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Perishable Pundit
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Produce Business

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American Food & Ag Exporter

Cheese Connoisseur



Filth Flies And Cultural Research

We wrote a bit about the Fresh Express Fresh Produce Safety Research Conference here, but one of the research presentations — that about filth flies — has occupied many hours of thought as holding the key to food safety.

Oh, it is not the actual research, which is quite preliminary. A hat tip to Michele Jay-Russell, DVM, MPVM, Dipl. ACVPM of the Western Institute for Food Safety and Security, for pointing out to the Pundit that the researchers summarized their report this way:

The high number of filth flies and the species composition on mature lettuce in some Salinas Valley vegetable farms in 2007 were unexpected. Several flies were PCR positive for E. coli O157:H7 and may have been capable of transmission to plants. Our inability to culture E. coli O157 from live flies collected in the same area in 2008 may indicate an ephemeral presence of this pathogen in certain settings. More intriguing questions were generated than answered, prompting us to continue examination of the filth fly E. coli ecological relationship in commercial greens.”

What has consumed us about this particular research is that it was so obvious that there was a problem in the fields. Simple visual observation allowed the researchers to find unusual numbers of flies all over the field. An equally simple technique — sticking some flypaper on small stakes in the field — showed high levels of filth flies.

Now we don’t know that these flies actually constitute a food safety risk — though we also don’t know that they do not.

Maybe that is not the right question though. Even if it won’t lead to E. coli 0157:H7, is there one consumer who would be enthusiastic about eating produce from a field that for some unexplained reason was attracting enormous numbers of filth flies?

After the spinach crisis, we wrote a piece entitled Tale of Two Buyers — the gist of which was that our food safety problem is, at root, a cultural problem caused by the failure of buying organizations to reward buyers who elect to exceed corporate minimums for food safety in procurement.

In other words, if a retailer requires a GAP audit and the buyer can buy GAP-audited product for $10, there is no upside for that buyer to decide that he personally will constrain the supply chain and only consider vendors who are also, say, GlobalGAP-certified and approved to sell to Darden and Tesco. In fact, if he does do this and so pays $12 for the product, he may lose his job or not get the raise, bonus, etc.

When the Leafy Greens Metrics were being articulated, one of our concerns was that our food safety systems depended too much on farmers doing things that they had no direct financial incentive to do and a lot of financial incentive not to do. So, if a farmer sees an animal encroach on a field, that portion of the field is supposed to be marked off as not harvestable — but, of course, then the farmer doesn’t get paid so exactly how likely is this to happen?

It is easy for us to write a speech about a food safety culture in which the end game is that a farmer with flies in the field tells everyone about it so that research can be conducted, and you want the farmer to decline to harvest until both safety is confirmed and product quality isn’t sullied by a disproportionate numbers of flies.

Yet it seems both unrealistic and unfair to simply say that the farmer should be courageous and take a hit for all of us and die some kind of economic Samurai death as he falls on the sword of food safety and product quality.

Supporting a particular culture is about doing real things that make it both likely and possible for people to behave a certain way.

So though scientific research is important, the importance of cultural research should not be overlooked. How do we change things so that the retail buyer has an incentive to exceed his employers’ minimally acceptable food safety standards and pay up for the best product? How do we buy fresh produce so that the farmer, the one on the scene and closest to the crop, has an incentive to say, “I’m suspicious about all these flies, so I’m not selling this crop.”

We have a sense that the answer to our food safety dilemmas may lie in some intersection between a sphere of scientific knowledge and capability and another sphere of cultural reinforcement of personal integrity.




AIG Bailout Gives Short-term
Relief Many Dangers Long-term

The Fed’s decision to lend $85 billion to AIG in exchange for an ownership stake just under 80% is very dilutive to shareholders, and with the terms of the loan precluding common and preferred dividends and the interest rate being about 10 percentage points over what the government is paying for funds, the most likely outcome is that AIG will sell off virtually everything to pay off the US government.

What the government is basically doing is putting the company into bankruptcy but in an orderly way so that its obligations will be honored and its assets do not have to be sold at fire-sale prices.

