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Ag and energy; the cost of kids in Delhi and Dallas; other stories

(Friday, Dec. 3, 2004 -- CropChoice news) -- Below are 8 agriculutre related information pieces.

1. A Surprising Courtship: Agriculture and Energy? Hardly a Surprise ≠ Itís a natural.
2. Asian soybean rust confirmed in two Missouri Bootheel counties
3. What kids cost us in Delhi and Dallas
4. How now, industrial cow?
5. Largest farms and firms get agriculture subsidies
6. Texas Grocer HEB Thrives Catering to Locals
7. Vermont's Country Stores Organize to Face Threats
8. Corn Growers Welcome Nomination of Governor Johanns for Agriculture Secretary
ACGA Calls Upon New Leadership to Help Change Course in U.S. Agriculture Policy

1. A Surprising Courtship: Agriculture and Energy? Hardly a Surprise ≠ Itís a natural.

Comments by Larry Mitchell, Chief Executive Officer, American Corn Growers Association, to the Environmental Grantmakers Association
Federal Policy Briefing Agenda, December 1, 2004, Washington, DC

In the early part of the last century, our nation utilized a farm-based power system as its main source of energy. Most farms used over half of its production to fuel its own energy needs. This was done by the use of horse, mule and other animal power. It usually took over half of the farmís production to feed these animals. Farms were also much more labor intensive, and the food to feed that labor force was also raised right on the farm. The water for the farm was most likely hauled from a nearby stream, pulled from a hand-dug well or pumped from the ground with wind power.

In addition, much of what was raised on our farms back then went to feed the livestock which powered much of the transportation needs of the other sectors of the economy. The ice wagon, the coal cart, the doctorís buggy, the preacherís mount, the horse drawn street cars, the tow animals of the canals ≠ you name it, it was most likely pulled with animals fed with feed off of our nationís farms.

Then came our dramatic conversion to a fossil-fuel economy. The street cars were electrified and later replaced with busses. The ice man got a truck and was later put out of business by the home refrigerator. The doctor got a car and then quit making any house calls at all. On the farm, horses and mules were replaced with the internal combustion engine and the people were replaced with ever bigger and faster machines of all forms.

What we need to realize today is that we must reverse the pendulum that has swung so far to a fossil fuel economy and back it up just a bit to a bio-fuel and renewable-fuel economy. Our farms can once again be an essential component to our nationís energy needs. Ethanol and other bio-fuels can be made from corn, soybeans and other surplus grains. These same fuels can also be made from many other feed-stocks and ethanol doesnít have to be just a corn based, Midwestern industry. There is biomass in every state of the union and ethanol should be produced in every state. The Renewable Fuel Standard (RFS) was pending energy bill and will advance our bio-fuel industry.

The current "hidden cost" of gasoline is most likely over $6.00 per gallon. According to The National Defense Council Foundation (see http://www.iags.org/n1030034.htm ), it was $5.30 per gallon a year ago. Ethanol competes very well with this other highly subsidized fuel.

(NOTE: we too often compare ethanol to regular grade gasoline ≠ when we should be comparing it to high octane grades of gasoline. Has anyone ponder the issue of our fuel merchants that take ethanol, which is now selling for under $1.70 a gallon, blend it with regular gasoline, which is selling around $2.00 a gallon, and then sell the higher octane blend for $2.25 a gallon?)

Our farms can also supply electricity to the nation with the expansion and new technology of electric wind generation. We are now harvesting a new wind crop from Americaís farms and wind power development holds tremendous potential both as a new cash crop for farmers and as a rural economic development strategy. The recent extension of the Production Tax Credit for wind generated electricity is a very positive step, as is the tax incentives to expand and upgrade the nationís electric grid. After all, the electric grid is our farm-to-market road for our newest crop ≠ WIND. Our wind generation capabilities are almost limitless.

Just as we have spent the past century building our traditional farm-to-market roads, our interstate highway system, locks, dams, harbors, railroads and the rest of our infrastructure to move our crops to market, we need to improve our national electric grid and do so smarter than we have in the past.

What we need is a national energy policy which ensures affordability and reliability through diverse, decentralized, domestic and renewable energy sources. Agriculture has been, and can be a major component of that goal.

ACGA has a history of working on the agriculture/energy solution.

