NATIONAL MEAT ASSOCIATION h 1970 Broadway, Suite 825, Oakland, CA 94612
Edited by Jeremy Russell
January 8, 2001
5TH CIRCUIT SPEAKS LOUD AND CLEAR
The U. S. 5th Circuit Court of Appeals ordered, last Tuesday, January 2, that USDA’s motion to remand Supreme Beef Processors v. USDA to the district court, with directions to dismiss as moot, is denied.
It further ordered that USDA’s motion to vacate the district court’s decision of May 25, 2000 and its July 11, 2000 order is denied. (see Herd on the Hill 12/18/00).
It further ordered that USDA’s motion to lift the stay of proceedings is granted. (This request was not opposed by Supreme Beef.)
It further ordered that the motion of appellant to expedite the appeal is denied.
It further ordered that the USDA motion to expedite the briefing schedule is denied as unnecessary.
It further ordered that the USDA motion to expedite oral argument is denied as unnecessary.
It further ordered that the motion of NMA, AAMP, NAMP, SEMA and SMA to file as Amici Curiae in support of Supreme’s response is granted.
And it further ordered that Supreme’s motion to file surreply regarding suggestions of mootness is granted.
No date has been set at this time for the next steps in this appeal. NMA is very pleased to have been an early supporter in this enormously important and successful litigation. We remain ready to find an amicable solution based on science and fairness by working with all parties concerned.
SUPREME BEEF STATEMENT
“We are very pleased with all of the decisions rendered this week on our case by the U.S. Court of Appeals for the Fifth Circuit. The Court’s decisions reflect the fundamental weakness of USDA’s case and we’re hopeful that these findings will lead USDA to abandon any further efforts in pursuit of unnecessary litigation.
“We again request that Secretary Glickman sit down with us and other industry leaders to work cooperatively to revise certain aspects of the flawed Salmonella performance standard.”
--Steve Spiritas, CEO, Supreme Beef
Any marriage counselor worth their diploma will tell you one of the keys to a good marriage is trust, which is not so much a state of mind but an activity supported by the actions of its object. For the opposite of trust in a relationship is deceit and the vows of a marriage are meant to ward that off. Similarly, when two companies wed they too must concern themselves with trust and, in the business world, the opposite of trust is anti-trust. Tyson and IBP, that nuptial pair on the verge of affirmation, are now besieged by anti-trust.
These star-crossed lovers have set into motion a series of demands by the regulatory and legislative bodies that form their oversight. Senator Chuck Grassley (R-IA), a critic of the proposed merger of meatpacking powerhouses, said on January 3 he would push legislation this year to strengthen the nation's antitrust laws. Outgoing Agriculture Secretary Dan Glickman on January 4, three days after Tyson agreed to a $3.2 billion price for IBP, advised Congress to strengthen the nation's antitrust laws, saying growing concentration in the agriculture industry has hurt family farmers and reduced competition. Glickman, who has less than a month remaining as Agriculture Secretary, also sent a memo to the Justice Department in December expressing the USDA's concerns about the growing concentration within the meat processing sector.
Grassley has already sent a letter to Attorney General Janet Reno and Federal Trade Commission Chairman Robert Pitofsky expressing serious concerns about a Tyson Foods-IBP merger. “I share farmers' and producers' concerns that this transaction will adversely impact their ability to obtain fair prices for their products,” Grassley said in the letter. “Moreover, I'm concerned that Tyson's current large presence in the retail market will negatively affect product choice and the price consumers pay at the meat counter,” he added.
However, IBP chose Tyson over two other offers in part to avoid antitrust concerns. After Donaldson, Lufkin and Jenrette made their initial overture, Smithfield Foods was eager to make a sweeter deal only to be trumped by Tyson. Sour from losing the bidding war, Smithfield Foods moved to reduce its stake in the beef processing giant to less than 5%.
But not all believe that IBP’s move is a mistake. “I applaud what [IBP is] doing,” said former Tyson CEO and, currently chairman of Spectral Fusion Technology, Ltd., in an interview in December’s Meat & Poultry magazine. “If Wall Street isn’t going to give IBP its true value, then it’s management’s privilege to take it private and unlock that value.”
Whatever the result, the merger is a historic moment in the meat industry. According to analysis by Cattle Buyers Weekly editor Steve Kay, “The sale will mark IBP’s disappearance as an independently operated company.” He also remarked that because of the rivalry between chicken and beef, “Such a combination would have been unthinkable a few years ago.” (For more information on the merger deal see last week’s Herd on the Hill).
