Seed piracy to fund scholarships

Royalty payments received from farmers who unlawfully saved and replanted or sold Roundup Ready soybeans will be used to fund $2,500 scholarships for farm kids in 28 states.

Monsanto Company and the American Farm Bureau Foundation for Agriculture will present 50 checks to deserving students from active farming families who plan to begin their college careers this fall to study agriculture. Applications are available from Farm Bureau offices and at agricultural chemical retailer locations. The deadline is April 15, 1999.

Decision-making tool

A new Web-based data warehouse called VantagePoint Network will help you make crucial farm management decisions, according to Growmark, Farmland and Deere & Company.This independent joint venture by the three companies, stated to be ready in September, will store vast amounts of data generated by a farmer's operations. Ken Dalenberg, a Mansfield, IL, farmer and advisor to this Web site, says that "the data warehouse will not only allow me to store data, but also to aggregate it with other producers, university research and independent research data. I can draw on these resources to analyze and then use the data in management practices on my farm."

A subscription fee of $20 to $30/month will be charged. Contact Deere & Co., Dept. FIN, John Deere Rd., Moline, IL 61265, 309/765-5678.

Hello...Justice Department, FTC...who's merging?

Has our government lost focus during this decade of merger mania, where it seems sex and software debates are holding court? Or has big business truly grabbed the reins away from government and "Joe and Jane Farmer/Consumer" in order to drive whatever mergers are needed to keep stock prices high?

This critical ag consolidation debate, coming on the heels of the pork and grain pricing dilemma, cuts to the root of what farmers perceive as the "big picture" problem. And farmer groups, such as the National Farmers Organization (NFO), the National Farmers Union (NFU) and the American Farm Bureau Federation, are taking this issue to task in Washington.

In early January, NFO President Gene Paul began hammering home this issue during a meeting with President Clinton, Ag Secretary Glickman and key Senate ag leaders. "I believe the Justice Department should immediately begin an investigation into the impact consolidation has on agricultural buyers, which dramatically affects market prices," he said. "If the overriding issue of unchecked ag consolidation is not dealt with soon, unstable producer price swings could undermine the entire farm producing sector."

And the rich get.... In late January as we went to press, NFU President Leland Swenson took facts and figures before the Senate Agriculture Committee to tout how rapid consolidation in every sector of agriculture has severely impacted family farmers and ranchers. His armload of facts included the following: *80% of all cattle are slaughtered by the four largest beef packers (IBP, ConAgra Beef, Cargill's Excel and Farmland National Beef); *75% of sheep are processed by the big four (ConAgra, Superior Packing, High Country and Denver Lamb); *60% of all hogs are slaughtered by four firms (Murphy Family Farms, Carroll's Foods, Continental Grain and Smithfield Foods); *50% of all broilers are killed by the four largest companies (the top six are Tyson Foods, Gold Kist, Perdue Farms, Pilgrim's Pride, ConAgra Poultry and Continental Grain's Wayne division).

Add to this the grain sector, where 57 to 76% of the corn, wheat and soybeans are processed by the four largest firms (Cargill, ADM, Continental Grain and Bunge). These firms have 24% of the elevator capacity and 39% of the facilities, and data suggest that they also control 60% of port facilities. Plus, the latest Cargill-Continental Grain merger talks could create less competition and more control. And concentration in the seed, chemical and fertilizer, transportation and retailing sectors has hurt producers as well, according to the NFU.

Maybe mergers are okay, but.... Then Farm Bureau leaders entered the Senate Ag Committee chambers with a less pointed message, recommending a wait-and-see approach. President Dean Kleckner said that, although Farm Bureau leaders are uneasy with the potential impact of ag consolidation and how it could lead to inadequate market access, they don't want to assume that a merger is good or bad. "Just as farmers have had to grow and consolidate to remain efficient competitors, so do other businesses," he said.

