Alberta Ag conference January 9, 2003


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Ten years ago - Robert Peterson, IBP Chairman and CEO, said “…there is no stopping it (concentration). This is an evolution that’s going to take place in spite of whoever is in the way.”

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  • Through out history, the greatest threat to a free society has been concentration of power and wealth into the hands of a few. Today, 1% of the world’s population control 57% of the wealth. Never before in history have consumers paid more for food and have farmers received so little as a percent of the food dollar.
  • NYSE investment empowers the same companies that are enslaving us. At the same time as the stock market was up 80%, IBP stock was down 40%. IBP is just a packer. They don’t innovate. They are putting their raw material suppliers out of business.
  • Alberta Ag conference January 9, 2003

    1. 1. Market ConcentrationThe Impact on Producers, Consumers and Rural Communities Tiffin Conference Series 2003 Lethbridge, Alberta By Mike Callicrate
    2. 2. PLUNGING FARM INCOME ! 1.20 1.10 Retail 1.00 Price MarketIndex 0.90 Power 0.80 Farm Price 0.70 84 85 86 88 89 91 92 93 94 95 97 98 87 90 96 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 - USDA Data
    3. 3. “The increasing gap between retailfood prices and farm prices in the1990’s is due largely to exertion ofmarket power, and not to extraservices provided by processors andretailers.”- C. Robert Taylor, Alfa Farmers Eminent Scholar, Auburn University
    4. 4. Consumers-Food Four FourBig Packers Big Retailers Farm and Ranch Production
    5. 5. Farm Share of Consumer Beef Dollar*70.0% 68%65.0%60.0%55.0%50.0% 48.6%45.0%40.0% 19 19 19 19 19 19 19 20 50 75 95 96 97 98 99 00 Percent of Farm Share *All Fresh Choice Beef – USDA-ERS Data
    6. 6. Never before has there been so muchmoney in the food system, and neverbefore has so little of the consumer fooddollar gone to the producer of that food.
    7. 7. Breakdown of Retail Beef Dollar - A Picture ofAbusive Market Power and Producer Poverty 1975 2000 Retailer 26% Retailer Cattlemen Cattlemen 42% 49% Packer 65% 9% 2001 Packer 9% Retailer Cattlemen 49% 40% Packer Source for price spread figures: 11% USDA, ERS
    8. 8. A Transfer of Wealth From Farm to Retail 70% 65% 60% 55% 50%Percent of 45% 1975Consumer 40% 35% 2000 Beef 30% 2001 Dollar 25%20% 15% 10% 5% 0 Cattleman Packer Retailer USDA fresh retail beef
    9. 9. November 2000 vs 2001 Comparison in Gross Income$900 12% Loss 37.5% Increase$800$700$600$500 2000$400 2001$300 27% Increase$200$100 0 Cattleman Packer Retailer Source for price spread figures: William F. Hahn, ERS-Sept. 2001
    10. 10. Concentration and the resulting market power of the big packer and retailer has cost cattlemen over$400/head of their share of the consumer beef dollar. “…there is no stopping it (concentration). This is an evolution that’s going to take place in spite of whoever is in the way.” Robert Peterson, IBP Chairman and CEO, July 1996 $20 Billion by 2001 article, in Meat and Poultry
    11. 11. Concentration in Food Retailing• In 1992, the five leading chains controlled 19 percent of U.S. grocery sales• By 1998, the five largest chains (Safeway, Albertson’s, Kroger, Ahold and Wal-Mart) controlled about 33 percent of U.S. grocery sales• Estimates in 2000 -- 42 percent of U.S. grocery sales by the five largest firms• Projection: in three years, absent rigorous antitrust enforcement, the figure will exceed 60 percent.
    12. 12. Five Leading Firms in Retail Sales Sales (billions) Percentage of total salesWal-Mart $57.2 11.1Kroger $49.0 9.5Albertsons $36.4 7.1Safeway $32.0 6.2Ahold USA $27.8 5.4
    13. 13. Top Four FirmsGrain and Soybean Shipping & ProcessingTerminal grain handling 60% (Cargill, Cenex Harvest States, ADM and General Mills)Corn exports 81% (Cargill-Continental Grain, ADM, Zen Noh)Soybean exports 65% (Cargill-Continental Grain, ADM, Zen Noh)Flour milling 61% (ADM Milling, Con Agra, Cargill, General Mills)Soybean crushing 80% (ADM, Cargill, Bunge and AGP) Source: Hendrickson and Heffernan, Univ. of Missouri-Columbia
    14. 14. Four Firm Packer Concentration Ratios (in percent) Year Cattle Steer & Heifers Cows/Bulls Hogs 1980 28 36 10 34 1985 39 50 17 32 1990 42 55 18 33 1995 69 81 28 46 1996 66 79 29 55 1997 68 80 31 54 1998 70 81 33 56 1999 70 81 32 56 2000Source: International Agricultural Trade & Development Center, University of Florida
    15. 15. The deadly combination of concentration andvertical integration… Why don’t you sue Wal-Mart? - John Tyson
    16. 16. The Dark Side of the All American Meal“Fast food has hastened the malling of our landscape ,widened the chasm between rich and poor, fueled anepidemic of obesity, and propelled a juggernaut ofAmerican cultural imperialism abroad.”