ACGA Projects include:

A. Wealth from the Wind/

B. Alliance for Renewable Energy from Agriculture (AREA)

1. Partners

a) Clean Fuels Development Coalition

b) Nebraska Ethanol Board

c) Keystone Cooperative Development Center

2. Pre-Feasibility Guide

3. Pre-Feasibility Workshops

C. Bio Diesel w/ Farm Aid

1. All Busses of the principals

2. The generators at the event

D. Alliance for Rural America

1. Annual Energy Conference

2. Working toward affordable and reliable energy

3. Members

a) American Agriculture Movement

b) American Corn Growers Association

c) Federation of Southern Cooperatives

d) National Association of Farmer Elected Committees

e) National Farmers Organization

f) National Grange

g) Women Involved in Farm Economics

h) Soybean Producers of America

i) Oklahoma Farmers Union

E. American Agriculture Wind Coalition

1. Members

a) American Agriculture Movement

b) American Corn Growers Association

c) Federation of Southern Cooperatives

d) National Family Farm Coalition

e) National Farmers Organization

f) National Farmers Union

g) Soybean Producers of America

h) Dan Mar Associates

Other programs that are not directly related to energy issues are:

F. Farmer Choice ≠ Customer First

1. Recent Analysis on lost exports ≠ GMOís cost us about $1.45/bu. in 2004.

G. USDA, Inc. ≠ an Agency Capture White Paper

H. Agricultural Policy Analysis Center (APAC) Study "Rethinking U.S. Agricultural policy ≠ Changing Course to Secure Farmer Livelihoods Worldwide"

This last project is very important to todayís discussion. ACGA is a leader in economic analysis for production agriculture ≠ not as a well-healed think-tank or institution, but a group of dedicated individuals that look closely at economics from the farmers' view.

For instance, we took on the current administration by pointing out that their inflated net farm income report was inflammatory, irresponsible, and, in most cases, intentionally timed to do U.S. farmers the most damage, such as in Sept. of 2003, just before the WTO ministerial in Cancķn. It that critical juncture, USDA issued a formal statement forecasting net farm income figures for 2003, which are totally absent of the reality of the real economy facing Americaís farm families. According to data, farmers' net cash income was forecast at a record high $60.2 billion. What they failed to report, and why their announcements are so misleading, is the fact that earnings for the entire year in 2003 for farm operator households from their farming activities is only $3,968, or about $330 per month.

Another good example of our ongoing work on economic analysis can be found at our website where we display the "Key Indicators of Major Crops." This data shows that while we have been promised by our policymakers that if we were to reduce our crop prices to a more "competitive" level we could export more and improve our economic status. The numbers show that we did reduce prices, some 67 percent in the case for corn over the past 25 years, when adjusted for inflation, but that our exports have remained flat. In fact, because we have increased our productivity, we now export only one in five rows of corn, while 25 years ago we exported one in four. It should be noted that over that same 25-year period, grocery prices increased over 250 percent.

Now to get back to the APAC analysis, for many years now, we have been pondering how to quantify several key points that we, as farmers, have observed.

› First ≠ farmers farm. They farm every available acre and produce every pound, bushel or hundredweight possible. Thatís what farmers do. They will produce as much as they can when prices are high to maximize profits. They will produce as much as they can when prices are low to service debt and survive.

› Second ≠ while low prices in many sectors of the economy may drive producers out of business, reduce production and put it back in line with demand, we find that, although farmers are put off the land with low prices, the land stays in production. Production does not decrease, and may actually increase when larger and larger producers take over the land.

› Third ≠ Low prices have not expanded our exports and are detrimental to farmers, not only in the U.S., but also around the globe.

ACGA approached Dr. Ray at APAC, who went to work advancing our cause and the result can be found their study "Rethinking U.S. Agricultural policy ≠ Changing Course to Secure Farmer Livelihoods Worldwide."

Government has been involved in agriculture policy since the beginning of recorded history by expanding production, improving technology, managing stocks, establishing weights and measures, supporting prices, etcetera. There were those seven fat years followed by seven lean years. The Chinese started a grain reserve program in 54 B.C., and operated it for 1400 years. When Queen Isabella asked Christopher Columbus to take her fleet down to the Bahama Boat Show, government was expanding agriculture. When government-backed military force removed the indigenous people from the land on our continent, government was again expanding agriculture production. The same can be said of the trans-continental railroad, where the government gave away ten miles of land on both sides of the tracks for settlement and, later, crop production. Then we had the homestead programs, USDAís research and development, land grant universities and even the federal interstate highway system, which means that today 4,000-head dairies in New Mexico drive down the price of milk in Wisconsin.

Let me repeat this point ≠ government has been involved in agriculture since the beginning of recorded history -- and will continue to do so. We must change course to make government involvement in agriculture to work for all of use, not just the processors and merchants.

A good farm program includes not only a good commodity program, but also good programs for conservation, research, rural development, nutrition, credit, and etcetera.

Having said that let me point out the three components of a good commodity program:

1. Price support, not subsidies,

2. Tools to manage stocks, and

3. Tools to manage production.

I know many of you may feel that the difference between price support and subsidies sounds like a semantic splitting of hairs. But I can assure there is a great difference. The biggest difference is who pays. The user pays for the support and the government, i.e. taxpayers, pay the subsidy. The best analogy I can give you to share with your urban friends is the difference between the minimum wage, a support program, and food stamps, a subsidy program. And you do not have to an economist to realize that if we raise the support program, we can reduce or eliminate the subsidy program. By the way ≠ most American corporations believe wholeheartedly in government price supports. They call it patent protection, copyright protection and/or trade mark protection. Think about it.

