The Lost World: Cereal Manufacturing
Although its sales slipped to $1.29 billion from $1.31 billion in the third quarter of FY 1997, General Mills, the nation's second largest cereal maker, posted a 5.6% overall increase in quarterly earnings. General Mills blamed lower cereal prices inaugurated in June, 1996. The company, which has about a 24% market share, cut its cereal prices after rivals Philip Morris's subsidiary Post and the Kellogg Co. lowered the cost of their leading brands in an effort to boost market share.
The cereal business in the U.S. is an $8 billion annual market with every one percentage point in market shares equal to $80 million in annual revenues. Four companies (Kellogg's, General Mills, Philip Morris and Quaker Oats) currently control 84% of the total U.S. cereal market.
The company said it expected to increase its sales volume in the fourth quarter as it launches a promotion centered on the movie "The Lost World: Jurassic Park."
In 1996 General Mills also acquired Ralcorp Holdings Inc.'s branded cereal and snacks business for which it paid $355 million in stock and assumed $215 million in Ralcorp debt as part of the agreement.
A small Warren, Vermont cereal company whose products are sold under the trade name ''Three Bears Company'' and are packaged in cottage-shaped boxes decorated with bears and other animals. has beaten back Kellogg's, the nation's largest cereal manufacturer.
It seems Kellogg had taken issue with Yankee Fare, commonly known as the Three Bears Company, due not only to the name of its cereal called ''Mooseli,'' which Kellogg found too similar to its trademark ''Mueslix,' but with its slogan, 'It tastes just right' on the back of the cereal boxes'' and with the depiction of a chicken among the barnyard animals on the Yankee Fare packages.
Kellogg pointed out in a lawsuit that it used a rooster on some of its own packaging and that Kellogg's manufacturers another cereal called ''Just Right.''
After Kellogg's, with a 33% national market share, filed suit in federal court, saying that the Yankee Fare marketing slogan and chicken featured on the box were copyright infringements of Kellogg's, the Vermont firm filed a counter suit, at which time Kellogg withdrew its suit. Yankee Fare's Ward Smyth said his small company wasn't seeking any money; it simply wanted Kellogg to back off.
American Farmland Trust, a private, nonprofit conservation organization, in a "Farming on the Edge." study funded in part by the Philip Morris Cos., has projected in a "worst-case scenario" that with the U.S. population expected to jump 50 percent by 2050 and prime farmland projected to shrink by 13 percent, the U.S. could become a net food importer within 60 years.
"The destruction of our best farmland by sprawl development reduces our agricultural efficiency, increases tensions between farmers and suburban neighbors, leads to higher tax burdens and puts greater pressure on less productive, more environmentally fragile lands here and around the world," said AFT President Ralph Grossi.
The AFT study estimated that between 1982 and 1992, 4.3 million acres of prime farmland were lost - nearly 50 acres every hour of every day. Every state shared in the loss. mainly due to scattered and fragmented urban development near major metropolitan areas.
Texas was the biggest loser with 489,000 acres or 11.5 percent of the U.S. total. Other states with big losses included North Carolina, Ohio, Georgia and Louisiana. The study also placed California's Sacramento and San Joaquin Valley at the top of its endangered list, followed by the Northern Piedmont areas of Maryland, New Jersey, Pennsylvania and Virginia.
In addition, other areas threatened with major losses include the Southern Wisconsin and Northern Illinois Drift Plain, the Texas Blackland Prairie and the Willamette and Puget Sound valleys of Oregon and Washington.
The 20 most threatened regions produce 51 percent of the fruit and 39 percent of the vegetables grown in the United States.
The study called for the federal government to strengthen, expand and enforce its farmland protection programs and change federal estate tax laws to encourage farm families to keep their property in agriculture. The AFT urged local communities to analyze land development trends, agree on which farmland to save and adopt the necessary policy reforms while the state and federal government was urged to quantify farmland by its agricultural importance and vulnerability to rapid urban development.
Given the same population growth, the AFT study projected, new laws forcing "compact growth" at an average of six homes an acre would save more than 500,000 acres of farmland, protect a million acres from encroachment, add nearly $70 billion to the agricultural economy and save taxpayers $29 billion that would be spent extending sewers and other services to newly developed areas.