It is quite possible that common shareholders will be wiped out and so the moral hazard of the action is reduced — at least as far as owners go. Shareholders will realize that even if a company is considered “too big to fail,” shareholders should not think that their investments can’t be wiped out.

Still, the bail out was a bad idea for many reasons:

First, the government is either wrong about the consequences of an AIG failure or it got snookered by Wall Street hot shots. The basic justification for an AIG bailout is that it is so big that its failure would create systemic risks which would bring down Goldman Sachs, The Bank of America, etc.

Yet if this were true, these institutions and others had the capacity to put together an $85 billion bridge loan as well. That they didn’t do so indicates either that they didn’t feel as threatened as the Fed and the Treasury thought or that they were playing a massive game of chicken with the government. The government employees simply folded first.

Second, the bailout will create enormous risks for the future. Moral hazard is what it is called when doing something creates the incentive for the thing you would like to prevent. The classic example is fire insurance. It is the very existence of fire insurance that creates the crime of arson for profit.

Although the bailout is structured — as was the Bear Stearns bailout before this — to reduce moral hazard for owners — it increases the likelihood of reckless behavior by lenders and investors.

For example, one of the big concerns that doubtless led the Fed to act is that AIG sold lots of paper that wound up in money market accounts all across the country and around the world. Now every time one buys a money market instrument, one has a choice: either invest in a money market that solely invests in US Treasury securities or invest in money market funds that stretch for a higher yield by including lesser paper.

By bailing out AIG, the government has avoided millions of people suffering losses as their money market funds would have “broke the buck” — that is, lost value.

But the consequences are far beyond that. The government made into suckers all those people, millions and millions of them, who invested in government-guaranteed money market funds or in FDIC insured CDs or passbook accounts — thus accepting lower yields, sometimes for decades, precisely because they wanted to avoid the risk of having their cash backed up by AIG as opposed to the federal government.

Now the Secretary of Treasury has basically said to all those conservative investors: “Man, were you guys chumps!” This will encourage more risky behavior in the future and is fundamentally immoral.

Third, by not compelling the sale of assets, the Treasury’s bailout will avoid a speedy reckoning. What was needed was a quick liquidation so valuation could be clearly established. What the Treasury is doing is going to do nothing but prolong the suffering — it is like removing a sticky bandage painfully slowly when we really needed to have it ripped off instantly. The pain might be acute, but it would be over and we could start growing from a sounder base.




Tomato Farmers Get A Little Help

Although CDC won’t exonerate tomatoes as a possible cause of the Salmonella Saintpaul outbreak and the chances for compensation aren’t very good, it does seem as if one segment of the federal government is trying to help:

SCHAFER ANNOUNCES PURCHASE OF UP TO
3.6 MILLION POUNDS OF FRESH TOMATOES

WASHINGTON, Sept. 17, 2008 — Agriculture Secretary Ed Schafer today announced that the U.S. Department of Agriculture (USDA) is purchasing up to 3.6 million pounds of fresh tomatoes with currently available Farm Bill funds. The tomatoes will be donated to child nutrition and other domestic food assistance programs.

USDA’s Agricultural Marketing Service (AMS) purchases a variety of high-quality food products each year for distribution by USDA’s Food and Nutrition Service (FNS). The products are distributed through FNS’ national school lunch program, the school breakfast program, the summer food service program, the food distribution program on Indian reservations, the nutrition program for the elderly, the commodity supplemental food program and the emergency food assistance program. USDA also makes emergency purchases of commodities for distribution to those affected by natural disasters.

With today’s announcement, AMS will award immediately contracts for the desired quantity to responsible bidders.

Government food experts work to ensure that all of the food purchased is healthy and nutritious. Food items normally are required to be low in fat, sugar and sodium. The commodities must meet specified grade requirements and be USDA-inspected or graded to ensure quality. AMS purchases only products of 100 percent domestic origin.

Reminds us a little of the time Poppa Pundit flew to France because an importer claimed the avocados we had sold had cut black and thus refused to pay. Discussions were to no avail as the importer refused to accept responsibility, split the loss, etc. But we always felt that the importer did feel a little guilty as when Poppa Pundit went to check out, he found that the whole hotel bill had been paid.