One of the timeliest discoveries in Dr. Rayís work, during these times when so many developing nations are demanding an end of U.S. farm subsidies as a way to improve the economic situation for their farmers, shows that the simple elimination of U.S. subsidies will not help. Such a policy change would devastate U.S. farmers and would even reduce the prices for some commodities worldwide. What would help is a policy to improve prices in the U.S., a world price setter for many commodities, and thereby help farmers worldwide.

Managing stocks, as I mentioned before, is not a new government policy. From the Joseph Plan as Henry A. Wallace called the 7 fat years, 7 lean years program, to his Ever Normal Grainery, to the Chinese program I mentioned earlier up to the farmer Owned reserve we lost in the 1996 farm bill, governments have previously provided the tools to manage stocks with positive results. In the early 90s, the GAO determined that the government grain reserves cost about $14 billion dollars between 1985 and 1990, but the savings to U.S. consumers in the midst of the drought years of the late 1980s approached $40 billion. Doesnít it make obvious sense that a $14 investment to save $40 is the wise course? Then wouldnít it also make a billion times more sense if we add 9 zeros to the equation? One last note on government stocks, another from the ACGA farmer view of agriculture economics. Did you realize that when our nation went to war last March, we only had 5 hours worth of corn in the CCC reserve? We only had 8 hours worth of soybeans and 11 days worth of wheat. We had 30 days supply of petroleum in the Strategic petroleum reserve, but only 5 hours worth of corn.

Tools to manage production are available and used by most every sector of the economy. The generals all use production management ≠ General Dynamics, General Electric, General Foods, General Mills and General Motors. Even both the House and Senate agriculture committees believe in production management by government. During the last farm bill deliberation, they spent hours discussing the loan rate. Their concern was that the higher the loan rate, the more incentive producers have to produce more. An erroneous assumption as we will see later. But given the fact that they decided to keep the loan rate low in order to curb over-production, it is clear that they support government tools to manage production.

In conclusion, I must explain that I have very mixed emotions when it comes to where many of our friends and allies in the environmental community are heading on this issue. My concern is actually has less to do with the direction and more to do with the route and where that route may eventually lead all of us. Few, if any, of us have supported any of the trade agreements passed over the past two decades. We couldnít. They failed to include adequate provisions for environmental protection, workers rights or food sovereignty. Now, many find themselves in the hell-bent to use the recent WTO decision on the U.S. cotton program as their ticket to changing farm policy to better address so many of the critical needs that have not been properly addressed in the past.

If we were to eliminate Step II and Step III of the cotton program, it may help improve the international cotton market, but I doubt it. And elimination of Step II and Step III will not reduce the incentive for U.S. growers to continue to produce. By the way, since passage of Freedom to Farm In 1996, U.S. cotton acreage has fallen from near 17 million acres in 1995 to about 13.5 million acres in 2003.

That leaves Step I, which is also the current commodity program for wheat, feed grains, oilseeds, peanuts and rice. We have grave concerns that as we start down this slippery slope, we are exposing all of our commodity programs to the sharp knives of reform. I urge you to seriously consider replacing those programs with the type of program I outlined earlier ≠ price supports, reserves and production management ≠ before we find ourselves at the bottom of that slippery slope.

A new farm bill may be written as early as 2005. There will be budget reconciliation in 2005 that will impact farm programs. If we change course, and take the proper course, we can help secure farmer livelihoods worldwide. We can save and reallocate $10 billion per year, or more, to improve our energy and environmental programs. Letís just make sure that the happy marriage of agriculture and energy interest discussed today doesnít turn out to be a drunken prom date.

2. Asian soybean rust confirmed in two Missouri Bootheel counties

11/30/2004 -- Soybean rust was confirmed in the southeast Missouri counties of New Madrid and Pemiscott in the "Bootheel" of the state, a key soybean production area.

Mike Brown, Missoui state entomologist and state plant regulatory official, said soybean plant samples from the two counties were identified morphologically last week, and confirmed by the USDA National Germplasm and Biotechnology Laboratory in Beltsville, MD, today using polymerase chain reaction (PCR) analysis. The first identification used a microscope; the second is a more definitive DNA test.

With this confirmation, Missouri becomes the seventh and the northern-most continental U.S. state Asian soybean is known to have reached since Nov. 10. The others are Alabama, Arkansas, Florida, Georgia, Louisiana and Mississippi. There is still no word on Tennessee samples being tested two weeks ago.

The Missouri samples were found in private growers' fields that had not been harvested yet, Brown said. "One of the plants was at the edge of a field near a parking lot that had lights," he said. "We believe the soybean plants were still green from the artificial lights glowing."