In New York Times correspondent Barnaby J. Feder's March 20 "Towns Are Slowing Invasion of Farms by Bulldozers" account of the above noted American Farmland Trust study dealing with the loss of prime U.S. agricultural land, he relates the following:
"New homeowners often push local officials to halt normal farm practices, like noisy nighttime harvesting or planting, spreading manure to fertilize fields, importing swarms of bees to pollinate fruit trees and spraying pesticides. Subdivisions can cause crop losses by altering drainage patterns in nearby fields. Dogs chase cattle and other livestock. And vandalism of machinery and crops becomes commonplace.
"`There was one kid who drove around in my alfalfa one night, got stuck in a creek and had the gall to come ask me to get my tractor to pull him out,' said Jim Lehrer, a dairy farmer in Kaukauna, Wis. `He said he was just having fun.'
"Lehrer said he pulled the vehicle out after first demanding the teen-ager's address, then drove his tractor to the offender's home and rode around on the lawn until the teen-ager's father burst out furiously demanding to know what he was doing. Lehrer said he told him he was `just having fun like your son' and then took a spin through the backyard before going home."
A guilty verdict against Jack L. Williams, a lobbyist for Tyson Foods Inc., the nation's largest poultry producer, was handed down March 21 by a seven women and five men U.S. District Court jury after four hours of deliberation. Williams was convicted of lying to federal investigators about providing favors to former Agriculture Secretary Mike Espy.
The investigators claim the favors included $1,009 in air travel and a $1,200 scholarship for Espy's girfriend Patricia Dempsey, as well as tickets, meals and limousine rides for the two for a National Football League playoff game. Espy, who has not been charged with any crime, resigned as USDA secretary in December 1994, has denied any wrongdoing.
Sentencing of Williams will take place on June 5 by Judge James Robertson. He could receive five years in prison and a fine of up to $250,000 on each of two counts of making false statements. Attorney, Barry Levine, representing Williams, charged that the verdict wasn't supported by the evidence and that he would move to have it dismissed; if it isn't, the attorney said he would file an appeal.
Federal prosecutor Robert Ray in his closing argument, however, claimed that Williams "lied because he had to protect what he knew" about his involvement in providing favors to Mr. Espy and Ms. Dempsey, on behalf of Tyson, the Springdale, Ark.-based food giant with past ties to President Clinton.
Donald C. Smaltz, the independent counsel in the Espy investigation, said the verdict demonstrated that the jury was not swayed by defense efforts to discredit the questioning of Williams by FBI and USDA Inspector General investigators. "This office has and will continue to prosecute instances where individuals lie to Federal law-enforcement agents," Smaltz said. "The independent counsel's investigation is ongoing."
In a suit filed in U.S. District Court on December 14, 1996, the Environmental Protection Agency (EPA) is seeking from Smithfield Foods Inc. up to $125 million in fines from the meatpacker on charges it polluted a Virginia river. The EPA has accused Smithfield of 5000 Clean Water Act violations dating to 1991. Federal law allows fines of up to $25,000 per violation.
The EPA suit comes on top of the State of Virginia's August 30 suit seeking from Smithfield up to $2 million in fines.
Both legal actions contend that the waste water from the company's slaughterhouse on the Pagan River exceeded limits on fecal coliform bacteria, nitrogen and other pollutants. The Pagan flows into the James River and eventually into the Chesapeake Bay. The federal suit also alleges the company failed to maintain required records and submitted false reports to regulators.
Earlier, in October, 1996, the Justice Department had given Smithfield Foods two weeks to decide whether to pay $3.5 million in fines or defend itself in court. The deadline was extended twice at the company's request.
"We offered a negotiated settlement at $3.5 million, and that number is no longer on the table," W. Michael McCabe, a regional administrator of the EPA, told the Associated Press. "The number could be a lot higher."
One of America's most prestigious literary magazines-- the Paris Review --- in its Winter, 1995 edition devoted its entire issue to the question: Whither mirth?
To do so, the review called on some of America's finest wits, including Woody Allen, Garrison Keillor, Calvin Trillin, Dave Barry, John Irving, John Barth, Harold Bloom and T. Coraghessan Boyle. Cartoonists, short story writers and poets also contributed, along with many foreign authors.
Harold Bloom, Yale literary professor got things rolling with a remarkable story (summarized) that Bloom says he learned from a Catholic prelate:
Frank Perdue, the poultry magnate, requests an audience with Pope John Paul II and is ushered into the presence of his holiness. The Baptist businessman offers to make a $10 million donation to the Vatican, and the pope asks what the church can do in return.
