Greg Page has a global view of agriculture. And well he should. He's president and chief operating officer of Cargill Inc., international marketer, processor and distributor of agricultural, food, financial and industrial products and services.
And he knows a bit about beef. Formerly as a corporate vice president, he was in charge of Cargill's red meat business, the largest of which is Excel Corp. Excel operates six packing plants in the U.S., one in Canada and two smaller plants in Australia.
Page has combined his international experience with lessons learned while with Excel to become adamant that increased global wealth is tied directly to the success of the U.S. beef sector.
BEEF: You're a big believer in being engaged in the global food business. What do the fortunes and misfortunes of other countries have to do with the well-being of American cattle ranchers and cattle feeders?
Page: Our growth potential clearly lies beyond our shores. It doesn't take much change in income to make a difference in people's demand for quality protein. Our research shows that people will spend one-third of any increase in their incomes on a more varied high-protein diet.
I lived in Asia in the '80s and watched Indonesia go from a country that consumed on average only one-third of a chicken/person/year to a country that consumed almost two chickens/year. That happened because their income increased during that period.
It's incredible how increased income goes toward buying more protein. We're all dependent on growing global wealth.
Three billion people in the world live on incomes below $1,000/year. They consume almost no meat, milk or eggs. If just one-third of those people increased their incomes by 25¢/hour, they would consume enough meat, milk and eggs to require the entire U.S. grain crop.
BEEF: We've seen some amazing changes in the international trade scene in the past 15-20 years. Where is this transformation taking us, and how are U.S. beef producers going to compete?
Page: Trade is the great energizer in increasing the wealth of the world. But when we have protectionism, we lose in two ways. First, we lose access to markets. More importantly, diminished global wealth takes away people's ability to enjoy our products.
We've seen recently how the import tariffs placed on steel banned Russian steel imports into the U.S. and resulted in the Russians embargoing our chicken exports. That hurt farmers and ranchers in this country. But beyond that, our behavior showing that we're less-than-honorable free traders has encouraged other countries like China to act just as dishonorably.
The U.S. has a decision to make — to fight to optimize the enormous comparative advantages in productivity we enjoyed all through the'80s and '90s or shrink back and become a nation that simply converts food into alcohol and produces beef only for the people who live inside our borders.
High tariffs and high-priced foods hurt us all. We have to raise our voices against those things.
BEEF: Closer to home, we're still debating laws that would control how companies like yours conduct business. As this shakes out, how will this impact the way you do business?
Page: We own a very small percentage of the livestock we process. But we quite energetically oppose the tenets of laws designed to ban packer ownership. I find it hard to believe that the framers of the Constitution sat on a steamy day in Philadelphia and argued about who had the right to own a pig.
The cost of the mandatory country-of-origin labeling bill is not zero. We can argue in the end who is going to pay it — whether it's producers or packers or retailers — but there's a cost to the beef industry of about $460 million per year. That's a cost the chicken industry will not have to pay.
Beyond the question of who is going to determine the citizenship of these cattle, the real issue is comparative advantage over other protein sources.
Someone once wrote: “Anger without enthusiasm is depression.” People in this industry are upset with things going on around them. In many cases, they have a right to be. The challenge for all of us is to turn that anger into enthusiasm and make sure our responses are thoughtful and we don't harvest unintended consequences of being too hasty.
BEEF: You're an outspoken critic of recent ethanol language in the new federal energy legislation. Why should ranchers and feeders be so concerned about ethanol?
Page: It will take 1.2 billion bu. of corn to produce the ethanol that's mandated by the new energy bill. That is three-fourths of the total corn that will be exported from the U.S. this year. We as cattle producers will be competing with the government to buy that grain — a government that has a 58¢/gal. or $1.35/bu. advantage simply by its control of the tax laws.
Our estimate is that the ethanol legislation will cost every family in the U.S. about $90/year — $90 that might otherwise be spent at a steakhouse or at the meatcase. We lose two ways — we compete with the government for our corn and we lose consumers' dollars on the demand side.