On page 2 of last week’s Lean Trimmings it was stated that cattle require 7 kg of grain to add 1 kg of live weight (this was a quote from the publication Feedstuffs). John Harris of Harris Farms wrote us to say the statement was “simply untrue and perpetrates a myth that we have been fighting for years. A large percentage of cattle’s weight is derived from range grasses before they ever go on feed and, once they are on feed, many of the feed ingredients are feedstuffs other than grain. Many people opposed to animal food production in general like to say that feeding cattle is not an efficient use of grain. In actuality, it is and we need to be sure to not perpetuate the myth that it isn't as this segment did.”
A fact of today’s retail market is shrinkage, not the kind where product leaves the store, but the kind where it never even arrives – what is called a weight out: the shrink of the package size. Both consumers and giant retail stores such as Wal-Mart are generally opposed to price increases and so, in an effort to offset rising production costs, companies have been playing the less product for the same price game. The problem is that consumers consider the practice deceptive. “It’s a rip-off,” one woman told the New York Times. “If I knew they were putting less in, I wouldn’t buy it.” Nevertheless, weight outs are one of the facts in the market today. “The key,” John McMillin, a Prudential analyst, was quoted as saying, “is to do it without the average consumer ever noticing.” A technique that lends itself to lengthy exposés, such as the one in the New York Times in which McMillan was quotes, which make businesses look deceitful at best. NMA encourages its members to be forthright with customers about price changes rather than manipulating the quantity.
As of January 4 the AMS sampling program for commodity beef has tested 89,372,287 pounds of ground beef from 16 vendors. Of the 978 tests performed, there were 9 failures for E. coli O157:H7 (9.57% of failed samples) and 52 failures for Salmonella (55.31%). There were 33 failures of other microbial tests for a total of 94 failures and 7,124,436 pounds rejected – 28,400 pounds since December 29.
In tomorrow’s Federal Register, the Food Safety and Inspection Service (FSIS) will publish its final rule applicable to moisture (water) retention in raw products. This rule will apply to both red meat and poultry products. In essence, the rule will prohibit raw product water retention except as an unavoidable consequence of the process used to meet applicable food safety requirements. The establishment must develop and submit a protocol to FSIS to demonstrate that the amount of retained water is unavoidable. FSIS will have a 30-day window to comment on the proposed plant protocol. FSIS stated at a constituent briefing that this is not a prior approval procedure and that if the plant does not hear back from FSIS in 30-days they may proceed with the protocol. If any water is retained, the maximum percentage must be prominently declared on the principal display panel. Comments on the guidance material published with the regulation are due by April 9, 2001. The rule itself will become effective on January 9, 2002, one year from publication.
A report in the Wall Street Journal noted that the National Cattlemen’s Beef Association and the National Pork Producers Council have been pressing the USDA for the changes since the mid-1990s and that the rule is the latest in a flurry of last minute USDA regulations by the Clinton Administration. For a copy of the final rule and Olsson Frank and Weeda memo, send a send a self-addressed, stamped (33¢) envelope to Jeremy Russell at NMA-West.
NATIONAL MEAT ASSOCIATION
NMA - East: 1400 - 16th St. N.W., Suite 400, Washington D.C. 20036 Ph. (202) 667-2108
NMA - West: 1970 Broadway, Suite 825, Oakland, CA 94612 Ph. (510) 763-1533 Fax (510) 763-6186
Edited by Jeremy Russell
January 8, 2001
The Mandatory Price Reporting (MPR) final rule is scheduled to become effective in three weeks. USDA’s Market News released the first of a series of questions and answers last week at http://www.ams.usda.gov/lsg/mpr/qa.htm. The Q&As attempt to answer some of the many questions that were raised in the public meeting in December, including some that are highly controversial. AMS takes the position that branded product that includes boxed beef and lamb is not exempt where “the basis of the brand is the quality, yield, or breed characteristics that are not unique to any one packer,” and they cite the well-known CAB® or Sterling Silver® brand names. The difference here is that the Sterling Silver® is a corporate brand, and the legislative language that accompanied the statute states: “The [Senate] Committee recognizes the importance of producers gaining a greater share of the marketing dollar through the development of branded products to meet the needs and demands of the consuming public. The Secretary currently reports generic product where there is significant competition and volume of product. The Committee expects this policy to continue and does not intend that individual branded products will be reported” (emphasis added).
Even more troubling, USDA says that “all reported information is subject to publishing by AMS in compliance with the confidentiality requirements of the Act.” It does say necessary steps to ensure confidentiality of the source data and brand names have been taken.
