Talking with Sam Rovit, Swift & Co.

When Sam Rovit agreed to take the top job at Swift & Co two years ago, he wasn’t banking on the business becoming front line news. Sure, lots of friendly press on the brand would have been nice. But the news was about pre-Christmas ICE raids that emptied the plants of every worker who was even remotely of Latin heritage, killed production for weeks and drilled a deep, cash hemorrhaging hole in the corporate P & L.

One would also guess that it was a well-aimed shot through the corporate heart of the Swift organization, fired by a sharpshooting Michael Chertoff. Swift had worked long and hard with the feds in an effort to solve the lingering problems created by illegal immigrants. For their efforts, they were expecting a major “attaboy” from the feds, not Chertoff’s stern lecture that sat cross-wise to what Swift had been told by an ICE Investigations Director a few weeks before the raid.

• What Michael Chertoff said, post ICE raid: "Over 400 workers were terminated, quit or did not show up. ICE wasn't notified and we don't know where those 400 workers are. . . . We asked the company not to do that. We asked the company not to reveal that we were going to be coming in in advance because common sense tells you, if you do that, everybody who is illegal is going to flee."

• What ICE Investigations Director Marcy Forman's Oct. 26 letter said: "I feel compelled to write you to clarify a point. . . . Specifically, at no time has anyone from ICE told any Swift official that they cannot take action against employees who Swift determines, on its own, are unauthorized to work in the United States."

Hey, you didn’t expect the right hand to know anything about the left hand, did you? These are the same people who brought you the continuing afternoon soap opera that’s known as Hurricane Katrina.

Swift’s financial losses, already burdened by the closure of Asian markets, accelerated after ICE’s raid and spurred rumors of takeovers, buy outs, and even selling the company piece-by-piece. The wolf was definitely at the door, huffing and puffing and threatening to blow the entire corporate house down. Survival meant a merger or being acquired. It was unavoidable.

Fortunately, mergers and acquisitions are a part of business that Rovit knows well. Shortly before joining Swift, he co-authored a book called “Mastering the Merger.” With partner David Harding, he poked a hole in the generally accepted idea that M & A’s were good for business. Far from creating wealth for shareholders, they failed 70% of the time. More often that not, such practices destroyed value and signaled the end of the road for the CEO.

But Rovit wrote the book on the pitfalls of poorly planned M & A’s…literally.


Swift & Co. was sweet talked by many and Rovit refused to expand on the juicy details. It was a dark horse, JBS-Friboi, Latin America's biggest beef producer, that would gallop out of Brazil and buy the debt-laden meat packer. For a reported $225 million and an assumption of $1.16 billion in debt, the cowboys from Brazil expanded their reach into the lucrative but until now forbidden U.S. market and gained a potential foothold in Asian markets. It will create the world's largest beef producer in terms of animals slaughtered, easily surpassing Tyson and Cargill.

Just how big will the new organization be? In 2006, JBS-Friboi and Swift slaughtered 9.6 million head of cattle and had about $11.5 billion in total sales. The combined businesses have the plant capacity to slaughter 47,100 cattle a day, topping Tyson's capacity of 37,100 and Cargill's 36,000.

"What we see as important are the distribution channels Swift has, both in Japan and Korea and also in the United States," JBS-Friboi's CEO, J. Mendonca Batista, said. He’s betting on the future, of course, since those Japanese and Korean channels aren’t exactly open for deep draft shipping.

Rich Nelson, an analyst with Allendale, Inc., expanded the scope of those distribution channels, telling MEAT&POULTRY’s Steve Bjerklie, "JBS becomes a very serious player in the global meat industry. With Swift’s operations in Australia, JBS becomes the No. 1 meat company in Australia, the No. 1 meat company in Brazil, and the No. 3 meat company in the U.S."



Nelson pointed out that the acquisition also bodes well for Mercosur, the trading partnership shared by Brazil, Argentina, Paraguay, Venezuela and Uruguay. It gives them almost instant access to the U.S. and our NAFTA partnership.

