Tuesday, February 15, 2005

Roundup, ready

This post marks the debut of "Roundup, ready," a new occasional feature of Bitter Greens Journal. Named in honor of Monsanto's famed line of seeds genetically engineered to withstand its herbicide Roundup, this feature will give a brief overview of recent news, trends, and topics in the food-politics world. Each of them is a candidate for expansion in the days and weeks to come.

Low soy prices feed Smithfield profits
As I wrote last week, soy prices have plunged. Monday, Smithfield Foods, the top U.S. hog producer and pork processor, signaled its fourth quarter 2004 profits had come in much higher than expected.

These two trends are not unrelated; soybeans are the key input in the industrial production of hogs, of which Smithfield produces about 14.5 million annually.

Another reason for the stellar profitability, it must be said, is that Smithfield has such a tight grip on labor costs that it recently inspired a blistering Human Rights Watch report.

The company's Monday press release hailing its 2004 profits was merely a preview; on March 1, it will deliver its full profit report. Bitter Greens Journal will be ready.

Rhymes with dung
Bunge (rhymes with dung, which is what farmers should be using instead of the company's chemical fertilizers) also reported fourth quarter results bolstered by Brazil's soybean explosion.

Bunge is a key player in the global industrial food chain. By its own reckoning, it ranks as the world's largest oilseed processor; the world's largest seller of bottled vegetable oil to consumers and a leading supplier of premium edible oils to the U.S. foodservice industry;
the world's largest corn dry miller; the largest manufacturer and seller of fertilizer and a leading supplier of animal feed in Brazil; the largest exporter of soy products to Asia; and a leading biodiesel producer. It generates in excess of $20 billion in annual revenue and boasts a stock-market value of around $5 billion.

The company reported operating profit for the fourth quarter of 2004 of $181 million, down 4 percent from the same quarter a year earlier. But things would have been worse without Brazil's burgeoning demand for fertilizer, which it needs to as cultivate soybeans on its marginal lands.

While overall operating profit was deteriorating, profit in the company's fertilizer segment bulled ahead 60 percent, from $68 million in the fourth quarter of 2003 to $109 million in fourth-quarter 2004. Fertilizer sales leapt 40 percent, from $593 million to $830 million.

While the company does not break out its results by region, it hinted strongly that Brazil drove its success in fertilizers.

Alberto Weisser, the company's CEO, said in Bunge's quarterly report that he expects worldwide soybean demand to rise 4 percent per year long-term. "“Demand will encourage production, and South America, especially Brazil, will enjoy the
majority of this growth. Brazilian soil needs nutrients so fertilizer sales should increase steadily as well," he said.

He added some interesting info on the supply/demand situation for soy. "This year’s U.S. soy crop is approximately 85 million tons, which represents a 27% increase over last year’s crop. The 2005/2006 Brazilian soy crop is forecast at 64 million tons, a 23% increase over last year, and the Argentine crop is forecast at 39 million tons, a 13% increase over 2004. ... Demand is strong. The USDA projects global soybean meal consumption in 2005 at 140 million tons, an 8% increase over 2004."

If global demand rises 8 percent and the world's dominant producers boost production 20 percent and more, sounds like more low prices for soy farmers, and more good tidings for the processors who buy their goods.

Ag Sec Johanns to address soy, corn farmers
Bitter Greens Journal is slowly getting the lowdown on Mike Johanns, the former Nebraska governor Bush tapped this year as the new agriculture secretary.

Oh, how we'd love to be in Austin, Texas, on Feb. 25 when he addresses the combined convention and trade show of the National Corn Growers Association (NCGA) and the American Soybean Association (ASA), known appropriatley as the Commodity Classic.

These farmers, like their Brazilian counterparts, are the industrial food system's foot soldiers. Using gigantic John Deere combines, genetically altered seeds from Monsanto, and fertilizers from Bunge and insecticides from Syngenta and others, they produce the inputs that are processed into food ingredients by Archer Daniels Midland, for later use in processed foods by food giants like Kraft. These farmers also help supply the main input to the industrial animal-farming sytem, as represented by above-mentioned Smithfield Foods.

Whereas Brazil's soy farmers take a hit when the price of soy plunges, these guys get cash payments from the U.S. government. Now Bush is muttering darkly about severely cutting those time-honored subsidies.

These farmers will raise legitimate questions about where the industrial food system will be if a subsidy reduction causes many of them to fail. I'm afraid the answer is: in Brazil, buying soybeans. How will Johanns spin this one? These guys form the basis of the Republicans' support in the quote-unquote blue states. If they pull back in the 2006 mid-term elections, some GOP Congressmen could be fidning themselves led to slaughter as unceremoniously as one of Smithfield's hogs.

I'll be closely watching media accounts of that speech; would any on my Austin readers like to cover it for me? I would try to arrange press credentials.

AP buzzes bee crisis

I've criticized the Associated Press for playing down the role of insecticides in a budding nationwide agricultural crisis caused by a shortage of bees.

But at least it's covering the crisis. The Wall Street Journal and the New York Times have not touched it. And here comes the good old AP again, releasing its third story in the last several weeks about how a shortage of bees is seriously threatening fruit and vegetable farming in the U.S.

As for the angle that I think is most interesting--that heavy insecticide use has created a super-resistant mite that's savaging bees--the article has this to say: "Beekeepers once used a plastic strip coated with one of two miticides placed in the hives when the bees are dormant. But the mites became resistant to both."

It adds: "Scientists are working on several possible solutions....One is formic acid, a hazardous material that has proved difficult to apply safely. They are also looking at oxalic acid, which is found in lettuce and is more benign."

Does anyone else care about this story but me and the Associated Press?


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