    17. 17. Alliance:The union of two thieves with theirhands so deep into each otherspockets that they cannot separatelyplunder a third.- Ambrose Pierce
    18. 18. Big packers and retailers are robbing thebank.Cattle feeders who provide captivesupplies are driving the getaway car.
    19. 19. Dynamics of The Packers’ Game Plan? How to control cattle feeding without spending a dime Offer preferential contracts to the Chosen Few Preferential deals for some will lead to an increase in aggregate supply This will depress cash price for slaughter animals The preferential price for the Chosen Few is enough to maintain their profitability even with lower cash prices But independents will be eventually forced out of the business due to sustained losses After the independents are gone, the preferential deals for the Chosen Few will evaporate End result: Independents are gone; Markets are gone; Chosen Few are controlled by Packers; DoJ will not enforce predatory pricing, so upstarts will be quickly forced out; participation in production will be “by invitation only”  And along the way, the Packers might be able to buy production facilities at bankruptcy prices
    20. 20. Cattlemen’s Anti-Trust Suit againstTyson/IBP Moves Toward Trial“The petition for permission to appeal . . . is DENIED.”“Pickett is a massive antitrust case,” Whatley says. “Itsgoal is to make sure the markets work – and are notdepressed by captive supplies”, adds Domina.- March 8, 2002
    21. 21. Cattlemen sue packers - a line in the sandA group of Midlands cattlemen filed class-action lawsuits Friday claiming that themeatpacking divisions of ConAgra Inc. andCargill Inc. have used contracts and ownershipof livestock to depress the cash cattle market.- May 11, 2002
    22. 22. A picture of unfair market practices and retaliation… Callicrate Feedyard, St. Francis, Kansas, December 2002
    23. 23. In August, 2002, Tyson announced itwas cutting back its pork division.The cuts included the elimination of200 jobs in the company and thetermination of contracts with 132 hoggrowers scattered from NorthwestArkansas to Southwest Arkansas aswell as in eastern Oklahoma.
    24. 24. C argill S u e d b y Tu rke y G rowe rS at, N ov 9, 2002Companys Policies Like Indentured Servitude, Lawsuit SaysBurl Jones, a Franklin County, Arkansas, turkey grower, suedCargill and Jesse Mahan, the Ozark region grow-out manager,claiming the companys policies are manipulative, coercive,fraudulent, overreaching, deceptive and unfair, resulting in asituation similar to indentured servitude.
    25. 25. Turkey growers file suit - Cargill cancels contracts“The Schauers are two of about 50 turkey growers in Gonzales,Lavaca and Caldwell counties that have filed a lawsuit againstCargill claiming that the company drove them out of business bymaking false statements to encourage them to spend more moneyand then unlawfully terminated their contracts…”- July 24, 2002, Ann Rundle, Victoria Advocate
    26. 26. The biggest Lies:• Wall Street is the economy.• Globalization will mean a morepeaceful world.• Price is the result of supply anddemand
    27. 27. The novel humanizes the growing farmcrisis caused by the corporate abuse ofmarket power in American and worldagriculture.
    28. 28. Throughout history, the greatest threat to afree society has been the concentration ofpower and wealth into the hands of a few. Today, it is estimated that 1% of the people control 57% of the world’s wealth.
    29. 29. According to UN numbers, as freetrade grew, the income gapbetween the world’s richest 20percent and it’s poorest 20% wentfrom 30-to-one in 1960, to 74-to-one in 1999.
    30. 30. The United States founding fathersbelieved the economy should serve thepeople, not the people serving theeconomy.The economy should serve the Americanworking man and woman and thedomestic producer, rather than the theinterests of multinational corporations.