On the downside, though, JBS-Friboi’s acquisition seems to ignore one of the major points in “Mastering the Merger” – determining the target's value under "business as usual" conditions. In his book, Rovit wrote that most of the purchase price should reflect the business as it is, not as it may be after you own it. Batista might be rolling some big bones, betting on the quick return of Swift’s Asian markets and access to a healthy cash flow from its North American operations.

You can bet one of Rovit’s other major points – integrate quickly in critical areas - will be at the top of the Friboi agenda. The attempt to integrate the Brazilian and American business cultures will be interesting to watch. Its success or failure might well be the real key to the success of the deal. And with Rovit's recent announcement that he will step down as soon as the merger is completed, the successful integration of the two businesses is a long way from assured.

Whatever happens, the JBS-Friboi/Swift & Co. deal is one of the watershed moments in the history of the American meat industry, more impactful in the long run than the rise of IBP and the development of boxed beef four long decades ago. It signals the beginnings of a truly international beef business.

Interviewing Sam Rovit was an interesting exercise. Like most successful CEO’s, he can play his cards close to the vest and get expansive on issues that rile his sense of fair play.

Q. The company was hurt by the loss of beef exports when Japan and Korea temporarily shut its borders to American beef, then again when ICE executed the pre-Christmas raid on your plants as part of an identity-theft investigation involving immigrants. How badly did those events hurt the business?

A: The loss of beef exports to key Asian markets such as Japan and Korea hurt the entire U.S. beef processing industry, not just Swift. While Swift’s volumes are below historical norms for both markets, our relative share has increased in the region and we look forward to building on that strong position as market access improves over time.

With respect to the December 12, 2006 ICE event, our latest financial impact estimate is $45 million to $50 million for the fiscal year ended May 27, 2007.

Q: The ICE raid created a lot of concern in the cattle business. Swift had worked with the government at trying to solve the illegal immigrant problem yet the company was singled out, nonetheless. What was behind the raid – political issues? A desire by ICE to make a high visibility statement to American business? And was it in anyway justified considering the final outcome?



A: Immigration policy is divorced from enforcement and the American employer is caught in the middle. Congress must pass immigration legislation that will fix a terribly broken system.

What seems bewildering is that an employer who follows all rules, would be treated by ICE in an adversarial as opposed to a collaborative manner when problems surface. Yet that is exactly what happened to Swift.

We are at a loss to understand how the December ICE raids could have been avoided. Swift is one of the few employers who checks all social security numbers through the government’s Basic Pilot program. Separately, every employee had to provide a government issued photo ID, and we cannot specify which of 29 forms of ID the applicant must supply, nor ask for additional forms. The law requires that we accept documents that on their face appear genuine. All employees had properly documented I-9 forms. Over the years, we’ve retained outside experts to scrutinize our hiring processes.

Simply put, a company cannot legally and practically do more than we have done to ensure a legal workforce with the current tools – and anti-discrimination guidelines – available from the government and no current or former member of management has been charged with any wrong doing.

Q: Swift was put in play over 6 months ago when several unsolicited inquiries came your way and you hired J. P. Morgan to help review the company's "strategic and financial alternatives." What made the JBS-Friboi offer the most attractive? And what are the advantages to both organizations?

A: While I won’t comment on the specifics of the other bids, I will say that this was a very competitive process.

The JBS / Swift strategic combination benefits our stakeholders – to include cattle producers and feedlot operators – in many ways:

The combination maintains a competitive U.S. and Australian meatpacking sector without further consolidation. Producers and feedlot operators will continue to sell cattle in a competitive marketplace.

Our prospective owners intend to maintain and grow the existing strong Swift business. JBS has a strong track record of growing businesses and is committed to using Swift’s valuable assets -- industry leading U.S. pork and Australian beef operations and a dramatically improved U.S. beef business -- to enhance its global presence.

Our prospective new owners are focused meat processors as compared to diversified conglomerate operators or financial managers. JBS has a 54 year family legacy in meat processing that has led to the creation of Brazil’s largest beef company. Their expertise will build upon Swift’s tradition of quality and innovation that dates back to 1855, creating stability for our communities and business partners.

The combined company has great operational and financial strength. JBS / Swift will become the world’s number one beef processor with operations on three continents and the ability to serve customers worldwide. The addition of JBS’ operations brings enhanced diversification to Swift’s existing business and creates a new company with improved profitability and balance sheet strength.

