August 2012 Archive

Legal Advice for the Urban Farmer: The Lease

August 30, 2012

I was stoked to hear today that one of my favorite towns, Ft. Collins, Colorado, will begin changing its zoning laws to accommodate urban farming. This news is just one of several urban farming items to come up on my radar this week. Entrepreneur recently profiled two very successful urban mushroom growers who sell both mushrooms and grow-it-yourself kits to Whole Foods. They  run the operation from a 10,000 square foot warehouse in Oakland. The phenomenon of urban farming also has its own book now.

Here’s a free tip for urban farmers, especially the ones that farms sustainably. Since the vast majority of you will be growing food on land leased from a municipality, you will find that your new urban landlord has very little experience with the business of agriculture. They will offer you a highly marginalized piece of land, which probably has buried tires, glass, and chunks of concrete embedded in it. They will expect you to magically, profitably  turn this land into a high-yield, biodynamic community resource and offer you a one-year lease to make your money back and your dreams come true.

If you are an urban farmer, a one-year lease is for suckers. By all means, discard the trash, enrich and rehabilitate the soil. Grow something delicious and make friends with the neighbors. But always be cognizant that your rehabilitative efforts constitute a transfer of wealth from your time and labor into the earth of your municipal landlord. Make this value known during the negotiation process. Insist that your business plan depends on a multi-year lease which will allow you to recoup the rehabilitative expenses you have made in year one. If you are an exceptionally good negotiator, you will be able to persuade the city that the improved soil quality that you leave behind at the conclusion of your term is equivalent to the same type of wealth transfer that would occur if you were to leave behind any other piece of infrastructure, like irrigation. Argue that this transfer of wealth justifies a handsome rent rebate.

Grab value where ever you can, and welcome to the agriculture industry.

 

Drought Hits Organic Farmers Hardest: Gaps in the Crop Insurance Program

August 28, 2012

Though temperatures may be cooling, a lack of rain has allowed the nation’s worst drought in decades to worsen this week. The U.S. Drought Monitor showed that as of Tuesday, just over two-thirds of Iowa, the nation’s biggest corn producer, was in extreme or exceptional drought — the Monitor’s worst two classifications. News agencies report that nearly all of Nebraska, Kansas, Missouri and Illinois are in the same categories.

Plains farmers have begun harvesting scant amounts of surviving corn, though some growers cut their fields weeks ago in acknowledgement of their losses. Many ranchers were forced to sell livestock after having no grass for grazing or money to buy feed, the cost of which has also soared due to the drought.

Initially forecasting the nation’s biggest harvest since 1937 in the spring, the USDA now estimates the summer will bring the lowest corn and soybean production levels since 2006.
Throughout this drought, however, organic farmers struggle the worst in the face of unfair insurance policies and disaster-relief programs.

Because the USDA perceives less chemically-dependent organic farming as a higher risk method than conventional farming, organic farmers are charged higher insurance premiums (about 5%) than conventional farmers. Theoretically, this premium is offset by the higher profit margins an organic farmer should receive compared to his conventional counterpart; currently, a bushel of organic corn goes for $15.89, while conventional corn goes for about $8.50.

However, in the face of a drought or other natural disasters, crop-insurance policies for organic crops do not compensate organic farmers at the same rate as “conventional” farmers. Scott Marlow, Director of the Farm Sustainability Program for Rural Advancement Foundation International – USA illustrates this disparate treatment:

“For an organic farmer who receives a price for organic product that is double the conventional price, 75% crop insurance coverage based on the conventional price actually covers 37% of the farmer’s income. Organic farmers in essence pay more for less coverage.”

In 1995, the Crop Loss Disaster Assistance Program (CLDAP) established separate payment rate and yields for different “end uses” of the same crop, with rates meant to reflect differences in price that the produce would have commanded on the open market had there been no disaster. However, a series of legal battles have since confirmed that there is no duty on the Secretary of the USDA to establish distinct rates for organic crops.

Organic producers should have access to insurance programs that meet their needs without putting them at a competitive disadvantage to conventional producers. It is time we either abolish the 5% insurance premium or begin to provide organic farmers with disaster assistance that will accurately reflect organic market prices.

