Vilsack’s checkoff problem

Tom Vilsack is back in charge of U.S. agriculture, promising to address racial equity, climate change and farmworker safety. But his past failure to deal with a series of Obama-era scandals in an obscure corner of the USDA raises questions about his willingness to tackle another major issue in rural America—Big Ag’s power over farmers.

When Joe Biden nominated Tom Vilsack to run the Department of Agriculture late last year, the former Iowa governor had a somewhat paradoxical political liability. After eight years as Barack Obama’s agriculture secretary, Vilsack was easily the most qualified politician for the job — only one person in U.S. history has served longer as agriculture secretary. But that long tenure also meant that constituents who felt ignored could gather plenty of evidence to support their grievances.

In Vilsack’s case, a broad swath — minority and family farmers, animal-rights and environmental activists, farmworker advocates, and food-safety watchdogs — objected almost immediately to his return, claiming that he had neglected or undermined their issues the last time around. Vilsack’s strategy was to reach out to many of these critics, often personally in phone calls and Zoom meetings, and assure them that the USDA now would be radically different. 

One example: Black farmers have vigorously criticized the USDA’s handling of racial discrimination under his watch. It didn’t help that in 2010, he fired a Black official, Shirley Sherrod, based on video excerpts of a speech she’d given that was selectively edited and posted on a website run by conservative commentator Andrew Breitbart, making her sound biased. It became a full-fledged scandal, and Vilsack soon apologized. So in December, Vilsack videoconferenced with nearly a dozen different civil-rights activists and advocates for Black farmers, contacted National Black Farmers Association President John Boyd, and also spoke to Sherrod, who said she “holds no ill will.”

This strategy became so central to Vilsack’s return that he told the Senate at his confirmation hearing, “This is a fundamentally different time, and I am a different person, and it is a different department.”

But for at least one group, worried about consolidation and corporate control of agriculture, that pledge comes with a healthy dose of skepticism. Farm debt has soared to an all-time high, industry concentration is worsening, and the major agriculture companies continue to post record profits. Several prominent voices that had urged Obama’s USDA to do something about it — groups like R-CALF USA, America’s largest independent-ranchers trade association, and the family-farmer advocacy group Organization for Competitive Markets — told me they’ve heard from no one on Vilsack’s team.

There have been hints that the Biden administration takes the imbalance of power in agriculture seriously, and Vilsack did recently name a senior adviser on fair and competitive markets — effectively an antitrust czar. But this rhetoric of reform has an unsettling sense of déjà vu. After all, Obama vowed during the 2008 campaign to break corporate agriculture’s grip, but his administration ultimately caved under pressure from industry. In fact, giving a pass to Big Ag is considered a key failure of the entire Obama White House, not just the USDA.

To many in farm country, there is no better symbol of that failure — and Vilsack’s role in it — than a series of scandals that stretched from 2009 to 2017 inside a cluster of obscure federal programs known as the commodity checkoffs that farmers and critics say have been captured by corporate lobbyists. 

Part of a USDA agency called the Agricultural Marketing Service, they were first established by Congress back in the 1960s to promote U.S. farmers’ products — everything from beef, eggs, and milk to avocados and Christmas trees. Funds come from a mandatory farmer fee that varies by industry (close to 2 cents per gallon of milk, for instance, or $1 per head of cattle). Last year, those assessments dumped just shy of $1 billion into the checkoff programs. Each one has a board that determines how its money is spent.

Their purpose is to conduct generic promotion campaigns that help small and large producers equally. This took its most famous form in marketing jingles like “Beef, It’s What’s for Dinner,” “Pork, the Other White Meat,” “The Incredible, Edible Egg,” and “Got Milk?” Defenders say the programs keep dull commodities exciting and relevant for consumers. They pump money into R&D (thank them for the McRib and Taco Bell’s Quesalupa), develop new markets overseas, and fund beneficial nutrition research. The early-2010s “butter is back” trend was the work of well-placed studies backed by the dairy checkoff.

These efforts draw criticism from dietitians and food economists. But the money and influence they can buy enticed industry lobbyists to seize control of the checkoff boards, and began diverting funds to projects that primarily served corporate interests. Legally, these funds can’t be used for lobbying but they can be spent on programs that serve agribusiness. For instance, the dairy checkoff started handing fat grants to the NFL and PepsiCo, and an alliance of checkoff programs paid Oscar-winner James Moll to make a 2014 documentary defending industrial farming practices that infuriated farmers.

