talk about creating a more sustainable farming system in Jo Daviess County.

Former state Representative (and Bos cheerleader) Ron Lawfer suggested that only livestock producers should have a voice in these decisions. He claimed that opponents “want every farm to have some chickens, a few sows and a cow.” I pointed out that between one cow and 22,000 cows lies a broad range of farm sizes, and everyone should have a voice in deciding the kind of livestock production we want in our communities.

The world’s largest beef packer says, “time to start growing again.” JBS CEO Joesley Batista is reticent about sharing details, considering the Justice Department stopped their purchase of National Beef last year because of antitrust concerns.

Another corporate farming nemesis is back. Validus was a for-profit subsidiary of the National Pork Producers Council that became involved in a shell game with Environmental Protection Agency grants funneled through the shadowy America’s Clean Water Foundation. Over $21 million passed from EPA to Validus, purportedly to conduct on-farm environmental assessments.

EPA eventually audited the foundation and demanded they return the $21 million. Then, long story short, the foundation disappeared in a cloud of smoke and Validus ran deep and quiet. Read www.cfra.org/newsletter/2007/08/corporate-farming-notes-1 for more of this bizarre story.

I was surprised in March when NPPC sold Validus to investors led by Validus CEO Earl Dotson. Perhaps something new is in the works, or perhaps it was time to bury the bodies and tie up loose ends. We’ll have more answers in next month’s corporate farming notes.

Contact: John Crabtree, johnc@cfra.org or 402.687.2103 x 1010 for more information.

May 2009

Last year it was Agriprocessors in Postville, Iowa, and stories of exploitation of immigrant labor, child labor violations and myriad other issues. This year it was worse. In February we all learned that for over 34 years a shadowy Texas company called Henry’s Turkey Service had “employed” mentally disabled men to work at the West Liberty Foods’ turkey processing plant in Atalissa, Iowa. They were paid as little as 44 cents per hour for their work at the turkey plant.

The disabled men, most in their 50’s and 60’s now, lived for decades in a 106-year-old schoolhouse, still owned by the city and rented to Henry’s for $600 per month. When the state fire marshal closed the facility because it was deemed a fire hazard, 21 men were still living there. Several Iowa officials described the conditions at the “bunkhouse” as deplorable. However, payroll records show that Henry’s deducted at least $1,000 per month for room, board, and “kind care” from wages of some of the men and diverted at least some of their disability and Social Security checks as well.

Iowa Governor Chet Culver recently summed up the colossal failures by multiple government agencies saying, “Every level of government bureaucracy has failed these men since 1974 … . The fact that this was allowed to go on for decades is completely unacceptable.”

After Atalissa, it is difficult to look for positive developments in the meatpacking sector. There are some, like the successful conclusion to the union organizing campaign at the Smithfield pork packing plant in Tar Heel, North Carolina, in December. And recent statements, made publicly and to me personally, by Agriculture Secretary Tom Vilsack regarding his intention to aggressively pursue Packers and Stockyards Act rulemaking to prevent packers from discriminating against smaller family farmers and ranchers when buying their livestock.

These are important first steps. However, much more must be done. Workers, farmers, ranchers and rural communities deserve fairness from meatpacking and poultry processing companies, not treatment that reads like a chapter from The Jungle, Upton Sinclair’s novel exposing the dark side of American meatpacking (published three years after construction of the Atalissa bunkhouse).

Contact: John Crabtree, johnc@cfra.org or 402.687.2103 x 1010 for more information.

February 2009

On January 19, 2009, the National Pork Producers Council (NPPC) filed a lawsuit in the U.S. Court of Appeals for the District of Columbia Circuit challenging the U.S. Environmental Protection Agency’s decision to require industrial livestock farms to file air emissions reports under the Environmental Protection and Community Right to Know Act.

NPPC also is alleging that EPA violated the due process rights of farmers by failing to develop an adequate system to accept the reports.

On December 18, 2008, EPA announced that large livestock farms would be required to file mandatory reports on air emissions. Farms that fail to comply could face penalties of $25,000 per day. The rule went into effect on January 20, 2009.

NPPC is challenging EPA’s decision to exclude industrial livestock operations from the Act’s agriculture exemption.

The Jo Daviess County Farm Bureau is seeking financial and logistical support from the Illinois Farm Bureau to assist dairy magnate A.J. Bos in overcoming his legal difficulties in building an industrial mega-dairy near Nora, Illinois.