Pundit Mailbag — Obtaining
Leafy Greens For Research

Our piece, Fast-Tracked Food Safety Research Findings Presented at Fresh Express, brought several letters including this one from a prominent presenter whose fascinating research dealt with the potential for internalization of E. coli 0157:H7:

My name is Manan Sharma, and I was one of the presenters at the Fresh Express Research conference last (Sept 11th, 2008) in Monterery, CA.

I was reading Perishable Pundit today (like I do on many days!) and came across the following description (emphasis is mine in bold):

“There was enough money to fund nine researchers, and that research was most worthwhile — though one thing that did come out of it was that these researchers really need better interchange with the industry. We were shocked to hear of researchers in Ohio and Michigan saying they had to do their research with pre-washed and bagged spinach because they couldn’t get raw product. If they had called us — or Fresh Express — we are 100% sure we could have gotten them some unprocessed product, so it seemed an unnecessary variable to throw into the mix.”

I would like to mention that several of the researchers I spoke with tried to obtain lettuce and spinach from Fresh Express but an arrangement could not be worked out. I also know that another company ended up supplying at least one researcher with lettuce and spinach from the field, which was unwashed. I would just like to point out that these researchers did make attempts to obtain leafy greens from Fresh Express, but again, an arrangement was not worked out.

For most of our research projects, we try to make our conditions as applicable to field conditions as possible. I do agree that more interaction between researchers and industry would be helpful, but I would also point you to several meetings that have occurred in the past year where there were research prioritizations between academia, the government and the industry:

International Leafy Greens Safety Conference — September 2007, Dulles Airport, VA

Interagency Risk Assessment Committee on Leafy Greens (sponsored by FDA) — July 2008, College Park, MD

Again, I think more interaction is needed between researchers and industry so that experiments can reflect real world conditions. But in the specific case that you cited, I think the researchers did make efforts to obtain appropriate product for their experiments, it is just that an arrangement could not be worked out.

Thanks for all that you do. I enjoyed your comments at the meeting.

— Manan Sharma, Ph.D.
Research Microbiologist
Food Safety Laboratory
United States Department of Agriculture (USDA)
Agricultural Research Service (ARS)
Animal and Natural Resources Institute (ANRI)
Beltsville, Maryland

We deeply appreciate Dr. Sharma taking the time to write. Indeed we feel a little guilty that we are keeping Dr. Sharma from vital life-saving research in the lab — so we will try to be succinct.

We did speak to some high-ups at Fresh Express and some of the researchers did, as Dr. Sharma mentions, make requests of Fresh Express for raw product. They were turned down not because Fresh Express wouldn’t give the researchers a little spinach but, rather, because Fresh Express was so intent on the research being perceived as unbiased it did not want to open the door for any accusation being made that in some way Fresh Express had stacked the deck on the research. As we discussed, the matter, it was clear there might have been a way around this issue:

We did receive a number of requests for assistance with raw product and tools from the researchers and always referred them to either the local USDA or Cooperative Extension offices for assistance. The only reason that happened was that we did not want to be seen as having selected unique raw products for one researcher or one type of study and different raw products for another researcher or another study.

In hindsight it could have been handled better if we had advised the researcher to have gone back to Dr. Osterholm and his committee and asked for this type of assistance. We always followed their direction completely. The only exception we made was to supply Dr. Doyle the cutting and coring tools because they are not generally available.

Subsequent to our running this piece, we received a number of kind offers from growers around the country to locally grow needed produce for food safety research by their state universities or local ag researchers.

The researchers obviously worked very hard, and we did not intend to imply otherwise. We also are pleased to know that there are conferences taking place to encourage communication between academia and the growing community.

We do suspect, however, that many researchers still have limited contacts and so, sometimes, use product that is not ideal for the purpose intended. Perhaps a local extension office is just not accustomed to calling up their Salinas counterpart and getting product.

We think researchers should not have to make compromises in this area. We are happy to throw the Pundit’s hat in the ring as an industry resource and invite researchers who have hit a brick wall to call us and ask for help. If we don’t have a ready resource, we would be pleased to use this column as a “Bully Pulpit” to ask others for help.