Brown said the confirmation of rust in Missouri "does not come as a real surprise, given the reports in the southern states."

"It puts a renewed emphasis on the need for growers to learn more about this disease in the winter months, and have strategies in place for the season."

3. What kids cost us in Delhi and Dallas

By Stan Cox
Prairie Writers Circle

In October, just in time for Halloween, the World Wildlife Fund issued its frightening Living Planet Report, which shows that humanity continues to consume resources and destroy ecosystems at a rate that overshoots Earth's ability to produce and restore. And the gap is widening.

This deficit spending cannot last; it will be brought to a halt either by self-restraint or by catastrophe.

The problem, of course, is that international negotiations meant to address the problem generally go something like this: "You've got too many cars!" say poor countries. "Oh yeah? Well, you've got too many people!" say the rich ones.

Energy consumption is perhaps the most divisive issue. The United States, the United Kingdom and Australia together consume more energy each year than India, Pakistan, Japan, China, the Koreas, Southeast Asia and the Pacific Islands combined. Those Asian-Pacific nations have more than 10 times as many people as we do in the U.S., U.K., and Australia, and we use almost 10 times as much energy per head as they do.

History shows that lower population growth usually results from an improved standard of living. But the Wildlife Fund says overall resource consumption must be cut almost in half for the planet to have a fighting chance. Humans are now spending natural resources at a rate equal to 120 percent of Earth's biological capacity. The Wildlife Fund says that we must gradually reduce that figure to about 67 percent by 2050, or risk piling up an "ecological debt" big enough to bankrupt the planet.

Global consumption must be reduced sharply. At the same time, poor nations need to become better off if theyāre to check their population growth. The implication: Rich nations will have to get by on a lot less.

A 2003 study by Melanie Moses and James Brown in the scientific journal Ecology Letters (pdf) sharpens the horns of this dilemma. They analyzed data from more than 100 countries and concluded that humans are far from unique among mammals. In fact, we obey a general biological law: The greater the energy consumption by individual animals of a species, the fewer offspring they will produce and raise. From little monkeys to big apes to prehistoric humans to subsistence farmers to commuters in their SUVs, increases in energy consumption lead to smaller families.

(For you math fans, the decline in fertility is proportional to the cube root of per-animal energy consumption.)

A blue whale needs a much bigger vascular system and a lot more energy than does a rabbit to deliver nutrients and oxygen throughout its body. An American toddler, in turn, is hooked up to a support system that dwarfs that of the blue whale: a planet-wide industrial infrastructure.

We humans have the unique ability to extend our "energy networks" far beyond our physical bodies. As we've drawn upon greater quantities of fossil fuels and other resources, we have built societies in which people have education, contraceptives and pension plans, all of which encourage smaller families.

The people of rich nations might like to believe that high consumption has thereby freed them from the laws of nature. But Moses and Brown's analysis says the lunch isnāt free: "We hypothesize that parents face a tradeoff between the number of offspring and the energetic investment in each offspring ... the perceived energetic investment (including material goods and education) required for a child to be competitive in a given society is greater in more consumptive societies."

Of course, in biology, no mathematical relationship is absolute. Looking at those nations that deviate from the overall trend can be as instructive as studying those that follow it. For example, birth rates in 10 oil-producing nations whose citizens have unfettered access to fossil fuels are much higher than would be predicted by Moses and Brown's equations. Meanwhile, Cuba, when compared with Central America and the larger nations of the Caribbean, has similar per capita energy consumption but only half the birth rate. Cuba's lower rate of population increase is generally attributed to its high degree of economic equality, a rarity in Latin America.

The generally close relationship between energy consumption and fertility decline, however, suggests that people, like members of all species, tend to keep consuming until, inevitably, they hit a limit. That limit is miserably low if you're a parent living in a Delhi slum; in a Dallas suburb, it's far too high.

If we put these hefty brains of ours to good use, we could become the first species to find a way around Moses and Brown's equations -- to restrain both our numbers and our consumption. But on an already battered planet, the solution will require more equality, not more growth.

###

Stan Cox (t.stan@cox.net) is senior research scientist at the Land Institute in Salina, Kan., and a member of the institute's Prairie Writers Circle.

4. How now, industrial cow?

By Francis Thicke
Prairie Writers Circle

As a dairy farmer, I use nature as my model. But most dairy farming today -- and farming in general -- ignores nature. This should concern not only farmers but also consumers, for the sake of their health and Earthís.

Nature produces no real wastes, because the "waste" of one species is food for another. Also, nature does not use up resources. Its ways are efficient and sustainable.

The typical industrial dairy is a much different matter.

First, consider the cowsí diet. It is typically high in corn. Growing corn requires nitrogen fertilizer, whose production uses up a lot of nonrenewable fossil fuel.

