Another side of stupid

A proposed beef plant in Aberdeen is being vigorously opposed. Its promoters, including the city and the county, have a couple of law suits filed against them on the basis that the plant will generate noise, emit odors, and reduce the value of properties a mile away. However, in public hearings, discussion boards, and letters-to-the-editor, the main complaint is the kind of people that the plant might attract as employees. You know, Mexicans. And the assumption is that many of them will be "illegal." But here is a typical response from the local newspaper's discussion board:

You don't leave (sic) in Aberdeen, so don't tell the people here to "leave it alone". You could be safe where you live. We Aberdonians are about to know what crime is. My kids do not need to be introduced the trash that will brought to town and in our schools!!!

In recent years, Aberdeen has had number of racist incidents, which have been dismissed by some "leaders" as the customary reaction to people of color and different cultures in the U.S. The level of thought in the above quotation reveals the basic source of the problem. However, more than racism besets the mentality of the community. In the Sunday paper, a corporation which is funded by the county and the city published a half-page ad in favor of the beef plant.

Ostensibly, the ad seems like a straightforward expression of support for the beef plant. But if you take a close look, the second item under what a beef finishing and processing plant will mean is:

Vertical integration of beef industry, enjoying higher margins for South Dakotans.

The writers of that ad obviously do not known what "vertical integration" has meant and means now for agriculture. In agriculture the term integration refers to the absorption of farms into corporate structures. It takes two forms, in the jargon of economics: vertical integration and horizontal integration.

The online Britannica defines vertical integration as follows:

Form of business organization in which all stages of production of a good, from the acquisition of raw materials to the retailing of the final product, are controlled by one company. A current example is the oil industry, in which a single firm commonly owns the oil wells, refines the oil, and sells gasoline at roadside stations. In horizontal integration, by contrast, a company attempts to control a single stage of production or a single industry completely, which lets it take advantage of economies of scale but results in reduced competition.

The advertisement supporting the beef plant touts vertical integration as a good thing. The statement quoted above is clearly the product of total ignorance and verbal ineptitude. The participial phrase "enjoying higher margins for South Dakotans" does not indicate who or what is enjoying "higher margins," or what margins are higher. It is a piece of grammatical expression born in ignorance and compounded by a stupid obfuscation.

Or maybe not. It may portend the future of any beef plant, if it gets off the ground. The beef industry has undergone such consolidation that four beef packers (Tyson, ConAgra, Cargill, Farmland) control 81 percent of the industry, as of 2001. If the Northern Beef Packers is successful, or if a major competitor just wants it out of business, the outfit will become a prime candidate for acquisition. And then it may be drastically changed or closed.

We have seen this kind of consolidation in South Dakota before. As of 2001, four firms controlled 59 percent of the pork packing industry in the U.S.: Smithfield, Tyson, ConAgra, Cargill. Until August 8, 1997, American Foods owned the pork packing plant in Huron. On that day, it completed the sale of the plant to Smithfield. The following day, Smithfield closed the plant, putting 850 employees out of work. Then, it set about to dismantle the plant to insure that no other company would ever use it for pork processing again.

Smithfield is a vertically integrated corporation. It owns facilities that farrow hogs, feed them, and then process them. (Anyone who wants to get some insight into the purpose and goals of vertical integration can review testimony presented at a U.S. Senate hearing on Smithfield's consolidation efforts.) The upshot of the Huron closing is that it eliminated a good portion of the market for regional hog farmers. It meant either high shipping costs in selling hogs or going out of business.

Farmers in North and South Dakota are looking forward to Northern Beef Packers. They will have a convenient market for their cattle and will realize some additional profits in terms of much lower shipping costs than they now pay. In fact, some cattle producers in the region are upgrading and expanding their feeding facilities in anticipation of the plant.

But then, before the concrete foundations are even poured, you have some outfit which purports to be involved in economic development advertising the advantages of vertical integration. The authors of the ad apparently have no idea of what they are talking about, but that makes the outlook for any true economic development even more bleak.

The Aberdeen Development Corporation is a strange entity. It says its mission is to "maintain and support primary job creation" in the city and county. It gets funding from both units of government. But just try to find an annual financial statement or report of activities by the Corporation.

A former colleague in the field of economics was infuriated by the corporation. His major complaint was that the organization insinuated itself into all sorts of development schemes, but never knew what it was talking about. My colleague often assailed me as a professor of journalism about the fact that the corporation put out statements to the press of its accomplishments but there was never any hard data about what it did, how many jobs it had created, or how many contacts it made with prospective employers and what the outcomes were. He asked me if I could come up with an annual report from the corporation or any line items in the city and county budgets detailing the contributions to this non-profit corporation. Up to this time, I have not been able to do so.

When an alleged economic development outfit promotes "vertical integration" as an outlook for a new company trying to get started, the community has some real problems. For a half century, agricultural analysts and reporters have seen integration as the force that is turning family farms over to corporations and making farmers "serfs on their own land."

For farmers and potential employees, Northern Beef Packers is a new opportunity for the community by adding a competitive element to the free market. But if it is seen by an outfit that presumes to speak for economic development as a candidate for "integration," we may well be setting up Aberdeen for a Huron experience.

We truly wonder if the originators and proprietors of Northern Beef Packers want a future of vertical integration to be part of their message.