Q: There are governmental hurdles to leap before the deal is final and one of the major issues will be that of growing consolidation. Industry consultant John Nalivka in a recent Denver Post story said, "We've been consolidating for 25 years, but it was always one U.S. packer buying a U.S. packer. Now, we have another global player buying into a U.S. packer. I think the fringe cattlemen's groups will jump into this. There will definitely be comments made about a foreign company owning an American cattle company." How will you deal with that problem and are there other issues that might be a factor in the finalization of the deal?

A: Considering the other possible deal outcomes, the JBS / Swift transaction is a great deal for cattle producers and feedlot operators – period.

Q: There are two parts of the Swift business – beef and pork. Will they both remain in the new organization or, as some analysts have suggested, will pork be divested?

A: At this time we have no reason to believe that Swift would lose any of its organizational identity – to include our outstanding pork processing business.

Q: The Swift/JBS-Friboi beef business will be larger by a long shot – approximately 25-30% larger in slaughter capacity than current leader Tyson. What world markets do you expect will take that kind of volume and how will you develop those markets?

A: The market is already taking that volume. JBS is over 60% export oriented, AMH is about 80% export, and Swift N. America is poised to go after Asian markets once they are fully open. The upside we have with this merger is a tremendous cross-selling opportunity to meet the specific protein needs of customers throughout the world. Swift has sales offices in Mexico and throughout Asia, while JBS-Friboi has offices in Russia, Europe and the Middle East. We are very complementary.

People talk...E.coli, ethanol, immigration, Chic-fil-A, BSE

"The USDA has been showing an unwillingness to trace it (E. coli) back to the slaughter plant of origin. All we've been doing is shoving the bad news under the carpet, hoping it would go away."
(Source: Ft. Wayne News-Sentinel, June 24, 2007)
John Munsell, forced to sell his family business, Montana Quality Foods, after an E. coli recall in 2002, talking about the loss of consumer confidence in meat production practices.
>PS: Munsell now manages the Foundation for Accountability in Regulatory Enforcement.


“They're presumed to be male, we don't do udders."
(Source: Atlanta Journal-Constitution, June 25, 2007)
Don Perry, Chick-fil-A public relations director, talking about evolution of the cow in their advertising campaign.
>PS: Illiterate bovines pushing the consumption of chickens? Hogs of America, unite! You could be next.


"We have a number of allegations that the government didn’t act in a prudent way to prevent risk to Canadian cattlemen. They never told anyone about the first B.S.E. case, for example.”
(Source: MEAT&POULTRY, June 29, 2007)
Gilles Gareau, Canadian attorney, talking to MEAT&POULTRY’s Steve Bjerklie about a court case asking if the government knew B.S.E. was in Canada 10 years before they admitted it.
>PS: The same old question asked of every government – who knew what and when did they know it? “Round up the usual suspects!” said Captain Renault.


"The American people don't have faith in their government's ability to win a war, enforce border security or even process passport requests."
(Source: Washington Post, June 29, 2007)
Senator Jon Kyl (R-AZ), one of the sponsors, talking about the defeat of the new immigration bill.
>PS: It was killed on the senate floor. Unindicted co-conspirators include the ACLU, the AFL-CIO and Rush Limbaugh.
>PPS: Bush’s last best chance to gain a moral victory of any kind before he leaves office goes down in flames.





"Critics of ethanol, including those in the animal feeding and oil industries, are engaging in baseless scare tactics to convince people that ethanol production will irreversibly increase their grocery bills. While it is true increased ethanol production is creating a real market-driven price for corn, this report clearly presents the undeniable facts: energy prices, not ethanol, are responsible for much of the increase in the price of food. Further, our industry is rapidly developing next generation cellulosic ethanol technology that will allow us to meet the growing demand for renewable fuels from wood chips, switch grass and other materials in addition to corn. Ultimately, the market will adjust and all those in the food, fuel and fiber industry will be able to prosper."
(Source: Mercopress, June 29, 2007)
Bob Dinneen, Renewable Fuels Association president, denying any real linkage between the rise in food and feed costs and the fast-rising price of corn.
>PS: Bob, four questions: 1. You don’t consider ethanol an energy resource? 2. Are only corn growers allowed to prosper for now? 3. Hasn’t the price of High Fructose Corn Syrup, an unavoidable ingredient in thousands of foods, skyrocketed in the past few months? 4. Are food processors all doing the noble thing and swallowing that added cost? Enquiring minds want to know, Bob.
PS: Hey, Spinmeister Bob, don’t worry about a thing. You’re serving your constituents well.

