NATIONAL MEAT ASSOCIATION h 1970 Broadway, Suite 825, Oakland, CA 94612

(510) 763-1533 Fax (510) 763-6186 h Email Address: [email protected] h http://www.nmaonline.org

Edited by Jeremy Russell

June 11, 2001

GETTING THE BEST OF BOTH PRICE REPORTING SYSTEMS

In the strong belief that it is useful to build on the strengths of the past, NMA last Friday wrote to newly appointed Agriculture Under Secretary for Marketing and Regulatory Programs, William Hawks, and suggested ways to improve both the quantity and quality of data reported for lamb meat. Under the statutory authority for mandating that packers electronically submit price information to USDA’s Market News, the Department has substantial discretion in the design of the lamb meat reporting program, unlike the very prescriptive authority for beef and hogs.

Effectively, seven packers report domestic lamb meat prices. In such a small and “thin” market, it is virtually impossible for USDA to have sufficient data to report regional markets; in fact, they’re lucky to have enough to report a national market! NMA sought input, first from the packers required to report and then from other industry organizations, and has suggested to Mr. Hawks that all lamb prices reported be adjusted by freight to a central location, such as Omaha, NE. (This is the old “river” adjustment theory, known and widely used in the industry for decades.) We provided Mr. Hawks with several examples of just how this would work from three major lamb packer locations as follows:

A $1.50 lamb at Dixon, CA would be reported as $1.45 Omaha (reduced by 5c freight).

A $1.50 lamb at Greeley, CO would be reported as $1.48 Omaha (reduced by 2c freight)

A lamb at $1.50 at Hawarden, IA would be reported as $1.50 at Omaha (no freight).

All freight adjustments would be known factors. Finally, we suggested that USDA hold a teleconference meeting with all interested parties to have input. A copy of NMA’s letter to Mr. Hawks is posted on its website and will be provided on request to [email protected].

The American Sheep Industry Association submitted a letter to Ag. Secretary Veneman on June 7 stating that, “to date, the implementation of MPR has failed.” They asked for immediate relaxation of the 3/60 rule, abandon the confidentiality rules for weekly and monthly reports, redefine terms such as normal negotiated, formula and contractual sales, provide for discretionary judgment input, broaden the requirements for importers, and dissemination of information provided on a voluntary basis in addition to the mandated program.

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UPWARD DESIGNED PIG FARMS

MVRD, an architectural firm in the Netherlands, has designed a model that may be the answer to the prevention of Foot and Mouth Disease (FMD) in hogs, according to an article in the Wall Street Journal. They call the model “Pig City.” The Netherlands not only faces problems with FMD, but it also must find a way to maximize pig production in a limited space due to unpredicted urban sprawl. Pig City entails 40 farms stacked in 87-by-87-meter towers rising over 500 meters high, with a slaughter plant on the bottom floor.

The hogs in Pig City would be fed grain grown organically on the property and Tilapia fish would be planted to feed off the hog manure. The pig manure would produce methane gas, which would be collected to supply the plant with power.

NEW BRITISH BSE WORRIES

British scientists are now concerned that there may be a risk of cross contamination in slaughterhouses that process animals killed because they are at risk of Bovine Spongiform Encephalopathy (BSE), as well as healthy, headed-for-the-table cattle. In a report on June 5, a working group of the Royal Society and the Academy of Medical Sciences concluded, in the words of working group chair Professor Brian Heap:

Urgent consideration needs to be given to the possibility of cross-infection in the few abattoirs in the UK that handle both the slaughter of animals for food and the culling of cattle aged over 30 months that may be incubating BSE. According to one report, some prions (the infective agents) may still be active even after heating to 600C although this observation needs to be confirmed by further research. Since cattle aged over 30 months are culled because they might be infected with BSE, we need to establish conclusively that work surfaces and equipment in abattoirs are not contaminated after the usual cleaning and sterilisation procedures.

The prion is thought to be the toughest of all infectious agents. It can survive conditions, such as cooking, that would normally eliminate food-borne illness.

The working group’s report also highlights fears that risk materials may leak from the backlog that is building up in storage hangers. The BBC reports that more than 430,000 tons of meat and bone meal, and a further 200,000 tons of tallow, are currently awaiting safe disposal in the UK. “There is always a danger of leaks into the environment through, for example, infestation of rodents or invertebrates,” says the report.

If the report was not enough to remind everyone how tenacious BSE can be, the Czech republic has confirmed a case of BSE in its herd. The U.S., however, remains BSE-free and carries out a rigorous testing program.

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BIG CHANGES IN THE MEAT INDUSTRY

According to an article titled “The New U.S. Meat Industry,” written by the Center for the Study of Rural America of the Federal Reserve Bank of Kansas City, the meat industry continues to convert into large corporations that focus on the demands of consumers and production of higher quality products. These new meat industry giants have developed in response to consumer demand for nutritious, safe convenient products. Massive companies such as Wal-Mart and Target create new competition for the traditional mom and pop stores that once were, causing supermarkets and other whole-food stores to merge into larger businesses.