As previously reported in this column and on the Blog for Rural America (www.cfra.org/blog/2008/09/03/insult-megadairy-style), Bos was seeking to construct an 11,000 cow dairy in the Northwest Illinois county until a judge ruled against him in a preliminary injunction hearing of a lawsuit brought by several local residents and the nonprofit organization Helping Others Maintain Environmental Standards (HOMES). A permanent injunction hearing is scheduled for March 2009.

In a January 8, 2009, letter to Illinois Farm Bureau officials, Jo Daviess County Farm Bureau President Nick Tranel asked the state organization to provide financial support, attorneys, and scientific studies to defend against claims of health and environmental risks of the proposed operation, all to assist Bos in his legal defense.

Jim Francis, a longtime Farm Bureau member and HOMES President, said, “It’s a slap in the face to other producers and Farm Bureau members who are opposed to the mega-dairy.” He added, “Anybody that is a contributing member is helping with Bos’ legal fees.”

Bos joined the Jo Daviess County Farm Bureau approximately one year ago.

Contact: John Crabtree, johnc@cfra.org or 402.687.2103 x 1010 for more information.

January 2009

There were not a lot of highlights in the 2008 farm bill. But one was a provision that requires USDA to write regulations that define an “unreasonable preference or advantage” under the Packers and Stockyards Act. The Act prohibits the kind of “sweetheart deals” that packers give large, industrial livestock operations. But USDA has never effectively enforced the law.

In October the Packers and Stockyards Administration held three listening sessions regarding this farm bill provision – in Arkansas, Iowa and Georgia. I attended the session in Ames, Iowa, and provided input for the Center.

First and foremost it is necessary for USDA to understand the impact of volume-based discounts on family farm livestock producers. For example, I pointed out that a family farmer with a 150 sow farrow-to-finish operation receiving a volume discount of 6 cents per pound would lose more than $56,000 annually just because he is small. Little wonder the big, industrial operations often win out. To read more about what we have to say, go to www.cfra.org/competition.

A November GAO report identified 2,700 so-called “farmers” who made over $2.5 million annually and received farm program payments totaling $49 million between 2003 and 2006. The report detailed hundreds of thousands of dollars going to insurance and financial service company executives, professional basketball franchise owners, and nine recipients who reside outside the United States, including residents of Hong Kong and Saudi Arabia.

Pilgrim’s Pride, the nation’s largest chicken producer, filed for Chapter 11 bankruptcy protection on December 1. The Pittsburg, Texas, poultry integrator has struggled with its debt, which dramatically increased after acquiring rival poultry integrator Gold Kist in 2007. A Texas court approved the company’s petition to access $365 million in financing. Pilgrim’s Pride says that financing, plus cash receipts, will allow them to meet their business obligations.

I would add that those “business obligations” had best include payments to their growers and that this situation is further evidence that mergers in the meatpacking and poultry processing sectors are not always good for business. We already know these mergers are rarely good for producers.

Contact: John Crabtree, johnc@cfra.org or 402.687.2103 x 1010 for more information.

December 2008

As reported here and on the Blog for Rural America (www.cfra.org/blog), A.J. Bos, an industrial dairy owner and developer from California, has been seeking to build an 11,000 cow mega dairy that could be expanded to 22,000 cows within two years with virtually no additional permitting. A preliminary court injunction has halted the project.

Bos initially received approval to build the first phase of the mega dairy from the Illinois Department of Agriculture on May 30, 2008. Shortly thereafter he began construction near the small rural community of Nora in Jo Daviess County, Illinois.

However, on October 20, Circuit Court Judge Kevin Ward issued a preliminary injunction halting the Bos project. Ward’s injunction prohibits Bos from housing more than 199 cows on the site or from using any waste-storage structures or ponds at the site.

Opponents of the Bos mega dairy in and around Nora formed a grassroots organization called Helping Others Maintain Environmental Standards (HOMES). They had several more victories on Election Day. Voters passed two out of four referenda put on the ballot by HOMES members. Jo Daviess County voters supported a moratorium on large livestock facilities, 5,606 to 4,607, and substantial setbacks between such facilities and any town of 80 people or more, 6,210 to 4,313. Neither referendum is binding on the Jo Daviess County Board.

Also on Election Day, California voters passed Proposition 2, which requires egg-laying hens, veal calves and pregnant pigs have enough room to stand up, lie down, turn around freely, and fully extend their limbs. The ballot measure passed with 66.6 percent of the vote in favor, and 33.4 percent against. The law will take effect January 1, 2015.

Poultry integrators and industrial hog producers sounded alarm bells about the measure ending agriculture as they know it. Clearly, changes in production methods will be more easily adopted on smaller, family farm operations than on large, industrial operations. It is likely that fear of adapting to new production rules will lead to large, industrial operations exiting California for what they perceive as “friendlier, less regulatory” climes – an unintended consequence that could impact other livestock regions in rural America.