People talk...

“We are already paying thrice for Washington’s love affair with corn-based fuel, in the form of higher taxes, higher gasoline prices and higher food prices. Yet, because of the prodigious amounts of energy and fertilizer used in its cultivation, corn-based ethanol provides little or no reduction in CO2 over the gasoline it displaces.”
(Source: Wall Street Journal, June 20, 2007)
Holman W.Jenkins, Jr. of Political Diary, the Wall Street Journal’s online opinion page, editorializing about the cost-benefit relationship between gasoline and ethanol.
>PS: Before we get stampeded by yet another fad du jour, can we do the math?

“In Alabama, we have had experience turning corn into alcohol for years.”
(Source: Newsweek, June 25, 2007)

Bob Riley, Alabama governor, talking about the state’s legendary history of making moonshine as he filled up his car with ethanol-based fuel.
>PS: Alabama’s 2,000+ vehicles will start using alternative fuel to “save money and help the environment.”
>PPS: According to the Wall Street Journal, Alabama will achieve none of those noble goals.

"In a marginal year, we should have grass up to your knee, and in a good year, up to your thigh, almost up to your hip. We don't even have it over the edge of your boot."

(Source: California Farm Bureau Federation News, June 20, 2007)
John Harvey, Ventura County cattle rancher, explaining why a lack of forage has forced him to get rid of two-thirds of his herd.
>PS: According to the National Agricultural Statistics Services, 82% of California's rangeland is in poor or very poor condition. Thirteen counties have been declared disaster areas by the USDA, making ranchers in those areas eligible for low cost loans.

"We sent inspectors to China. We had three people there for a couple of weeks.”
(Source: Washington Post, June 20, 2007)
David Acheson, FDA's assistant commissioner for food protection, explaining the procedures FDA used to check into the problem of possible contamination for food imported from China.
>PS: “Three people. . .for a couple of weeks?” To check up on food processors in a country that sends over $6 billion worth of food to the U.S.? I’m doing the math and it doesn’t compute.
>PPS: The FDA inspected less than 1% of incoming food in 2006, down from an anemic1.5% in 1997 and it will probably drop to 0.7% this year. Chow down on that shrimp cocktail, guys, Acheson is from the government and he’s here to help you!
>PPPS: To be fair, the inspection problems have skyrocketed in the past decade but the dollars and personnel to keep up haven’t been approved by a short-sighted congress. The old hometown pork barrel will always come first.

"These two senators (Saxby and Isakson) have rolled up their sleeves and been willing to, against a lot of pressure, to get out there and participate in the development of this bill over many months. The purpose of this campaign at this time is to encourage them to stay the course, continue to be engaged in this important process."
(Source: Atlanta Journal-Constitution, June 21, 2007)

Wayne Lord, v.p. of Pilgrim's Pride, one of Georgia's largest poultry companies and spokesman for Georgia Employers for Immigration Reform, talking about the encouragement the ad hoc group is offering to make sure the two men “stay the course” and continue to support a wildly unpopular bill among Georgia voters.
Not cattle-related news, but…



Cinnamon helps keep blood sugar level down, study finds
Swedish researchers report cinnamon can help keep post-meal blood sugar levels down, a finding with potential implications for diabetes treatment. About one teaspoon of cinnamon added to a bowl of rice pudding lowered the blood sugar increase in a group of healthy volunteers, the study found.
(Source: Reuters Health, June 20, 2007)
Dr. Joanna Hlebowicz said she and her colleagues based their findings on 14 healthy volunteers who ate the cinnamon-laced rice pudding.
>PS: Cinnabons and lattes for everyone!