— By Gabriella Agostinelli

Cantaloups, Food Safety Law, and Risk Management on the Farm

August 24, 2012

Guest writer Gabriella Agostinelli is back again, this time with some shrewd – and potentially controversial – advice for farmers who plant cantaloup. Every farmer is an expert risk-manager, and here she assesses the particular legal risks of growing this seemingly incident-prone crop:

One year after its Listeria-contaminated cantaloupes killed 36 people and sickened 146 others, Colorado’s Jensen Farms reported earlier this summer that it filed for Chapter 11 bankruptcy. Facing multiple wrongful death and personal injury lawsuits, the farm’s decision to file bankruptcy has freed up millions of dollars in insurance money and other funds to pay victims. Bill Marler, food-safety attorney for Jensen’s victims, says $5 million is currently being put into a trust for victims, though he estimates the amount may swell to $20 million in the course of litigation.

The company may also face criminal charges for its food-safety indiscretions.  Marler confirmed to the Denver Post that the farm is under investigation by the Colorado U.S. Attorney’s Office, most likely for violations of § 303 of the Food, Drug and Cosmetic Act prohibiting food “adulteration.” According to 21 U.S.C. § 333(a)(1), the Act can carry prison sentences of one year, fines of $1,000, or both amid a showing that harmful food has been introduced into interstate commerce.

Once again, cantaloups are at the center of a public health crisis, stemming from sloppy agricultural practices and less-than impressive third-party agricultural auditing. USA Today reports that the CDC confirmed another deadly outbreak linked to illness-prone cantaloupes this week. At least two have died and over 150 have fallen ill after eating salmonella-strained fruit from an Indiana farm.

As a risk management measure, it may be time for individual farmers to begin to consider not growing cantaloup. Growing any fruit on the ground exposes it to dirt and germs from manure running off livestock fields. Further, unlike the smooth surfaces of watermelon or honeydew, the corrugated surface of the cantaloupe’s skin makes cleaning difficult, as bacteria are easily left behind. Washing cantaloupes together in a large tub can also lead to cross-contamination. Worse, experts contend it is “almost impossible” for consumers to adequately wash cantaloupes at home. Risks are elevated every time a knife presses through a contaminated exterior and transfers bacteria to the fruit within. Each of these unavoidable biological factors bears directly on the legal risks farmers should consider when growing this fruit.

Considering the aggregate risks associated with this type of melon, I’d most likely advise a client to abstain from growing the crop. Almost no farm of any size could recover from a contamination outbreak of the size that we have seen associated with this crop. The magnitude of these outbreaks also appears to be busting through the cap of the product liability policies of the growers in cantaloup cases. If a farmer wanted to go forward regardless of the risk, at the very least, it would be wise to encourage cantaloup farmers to review their policies relative to their scale of production.

Food System Elitism Makes Us Look Bad

August 23, 2012

I am loathe to be impolite at the expense of anyone in this space, but c’mon, dude. Vilifying commodity producers, in an article ostensibly titled “Celebrate the Farmer”, just makes Mark Bittman pompous.

I find this particularly bombastic:

“In short, we need more real farmers, not businessmen riding on half-million-dollar combines.”

Is it not “real” farming unless my food is delivered to my coastal Maine retreat in a burlap sack on a vintage Chevy? How about via donkey? The glorification of pastoralism in alternative agriculture is good marketing, but no one should advocate for it as a business practice.

All successful farmers are good businessmen, and they acknowledge a worthwhile capital investment when they see one. According to the Organic Trade Association, last year organic farmers did $31 billion in business riding on those same half-million dollar combines. They did it in a humane and environmentally conscientious manner for sure, but they were not at all shy about learning how to graft the big-scale of their commodity analogues onto an alternative agricultural practice. Now that they have made the investment in scale, matriculating into “fake” farmers in Bittman’s view, organic production is no longer a niche. It is an established component of the food industry. Using the half-million dollar tractor is what helped to make organic farmers the established economic force they are today.

Other alternative producers should be just as driven by efficiency and investment if they ever want to be more than a fleeting, elitist pursuit. Alternative producers may make better tomatoes, but they have way, way more to learn from commodity and large scale producers than they and Bittman will ever admit. Mocking capital investment and commercial success relegates alternative agriculture to a perpetual state of adolescent, elitist, pop-culture ephemera.

Commodities, by the way, don’t just feed us. They clothe us, too, in titanic amounts of cotton grown and gathered using more half-million dollar machines. Bittman always forgets about his shirt and bluejeans when railing against commodity production.

Food Law and Why Practice Area Is Destined to Grow

August 22, 2012

As I proudly relayed earlier today, some colleagues of mine are putting together a Continuing Legal Education Course at Pace University School of Law in October. That is a good sign that the practice area we happy few call “Food Law” is growing and gaining legitimacy. Via Baylen Linnekin of Keep Food Legal and Reason, we have some firm indication that if the public has its way, more food laws and regulations will be headed to a specialized law office near you. Apparently, the public loves regulation in the food industry. I say “public” as in “general public”, regardless of political affiliation.

