Corporate Farming
| Industrial agriculture has been defined, even by its proponents, as a system where the farm owner, the farm manager and the farm worker are different people. That's a dramatic change from the historic structure of agriculture, where the people who labor in farming also make the decisions and reap the profits of their work. Corporate farming leads to closed markets where prices are fixed not by open, competitive bidding, but by negotiated contracts, and where producers who don't produce in large volumes are discriminated against in price or other terms of trade. A healthy and stable community depends not on the number of livestock being produced, but on the number of livestock producers living and working there. The Center works to create genuine opportunity for family farms and ranches. We educate the public about the consequences of industrialization and corporate farming through our monthly newsletter. The last 12 months of Corporate Farming Notes are presented below. |
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 ( 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 oppositionIn 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 AcquisitionsThe 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.
June 2008
The farm bill was pretty good for corporate farms. No farm program payment limits, of course, but, just as disconcerting, the conference committee also stripped a provision from the Senate farm bill that would have prohibited meatpackers from owning livestock.We have often written about the importance of banning packer ownership to foster competition in livestock markets and remove the driving force behind the rapid expansion of massive, vertically integrated, industrial livestock operations and the environmental nightmares associated with them.
Several members of the conference committee endeavored to put the ban on packer ownership of livestock back into the farm bill conference report. Most notably, Senator Chuck Grassley (R-IA) offered an amendment to include the provision with the vocal support of Senate Agriculture Committee Chairman Tom Harkin (D-IA), and Representative Leonard Boswell (D-IA).
However, that support was not enough to overcome the opposition lead principally by House Agriculture Chairman Collin Peterson (D-MN) as well as Representatives Cardoza (D-CA), Hayes (R-NC), Etheridge (D-NC), and Goodlatte (R-VA).
The largest corporate “farms” in the country – Smithfield (the largest pork producer and packer in the U.S.) and JBS (the largest cattle feeder and beef packer in the U.S.) – will continue to wreak havoc among family farmers and ranchers and throughout rural America, for now.
As in 2002, the U.S. Senate showed vision and courage by prohibiting packer ownership of livestock in their farm bill. In fact, support for this provision was actually stronger this year, including greater support within the Senate Agriculture Committee. But, in the end, Chairman Peterson and others who publicly declared their opposition to fair access to competitive livestock markets for family farmers and ranchers won the day on vertical integration.
However, thanks to the tireless efforts of a core group of family farmers, ranchers, and like-minded organizations, combined with the persistence of Senator Harkin, the farm bill conference report did include one meaningful livestock market reform for which the Center for Rural Affairs has long advocated. It requires the Secretary of Agriculture to write rules that define an “unreasonable preference” as prohibited by the Packers and Stockyards Act.
If well written, rules defining “unreasonable preference” could help stop price discrimination against family farmers and ranchers and breathe life and competition back into livestock markets.
Contact: John Crabtree, 402.687.2103 x 1010 or johnc@cfra.org for more information on the Center’s Corporate Farming Notes.
May 2008
On March 4 and 5, JBS-S.A. of Brazil announced the acquisition of National Beef Company of Kansas City, America’s fourth largest beef packer, as well as the Smithfield Beef Group. In little more than a year, JBS has become the largest cattle feeder and beef packer in the United States. The Department of Justice has undertaken a premerger analysis to determine if the acquisitions by JBS are anticompetitive under U.S. antitrust laws.The Center for Rural Affairs has been working with allies to convince Justice that this mega-merger must be scrutinized more closely and that the premerger analysis should be extended. We are also gathering comments from organizations, churches, farmers, ranchers, and other concerned citizens through an online petition and comment page. We have over 500 citizen signers of our letter to Justice and, given time, hope to make that thousands.
You can find out the status of the Justice Department’s analysis and, if there is still time, comment and sign onto our letter at http://www.cfra.org/competition.
As previously reported, local residents near Ravenna, Nebraska, have engaged in a running battle with Swift over dumping of paunch (gastrointestinal contents of slaughtered cattle) in open fields near their homes. Since the JBS takeover, the residents’ limited progress has been reversed, and paunch dumping is as egregious as ever.
In early April the mayor of Grand Island told JBS-Swift officials that the company’s plant could be shut down over unresolved wastewater problems. Nebraska Dept. of Environmental Quality issued notices to the city and JBS-Swift four times in the last nine months for violating discharge permits.
The Iowa General Assembly is poised to provide $22.8 million in true “pork barrel” spending for yet another research study of how to make liquid manure from industrial livestock operations not stink (HF 2688). House Ag Committee Chair Delores Mertz (D-Ottosen) and Speaker Pat Murphy (D-Dubuque) played a legislative shell game to get the bill out of committee and reported to the floor.