It’s possible the corruption would have sneaked by, as just a squabble over some niche USDA program, if not for the Obama-era scandals. Between 2009 and 2017, one scandal after another erupted in five of the biggest checkoff programs — beef, pork, dairy, egg, and soybean. Hundreds of thousands of misappropriated dollars were involved, and so were accusations of racketeering, illegal lobbying, congressional inquiries, multiple lawsuits, even threats of physical violence. 

The kicker came in 2017, at the end of the Obama presidency, when Vilsack whooshed through the revolving door to become CEO of the U.S. Dairy Export Council — making him the highest-paid employee at the country’s largest checkoff program. In his first year, milk exports to China and Japan jumped almost 50 percent and the nation’s top milk producer, Dairy Farmers of America, posted record earnings. Yet some 1,600 U.S. dairy farms went out of business as profits for farmers sunk to a negative $60 per cow.

In Shanghai in 2018, visitors taste ice cream at the booth of U.S. Dairy Export Council, which is funded by the dairy checkoff. Photo by Xinhua/Liu Dawei via Getty Images.

The story of these checkoff abuses is one reason some smaller producers remain skeptical that the Biden administration will actually address the industry’s power imbalance.

“If you look at where we were when Vilsack came into office and where we are today,” says Mike Eby, chairman of the National Dairy Producers Organization and executive director of the Organization for Competitive Markets, “there’s no doubt he has an agenda, and that agenda is to utilize the checkoff programs to further consolidate the industry.”

When asked if checkoff reform is going to be a priority for the new department, the USDA press office did not respond. Multiple requests for Vilsack to address criticism from farmers about checkoff abuses were ignored as well.

When Barack Obama ran for president, his trust-busting agriculture platform hooked a surprising number of farmers who otherwise didn’t care for his politics. Fred Stokes, a founder of the Organization for Competitive Markets, was one. He voted for Obama, and has regretted it ever since. “I convinced a bunch of broke Mississippi farmers to support him,” he recalls. “At first they said, ‘Stokes, I think you’re right. That guy really does get it.’” By 2008, industry profits and power were growing ever more concentrated in fewer corporate hands. The Congressional Research Service says that from 1986 to 2008, the share of animal slaughter nationwide controlled by the four largest processors increased from 55 to 79 percent for cattle, from 33 to 65 percent for pigs, and from 34 to 57 percent for poultry. Also by 2008, nearly a fifth of all U.S. dairy was being produced by two companies, Kraft and Dean Foods. 

Meanwhile, farmers were “funding their own demise,” as Stokes puts it, by continuing to surrender millions to checkoffs that benefitted these corporations.

This was the context for a nationwide listening tour for farmers that Attorney General Eric Holder and Vilsack launched in 2010 to help them understand “whether or not the system is fair.” More than 4,000 farmers showed up; Stokes personally attended workshops in four different states. Holder and his top antitrust cop Christine Varney, plus Vilsack and his antitrust enforcer Dudley Butler, heard stories about corporate price-fixing, intimidation and abuse of market power from farmers who risked retaliation for speaking out.

Jerad Herther with calves at the Rob-N-Cin farm in West Bend, Wisconsin, in 2010. At the time, the farm was struggling to recover from milk prices that were below the break-even level. Photo by Darren Hauck/Getty Images.

But this optimism quickly dissipated. Varney left the Justice Department for the private sector seven months after the tour concluded. Butler quit five months after Varney.

Producers told me that, in retrospect, this should have been an omen. 

The scandals began gathering steam that same year, 2010, when the Cattlemen’s Beef Board, which administers the beef checkoff, released an audit showing how the National Cattlemen’s Beef Association (NCBA), a trade group that lobbies for big meatpackers, had misspent at least $216,000 on executive golf outings, trips that CEO Forrest Roberts’ family took to New Zealand and Texas, and illegal lobbying activities.