    31. 31. Breimyer called the 1996 Farm Bill theworst ever. "What is worst of all ...andindefensible, is the paying out of big bucks(1) irrespective of the level of market prices,and (2) without necessarily requiringperformance on the farmers part. Theformer is often put in terms of seriouslyweakening the safety net that has long beena distinguishing feature of farm programs."
    32. 32. “... The new Farm Security and Rural Investment Actof 2002 - the new farm bill - does nothing to securethe future food security of this country, and it doesnothing to enhance the investment in rural areas. Thefarm bill just passed does nothing more than continueto subsidize wealthy landowners and the corporationsthat are basically destroying opportunities for familyfarms and destroying the future of rural communities.Whats driving agriculture is people who are politicallyand economically powerful. They have a firm grip onthe economic trough…”- John Ikerd, Professor Emeritus, U. of Missouri
    33. 33. “Farming needs to work for foodproduction, for taking care of creation,for community development, and forfamily life.”- Christian Farmers Federation of Ontario
    34. 34. Regulation of Economic Power isRequired to Ensure the Preservation of the Free Market System Adam Smith, late 1700s J.B. Clark, early 1900s Frank Knight, early to mid 1990s
    35. 35. “…the price of dressed meat hadincreased nearly fifty per cent in thelast five years, while the price of ‘beefon the hoof’ had decreased as much,it would have seemed that thepackers ought to be able to pay; butthe packers were unwilling to pay…”- The Jungle 1906
    36. 36. “The farmer can withstand the challenges of unpredictableweather, he can stand the up and downs of a fickle but fairmarketplace, but the one thing neither he nor the smallbusinessman can withstand is the calculated corruption ofthese gargantuan multinational corporations. When themultinational corporations have been exposed as thescheming greedy giants that they are, it’s going to beinteresting to see how long Americans will put up withallowing them to financially rape unsuspecting citizens.”Marinell Strain, Oklahoma Contract Poultry Growers
    37. 37. Other Problems with Market Power Retail prices are very slow to change, due in part to the economic power of retailers and category captains When there is a burp in demand or supply, the retail market does not clear (e.g. when there is a sudden increase in production, retail price does not fall, which causes dis-equilibrium in the markets This magnifies variability of prices for slaughter cattle and hogs The effect is further magnified by thin markets  Stabilization of owned and controlled production by packers makes the thin cash market a shock absorber for the industry, leading to more volatile farm prices Risk (price variability) is transferred to the producer
    38. 38. Is the Global Food System Out of Control? Our present economic system has emerged without any apparent forethought about what kind of economic/social system citizens want  Change has been driven by corporate interests and investor interests  The Fathers of a competitive market economy recognized that there is an inherent instability in the system: A competitive market economy may evolve, through natural growth, acquisitions or mergers, to monopoly Unless the market is regulated Antitrust laws were intended to prevent this outcome
    39. 39. The Well-being of Society Depends on Maintaining a Balance Of Economic efficiency Economic power Economic freedom Stewardship of natural resources & the environment Community The Interface Between Law, Politics & Economics
    40. 40. Opportunity is in short supply inmuch of rural America. Stretches ofNebr. and the Dakotas include thenations two lowest-income countiesand more than half of the bottom 20.Across a wide swath of rural America,communities are dying and churchesand schools are closing.- Chuck Hassebrook, Exec. Dir. of the Center for Rural Affairs, TheNew York Times; 4-14-02
    41. 41. Turning rural America into a ghetto…The Latest Data on Rural Poverty:The newest data on income levels in each ofthe nation’s 3,110 counties show thepervasiveness of rural poverty in America.Only one among the poorest 50 counties is ametropolitan county; most are very rural,agriculturally dependent counties.
    42. 42. For the fourth year in a row (1996 to1999 data), the rural Midwest can layclaim to being the poorest region inthe nation and Nebraska the statewith the poorest counties. The U.S.Department of Commerce, Bureau ofEconomic Analysis data shows thatNebraska has six of the poorest 20counties, including the two poorest.
    43. 43. Historically, farmers have beenland serfs and peasants.
    44. 44. “The New Agriculture” Globalize and Industrialize !“Corporations searching the globe for the hungriest people that will produce the cheapest and sellingthat production in the highest consuming markets.” -William Heffernan PhD.
    45. 45. The corporate managed global agriculture,or so-called “New Agriculture,” promoted bythe current establishment will restorepermanent peasant status to all farmersand livestock producers.
    46. 46. Like every other centrally planned economic orpolitical system in history, an agricultural system that enslaves producers and exploits consumers like the “New Agriculture,” will also fail. But at what cost?