"USDA's resistance to restoring reasonable BSE import restrictions, implementing country-of-origin labeling (COOL), allowing voluntary BSE testing and strengthening the U.S. feed ban all of which would improve our ability to restore lost export markets makes me question what the agency's actual agenda is concerning restoration of lost export markets,"

(Source: The Grand Island Independent, June 21, 2007)
Eric Nelson, R-CALF USA trade committee chairman, chastising the USDA for not doing a better job of managing our export market problems.




"Our stance on COOL is that it's a bad law that adds tremendous costs, with no tangible benefits. It was really written as an anti-import law rather than to provide information to consumers. . .It’s just going to be a train wreck.”
(Source: SmokyHollow.blogspot.com, June 21, 2007)

Jeremy Russell, communications director for the National Meat Association, pointing out one of two problems with COOL.
>PS: Russell said one of the difficulties is the law prohibits a national animal-identification system, necessary to make the labeling law workable.



"When you open up the newspaper, turn on the radio or watch TV, you see China with this problem (exporting contaminated food and food ingredients) ... but is there a country in the world that doesn't have such problem at one point?"
(Source: China Daily, June 22, 2007)
Roland Vaxelaire, director for quality and risk management at Carrefour.
>PS: At one point, maybe. But, et puis zut, at dozens of unregulated points? Chinese officials have some serious work to do.

"It is inappropriate to single out China as we all have instances related to food safety issues in our backyards."
(Source: China Daily, June 22, 2007)
Jeffrey Ettinger, C.E.O., Hormel Foods Corp.
>PS: See previous PS. “The other guy did it first,” didn’t work as an excuse in the first grade. It doesn’t work today on the world stage, either.

"Rapid development of the corn-based ethanol industry is already having adverse impacts on food supplies and prices."
(Source: ReasonOnline.com, June 22.2007)
Letter to Harry Reid (D-NV), Senate Majority Leader, from some leading food companies.
PS: Let’s talk about two Mexican crises driven by the high price of corn - a tortilla shortage, which has led to a rapid price increase in this staple food, and a future tequila shortfall because farmers are ripping up their agave fields to plant suddenly much more profitably corn. Are we really ready to trade Margaritas for moonshine?

Meat Industry News - Organic food, Bird flu, Corn, Laptops, China, COOL, Father’s Day, Animal disease

"Adding 38 new ingredients is not just a concession by the USDA, it is a major blow to the organic movement in the U.S. because it would erode consumer confidence in organic standards."
Source: Los Angeles Times, June 11, 2007)
Carl Chamberlain, a research assistant with the Pesticide Education Project in Raleigh, N.C. complaining about the standard USDA politically-activated collapse on issues where large amounts of money are involved.
>PS: The list includes 19 food colorings, 2 starches, casings for sausages and hot dogs, fish oil, chipotle chili pepper, gelatin and a few other obscure ingredients.

"If there was a health scare (closer to home), I could easily drop chicken without thinking about it."
Source: Phillyburbs.com, June 10, 2007)
Monique Vogelsang 24-year-old New York teacher, responding to a survey question about bird flu
>PS: Even some of the educated don’t understand the difference between a health problem with livestock and the safety of our food supply.

"The key driver for us is corn and more recently soy meal, following it up with some questions about acreage. Unlike a single-year equation, where corn is being driven by weather or carryover stocks, we see all of the ethanol plants coming on line, a number of them are in our region of the country. We don’t see any signs of wavering in terms of national policy as far as subsidizing ethanol facilities. So we feel we need to run our business prudently and we need to factor that in how our pricing needs to be going forward. We anticipate costs to be at the level we have today."
Source: MeatPoultry.com, June 12, 2007)

Jeff Ettinger, chairman, president and CEO, Hormel Foods Corp., talking about the effects of ever-increasing ethanol production on the price of a can of Spam during an interview conducted by Keith Nunes.

“Anybody that knows anything about the marketing of corn knows that when you raise the price of corn you are going to create problems in all of the markets that use corn."
Source: Washington Post, June 15, 2007)
Ronald W. Cotterill, director of the Food Marketing Policy Center at the University of Connecticut, talking about the rising prices of just about everything in the average market basket.
>PS: The Bush administration is toying with asking for a seven-fold increase in ethanol production. Hot times for the corn business, painful for everyone else.