The meat industry has struggled to compete with the poultry industry which was the first to develop a “conception to consumer” supply chain structure that ensured consistent, high quality consumer oriented products. Poultry consumption nearly doubled while “beef prices continued to fall causing an estimated fall in retail beef prices estimated at 50 percent lower in 1999 than if demand for beef had been as strong as in 1980.” Beef and Pork processing industries tightened and shifted to expand plants into newer and larger, low-cost plants owned by fewer processing companies.

Larger farms in the livestock industry appear to be more capable of utilizing new production technologies. “Supply chains are also rapidly taking root in the beef and pork industries, connecting livestock producers to meat processors.” Pork and cattle producers are working to improve their products by using “grid” pricing techniques that reward livestock producers for producing higher quality and yield grade carcasses. An alliance between producers and processors creates “a common goal of producing higher quality, consistent products that generate more profit.”

FOOD RETAILER CONCENTRATION

The five largest grocery retailers controlled 41% of all food sold through supermarkets and 32% of all food sold through all kinds of retail store formats last year, according to Feedstuffs. Kroger Co., the largest retailer, controlled 12.8% of the supermarket category and 9.9% of the total grocery market. Albertson’s Inc. and Safeway Inc., controlled 9.6% and 8.3% of the supermarket category and 7.5% and 6.5% of the total market sales.

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GIPSA & FARMLAND NATIONAL BEEF SETTLE COMPLAINT

USDA’s Grain Inspection, Packers & Stockyards Administration (GIPSA) and Farmland National Beef Packing Co. reached agreement on May 30 settling GIPSA’s complaint, filed in July 1999, alleging that Farmland National retaliated against Callicrate Feedyard in violation of the Packers & Stockyards Act. A hearing on the complaint commenced on May 22. Both GIPSA and Farmland said that they believed it was in the best interests of both parties to settle the issue, rather than take the case to its final judicial conclusion. Under the terms of the settlement, Farmland is to comply with the law and not engage in any unfair or unjustly discriminatory practice or subject any cattle seller to any undue or unreasonable prejudice or disadvantage in any respect. Farmland is not required, under the Order, to visit, offer bids or buy cattle from any particular seller, including Callicrate, unless such failure is a violation of the Act.

In making a payment of $95,000 to the U. S. Treasury, Farmland acknowledged that it benefited from the cost and expense incurred by GIPSA in conducting its investigation because GIPSA clarified Farmland National’s rights and responsibilities under the law. Bill Hawks, Under Secretary for USDA’s Marketing and Regulatory Programs, said: “The settlement clearly acknowledges that retaliation is a violation of Section 202 of the P&S Act, putting the industry on notice that GIPSA will pursue complaints of retaliation vigorously.” John R. Miller, CEO of Farmland National was “pleased that GIPSA’s allegations have been resolved. National Beef has denied any wrongdoing and confirms its policy not to engage in retaliation against beef producers. … The clarification of the law benefits the entire industry. It is National Beef’s policy to abide by the provisions of the P&S Act.”

SPOILED LUNCH REPORT

This morning, the Sierra Club released a report, Spoiled Lunch: Polluters Profiting from Federal School Lunch Programs, which details a “history by the Federal government of awarding Federal food contracts to companies that have violated environmental and worker safety laws or that have a history of recalls.” The report claims 12 companies who participate in the school lunch purchasing program have a bad record of environmental and worker relations, and recalls. NMA will be following up.

GOING THE OTHER WAY!

The meat industry hears a lot about large companies eating up small companies, so even a small step in the other direction is newsworthy! Kraft Foods Inc., carved out of Philip Morris, plans to sell 280 million shares this week in an initial public offering (IPO). Credit Suisse Group’s Credit Suisse First Boston and Citigroup’s Salomon Smith Barney are leading the IPO for Kraft. Kraft is expected to be priced between $27 and $30/share, and its strong brand identities, including Oscar Mayer, make it desirable to many investors in the consumer staples sector. Philip Morris will still own 49.5% of the class A common stock and will control 97.7% of the voting shares.

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

June 11, 2001

USDA STRATEGIC PLAN TO REDUCE Salmonella

USDA has announced a new five-year strategic plan. The plan includes ambitious goals to reduce Salmonella on raw meat and poultry products by changing the allowable level of contamination. FSIS wants to lower the already existing baseline on broiler chickens from 20% to 7.5%. The level for market hogs will drop from the current baseline of 8.7% to 4%, a level that is lower then what is specified under HACCP. Ground Beef will be reduced from the current baseline of 7.5% to 4%. In the past most ground beef plants have been able to meet the standards, but the USDA has some skepticism on whether or not the industry will continue its record if these new standards take effect.