Not all of this fertilizer stays on the field. Typically more than half of it is lost, polluting groundwater or flowing downstream through the Mississippi River basin to feed a process that sucks out oxygen and drives life from a New Jersey-size patch of the Gulf of Mexico.

Most corn producers also use pesticides, which further poison the landscape. And because corn must be replanted annually, it promotes soil loss through erosion from fields left bare to wind and rain much of the year.

Waste is another problem with industrial dairies, where cows are confined to feedlots or barns. Manure accumulates in lagoons. Eventually it must be hauled to crop fields. With thousands of cows in a typical industrial dairy, it often is difficult to find enough fields close by to accommodate the manure, which can end up fouling the air or spilling into streams.

In place of this industrial model, I run my farm based on ecology, an understanding of the interconnection of living things and their environment.

The most striking feature of a dairy farm designed and operated on ecological principles is that the land around the milking facility is pasture of perennial grasses and legumes covering the ground year-round. It does not erode. It does not require pesticides.

The cows harvest their own feed by grazing on these plants. The environmentally costly process of growing corn and transporting it is avoided.

There is no need for synthetic nitrogen fertilizer. As the animals move about, they deposit manure, a natural fertilizer. This manure is not concentrated, so it breaks down quickly and is thereby less likely to pollute air and water.

Pasture dairies make sense financially. Milk production per cow is less, but milk production per acre, when acres used to grow feed crops are included, is comparable. Studies at the University of Wisconsin show that grazing dairies are as profitable, or more profitable, than industrial dairies.

Whatís more, cows on pasture are healthier and live longer than those on a high-corn diet, which is not their natural food. And research is beginning to suggest that milk from grazing cows is more healthful because it has higher levels of omega-3 fatty acids, beta carotene and conjugated linoleic acids -- substances that may be useful in helping to prevent heart disease or certain cancers.

Given all these benefits, it is time we get serious about focusing our agricultural research, education and government policy on farming that uses ecology as its guide. And we should begin requiring industrial agriculture to pay for the environmental costs that it imposes on our planet -- costs now borne by society as a whole or charged to future generations.

###

Francis Thicke and his wife, Susan, have an organic, grass-based dairy near Fairfield, Iowa. He has served as national program leader for soil science for the U.S. Department of Agricultureís Extension Service. He is a member of the Land Instituteís Prairie Writers Circle, Salina, Kan.

5.Largest farms and firms get subsidies

Joy Powell, Star Tribune, Published November 30, 2004

Most of the nation's $16.4 billion in U.S. farm subsidies went to the biggest and most profitable farms and agribusinesses -- including Minnetonka-based Cargill Inc., according to new data released Monday by a watchdog organization.

In Minnesota, corn subsidies topped the list, totaling more than $260 million to 51,547 recipients last year. That's twice the amount of soybean subsidies paid in the state, according to the Environmental Working Group, or EWG.org., a nonprofit organization in Washington, D.C.

Minnesota was the sixth-largest recipient of farm subsidies in 2003, dropping from fifth place the year before.

A total of 80,231 recipients, including absentee landowners, collected nearly $781.7 million in 2003 payments to Minnesota producers, said Ken Cook, president of the Environmental Working Group.

His organization also released such data in 2002, causing controversy while, some say, helping to shape the farm policy debate into one focusing on equity. The new data show that once again the top 10 percent of producers received most of the subsidies, Cook said.

"It's all tied to one simple thing -- how much qualifying land do you own, and how much is grown on that qualifying land," Cook said. "The more you've got, and the higher the yield on that land that's registered with the local USDA office, the more money you get."

Topping the list of Minnesota farm recipients is Oberg Farms Partnership, a family corporation based in Moorhead. Last year, the Obergs collected $646,205 as Ernie and his four sons farmed one of the biggest spreads in Minnesota's Red River Valley -- more than 10,000 acres of wheat, corn, soybeans, barley and oats.

Ernie Oberg could not be immediately reached for comment Monday evening. In a 2001 interview, he noted that five families are supported by the farm corporation, which also incurs big expenses and, from time to time, losses due to bad weather, crop disease and pests.

From 1995 through 2003, the Obergs collected nearly $4.58 million under various programs as one of the state's leading food producers. They're among the 3 percent of U.S. farmers who account for about half the nation's food production.

Paul DeBriyn, president of AgStar Financial Services, said numbers in the subsidy database can easily be twisted by critics of farm policy. It only makes sense, he said, that larger volumes of production draw more support.

U.S. consumers should keep in mind that they continue to enjoy some of the lowest food costs, relative to disposable income, of people in any country, DeBriyn said.

"The American public has got it pretty darn good. We've got the safest, cheapest, highest-quality food in the world," he said.

It's a question, the banker said, of how U.S. consumers want to pay for it.

Riceland tops list

Cargill Inc., the nation's largest agricultural company, collected millions in subsidies from 1995 to 2003, including cotton subsidies, which have been challenged by Brazil.