Through contracts with the checkoff board, the NCBA receives as much as 80 percent of the $40 million collected annually from farmers by the beef checkoff program. And those funds account for the majority of the NCBA’s budget, helping fund executive salaries, like the $601,599 that CEO Kendal Frazier earned in 2019. It also supports the overhead necessary to lobby for policies that critics say largely benefit big meatpackers: requiring cattle to wear electronic ear tags, for instance; fighting efforts to reinstate mandatory country-of-origin labeling nationwide that would allow consumers to distinguish meat produced by U.S. ranchers from imported beef; and trying to convince Congress to exempt the checkoffs from Freedom of Information Act requests. 

After the 2010 beef board audit, dozens of industry groups urged Vilsack to conduct a more extensive probe. The USDA’s Office of Inspector General (OIG) launched one in 2011. For the next two years, the Organization for Competitive Markets and R-CALF say they regularly hounded the USDA for updates, and even shared tips about potential new abuses. Finally, in January 2014, the Inspector General produced a 17-page report that effectively absolved the NCBA of wrongdoing, describing the misspent money as, essentially, a mistake. Critics called the report “a colossal political sham.”

In theory, the OIG operates independently from the rest of the USDA. But emails surfaced in which top officials at the agency overseeing the checkoffs, the Agricultural Marketing Service, appeared to try to influence the OIG report. The Organization for Competitive Markets sued Vilsack and the USDA to see what documents auditors had originally reviewed. But lawyers for the USDA and NCBA, which asked to join the lawsuit as a defendant, have used motions to delay the case, which seven years later is still awaiting a ruling.

In the wake of the OIG report, checkoff critics again began clamoring for the USDA to take more forceful action. In June 2014, a group that included Stokes and a Cattlemen’s Beef Board member named Dave Wright met with Vilsack in Washington to discuss how the beef program had been seized by lobbyists. They believed if they distilled the message for the busy secretary, he’d empathize with their plight. Wright told me his parting words were: “Mr. Secretary, the beef checkoff is the most corrupt program I’ve ever seen in my life.” The crew left semi-hopeful, but the meeting brought no changes. “He didn’t say no,” Stokes recalled. “He just let us vent, then did nothing.”

Vilsack, though, was developing his own plan. Back in 2011, he had been persuaded by the industry to create the Beef Checkoff Enhancement Working Group, ostensibly to recommend ways to reform the checkoff. It seemed destined to fail, a cacophony of antagonistic voices shouting past one another — the NCBA and Big Dairy’s lobbyists at one end of the table, and groups representing independent producers, like the National Farmers Union and the U.S. Cattlemen’s Association, at the other. By 2014 the group had made zero headway. One member organization quit, declaring it “a waste of time and money.” 

Reportedly unhappy with the lack of progress, Vilack put forward a solution that November. In a statement he said, “Beef industry representatives agree this important program needs more resources,” and proposed using his executive authority to create a second, $1-a-head checkoff program. That may seem illogical, but at the time even the big meatpackers were complaining about the size of the checkoff’s budget. Vilsack never offered much in the way of an explanation. But while most changes to checkoff programs require amending the law, this end run, via executive order, would have increased the beef checkoff budget to as much as $80 million without any congressional action.

Vilsack’s proposal was poorly received. In fact, the secretary later acknowledged that it was “fairly obvious the industry was not interested in having a second checkoff.” His idea even troubled Congress, which took the extraordinary step of warning Vilsack to abandon it in the 2015 appropriations bill. Vilsack pinned the blame back on producers: “They have prevented me from doing the one thing I had the capacity to do. So now it’s really totally up to the industry.”

Critics hoping for reform felt ignored. Dudley Butler, who by then was back in Mississippi farming and practicing law, wrote a letter calling on Vilsack to resign. “Many producers, conservative and progressive, believed your promises and were hopeful for a new day at USDA. Some took brave stances based on your promises to their own peril,” he said. “Instead, they got more of the same — an agency controlled by the big food companies and the big meat packers … Your lack of leadership has ensured that independent cattle producers will continue to be systematically pushed toward the slaughterhouse of vertical integration.”

Hard times continued for dairy farmers during the Trump administration, when trade tariffs and rising costs made it hard to turn a profit. Bob Krocak, a fifth generation Minnesota farmer pictured here, was drowning in debt. He and his family closed their dairy business in May 2018, sold most of their cows, and decided to transition to organic crops and livestock. Photo by Ricky Carioti/The Washington Post via Getty Images.