In his latest piece for reason, Baylen conducts an interview with Jayson Lusk, agricultural economist at Oklahoma State University and recent author of a recent  study, The Political Ideology of Food. Respondents to Lusk’s survey were most in favor of additional government action related to food safety, but quality, public health, and agricultural policies such as subsidies were other predominant concerns. Lusk found that this was true even among groups ideologically predisposed to disfavor regulation, such as libertarians. Key quote from Baylen’s  interview:

…libertarians, in fact, prefers less regulation on farm policy issues and less regulation on what I call “food quality and quality” issues. It is only “food safety” issues where the libertarians prefer more regulation. When I look specifically at what most of them said they preferred, it tended to relate to a desire to have more mandatory labeling of foods according to origin of production and use of genetic modification, cloning, irradiation, or nanotechnology. I can only speculate about why such preferences were expressed among libertarians, but perhaps it relates to a belief that labels promote “truth in advertising” or provide information needed to avoid deception in trade among food sellers and buyers.

We have a contentious political culture – no doubt –  but I find it interesting that despite the divisions the one thing everyone can agree on is more food regulation. I applaud the efforts of groups like Keep Food Legal, which strives for a regulatory climate more favorable to entrepreneurs and smaller scale producers. But if this study is accurate, or if the public’s inclination is indicative of a future trend, we could see more laws and regulations in the food industry that will occupy us Food Lawyers.

Food Law Has A CLE

August 22, 2012

I’m as pleased as artisanal punch to announce that I will be a panelist on an upcoming CLE hosted by Pace University School of Law entitled “A Survey of Local Food Law”. I’ll be appearing alongside fellow food law professionals Cari Rincker and Judith LaBelle discussing raw milk, labeling regulations, food product liability, cottage food laws, environmental regulations, and direct farm marketing. Continuing Legal Education Courses are usually attorney-only, but this one is open to the public – we are designing the course to educate our legal peers, but also to inform the general public about a field of law that affects them every day in innumerable ways. So if you are an attorney looking for guidance on how to service a new breed of food entrepreneur, you should attend. If you are a concerned or conscientious eater, you too will learn about the laws that govern the production of the foods you eat.

The details you need to get yourself some education:

Location:  Pace Law School

78 North Broadway

White Plains, NY 10603

(914) 422-4205

Date/Time: October 29, 2012, 6:00 to 8:30pm

CLE Credits: 3.0 (50 min. states), 2.5 (60 min. states)

Price: Pace Law School Alumni- $100

Non-Alumni- $125

Government Lawyers – $50

General Public (non attorneys) – $15

Pace Law School Students – Free

Food Labeling: Do it Right The First Time

August 17, 2012

It is my pleasure to introduce fellow food law geek, Gabriella Agostinelli. Garbiella is a second year law student at SUNY Buffalo School of Law. She is originally from Rochester, NY, absolutely food obsessed, and she hopes to build a professional legal career celebrating food in all its forms. Her first contribution to the LLC contemplates the importance of accurate labeling for food products:

Just weeks after General Mills came under fire for allegedly “deceptive” marketing and labeling claims, similar controversy has now arisen for fellow food giant Hershey Co with its chocolate-syrup labeling. Months ago, the FDA issued a warning to the company that two of their products, Hershey’s Syrup+Calcium and its Syrup Sugar Free with Vitamin & Mineral Fortification, violated the Food Drug and Cosmetic Act. FDA claims that Hershey’s product labels bore nutrient content claims that did not meet the requirements to make the claims, in violation of 21 U.S.C. § 343(r)(1)(A). The products’ nutritional contents did not meet the guidelines warranting the use of a “plus” sign or the word “fortification.”

The FDA regulates a broad range of words food companies can use to market their products. Devices such as plus signs and words like “with” are referred to as “More” claims and their permissible use is described at 21 CFR 101.54(e). For example, producers can only use “more” claims when the food contains more than 10% of the recommended daily intake for the fortified nutrient. This is where Hershey’s dropped the ball.

To avoid further issues, Hershey’s recently changed the plus sign to “with” and has removed “fortification” from the other label.

If seasoned vets like General Mills and Hershey’s can mislabel, one can imagine the potential dangers small businesses could face when labeling their products. A corporate titan like Hershey’s can bounce back from a mistake like this and absorb the financial losses associated with recalling and rebranding. Smaller businesses have zero margin for error.