Perdue makes a simple request: Could the Church change the wording in the Lord's Prayer from "Give us this day our daily bread" to "Give us this day our daily chicken"?
The pope is outraged. Perdue says: "Twenty million." His holiness rises angrily and Perdue also rises, saying: "$100 million." At this, the pope asks Mr. Perdue to follow him into his innermost chambers. One week later, his holiness addresses the College of Cardinals.
"There's good news and there's bad news," he says. "The good news is that Mr. Frank Perdue will make a $200 million gift to the Vatican. In return he is asking for the trifling concession that from now on when we Catholics recite the Lord's Prayer, we will not say 'Give us this day our daily bread,' but will instead say, 'Give us this day our daily chicken.'"
The cardinals give his holiness a standing ovation.
"Now the bad news," the pope says. "This will ruin our relationship with Wonder bread."
Charged with systematically cheating farmers who sold crops to a dozen of ConAgra's Peavey grain elevators in Indiana from 1989 to 1992, doctoring samples of grain being
offered by farmers to make the crops appear to be of lower quality, and thus less valuable, the nation's second largest food manufacturer, has agreed to pay $8.3 million in criminal penalties to settle fraud charges.
The company, in addition to pleading guilty to a felony charge of wire fraud also agreed to plead guilty to misdemeanor charges of misgrading crops and adding water to grain.
ConAgra elevators had been accused of spraying water on grain to make it heavier before it was sold to customers, a tactic that increased its market value because grain is sold by weight, according to the court documents.
The U.S. Justice Department claimed local ConAgra managers concocted the plan to boost profits, thereby also increasing their individual yearly bonuses. The department said ConAgra reaped $3.5 million in criminal profits.
Several individuals have also agreed to plead guilty to criminal charges, including four former ConAgra employees who worked at the Indiana elevators, as well as two former employees of a grain-inspection service that was licensed by the USDA to oversee the sampling of grain at the elevators, which handles 13% of the grain that moves through the ConAgra system.
Since 1992 when the illegal activity ended Congress has made it a felony for a grain elevator to add water to grain in order to increase its weight. In 1995 the USDA also banned grain elevators from spraying water on grain to suppress dust, a move that forced ConAgra to dismantle sophisticated watering systems at several of its biggest elevators throughout the country.
In a press release, the company said it regrets the actions at the facilities involved. 'We offer no excuses, and we've made it very clear that we do not tolerate such conduct," the company said. "No one charged in this case works for Peavey or ConAgra today." The company also said it has boosted its control systems and brought in compliance and training programs to ensure the problem is not repeated.
Today in the U.S. poultry industry the predominant method utilized to pay growers for flocks grown under a poultry growing arrangement is based on a system which compares a grower's results to that of other growers during a specified time period. Many poultry growers have repeatedly expressed concern to the USDA's Packers and Stockyards Administration that comparison of their production costs against production costs of other growers in determining their payment is unfair.
As a result of hearings held in the fall of 1996 in Sanford, North Carolina and other parts of the South the P&SA Administration has posted an advance notice of proposed rule changes affecting the poultry industry in the February 10, 1997 Federal Register. They have identified three of the most common concerns for comments.
* The ranking system, that is broiler grower payments tied to the performance of other growers.
* The accuracy of feed weights, feed delivery, and pickup. Currently there are no regulations requiring feed scale testing, the mechanical printing of feed tickets, designating what information should be included on the feed tickets, nor that it be weighed by a certified weigh master.
*The procedure of weighing live birds returned to the plant. The accuracy of the live haul weights depend on accurate and tare weights and on weighing the birds immediately upon arrival at the processing plants. P&SA wants to write regulations which will spell out how to figure the gross and tare weights of the live haul trucks and require that the birds be weighed immediately upon arrival at the processing plant.
Comments on these new regulations by letter, fax, or e-mail must be submitted by May 12, 1997 to:
Harold Davis, Acting Deputy Administrator
GISPA, Stop 3641
1400 Independence Ave. S.W.
Washington, D.C. 20250-3641
FAX: (202) 205-3941
e-mail: psp.gipsa@usda.gov
For additional information contact the North Carolina Poultry Growers Association, P.O., Box 852, Siler City, North Carolina 27344, 1-800-742-0998 e-mail: HN5939@handsnet.org