“Everybody has to eat, and everybody has to drive to work. For households, the headline number truly is the more important number, and clearly the run-up in gasoline prices in the last few months has left consumers with less money to spend on everything else. I guess we need to walk to work and bring a brown bag lunch.”
(Souce: New York Times, June 16, 2007)
Mark Vitner, senior economist for Wachovia, talking about the run up in two very important components of the cost of living index.
>PS: The same article said gas prices were up 10.5% last month, compared with an increase of 4.7% in April. Beef prices climbed 5.1%, poultry prices 4.3% and pork prices 3.4%. Nothing was mentioned on the cost of a bushel of corn.

"Hyperbolic rhetoric is being substituted for fact. Critics in the animal feeding and oil industry in particular are using scare tactics to frighten the American consumer to believing their unsupported claims."
(Source: CNNMoney.com, June 14, 2007)

Bob Dinneen, president of the Renewable Fuels Association, trying to convince reporters during a teleconference that the fast-rising cost of a bushel of corn has little or nothing to do with the food price increase.
>PS: Bobby, Bobby, Bobby, here’s a fact: the Consumer Price Index says U.S. food consumer prices have risen from a year-over-year rate of 2.5% in September 2006 to 3.7% in April. The price of corn has almost doubled in that time – absolutely no cause and effect there?
>PPS: See Ronald Cotterill’s unbiased comments on the price of corn.

“Saying rising feed prices don't have a direct impact on the cost of food is as ridiculous as saying that rising gasoline prices will not result in people paying more to fill up their cars,"
(Source: Chicago Tribune, June 15, 2007)
David Ray, an American Meat institute spokesman, perhaps responding to Bob Dinneen?

Reader Poll: Do you take your laptop with you on vacation?
I bring it along to stay connected to work. 34.52%
I have it for leisure and work. 27.42%
I leave it behind. 18.71%
I do not use a laptop. 16.13%
I keep it with me for leisure. 3.23%
(Source: NAW Smart Brief, June 13, 2007)>
PS: The survey raises serious concerns about the mental state of half the respondents – the 34.52% who feel an unconscionable need to stay connected to work and the Luddite-like 16.13% who have not yet joined us in the 21st century.

"U.S. trade-remedies laws are already vigorously, even zealously enforced. Waving the banner of 'fair trade,' some domestic industries have taken advantage of popular anxiety over trade and globalization to push for protectionist measures and legislation to limit foreign competition and pad their own profit margins at the expense of U.S. consumers."
(Palm Beach Post, June 13, 2007)
Erik Autor, vice president of the National Retail Federation, trying valiantly to defend an untenable position.
>PS: Autor also said calls for tougher enforcement amount to “histrionics and disinformation.” And about that ‘vigorously, even zealously enforced’ comment? Come on, Erik, to what nationally respected (dis)information service do you subscribe? The Boston Globe says only about 1% of food imports are given even the most cursory inspection. If that qualifies as ‘zealous,’ how would you define ‘lax enforcement’?
>PPS: I want to ‘pad my health margins’ at the expense of unregulated Chinese business practices.
>PPPS: "I have watched FDA chase too many imports with too few resources for too many years." John Dingell, chairman of the Committee on Energy and Commerce.

“There are 13 million food imports this year, with FDA able to inspect only about 1 percent. The system is so weak that many FDA professionals fear the word is out in the international community you can send virtually anything, of any quality, regardless of risk, to the United States, because no one's looking.”
(Source: Boston Globe, June 3, 2007)
Unsigned editorial talking about the inadequacies of federal inspection programs.

‘‘Mandatory labeling of fruits, vegetables and meats will be implemented. It is going to happen.’’
(Source: Farm News-Iowa, June 14, 2007)

Collin Peterson, chairman of the House Agriculture Committee, telling reporters that COOL is a done deal.
>PS: Oh, sure, a few “minor changes in the law. . .have to be ironed out” but country of origin labeling “will become the law of the land in 2008?” Not without a fight.
>PPS: Collin, let the battle begin.
>PPPS: Kevin Coupe, renowned supermarket industry observer, said this about that: “If we’re all so concerned about imported products, and recent experience suggests that some imports are not safe to consume, isn’t it time to reconsider the notion of country-of-origin labeling (COOL)? We know it is expensive and complicated, but doesn’t it make sense to put consumer welfare – and transparency – first?”