A good start it to check out the FDA’s Food Labeling Guide, which provides a summary of the required statements that must appear on food labels under federal laws and regulations. The FDA does not pre-approve labels for food products, so it has to be done right the first time around.

There is, however, no substitute for expertise. Food entrepreneurs have a compelling need to distinguish their products from their competitors. That can be done through better sourcing or different recipes, but the label is probably the most important interface they have with new customers. The label is the first chance they get to discuss the things that make them different. New food businesses, therefore, need to push the regulatory limits even more than established businesses, and labeling is a regulatory minefield. No marketing strategy for a food product can be complete without some level of labeling review by someone familiar with the mass of regulation that governs the words you can use on your product.

Creative Methods of Drought Relief

August 16, 2012

A modicum of good news for drought-beleaguered farmers. More government agencies are stepping up to provide relief. Frequent Food Law contributor Emilie Cajigas is here with details:

News of the worsening U.S. drought continues to plague the headlines. More than half of all U.S. counties have been designated disaster zones, with some areas reaching the D3 and D4 drought intensity levels. In an effort to assist U.S. Farmers during this time of need, the USDA issued a press releaseon August 8th which announced the various steps the current administration is taking to assist farmers. Many of these steps exhibit some admirable regulatory deftness:

Within the last month, USDA has opened the Conservation Reserve Program to emergency haying and grazing, has lowered the borrower interest rate for emergency loans, and has worked with crop insurance companies to provide more flexibility to farmers. USDA has also announced the following:
  • Allowing producers to modify current EQIP contracts to allow for grazing, livestock watering, and other conservation activities to address drought conditions.
  • Authorizing haying and grazing of Wetlands Reserve Program (WRP) easement areas in drought-affected areas where haying and grazing is consistent with conservation of wildlife habitat and wetlands.
  • Lowering the reduction in the annual rental payment to producers on CRP acres used for emergency haying or grazing from 25 percent to 10 percent in 2012.
  • Simplifying the Secretarial disaster designation process and reduced the time it takes to designate counties affected by disasters by 40 percent.

Even the U.S. Small Business Association has stepped up to offer farmers the Economic Injury Disaster Loans (EIDL). “Those eligible for these loans are small businesses, small agricultural cooperatives, small businesses engaged in aquacutlure, and most private nonprofit organizations of all sizes that have suffered substantial economic injury resulting from a physical disaster or an agricultural production disaster (as designated by the Secretary of Agriculture).”  In order to receive an EIDL loan, you must fill out an application, which can be done online. After you file, SBA inspector will be sent to estimate the damage incurred in order to gauge the amount of assistance required by individual need.

Gestation Crates, Production Contracts, and Change in the Food System

August 9, 2012

In the food business, corporate identity is beginning to merge with production standards, and contract law is the bridge that often binds the two together.

Via my lovely wife, Iowa Public Radio brings us more news of the phase-out of gestation crates within the hog industry. Sysco, the largest commercial food distributor in the world, has agreed to phase-out pork produced using gestation crates. Changing food culture has precipitated the new policy. Money quote from the president of the American Restaurant Association, David Maloni:

“Food seems to … need to have a story to it. And whether that’s non-stalled pork, whether that’s Angus beef, whether that’s organic vegetables, or free-range chicken,” Maloni says. “One thing that’s very interesting is that it helps a restaurant change [sic] differentiate themselves.”

It’s tough to get the industry to change its story because of the way most livestock is raised. The big meat producers, like Tyson, don’t really do the farming part of the business. They are “integrators”, companies which encompass the functions of production, marketing, logistics, and distribution under one roof. The livestock part is done under contract with independent growers. The integrator provides the genetics and the feed to small, family owned farms who raise the livestock in exchange for a set price. In order to be eligible for each contract, farmers must equip their facility to conform with the production standards of the integrator, and they make these investments on their own credit or at their own expense. The contracts now in place are binding agreements which need to either run their course or be voluntarily abandoned by farmers and their affiliated integrators.

Eliminating gestation crates will have two consequences in the contract production system. First, it will destroy the capital investment farmers have made in the equipment they needed to solicit the old contracts. Secondly, new production contracts will mandate the purchase of different equipment to accommodate the more humane methods of production. Hence the lag in implementation of the policy, and a transition cost between $1.87 billion and $3.24 billion as estimated by the University of Minnesota study. It’s not a cop-out to say that this switch will have real financial consequences for farmers. They march to the beat of the integrator.

Contracts have created systemic inelasticity in the production system that now prevent agricultural producers from telling the story that consumers want to hear. But as these changes pulse through the production system, contracts will be also be the means by which the more humane production standards are implemented.