Cargill's turkey business alone was the sixth-largest recipient for 2003, collecting $6.7 million for insurance compensation for losses by avian influenza, or bird flu, Cook said.

Pilgrim's Pride of Virginia also received $11.4 million for that program. Overall, Arkansas-based Riceland Foods, the world's largest miller and marketer of rice, topped the list of companies receiving subsidies with $68.9 million taken in last year.

Nationwide, the $16.4 billion that taxpayers spent in 2003 represents a 27 percent increase over 2002. Surges in disaster payments and commodity subsidies drove the increase, Cook said.

As Congress begins scrutinizing policy for the 2007 farm bill, Cook hopes his database and analysis will help open the debate, he said. He and DeBriyn said issues of equity, conservation and risk management will be central to the discussions.

Taxpayers have spent more than $131 billion on federal farm programs over the past nine years, Cook said. He and other critics contend that taxpayers are subsidizing mostly large operations that overproduce corn, wheat, soybeans, rice and cotton. The result, they say, is low crop prices.

Only 33 percent of the nation's farmers received subsidies. And of those, 10 percent collected 72 percent of all money that taxpayers provided for conservation, commodity and disaster programs over the past nine years, Cook said.

Barry Flinchbaugh, a professor of agriculture at Kansas State University, said he does not expect the data to have a great effect on farm policy, though it will generate interest.

"It will cause lots of discussion in rural America, neighbor looking at what neighbor got," Flinchbaugh said Monday. "It'll be great coffee-shop talk."

6.Texas Grocer HEB Thrives Catering to Locals

By SUSAN WARREN, THE WALL STREET JOURNAL, December 1, 2004; Page B1

In its sprint to become the nation's biggest grocer, Wal-Mart Stores Inc. has built hundreds of "supercenters" across the country and forced others to dance to its tune.

But in Texas, a private family grocer is teaching Wal-Mart a thing or two about the food business. Charles E. Butt and his HEB supermarkets have found a formula for not only surviving, but thriving in the same markets as Wal-Mart by playing off a simple creed: "We're the local guy," Mr. Butt says.

From Texas-shaped tortilla chips to a special rubbing alcohol for keeping Texans cool in the sizzling summers, HEB Grocery Co. has made catering to local tastes an obsession that has paid off with growing market share even as Wal-Mart vacuums up grocery customers with its low prices. HEB's 304 stores and $11 billion in annual sales are dwarfed by Wal-Mart, which has built more than 1,600 grocery-enhanced supercenters nationwide since 1988. But while HEB is relatively unknown among U.S. consumers outside of Texas, it's providing a blueprint for competing successfully against Wal-Mart that's being closely watched by the grocery industry. Even as Wal-Mart has spread throughout the state, with 213 supercenters, HEB has held on to market share above 60% in key cities, including Austin and San Antonio.

Now, both retailers have set their sights on Houston, the nation's fourth-largest city and one of its toughest grocery markets because of an eclectic immigrant population and cutthroat competition. Since 2000, HEB and Wal-Mart have opened stores and grabbed market share from local competitors. Houston is the greatest test yet of HEB's strategy of thriving in Wal-Mart's shadow by paying attention to local tastes.

HEB supermarkets in Texas sell tortilla chips in the shape of the Lone Star state.

Since the 1970s, when he took over leadership of the chain founded by his grandmother, the 66-year-old Mr. Butt has preached a culture of "restless dissatisfaction" at HEB. Even before Wal-Mart arrived on the grocery scene in the 1980s, Mr. Butt worried that the business was growing stale, and pushed his employees to take more risks. In 1994, HEB opened its first Central Market, the chain's answer to research showing grocery shopping had become a drudgery for most consumers. The sprawling gourmet store, with a gargantuan produce department and olive bar featuring more than 30 varieties, now rates as a Texas tourist attraction.

Central Markets were just the flashiest part of a broader plan to raise quality across the whole chain. The gourmet stores are strictly high-end, while the chain's HEB supermarkets and HEB Plus combine low prices on staple items that compete with Wal-Mart and pricier products for customers looking for more selection.

Mr. Butt signed off on a plan to make fresh produce and high-quality meats the chain's hallmark. He spiced up the formula with cooking demonstrations at some stores, stationing chefs in kitchen booths in the middle of the store floor to whip up recipes and answer shoppers' questions. In-store tortilla makers churn out fresh, hot tortillas all day.

At the same time, Mr. Butt insisted that prices stay competitive with Wal-Mart's. At headquarters in San Antonio, Mr. Butt drives home the message that managers must learn to think like the customer, not just about the customer. In one exercise, HEB's president of food and drugs, Suzanne Wade, handed $20 to several employees and told them to feed a family of four for a week. "We found out why beans and rice and tortillas sell so well," she says.