A lot of new questions and concerns are raised by the Q&As. For instance, AMS goes on to describe the 3 and 60% guideline, prior day swine reporting including swine from Canada, further definition of “lot,” and in a series of Q&As about carlot and distributive sales, it tries to differentiate its efforts to not collect on the latter. The Q&As respond to some of the IT (information technology) issues. Packers may use Outlook Express 4.0 or Outlook 98 or greater, but the Netscape web browser does not appear to be interchangeable with Microsoft Explorer (an unfathomable irony given the efforts of the Department of Justice to mercilessly prosecute Microsoft). Data from multiple locations may be sent from a headquarters plant, but would have to identify each entry, each row of data, with the specific plant ID. AMS expects to be able to acknowledge the receipt of data within 1 to 5 minutes under optimal conditions.
One Q&A states that, if a packer is unable to meet a required submission time, they are required to submit the data at the next required submission time and the unsent data should be identified with the reporting time when it was originally supposed to have been submitted. This unresolved problem, brought up during rulemaking and at the December meeting, will potentially distort the market. Delayed price information can occur for a great many reasons – weather, IT problems, price dependent on dressing characteristics, etc. Any mix and match of one day’s prices with another day’s, or even a shortfall on one day, could cause distortion.
Although the officials charged with its implementation work diligently to get the program flying, MPR is increasingly reminiscent of that mighty airplane the Spruce Goose, which was so ceremoniously displayed on a launch pad in Long Beach by the late Howard Hughes, although it only flew once and only a few hundred yards!
FEDERAL FIGURES FOR WORKPLACE INJURIES
The meat industry has, according to the U.S. Department of Labor’s Bureau of Labor Statistics, improved for the most part in the arena of illnesses and injuries, the exception being in the “sausage and other prepared meats” category. The latest data is available at http://stats.bls.gov/oshum99.htm. The incident rate changes from 1998 to 1999 is below:
Percent change in incident rates for workplace injuries from 1998 to 1999
Injuries and illnesses total cases -10.9%
Injuries total cases -6.8%
Meat packing plants
Injuries and illnesses total cases -8.9%
Injuries total cases -10%
Sausages and other prepared meats
Injuries and illnesses total cases +.7%
Injuries total cases +4.5%
USDA/FSIS officials met with industry representatives this morning in Washington to discuss their intention to publish in the near future a Directive stating FSIS policy about testing for E. coli O157:H7 on non-intact product in a HACCP system. Reportedly, the agency will publish two Notices in the near future. The first will state the need for an inspected establishment that handles raw beef to reassess its HACCP plan to determine whether H7 hazard is reasonably likely to occur, similar to the requirements set forth for such a determination for Listeria monocytogenes in RTE products. The Agency anticipates that this requirement will become effective on March 19. The agency will make available a draft of its Directive on testing which will provide, in the absence of company policy at slaughter level, that each carcass is a lot, and in the case of trimmings, each combo is a lot, and in a grinding plant, clean-up to clean-up is a lot. Industry guidance material will be updated from a year ago and made available. In a separate document, FSIS will seek comment on an H7 Risk Assessment.
The government officials further identified the priorities for testing, targeting those plants that are not instituting controls and not achieving specific target levels, and not controlling through CCPs to prevent re-occurrence. Further, they won’t target retail stores that do not grind their own trim.
NMA joined nine other trade associations in submitting comments in response to the Food Safety and Inspection Service’s (FSIS) “Next Steps” initiative. The comments identify and address the more significant issues concerning the changes in the meat and poultry industry, including hazards, risks, Performance Standards versus Performance Guidelines, Joint Training, Information Sharing, and Field Implementation. “We appreciate the opportunity to comment on the Next Steps initiative. The proposed transition to a scientific, risk-based regulatory agency is critical to further progress in HACCP implementation – but only if the transition is based on science, common understanding, and communication,” concluded the comments. For a copy, send a self-addressed, stamped (55¢) envelope to Jeremy Russell at NMA-West.
Agricultural Research Service (ARS) scientists have completed a pilot project to decipher segments of cattle and swine genes, paving the way for technologies that will help livestock breeders quickly and accurately identify animals with superior qualities. The scientists at the U.S. Meat Animal Research Center (MARC) deciphered sequence information on 80,000 DNA segments called expressed sequence tags (ESTs) from cattle and 40,000 from swine. All this information now is accessible through the databases at the National Center for Biotechnology Information (NCBI), from where researchers worldwide can access the data for research in medicine as well as animal science. The MARC scientists also produced clonal "libraries" of expressed genes from a variety of tissues important to livestock growth, composition, reproduction, animal health and food safety.