Many thanks to Dr. Manan Sharma for both his research and his reaching out to us today.




Perishable Thoughts — Youth, Experience And The Subprime Crisis

In a rare example of rectitude, we will withhold our opinions on the relative qualifications of (in alphabetical order) Joe Biden, John McCain, Barack Obama and Sarah Palin for the office that each person respectively seeks. We will, however, extend a hat tip to Richard A. Aust of LiquidPress Company, a cold aseptic bottling technology consulting and implementation company headquartered in Lake Forest, California. He sent along one of his favorite quotes, which focuses on how to hire great people:

“Hire and promote first on the basis of integrity; second, motivation; third, capacity; fourth, understanding; fifth, knowledge; and last and least, experience. Without integrity, motivation is dangerous; without motivation, capacity is impotent; without capacity, understanding is limited; without understanding, knowledge is meaningless; without knowledge, experience is blind. Experience is easy to provide and quickly put to good use by people with all the other qualities.”

— Fast Company Magazine
Dee Hock on Management
by M. Mitchell Waldrop
Issue 05, October 1996

You can view the original Fast Company Magazine article here.

Dee Hock is the founder and former CEO of VISA Credit Card Association, which came about in 1968 when Mr. Hock persuaded Bank of America to give up ownership and control of its old BankAmericard program, thus allowing the old one bank card to blossom as other banks freely started distributing VISA cards.

Mr. Hock eventually moved to a 200-acre parcel west of Silicon Valley, where he lived in virtual isolation. He explained his isolation this way:

“Through the years, I have greatly feared and sought to keep at bay the four beasts that inevitably devour their keeper — Ego, Envy, Avarice, and Ambition. In 1984, I severed all connections with business for a life of isolation and anonymity, convinced I was making a great bargain by trading money for time, position for liberty, and ego for contentment — that the beasts were securely caged.”

He eventually became interested in social and business organization and left isolation to promote what he termed “Chaordic” systems — systems that combine elements of chaos and order.

We will have to study up before we have much to say on Chaordic systems, but we think his insight into proper hiring is pretty sound. Experience is a tricky widget. You never really know if a person has 20 years of experience or one year 20 times.

We also find that some things are very teachable and some things are not. We get a chuckle every time somebody endows an ethics institute at some MBA program, since we are pretty convinced that this really is a subject where if people didn’t listen to their mothers we doubt they will listen to a B-school professor.

So the focus on integrity — both because it is hard to lead without it and it is hard to teach it — is right on. Then we have to confess that we have rarely been disappointed by super-motivated employees. We may have to move them around, but there really is always a place for those willing to work hard and do what needs doing. So the focus on motivation is crucial. Capacity means so much. Everyone is limited to some degree; the question is at what level they are limited. Knowledge is crucial, whether it is technical knowledge — how to do accounting or food safety or knowing the right people to call and how to get them to respond.

Of course, experience is often an indicator — it is hard to have a golden rolodex if you started six months ago, and it is hard to have historical knowledge if you have been working two years — and temperament matters.

With golden names such as Bear Stearns, Lehman Brothers and Merrill Lynch now tarnished, one suspects that it wasn’t the 50-year veterans of these firms who pushed into subprime mortgages.

In many ways, the young have taken over the world and by that we mean that if the CEO of, say, Merrill Lynch, an old-line broker, had declined to get into subprime mortgages, Merrill Lynch would have under-performed the market for several years. Young bulls running hedge funds would have pushed Merrill’s stock down, and the Board of Directors would have felt the heat. Perhaps someone would have begun a proxy battle to have directors removed. In his pursuit of financial rectitude, he would have been tarred as old-fashioned.

In the end Merrill’s CEO would have been history — although by seeing what the move to junk would come to entail, he would have been right. Still that would have probably been of little consolation.

So, perhaps we need some old lions, filled with memory of things gone wrong to restrain the enthusiasm of the young.

Maybe this is one of the eternal tensions in society: A tension between the energy of youth, with its blindness to the possibility of loss, and the restraining influence of the aged, with memories of a lifetime of experience in which they have seen loss.

Maybe an election such as the one we hold this year will in the end depend on where the pendulum is swinging at this moment in time.

*****

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