Kleckner added that some industries within ag may need a more watchful eye than others, particularly if mergers take place in already concentrated segments like poultry and beef.Solutions? The NFU suggests: 1) placing a moratorium on further mergers until a farm income impact study can be done; 2) finding antitrust violations within current alliances, agreements or ventures between companies that work to eliminate or reduce competition; 3) determining if existing laws give enough power to the JusticeDepartment and the Federal Trade Commission to halt mergers that diminish competition; 4) repealing the 18-month study/investigation of price reporting; 5) adopting mandatory price reporting to improve the producer's ability to earn a fair return on commodities through timely and accurate market information; and 6) adopting country-of-origin labeling laws, which increase consumers' ability to voice their preferences in the marketplace.

Has any merger directly affected your operation? If so, let your local, state and national political representatives know, now. While you're at it, drop me an e-mail with your thoughts at FIN@Intertec.com. And let's all hope adequate competition and fairness will prevail. - Kurt Lawton

Grain giant merger

The proposed merger of the United States' two largest grain exporters raises many questions but triggers few red flags, according to a university report looking at the deal. In December, Cargill announced its plan to buy Continental Grain's grain merchandising and exporting business.

Since then, the grain business has buzzed with the pros and cons of such a major deal. Cargill is the largest private company in the United States and Continental Grain is the fifth largest. Combined, the two would handle 35% of U.S. grain and oilseed exports.A special university report looking at the Cargill-Continental deal discusses a number of complex questions. But overall, the merger may have less of an impact on grain merchandising than some people in the industry first speculated.

The report was prepared by economists from Iowa State University (ISU), North Dakota State University and Oklahoma State University. It examines today's grain merchandising climate and provides some analysis of the impact of the proposed Cargill-Continental deal. ISU economists Marvin Hayenga and Robert Wisner are the lead authors.

Antitrust review. The report states that a big concern regarding the Cargill-Continental deal "is that Cargill bought Continental to remove a significant competitor, particularly in the export market, and will expand merchandising margins."

The U.S. Department of Justice (DOJ) is conducting an antitrust review of Cargill's proposal to purchase Continental's grain merchandising business. Antitrust laws prevent transactions that may have major anticompetitive effects. And a combination of the two leading competitors in the U.S. grain merchandising industry face questions about competition.

Cargill's entire company posted revenues of $51.4 billion last year. It operates grain merchandising offices and facilities in 43 countries. In the United States it operates 243 grain facilities. In comparison, industry leader ADM operates 669 facilities in the United States.

Continental's grain storage, transportation, export and trading operations will be sold to Cargill if the DOJ approves the sale. Continental operates 83 grain-handling facilities in the United States; ten of the facilities are located in areas in which Cargill also operates an elevator.

The Cargill-Continental merger will account for 35% of U.S. grain and oilseed exports, 20% of river terminal elevator capacity, 10 to 13% of the grain coming off the farms, and 3% of the U.S. commercial grain storage facilities.

Secretary of Agriculture Dan Glickman reported that Cargill and Continental combined accounted for 42% of corn exports, 31% of soybeans and 19% of wheat exports last year. He sent these figures in a letter to the DOJ.

The university report looked at the location and ownership of river terminals for grain movement. The authors say the terminals should not be affected by the Cargill acquisition. However, the Chicago Board of Trade may need to expand its corn and wheat delivery areas beyond those dominated by the largest grain companies.

The report also says the acquisition should not affect local competition for farmers' grain. Many competitors for the grain still operate.

Why sell? The report suggests that Continental decided to sell because it had not diversified enough into value-added processing to be competitive. It had excelled in large-volume bulk exports, but exports have dropped sharply. D iversifying would require too much capital. Cargill sought the purchase to help it compete more efficiently. Continental will give it more grain origination facilities. The report says, "Cargill hopes tokeep a large share of the Continental volume, capturing economies of scale by running more volume through without equivalent changes in the costs of managing their system."

Some grain facilities will be dedicated to specialized products. Cargill will need more of those facilities because of its joint venture with Monsanto for value-added specialty grains. The specialized facilities will help preserve the identity of these crops.

Putting the transaction in perspective, the report's authors say the proposed merger is part of the trend toward rapid consolidation in the food and agriculture industry. Fewer, larger, more sophisticated operations are consolidating food production and processing.