“Sitting down to a nice big juicy steak makes a man feel like he's done OK for himself. You just don't get the same euphoria from eating wasabi-crusted tilapia."
(Source: Cincinnati Enquirer, June 13, 2007)


Jeff Ruby, Cincinnati steak restaurant owner, talking about what to order dear old dad on Father’s day.
>PS: Mr. Ruby, you are a wise man.

"I thought there should be a relatively cheap diagnostic tool for monitoring animals"
(Source: Forbes, June 7, 2007)Eliav Tahar, founder of Veterix of Or Aqiva, explaining his reasoning behind developing a ‘swallowable’ diagnostic tool for cattle.
>PS: At $70 to $80 each for the capsules and up to $6,000 for the software, dairy farmers and ranchers might find the system a little too hard to swallow.

Facing East

Seiyu Ltd., a major Japanese supermarket chain, plans to nearly triple the number of its stores selling U.S. beef, and possibly adding even more in the coming months. It puts a small light at the end of the long, dark tunnel that’s been the American beef business with what was once our major trading partner. But all lights seen at (or near) the end of long tunnels must be carefully considered.

Sometimes, it’s a headlight on the engine of an even longer freight train.

The good news: Increasing the availability of U.S. beef just as the Japanese summer grilling season starts is a very good thing. If Seiyu sells out of the product early and often, then the Japanese public will have spoken and all the other supermarkets will be clamoring for American beef.

The bad news: Kevin Coupe, a well-known supermarket industry observer, said it best. “There are two possibilities here. One is that Seiyu is getting so many requests for US beef that it is being forced to expand the number of stores in which it sells the product. The second is that Seiyu believes that it can force-feed US beef to the Japanese customer simply through force of marketing will.”

He’s betting on the latter.

Coupe doesn’t pretend to be an expert on the Japanese market but Aeon, the nation's biggest food retailer, told him in 2006 that local consumers were not interested in American beef and they had no intention of selling it.

Seiyu is not a major force in Japan. Although a good-sized organization, they’re a drop in the deep ocean of Japanese trade - small child’s sand pail sitting on a very wide beach - wee little dry creek bed occasionally feeding a river of commerce. To put it simply, the small ripple created by just respectable sales at Seiyu will not grow into a tsunami.

We haven’t exactly earned the trust of our far Eastern trading partners with our repeated missteps, either. Korea has made no bones about the fact that they want no bones. We respond by sending shipments of boneless beef with bones “inadvertently” mixed in. Can we call these “bone-headed” mistakes? Korean inspectors, undoubtedly under the gun to do their best to limit incoming raw product, have found their job to be ridiculously easy.

Koreans rejected two shipments totaling 66 tons of beef. A 51 ton shipment from a Tyson plant arrived a day after the arrival of a 15 ton shipment of U.S. beef produced by Cargill containing chuck short ribs. Further shipments from both offending plants have been banned by officials in Seoul.

Meatingplace.com reported that “S. Korea pinned responsibility for the 15.2-ton shipment to Wichita, Kan.-based Cargill Meat Solutions,” though the company and U.S. government officials said Cargill sold product intended only for domestic use to another company, which then shipped it to S. Korea. The AMI and NCBA immediately issued statements regretting the errors but urged Korea to not delist the innocent Cargill plant.

In a sternly worded press release, Jay Truitt, Vice President of Government Affairs, National Cattlemen's Beef Association, wrote, “U.S. and South Korean officials developed a strict protocol for exporting U.S. beef to South Korea, and the U.S. cattle industry is insistent that this protocol be followed to the letter. These shipments were standard U.S. bone-in beef products destined for our U.S. market or other export nations, but sent to South Korea. We are asking that the USDA conduct a full investigation of this incident to determine where the breakdowns in protocol occurred.”

And may the offender be thrashed at high noon on Main Street. His choice – Main Street in Wichita or Greeley.