To emphasize its Texas roots, HEB has specialized in developing its own branded products tailored to specific community needs and tastes. For instance, managers in the Rio Grande Valley discovered an annual summer spike in rubbing alcohol sales came from customers who couldn't afford air conditioning and used the alcohol on their skin to keep cool in the sweltering Texas heat. Since alcohol also dries out the skin, HEB worked with manufacturers to develop its own brand of rubbing alcohol with moisturizers, which now makes up a quarter of its rubbing alcohol sales. And while outdoor grilling is a Texas passion, not all Texans do it the same way. Along the southern border HEB stocks its stores with the large metal discs, called discos, that Mexican-Americans use to cook their brisket. Further north, it sells the gas grills and barbecuing gadgets that Anglos prefer.

HEB's size and long history in Texas gives it considerable market clout here, enabling it to deal aggressively with suppliers to keep prices low. Mr. Butt has streamlined operations with the latest software and equipment to lower labor costs, speed up processes and minimize waste. It also makes many products -- it has its own dairy, bakery and canning operations.

By paying closer attention to customers' habits, HEB has been able to maintain low prices on basic staples by charging more for specialized products, evening out profits. As a private company, HEB doesn't release financial data, and analysts estimate that the company generates a 1% to 2% profit margin on sales, on par with industry averages. Mr. Butt doesn't dispute that estimate, adding, "We're not phenomenally profitable." The goal isn't to maximize profits but to keep prices low enough so that HEB can keep gaining market share.

HEB is hoping to do exactly that in Houston over the next few years. The grocer began a major push into that city three years ago and has since built 26 stores. Company executives believed their know-your-customer skills would play well in diverse Houston, which has the eighth-largest Asian population in the nation.

But it hasn't been easy. For the first time in years, HEB found itself competing in a town where it was the new guy, not the local guy. Immediately, the city's large immigrant community complicated HEB's efforts to cater to local ethnic tastes, requiring store managers to distinguish between the eating habits of Japanese versus Vietnamese, or African-Americans versus African immigrants.

Baffled, HEB hired ethnic experts to advise it on each communities' eating habits. Mr. Butt sent Scott McClelland, president of HEB's Houston division, and Executive Vice President of Food Steve Harper, to Asia on an ethnic food-finding hunt. HEB began importing a football-sized, spiny Asian fruit called Durian after the executives noticed a long line forming for the peculiar fruit at a food market in Thailand.

HEB opened one store in southwest Houston that draws from a neighborhood mix of Asians, Latinos, African-Americans and Anglos. HEB wanted to create a store where each community would feel at home, but it's been a steep learning curve. The store put in live tanks of fish and shellfish to cater to Asian customers. But no one put a lid on the shellfish display overnight, and the next morning store employees found the live periwinkles -- an Asian delicacy -- had crawled out of their tanks. (They were still alive.)

Closer to downtown, HEB's Gulfgate store faces more competition for lower-income customers. There, Mr. McClelland has found that pricing produce by the piece, instead of by the pound, produces better sales from buyers who come in with just $20 in their hands.

So far, HEB has increased its market share in Houston to about 14% from 10% five years ago, even as Wal-Mart zoomed into the No. 2 slot with 24% this year, behind long-time market leader Kroger's 27%, according to data from TradeDimensions. HEB's goal: a 25% market share in five years. "Wal-Mart coming isn't the end of the world," Mr. McClelland says. "It forces you to be better."

7.Vermont's Country Stores Organize to Face Threats

November 28, 2004, By KATIE ZEZIMA, NY Times

BRIDGEWATER CORNERS, Vt. - With its ample selection of Australian wines and shelves filled with DVD's and garlic-flavored pita chips, the country store in this tiny south-central Vermont town might appear to have come a long way since it opened in 1839.

But its creaky wood-plank floor, its wall of 19th-century mailboxes cater-cornered to a jar of Marshmallow Fluff and the proudly displayed town hunting ledger suggest that it has not really changed much.

Independent country stores like this one, the Bridgewater Corners Country Store, where customers are urged to sit outside at the wooden tables with a cup of coffee from a bottomless urn and where regulars run tabs, have long been a Vermont way of life. Now, threatened by the minimarts and large grocery chains that have driven some of them out of business in recent years, they have been banding together to help protect themselves.

Of the 100 independent country stores in the state, 55 have become members of the Vermont Alliance of Independent Country Stores. The organization, founded about two years ago, serves primarily as a support network, a sounding board and a marketing tool for owners. It promotes both the vitality and the history of the stores, limiting membership to those built before 1927, when the Winooski River flooded, decimating the state and killing 88 people.

"It's strength in numbers," said Charlie Wilson, owner of the Taftsville Country Store, which opened in 1840.

The alliance, started with state grant money and sustained by annual dues of $50, holds meetings every few months and is supported by the Vermont Grocers Association, a lobbying group. It is urging its members to market themselves with a detailed Web page on the alliance's site, www.vaics.org, and is working toward selling its own brand of products like salsa and jams.