Contact: John Crabtree, johnc@cfra.org or 402.687.2103 x 1010 for more information.

November 2008

The U.S. Justice Department and 13 state attorneys general filed a lawsuit with the U.S District Court in Chicago on October 20, 2008, seeking to stop the Brazilian meatpacker JBS’s proposed acquisition of National Beef Packing.

“The transaction was likely to lead to lower prices for cattle producers and to higher prices on the output side,” Thomas Barnett, Assistant U.S. Attorney General for Antitrust, told Reuters.

According to the Justice Department, their antitrust suit was joined by the states of Colorado, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Texas and Wyoming.

In March 2008 JBS, the largest beef packer in the world, announced their intention to purchase National Beef and the Smithfield Beef group. Those acquisitions would have reduced the U.S. cattle market from five major packers to just three and would have made JBS the largest U.S. beef packer with nearly 35 percent of the cattle slaughter market, followed closely by Tyson and Cargill. The top four packers – JBS, Tyson, Cargill and National – together slaughter more than 85 percent of U.S. cattle.

Justice also announced that they will approve JBS’ purchase of the Smithfield Beef Group, including Five Rivers Cattle Feeding with the one-time capacity to feed 800,000 head of cattle in several states. National Beef announced it will vigorously oppose the government’s suit.

Many thanks to the literally thousands of Center for Rural Affairs supporters who took action to encourage the Justice Department to act on this merger.

A recent report commissioned by the Pew Commission on Industrial Farm Animal Production ( http://www.ncifap.org ) concludes that large, industrial livestock operations offer fewer economic benefits to rural communities and pay workers less than smaller operations.

According to the report authors – David Andrews and Timothy Kautza – large-scale, industrial livestock production returns $1 to local economies for every $1 spent, while smaller operations return $7 for every $1 spent. The authors also report that workers at industrial livestock operations earn 58 percent of the typical wages in their area, and 45 percent of hired farm workers at these operations earn less than the poverty level for a family of four.

Contact: John Crabtree, johnc@cfra.org or 402.687.2103 x 1010 for more information.

October 2008

USDA blocks responsible livestock testing

On August 29 the D.C. Circuit Court of Appeals ruled that USDA has the right to restrict meatpackers’ testing of slaughter cattle for Bovine Spongiform Encephalopathy (BSE), the degenerative neurological disease in cattle known as “mad cow disease.” Since 2006 Creekstone Farms Premium Beef has sought permission to conduct BSE tests, at their expense, on all the cattle they slaughter instead of a sampling to ensure product safety and preserve export markets they have established. USDA refused to allow the additional testing. In March 2006 Creekstone sued in federal court for access to BSE test kits.

In March 2007 U.S. District Court Judge James Robinson ruled in favor of Creekstone, saying that USDA could not control BSE test kits under the 1913 Virus-Serum-Toxin Act because the kits were not a treatment for livestock. USDA appealed the decision to the D.C. Circuit Court.

A ruling by Appellate Judges Judith Rogers and Karen Henderson overturned the District Court, stating that USDA has the authority to prevent the sale of BSE test kits. D.C. Circuit Court Chief Judge David Sentelle dissented, arguing the USDA’s interpretation of the law “exceeds the bounds of reasonableness” for a statute restricting the sale of ineffective livestock medicine.

We remain supportive of Creekstone’s efforts and puzzled by USDA’s response. We fervently hope USDA’s rationale for restricting BSE test kits does not stem from an effort to protect the large, vertically integrated packing companies from holding up their end of the food safety system.

As reported last month, California dairy magnate A. J. Bos plans to build an 11,000 cow dairy in Jo Daviess County, Illinois, that could expand to 22,000 cows in the next two years. Local residents report that initial construction has begun. If you missed last month’s report, see http://www.cfra.org/blog/2008/09/03/insult-injury-megadairy-style for the full story.

Arkansas chicken growers have filed suit against Pilgrim’s Pride, accusing the company of fraud, deceit and misrepresentation relating to its Clinton, Arkansas, plant closure. According to Robin Dunlap in multiple local media reports, Pilgrim’s Pride broke their contractual promise to deliver chickens to growers in the region. Dunlap reported having borrowed $500,000 to build her chicken barns and is no longer able to fill them.

Contact: John Crabtree, 402.687.2103 x 1010 or johnc@cfra.org for more information.