A year later, Vilsack did try to resign. In late 2015, he marched to the Oval Office and told President Obama, “There are days when I have literally nothing to do.” Obama convinced Vilsack to stay, getting him to shift his energy to overseeing the government’s response to the mounting opioid crisis.

By then, though, scandals had boiled over inside the pork, egg and soybean checkoffs, as well as the beef program.

When Vilsack entered office in 2009, there was already a wild complaint filed by soybean growers against the United Soybean Board. It accused board members of a grab-bag of crimes, everything from embezzlement and sexual harassment to an alleged knife assault by Dan Duran, CEO of the U.S. Soybean Export Council, during an event. The Office of Inspector General investigated this too, and in 2010 revealed that the Export Council had also “paid approximately $320,000 in bonuses” to staff with checkoff funds.

At the same time, the National Pork Board allegedly was involved in a scheme to channel funds to the industry’s main lobbying group. In 2006, the National Pork Producers Council (NPPC) — the lobbying operation — sold the pork checkoff board licensing rights to the iconic “Pork, the Other White Meat” tagline, which, for a complicated set of reasons, the NPPC owned. The pork board agreed to pay $60 million, or $3 million a year for 20 years. Technically, farmers had already paid an ad agency to invent this slogan back in 1987, with their annual checkoff dues, and now they were paying again to buy it back. A group of angry hog farmers filed a lawsuit in 2012, alleging the board was funneling money to industry lobbyists, but lost on appeal in 2019. Although “the Other White Meat” was officially retired in 2011, the board continued to pay out the contract. Since then, it has used producer dollars to develop a new motto: “Real Pork.”

Then came 2015, when the American Egg Board behaved so inappropriately that Congress debated whether to intervene. An open-records expert at the Massachusetts Institute of Technology named Ryan Shapiro published emails showing the board had plotted to crush a popular eggless mayonnaise called Just Mayo. Producer checkoff dollars were spent trying to convince grocers to remove Just Mayo from stores, members deleted pertinent emails that had to be recovered using forensic methods, and the board joked about “put[ting] a hit on” Just Mayo founder Josh Tetrick. The OIG investigated again, and the egg board was punished with three years of increased management review and a directive to retrain staff on “proper email etiquette and ethics.”

Jars of Just Mayo by Hampton Creek and Hellman’s Real Mayonnaise by Unilever in a supermarket in New York in 2014. Photo by Richard Levine/Corbis via Getty Images.

A bipartisan group of senators who watched the egg board go rogue decided to impose their own oversight. Democrats Cory Booker and Elizabeth Warren, and Republicans Mike Lee and Rand Paul, co-sponsored a checkoff reform bill, the OFF Act, that would have banned lobbying groups like the NCBA and NPPC from accessing checkoff funds. Lee, chair of the Senate Judiciary antitrust subcommittee, warned Vilsack that the programs were “behav[ing] like state-sponsored cartels,” and Congress could simply stop authorizing them.

Over 100 agriculture groups backed the OFF Act, but it went nowhere. Lobbyists for the NCBA, the NPPC and other trade groups spent millions painting the reforms as the work of “militant vegans and extreme political organizations.” The bill was voted down 38-to-57 in 2018.

The final scandal was Vilsack’s own creation, involving the dairy checkoff. The dairy program is unique among checkoffs in that Congress requires the agriculture secretary to submit an annual report disclosing the past year’s expenditures. Vilsack upheld that duty from 2009 to 2012, but then in 2013 he stopped and never issued another report. Watchdogs cried foul, including a Tufts University food economist named Parke Wilde who has monitored checkoff misbehavior for years. He filed a Freedom of Information Act request to force the release of the reports, but the USDA told him no.

By the time Sonny Perdue, Donald Trump’s agriculture secretary, released the delinquent reports in 2017, Vilsack was crisscrossing the world convincing nations like China and Mexico to import more U.S. dairy, a job he said kept him “surprisingly more busy than I was when I was secretary.”