I have a difficult time understanding the lack of protest that's come out of the livestock industry now that they have to compete with the federal government to obtain the feedstuffs they need to produce their livestock.
BEEF: There's been a great deal of discussion lately over whether ranchers and feeders are “beef” producers or “cattle” producers. As a meatpacker and processor, how does Cargill address the discussion?
Page: I'll be a little harsh here and take that issue a step further and say that there is no demand for beef, but there is a demand for cuts of beef. The last year has taught us this.
How many ranchers that you know have thought much about tongues, intestines and chuck short ribs lately? Not many. But since the discovery of BSE (bovine spongiform encephalopathy) in Japan last year, $20/head has been taken out of the value of a steer because of lost markets for those cuts.
We calculated the damage done at about $600 million dollars total. If you take the velocity of money at about six-fold, that's $3.6 billion sucked out of the communities where we live, simply because of tongues, intestines and short ribs.
The recognition of demand for cuts and not demand for beef is far better than it was just a few years ago. When we can all recognize in our marketing systems that we are selling cuts and not just beef, we will all enjoy better times.
BEEF: What are some things Cargill is doing to help increase demand for beef and help the industry get through tough times?
Page: One is marketing — everything we can do to get people into Outback or Applebee's or anywhere they can use their money to buy a product they obviously prefer. Ten years ago, Cargill spent $500,000 marketing beef. This year, we'll spend $15 million on beef in support of our private brands and in co-support of brands we have in conjunction with Kroger's and other retailers. And we're spending a lot of money in Japan in an effort to turn that demand situation around.
Domestic beef demand is still strong, but when you have a government policy that takes $90 out of our pockets for ethanol, you know something has to be done to get that money back into buying beef.
The other way we can help is in food safety. Every time there's a food safety incident, it diminishes us all. Food safety is not something where you can say the hole is in your side of the boat. The consumer has one image of all of us.
Collectively, we are making progress. There are some really interesting technologies coming out, including automatic detection systems and instant testing. We're finally getting some traction with irradiation, and we need to stay the course with research and development on irradiation. It will come.
BEEF: What's the major advantage we have in this country when it comes to producing beef. Is there a transformation underway with regard to comparative advantage?
Page: To our disadvantage, where we go and where we can succeed has a great deal to do with regulations. There has been some movement of livestock production to Canada, Mexico and Brazil. Some of that has been as a result of regulatory restraints people have felt in the U.S. Labor cost is another important factor in determining where this transformation will take place.
The fact is that we are still sitting in the midst of the greatest food-producing engine on earth. We can grow grain where it's most economically efficient, bring feeder cattle out of markets where they are most effectively raised, and finish cattle where it's climatically most beneficial.
We can do each of these things in the best place and move commodities between regions at a fraction of the cost of virtually any other country. The U.S. has the most incredible transportation system of any country in the world. It's something we often overlook, but is an amazing strength of American agriculture.
During this transformation, we're going to continue to see consolidation in all links in the food chain. But in doing so, we're going to continue to see more information shared between segments in the food chain.
We're all going to be more dependent on each other in the future. In turn, we will be dependent on the growth in global income. But if we can't make the world wealthier, it's hard to make a case for a prosperous American agriculture.
type of company: private, family owned
year established: 1865
corporate headquarters: Minneapolis, MN
vision: to raise the standard of living around the world by delivering increased value to producers and consumers
number of employees: 97,000 in 59 countries
net worth in 2001: $7.52 billion
net earnings in 2001: $358 million
name: Greg Page
birthplace: Bottineau, ND
current job: president and COO of Cargill
education: University of North Dakota-Grand Forks, bachelor's degree in economics
career: 28 years at Cargill serving in various worldwide posts, including corporate vice president in charge of Excel Corp. and other red meat businesses
Cargill's Agri-Business Ascent
1865 - William Wallace Cargill becomes proprietor of a grain flat house in Conover, IA. Four years later, Cargill moves to Albert Lea, MN, where he builds his second flat house.