    47. 47. PARIS, France -- Angry farmers usedbricks, cars and crates to block scoresof food warehouses across France in aprotest for better pay fromsupermarkets.- Associated Press, November 21, 2002
    48. 48. Spanish retailers criticised for hugemargins04/12/02 - There is a huge disparitybetween the price paid by Spanishretailers for a wide range of agriculturalproducts and the price at which they areeventually sold on to the consumer,according to a new survey by theSpanish farmers’ organisation, COAG.
    49. 49. “…angry farmers have been protesting in MexicoCity for weeks, arguing that they will be driven outof business and forced to migrate to the UnitedStates.”But Fox refused to halt the changes…He arguedthe government had already taken several stepsto help farmers compete with their U.S.counterparts, including lowering electricity ratesand providing more access to credit.He said. "The solution is in being competitive andproductive.”- Associated Press, December 21, 2002
    50. 50. “The farm crisis in Canada andaround the world is caused by thecorporate-driven extraction ofwealth from rural areas. Structuraladjustment removes the barriers tosuch extraction and accelerates theoutflow of profits and wealth.”-2002 N F U R e p o rt: Th e S tr u c tu r a la d ju s t m e n t o f C a n a d ia n A g r ic u lt u r e
    51. 51. As Eduardo Galeano wrote 25 years ago in "OpenVeins of Latin America":"The division of labor among nations is that somespecialize in winning and others in losing." Thebook quotes an Alliance for Progress coordinatoras observing that "to speak of fair prices is amedieval concept, for we are in the era of freetrade."
    52. 52. “Farmers need to raiseless corn and more hell.” Kansan Mary Ellen Lease in analyzing the U.S. farm crisis one hundred and fourteen years ago.
    53. 53. She also said, “Wall Street ownsthe country. It is no longer agovernment of the people, by thepeople and for the people, but agovernment of Wall Street, byWall Street, and for Wall Street.”
    54. 54. Are we financing our owntransition into slavery?
    55. 55. She continues, “Our laws are theoutput of a system which clothesrascals in robes and honesty in rags….The people are at bay, let thebloodhounds of money who havedogged us thus far beware.”
    57. 57. ConAgra pays up for cheating growersConAgra agreed to a $6.75 million settlement to a lawsuit filed byGeorgia contract poultry growers. ConAgra denied the charges inthe suit, but settled one day before trial. The counts in the case:• Breach of contract (for shorting growers on the number and quality of chicks and other inputs);• Conspiracy to defraud, fraud and deceit (for planning to cheat growers by mis-weighing of birds, feed, etc);• Packers and Stockyards Act violations (for unfair, unjustly discriminatory, or deceptive practices, subjecting growers to unreasonable prejudice or disadvantage, and conspiring to do all of the above);• Federal mail fraud (for mailing documents used in the above schemes through the U.S. mails); and Racketeering (for conspiring and agreeing to conduct its business so as to defraud the growers).
    58. 58. Tyson pleads guilty tobribing USDA Secretary
    59. 59. ADM, “Super Price Fixer tothe World” pays $200 millionin fines and civil penalties
    60. 60. Nafta has been good for a fewmultinational corporations wanting toescape the high cost of doing business inthe U.S. It has been bad for thecountries and people exploited by thesecompanies to lower costs and extracthigh prices.