Vilsack has frequently compared being USDA secretary to having two sons — corporate agribusinesses and family farms — and wanting to “love ’em both.” Independent farmers say Vilsack’s metaphor ignores the fact that the bigger brother is a bully. “The problem with his ‘two sons’ propaganda,” wrote Roger Allison, the director of Missouri Rural Crisis Center and a longtime checkoff critic, in December 2020, “is that corporate agriculture is doing everything they can to put independent family farms out of business … and they are doing it with the policies and checkoff dollars that Vilsack has vehemently promoted.”

For this story, I asked multiple current and former USDA officials how they think Vilsack will handle checkoffs this time around. Like the USDA itself, most didn’t respond, and others wouldn’t talk on the record. After a turbulent transfer of power in Washington, the feeling may be that now isn’t the right time to rock the boat.

“Our nation has recently been going through a major political crisis,” Wilde, the Tufts food economist, told me. “I think people may be politically loyal currently rather than aiming for perfection in government.” But, he added, the checkoffs have benefitted from “a long history of revolving doors, where key people go back and forth between well-paid checkoff positions and senior government positions.” In this case, the door is revolving from the second-longest-serving USDA secretary, to highest-paid checkoff CEO, back to USDA secretary.

One former official said Vilsack’s team has been in touch to discuss taking on Big Ag, but that the conversation didn’t venture into checkoff reform. And Mike Eby, of the Organization for Competitive Markets, told me his group had been in active dialogue with the Trump White House about checkoff reform. The administration ended before the conversation went anywhere, but that progress was more than they made in eight years with Obama and Vilsack.

Others aren’t sure it even matters who’s agriculture secretary. Jerry Hagstrom, a veteran agriculture journalist who writes the Hagstrom Report and has covered every administration since Reagan, says the majority of farmers pay no attention to how their checkoff dollars are spent. That means the loudest voices pushing for reform “aren’t mainstream groups. The mainstream groups are very supportive of the checkoffs as they are. Pressure has to come more from the farmers themselves.” Hagstrom compares the fight to shareholder activism: “Like these controversies where stockholders try to influence company policy and find it very difficult. Management manages to stop them from doing it.”

But the secretary is right about this being a different time — one in which Congress or White House officials might get pushier about program oversight. Biden’s economic team includes some big-name trustbusters, like Lina Khan and Tim Wu, both of whom have Big Ag in their sights, as well as Big Tech, and haven’t shied away from criticizing the Obama administration’s failures at reform. 

Sen. Booker, just appointed to the Senate Agriculture Committee, tells me that while he believes Vilsack is “committed to transformational change at the USDA,” he also plans, from his new perch, “to exercise oversight and push for reforms to the commodity checkoff programs to be included as part of that change.” Booker’s short list includes making checkoff budgets publicly available, enacting what he calls a “bright-line rule” barring lobbyists from receiving any checkoff dollars, and urging more action from the USDA, which he says “has authority to conduct more robust audits and require more transparency of the organizations using checkoff funds.” It’s simply chosen not to exercise that authority.

If the USDA did — even requiring programs to post full financial records, as the Government Accountability Office recommended in 2017 — critics argue new abuses by the checkoffs might come to light, such as recent cases where $2.6 million of Oklahoma’s beef funds were embezzled to open a clothing boutique, or where $40,000 of Washington state’s beef funds were stolen by an employee with access to her office’s credit card.

One Obama-era USDA official who did speak on the record was Dudley Butler. I asked what checkoff reform needs to look like, hypothetically, and he invoked an analogy of bulldozing a decaying barn. “When you have a damaged barn on your farm that is compromised and has lost its structural integrity, it is usually the best decision to demolish it and build a new one,” he told me. “Those in charge should reach the same decision — demolish the current checkoff, and develop a more equitable and accountable system.”

Note: This story has been updated to correct the name of the director of Missouri Rural Crisis Center to Roger Allison. 

Lead image: Tom Vilsack speaks in early December 2020 after being nominated to be Agriculture Secretary by then-President-elect Joe Biden, in Wilmington, Delaware. Photo by Jim Watson/AFP via Getty Images.

You made it this far so we know you appreciate our work. FERN is a nonprofit and relies on the generosity of our readers so that we can continue producing incisive reporting like this story. Please consider making a donation to support our work. Thank you.

This article may not be reproduced without express permission from FERN. If you are interested in republishing or reposting this article, please contact info@thefern.org.