Contact: John Crabtree, 402.687.2103 x 1010 or johnc@cfra.org for more information.
April 2008
Brazilian firm plunges into U.S. meatpacking and cattle feeding ventures; California beef recall the largest in historyOn March 4, JBS-S.A. of Sao Paulo, Brazil embarked on a beef packing acquisition binge. That day JBS announced its intention to purchase National Beef Company of Kansas City, America’s fourth largest beef packer. The next day, JBS announced its acquisition of Smithfield Beef Group.
If approved by the Justice Department, these acquisitions would give JBS the capacity to slaughter over 42,000 head of cattle per day in the U.S. or about 32 percent of national slaughter. Cargill, with 29,000 head per day slaughter capacity, and Tyson, with 28,300, are the second and third largest beef packers in the U.S. and combined with JBS would account for over 80 percent of U.S. beef slaughter.
JBS would also acquire Five Rivers Cattle Feeding, a Smithfield joint venture consisting of feedlots in Idaho, Colorado, Kansas, Oklahoma, and Texas with combined capacity to feed over 800,000 cattle at one time.
Two days and $1 billion later, JBS is positioned to become the largest cattle feeder in the world along with its status as the largest beef packer in the U.S. and worldwide. JBS continues to demonstrate to ranchers and farmers with cattle exactly why a ban on packer ownership should become federal law, just as Smithfield has convinced family farm hog producers.
On February 18 the Hallmark/Westland Meat Packing Company of Chino, California, recalled 143 million pounds of beef, the largest recall in U.S. history. The Food Safety and Inspection Service determined that the beef in question was unfit because some of the cattle slaughtered did not receive “complete and proper inspection.”
The Hallmark/Westland recall occurred because the company forced “downer” cows that could not walk or stand for inspection, as required by federal regulation, to stand by using forklifts, electric cattle prods to the face, and other extremely abusive methods. The abusive practices were captured on video shot by a Humane Society investigator inside the plant.
Hallmark/Westland CEO Steven Mendell was subpoenaed to appear before a Congressional investigative hearing on March 12. USDA, however, has done little more than rescind Hallmark/Westland’s USDA “Supplier of the Year” award for the 2004/2005 school year. Over 37 million pounds of the beef recalled by Hallmark/Westland last month had made its way into school lunch programs throughout the country, according to USDA officials.
Contact: John Crabtree, 402.687.2103 x 1010 or johnc@cfra.org for more information on the Center’s Corporate Farming Notes.
February 2008
Indiana county slated for mega hog expansion; South Dakota industrial dairies financed through bizarre immigration arrangementIn December, the 12-member Planning Commission of Randolph County, Indiana, voted unanimously to endorse an ordinance that would create a so-called “agricultural district” across 75 percent of Randolph County specifically for the construction of industrial livestock operations.
Over 50 opponents filled the meeting room to comment on the proposed ordinance, and at least another 50 were forced to stand in the hallway because the room was too crowded for them to enter.
The Commission voted against allowing public comment at this meeting. Commission member Todd Schroeder declared that he had heard enough from the public and joined the vote against public comment.
The proposed ordinance would turn 220,000 acres of the nearly 290,000 acres in the county into an industrial park for confined animal feeding operations by creating an intensive agricultural district.
In 2006 Randolph County’s hog population grew by over 126,000 hogs. Last year nearly 38,000 more hogs were added. Maxwell Foods of Goldsboro, North Carolina, has been expanding into the region because of excess pork production in North Carolina.
As was first reported in the Argus Leader of Sioux Falls, South Dakota has witnessed a recent spate of construction of industrial dairies that are financed through a truly bizarre type of capital formation. In the case of Drumgoon Dairy near Lake Norden, South Dakota, which was featured in the Argus Leader report, Rodney Elliot of Northern Ireland was able to construct a 1,700 cow dairy by accessing $2 million from four South Korean investors.
In exchange for their $500,000 investment, each of the South Korean investors gains the right to permanent residency in the United States for themselves and their families. South Dakota has led the pack in taking advantage of the revised U.S. Citizenship and Immigration Services EB-5 program, which provides 10,000 visas annually for foreign investors, with 5,000 reserved for those who invest at least $500,000 in rural areas to create at least five jobs.
Our research has found nine such mega-dairy projects in planning, construction, or operational stages in South Dakota. Most appear to be of similar project size, scope, and cost to Drumgoon Dairy (1,700 cows and $6.8 million estimated project cost), but three South Dakota projects with price tags in excess of $35 million are “in progress,” and several even larger projects are said to be “under development.”
Contact: John Crabtree, johnc@cfra.org or 402.687.2103 x 1010 with questions and comments.