September 2008

Permit granted for mega-dairy despite intense local opposition

In Jo Daviess County, Illinois, a particularly disconcerting brand of corporate farming is coming to town. Perhaps I am biased because I know so many dairy farmers in northeast Iowa, southwest Wisconsin, and northwest Illinois, but I find the location of an 11,000 head (or more) mega-dairy so close to the heart of family farm dairy country is the epitome of adding insult to injury.

A.J. Bos, the Bakersfield, California, dairy magnate with a dairy empire of over 50,000 cows in multiple states, is seeking to build two industrial dairy sites with at least 5,500 cows and heifers. Illinois law would allow him to double the number of cows at each site within two years, with no additional supervision, if the cost of the expansion is less than 50 percent of the initial cost of construction.

Despite stiff opposition from local residents, and an 11 to five vote earlier this year by the Jo Daviess County Board recommending that the Illinois Department of Agriculture deny the mega-dairy construction permit, Bos was able to convince the department to grant a construction permit for the site.

Members of Helping Others Maintain Environmental Standards, a grassroots organization that sprung up in Nora, Illinois (population 200) and surrounding communities in opposition to the Bos mega-dairies, have filed for an injunction against the construction arguing that the Illinois Department of Agriculture wrongfully granted Bos the construction permit. The village of Nora is less than one mile from the proposed mega-dairy site.

Ken Turner, Warren, Illinois, resident and mega-dairy opponent said it as well as any, “We have to fight for the right to breathe air and have drinkable water… This is not the ag you grew up with. This is not the future of ag.”

Think about it this way. While the residents of Nora, Warren, and Waddams Grove struggle to protect the air, water, and quality of life in their communities, will Bos’ mega-dairy help drive 100 tri-state family farm dairy operations out of business, or just 50?

Contact: John Crabtree, johnc@cfra.org or 402.687.2103 x 1010.

August 2008

Regulators Scrutinize Effect of Possible JBS Acquisitions

The Department of Justice is looking more closely at the anti-competitive impact of JBS S.A.’s acquisition of Smithfield Beef’s Five Rivers Cattle Feeding, according to our investigations and several reports in financial trade publications. JBS announced in March their intention to acquire Smithfield Beef Group and National Beef Packing, purchases that would make JBS both the largest beef packer and cattle feeder in the U.S.

Five Rivers Cattle Feeding, a joint venture between Smithfield Beef and Continental Grain with the capacity to feed over 800,000 head of cattle, would come under the ownership of JBS if the transaction is approved. In conversations with a variety of government agencies looking at the JBS mergers, the ownership of Five Rivers by JBS has been called a “significant area of inquiry.”

Our investigations also lead us to believe that the JBS purchase of National Beef’s Dodge City and Liberal plants in Kansas combined with the JBS Swift plant in Cactus, Texas, as well as the combination of National Beef’s plant in Brawley, California, and Smithfield Beef’s plant in Tolleson, Arizona, are points of concern for the Justice Department.

Thousands of people from across the U.S. have weighed in with the Justice Department in opposition to the JBS - Smithfield Beef - National Beef mergers. We encourage you to keep up the pressure by expressing your opposition to the JBS mergers at http://www.cfra.org/JBS.

On June 30 the Organic Trade Association filed a legal complaint against Ohio’s Department of Agriculture challenging as unconstitutional an emergency rule seeking to prevent milk labeling that tells consumers whether cows producing the milk were treated with rBST, the synthetic growth hormone sold by Monsanto under the brand name Prosilac®.

“The Organic Trade Association firmly believes that consumers have a right to know, and want to know, about the products they purchase, and organic farmers and processors have a right to communicate with their consumers regarding federally regulated organic production practices,” said Caren Wilcox, the Organic Trade Association’s Executive Director.

USDA’s National Organic Standards prohibit the use of hormones to promote growth or increase production in organic milk production.

Contact: John Crabtree, johnc@cfra.org or 402.687.2103 x 1010 for more information.

July 2008

Pork producers will get another shot at democracy. In 2001 a majority of pork producers nationwide voted to end the mandatory checkoff that mainly benefits large, vertically integrated pork producers rather than small and mid-sized family producers. Yet a back room deal at USDA kept the checkoff alive despite the vote.

A lawsuit failed to reverse the action at USDA. But as part of the court settlement, USDA will conduct a survey of producers this year. If more than 15 percent indicate they would like to vote again on the continuation of the checkoff, USDA will hold another vote within one year.

Unfortunately, the steep decline in family farm pork production that led up to the first vote has continued for the last seven years. Opponents of the checkoff will likely be fighting an even tougher battle as they seek justice for family farm pork producers.

Contact: Brian Depew, briand@cfra.org, 402.687.2103 x1015 to comment.