"They represent, both in terms of the present and past, Vermont's communities," Dennis Bathory-Kitsz, executive director of the alliance, said of the stores. "They contain things that people want to buy, and they are a place that people want to go talk and meet friends. They are just a real example of those traditions in Vermont that survive not because they're cute but because they're necessary."

But the key to surviving in the market, members of the group say, is being able to adapt to changing times and falling prices with new products and amenities while retaining old-fashioned charm and friendly service.

"Country stores are struggling," Mr. Bathory-Kitsz said. "They've had three hits over the course of the 20th century. The first was the supermarket, the second the convenience store and third the big box store. Each took away part of the day-to-day operation that kept that store alive. Now they've had to substitute items and come up with ways to keep up. These changes have required a lot of imagination. Now there's A.T.M.'s in a lot of stores."

Mr. Wilson's red brick store, where his two dogs, Emily and Annie, greet customers, is a hodgepodge of tourist knickknacks, maple sugar candy, goat cheeses and basic sundries. The post office serving his town's 283 residents is in the back, past the ice cream freezer and beyond the substantial high-end wine collection. On a recent late afternoon, one man came into the post office and grabbed a soda, waving to Mr. Wilson, who put it on his tab.

"What we've become is a convenience store," Mr. Wilson said. "I carry all this stuff out of convenience for people. If someone runs out of flour or sugar or milk, they can come pick it up here."

Not that he is entirely happy about it. "I can't keep the store open and pay the light bills just to sell one box of sugar," he said.

Bob Hammond, owner of the store here in Bridgewater Corners, said: "It's hard to run a place like this. It's not always easy to stay competitive, to stay afloat."

Still, Mr. Wilson said that with the creation of the alliance, owners were now able to help one another in ways that were earlier unheard of, as when one owner lost his milk contract because his store was too small and another member of the group put him in touch with a distributor who was willing to deliver only a few gallons at a time. That, members say, would never have happened before the alliance, whose stores are sprinkled throughout the state.

"To be alone is one thing; to be among 50 or 60 people you know is another," Mr. Bathory-Kitsz said.

To customers like Sandy Sawyer, who shopped at the Bridgewater Corners store with her 8-year-old daughter the other day, convenience trumped all. The store is right around the corner from her house, and she needed to pick up some things for dinner.

But Pete Oldenburg, who stopped in on a work break for a cup of coffee, enjoyed the personal touch.

"You come in a little country store and you know all the people," Mr. Oldenburg said. "You try to keep the money local. It's not the fast-paced in and out of a big chain."

http://www.nytimes.com/2004/11/28/national/28vermont.html?ex=1102862717&ei=1&en=a63b7c526d2a17cb

8. Corn Growers Welcome Nomination of Governor Johanns for Agriculture Secretary
ACGA Calls Upon New Leadership to Help Change Course in U.S. Agriculture Policy

Contact:
Larry Mitchell (202) 835-0330
Keith Dittrich (402) 385-7786
http://www.acga.org

WASHINGTON, Dec. 2, 2004 ≠ Keith Dittrich, Chairman of the Board of the American Corn Growers Association (ACGA) and a corn farmer from Tilden, Neb., congratulated Nebraska Governor Mike Johanns for his nomination by President Bush to the post of United States Secretary of Agriculture.

"ACGA looks forward to continuing the working relationship with Governor Johanns in his new position as Secretary of Agriculture," said Dittrich. "We hope that with the onset of a new term for the Bush administration, and given that the farm bill debate is coming soon, we will all work to rethink current agriculture policy."

Dittrich added, "We offer our assistance to the incoming Secretary to improve agriculture and trade policy so that it reflects the realities of the business of farming and therefore better serves those involved in production agriculture."

"With a new farm bill just over the horizon, maybe as early as 2005, we urge the new secretary and his staff to closely study the groundbreaking research report Rethinking U.S. Agriculture Policy: Changing Course to Secure Farmer Livelihoods Worldwide, by the Agriculture Policy Analysis Center (APAC)," added Dittrich. "This report goes comprehensively to the heart of the ever more contentious trade issues of farm subsidies in developed countries, low world commodity prices, and global poverty."

"We highly recommend the new Secretary to thoughtfully review this research. It concludes that even if the difficult task of negotiating the elimination of global farm subsidies is completed, family-based agriculture will continue to spiral downward as a result of continued low commodity prices," concluded Dittrich.

APACís analysis includes a blueprint for improving U.S. farm policy which suggests price supports as a replacement for the current and expensive policy of direct government subsidies, a farmer-owned food security reserve, and acreage diversion to energy producing crops, short-term conservation uses and longer-term acreage reserves.

For more information about the study, please go to http://agpolicy.org/blueprint.html , or go to http://www.acga.org