1890 - Cargill Elevator Co., now of Minneapolis, owns 71 grain elevators, 28 coal sheds and two flour mills.
1909 - John H. MacMillan Sr. becomes president of Cargill and its subsidiaries.
1930 - The expansion continues with offices opening in Canada, Holland and Argentina.
1951 - Cargill's Feed Division (Nutrena Mills, Inc.) merges with Royal Feed & Milling Co.
1966-69 - Cargill enters the broiler-chicken industry and later moves into corn wet milling. Cargill-Korea and the Cargill-Taiwan Corp. are formed.
1974 - Cargill purchases Caprock Industries and enters into cattle feeding. The poultry division expands, and Cargill enters into steel making.
1977 - Whitney MacMillan is elected chairman. Cargill Citrus imports the first Brazilian frozen concentrated orange juice into the U.S.
1979 - Cargill acquires MBPXL Corp. and enters into beef processing. The name is later changed to Excel Corp.
1980-81 - Cargill becomes a leading international coffee, cotton, rubber, wool and fiber trader with locations in Kenya, Pakistan, Nigeria, Tanzania, Singapore, Malaysia, Hong Kong, Peru, France and West Germany.
1987-89 - Cargill acquires a leading international cocoa processor. Excel enters into pork processing by acquiring plants from Oscar Mayer Foods and Hormel. Cargill begins crushing cottonseed in China and builds a $500-million nitrogen fertilizer plant in Saskatchewan.
1995 - Cargill sells its broiler operations to Tyson Foods and acquires Tyson's pork producing facility in Marshall, MO. MacMillan retires after more than 44 years at Cargill. Ernest S. Micek becomes chief executive officer.
1997 - Excel installs steam pasteurization in its seven beef plants. Cargill becomes one of the largest salt production companies in the world, and it forms a new energy trading and marketing company.
1998 - Warren R. Staley is elected president and chief operating officer. Cargill acquires Continental Grain Co.'s worldwide commodity marketing business and acquires Agribrands for $580 million.
2000 - Gregory Page, 48, rises to become Cargill's president and COO while Staley becomes chairman of the board and CEO.
The World, According To Page
A quick tour around the world with Greg Page, president and COO of Cargill Inc.
European Union (EU) — “We have no participation in the beef industry in the EU. I don't see them as a threat to the American producer as global demand for beef grows. Even though they say they're a united community, it's our experience they're still very fragmented, especially in food processing.”
Brazil — “We had packing plants in Brazil for years, but their value-added tax system forced us to leave. It's a country with great potential in beef and pork production. Brazilian packing plants are first-rate, and some of their cooking methods are among the best in the world.”
Argentina — “We do not participate in the Argentine beef business. The value-added tax in Argentina causes the same problem as in Brazil.”
Australia — “We operate two packing plants in Australia. Labor relations have improved from one of despair to one of great strength in the past few years. They are growing their herds nationally — probably to about 32 million head this year from 25 million not too long ago.
“More Australians are raising grain-fed beef. They have a chance to take away our markets in Japan as a result of their current cost-competitiveness. It shows how important foreign exchange and the relative value of a currency is to an industry.”
China — “In every aspect but beef, their livestock industries are very robust. We have a large animal feed business in China where they have been experiencing double-digit growth in demand for meat.”
Canada — “It's a country with great cattle and forward-thinking producers. It's seasonally difficult to feed cattle because of the climate and provides challenges in running our packing plant. The behavior and attitude of food safety officials to continually improve the safety of beef in Canada is very proactive and cooperative and stands in stark contrast to the regulatory climate we have in the U.S.”
Mexico — “The demand for beef in Mexico has been a godsend the last year. There is nothing but upside potential in Mexico for beef.”