    61. 61. Realized Net Farm Income and Canadian Agri-Food Exports $22 $20 $18 $16 Realized Billion of Dollars $14 net farm $12 income $10 $8 Canadian agri-food $6 exports $4 $2 $0 1989 1990 1991 1992 1993 1994 1995 1996 1997 • At the same time Canadian agri-food exports are up are up prices • At the same time Canadian agri-food exports 224%, 224%, paid to farmers have remained basically unchanged. unchanged. • pricessame time Canadian agri-food exports are up 224%, prices At the paid to farmers have remained basically • • At to farmerstime Canadian agri-food exports are up 224%, prices Expenses have increased 35%. • paid the same have remained basically unchanged. Expenses have increased 35%. • Since 1941, farmshave2.56 times basically unchanged. investment has paid to farmers are remained bigger and return on • Since 1941, farms are 35%. times bigger and return on • Expenses have11.87% to 1.26% ($7,174 net income per farm dropped from increased 2.56 • Expenses have increased times bigger and return on investment has • investmentfarmsdropped 35%. 11.87% to 1.26% ($7,174 net Since 1941, has are 2.56 from including return to labor & management). • Since 1941, 11.87% to2.56 times bigger and return on farm dropped from farms are 1.26% ($7,174 net income per investment has • income per farm labor to 1.26% ($7,174 1957.& management). Gross farmfrom 11.87%risen tenfold sincelabor Meanwhile, the including return to including return to has & risen tenfold since 1957. Meanwhile, dropped income net income per farm has management). • Gross farm incomelabor & management). fallen from 38 cents per farmers’ share of that gross farm income has • Gross farm incometo ofrisen tenfoldfarm income has fallenthe including return has since 1957. Meanwhile, the farmers’ shareand ‘60’sgross cents in 1957. Meanwhile,from dollar in farm income has risen tenfold sincethe 1990’s. 54% of the 38 • Gross the 1950’s gross farm12 that to farm farmers’ share of thatthe 1950’sincome has fallen from 38 cents per cents per dollarfrom off farm sources. living expense is of that gross farm income has fallen fromin the per farmers’ share in and ‘60’s to 12 cents 38 cents dollar in the 1950’s and ‘60’s to 12 cents in the 1990’s. 54% of farm 1990’s. 54% of farm living to 12 cents in the 1990’s. 54% of farm expense is from off farm sources. Source:dollar in the 1950’s and farm sources. living expense is from off ‘60’s Realized net farm income: Statistics Canada Cat# 21-603E, Agri-Food exports: living expense is from off farm sources. Agriculture and Agri-Food Canada: Source: Realized net farm income: Statistics Canada Cat# 21-603E Source: food Export Potential for the Statistics Canada Cat# 21-603E, Agri-Food exports: “Agri- Realized net farm income: year 2000”. Agriculture Realized net farm income: Statistics Agri-Food Canada: “Agri-food Export Source: and Agri-Food Canada: Agri-Food exports: Agriculture and Canada Cat# 21-603E, Agri-Food exports: Agriculture and Agri-Food Canada: Potential “Agri- food Export Potential for the year 2000”. “Agri- food Export Potential for theyear 2000”. for the year 2000”.
    62. 62. Corporate controlled globalization willdestroy food security, self reliance, andreduce all food producing countries tothird world status.
    63. 63. 1. Restore competition - break up the biggest agribusiness firms including Tyson/IBP, ConAgra, Cargill, ADM, etc.3. Break up large wholesale and retail firms like Wal-Mart, Krogers, Safeway, Nestle, RJR, etc.3. Suspend all mergers that include any of the large firms.4. Ban big packer ownership and control of livestock.
    64. 64. 5. Eliminate the 3/60 rule for price reporting. Make the markets totally transparent. Make contract terms and conditions public.2. Repeal Illinois Brick, giving indirect injured sellers relief from predatory retailers like Wal-Mart.3. Promote and financially support more localized, non-global food systems that give both small and commercial size farms market access.4. Make global trade fair.
    65. 65. "Let it be told to the future world,that in the depth of winter, whennothing but hope and virtue couldsurvive, that the city and thecountry, alarmed at one commondanger, came forth to meet andrepulse it."- Thomas Paine, December 23, 1776
    66. 66. *Corporate rule and tyranny - TheEast India Company, created inDecember of 1600, with QueenElizabeth as CEO, was the worldsfirst multinational corporation.In 1776 it held a virtual strangleholdon commerce and politics in NorthAmerica and used British troops asits enforcers.
    67. 67. "Tyranny, like hell, is not easilyconquered… What we obtain toocheap, we esteem too lightly: it isdearness only that gives every thingits value. Heaven knows how to puta proper price upon its goods; and itwould be strange indeed if socelestial an article as FREEDOMshould not be highly rated."- Thomas Paine, December, 1776
    68. 68. Officials of Porter Township move to endcorporate rule and tyranny in their community...Porter Township, Pennsylvania, has fired the firstshot in the New American Revolution with this firstbinding law denying corporate personhood. Its arevolution that will be fought not with guns but in thecourts, in the voting booths, and on the battlefield ofpublic opinion.
    69. 69. "Well, maybe its like Casey says: A fella aint got a soul ofhis own, just a piece of a big soul, the one big soul thatbelongs to everybody. And then it dont matter, Ill bearound. In the dark. Ill be everywhere. Wherever you canlook. Whenever theres a fight so hungry people can eat,Ill be there. Whenever theres a cop beaten up on a guy,Ill be there. Ill be in the way guys yell when theyre mad,and Ill be in the way kids laugh when theyre hungry andthey know suppers ready. And when people are eatenstuff they raise, and livin in the houses they build, Ill bethere, too!!!"--- Tom Joad in the movie "The Grapes of Wrath"
    70. 70. Mike CallicrateSt. Francis, Kansas 785-332-3344