FSIS acted swiftly making this statement: “Effective June 4, 2007, the Government of Korea advised the United States that Korea will suspend import inspection for U.S. beef until further notice. Certificates should no longer be issued for export of beef to Korea. Additional information about the suspension of beef import inspection in Korea will be provided as it becomes available.”

But the painful point remains. Shipment after shipment fails even their most basic scrutiny. We must appear to be either hopelessly inept or unbelievably callous. Inspectors, relaxing over a few Hite beers after a not-too-hard day on the job, are probably sharing a few laughs at our expense.

We’ve blown it again with the South Koreans. The Japanese, sitting right next door, are taking notes.

A senior Farm Ministry official with the Japanese government said on Thursday that Japan will prepare for bilateral talks on beef imports if and when the United States asks it to ease rules, but no such request has been made. Maybe a battered, bruised and embarrassed Johanns is holding off on making that request until we can prove to ourselves that we can finally get it right?

With the recent South Korean snafu, maybe that Farm Ministry official in Tokyo is rethinking his statement on bilateral talks. No government official – Japanese or Korean – is going to put his reputation on the line by relaxing their very strict import standards if we’ll just end up embarrassing him by dropping the ball.

Meanwhile, the beef boys in Adelaide, given a free shot at two of our most treasured export markets for almost three years now, are not-too-secretly gearing up for even greater sales in the Pacific basin. It’s their back yard, Nippon Beef is a major shareholder in one of their major beef suppliers and Swift, another biggie in the Land of Oz, is (probably) soon to be owned by Brazilian interests with aggressive world-wide trading ambitions. Can we talk about a perfect storm?

Meat Industry News for June 4, 2007

"Nationwide, we didn't have as many kids in large animal medicine. A lot of rural clinics had the cow numbers but it was not a place that graduates wanted to go back to. Small towns didn't have the luxuries of the big city -- recreation, places to eat."
(Source: Sioux City Journal, May 27, 2007)
Kevin Klozenbucher, Huron, S.D. veterinarian, talking about a looming crisis in large animal vets.
>PS: Baxter Black, time to quit kidding around and get back to work. We need you.





“The problems with the restrictionist provisions of the Senate immigration bill are serious and many. It includes a path to citizenship for 12 million illegal immigrants, which is a rare triumph for common sense, but that path is strewn with cruel conditions, including a fine — $5,000 — that’s too steep and hurdles that are needlessly high, including a “touchback” requirement for immigrants to make pilgrimages to their home countries to cleanse themselves of illegality. The bill imposes an untested merit-point system that narrows the channels through which family members can immigrate.”
(Source: New York Times, May 29, 2007)
Unsigned editorial pointing out several inequities in the proposed [anti] immigration bill.
>PS: Remember these famous words on the Statue of Liberty? ‘Give me your tired, your poor…yada, yada, yada’






"We were doing that anyhow, so it just helps out with defraying some of the cost in operating the way that we need to."
(Source: Galesburg [Il} Register Mail / Associated Press, May 29, 2007)
Mark Akin, general manager, Circle A Ranch, Iberia, Missouri, talking about the ‘little extra’ incentive to feed cattle in that state offered by a multi-million dollar tax break.
>PS: The tax credit allows up to $30 million in tax breaks but no more than $10 million per year. Way to defray!



"I can't go six months without growing a chicken. ... We'll be out of business when they come back."
(Source: Orange County Register, May 27, 2007)
Lucius Adkins, owner of one of the biggest chicken farms in Georgia and president of the United Poultry Growers Association, talking about the revolving door (stay, go home, come back) guest worker policy in the proposed new immigration bill.

“It is interesting that the (New York) Times story notes that it was the manufacturer that determined melamine was being used in its feed – not the government through inspections and oversight. Which speaks to the value of private testing, which the government is resisting when it comes to made cow disease. It isn’t exactly the same thing, but we think the connection is worth making.”
(Source: Morning News Beat, May 31, 2007)
Kevin Coupe, Supermarket industry analyst, drawing an interesting conclusion.
>PS: He's far from the mainstream cattle community but his comment is probably very close to that of mainstream America.