Food Chemical News reported that industry officials are concerned that more lawsuits will arise, similar to the Texas Litigation, in response to the new standards. The grinding business faces the biggest challenge in lowering their contamination levels due to the lack of tools that are regularly used by the slaughter plants to eliminate the pathogen. It is unclear in the specifications of the strategic plan whether the agency plans to strictly monitor these new standards, or if this is something the agency hopes that plants will achieve on their own. The agency also plans to set goals to lower the levels of Listeria monocytogenes on ready-to-eat meat and poultry products by reducing half the numbers testing positive by 2005.

FMD RESOURCE FROM NMA

With more countries, like Argentina, being added to the list of those struck by Foot-and-Mouth Disease (FMD) and the virus’s continued presence in countries in Europe, some fear it may only be a matter of time before the United States is struck. USDA has taken its defenses to an all time high. The industry must also do what it can to stop the introduction of FMD. With this threat in mind, NMA has put together a Resource for its members on the animal disease. The Resource was developed by the Meat Science Section of the Department of Animal Science at Texas A&M University. The Resource is structured as a list of questions and answers, covering the symptoms of FMD, why vacinnation is ineffective, the sources of infection and the history of FMD in the U.S., as well as other relevant topics. Send a self-addressed, stamped (55¢) envelope to Jeremy Russell at NMA-West and be sure to include the newsletter date with your request.

COMPLIANCE POLICY SEMINAR

Learn how to assure that your company’s Corporate Compliance Policies are effectively ensuring compliance with the law and protection from the regulators. NMA’s new course, featuring Dennis Johnson, Esquire, Olsson, Frank & Weeda, will focus on the development and implementation of policies and procedures for dealing with FSIS. Other speakers include Chuck Jolley, publisher, Meat & Poultry, and NMA Director of Regulatory Services Ken Mastracchio.

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USDA LAUCHES FIRST MEETING ON IMPROVING FOOD SAFETY

The Food Safety and Inspection Service (FSIS) held its first in a series of public meetings about improving inspection of processed meat and poultry on June 7, 2001. The agency plans to provide an overview of its use of risk analysis in protecting public health. FSIS will discuss its strategic plan for 2000-2005 and the key attributes of a public health regulatory agency. The agency will then discuss further steps that occur action to develop an inspection system that minimizes the risks from processed products while making optimal use of processing inspection resources. The floor will then be open to comments on how to best achieve these new steps and the agency’s objectives.

“Our overall food safety objectives include strengthening the scientific basis for food safety policies, ensuring that we manage the risks associated with the products we regulate, and carrying out these activities through a public process,” said USDA Secretary Ann M. Veneman.

Word is eagerly awaited by interested parties about the selection by the Bush Administration of a new Under Secretary for Food Safety, a key position in the effort to introduce the new food safety initiative.

ROBERT BRACKETT NAMED DIRECTOR OF FDA’S CENTER FOR FOOD SAFETY

The Food and Drug Administration’s (FDA) Center for Food Safety and Applied Nutrition (CFSAN) June 6 announced the appointment of Robert E. Brackett, Ph.D., as the center's Food Safety Director. In this capacity, he will report directly to Joseph A. Levitt, director of the center. Dr. Brackett currently serves as a Senior Microbiologist in CFSAN’s Office of Plant and Dairy Foods and Beverages where he manages food safety issues related to these products. Prior to coming to FDA, Dr. Brackett was a Professor of Food Science and Technology in the Center for Food Safety and Quality Enhancement at the University of Georgia, where he was an active researcher in food microbiology, specializing in the microbiological safety of foods.

L.A. TIMES ACCESSES HISTORY OF E. coli O157:H7

Emily Green, a writer for the Los Angeles Times and speaker at the NMA Expo 2001, wrote an extensive article reviewing the history E. coli O157:H7 and effects of the disease on the meat industry. Green gave a recap on a series of outbreaks from Jack in the Box to Hudson’s Beef and explored how the disease affected both the consumer and the industry. The article takes the reader through the lives of the people who experienced loss of loved ones as well as describing the heavy financial blow that hit the meat industry.

Rosemarry Mucklow, director of NMA, was quoted in the article for describing the political struggles the meat industry faced. Green discussed the federal acts that lead to the implementation of HACCP and how the industry had to make a change to come under constant federal surveillence. “All U.S. meat processors now either contract routine services of a lab or have an in-house microbiologist.” Green came to the United States in 1998 after working freelance in London for a spectrum of newspapers. In 1993, she received the Glenfiddich Award for best feature in food writing, and in 1997 the Association of British Science Writers Award for best feature. Green contributed to an open panel discussion at the NMA Expo 2001, speaking of her experiences with BSE while in London.

PRESIDENTIAL PROCLAMATION

The incorrect assignment of two-year certificates for product exported in year one of the 201 trade action quotas at the time when the quotas were filled resulted in a presidential proclamation last week. The proclamation announces the Bush administration’s decision to count the assignments against the year two quotas.