Arkansas City ? Three days before Christmas, this town’s largest employer, Creekstone Farms, laid off 150 of its 800 workers.

“In a big city, 150 workers may not sound like much, but in a 12,000-population town like Ark City, it’s big. It’s significant,” said Mayor Wayne Short. “People need to understand that our economy down here hasn’t recovered like it has in other places. We’ve been through a lot.”

The remaining workers at the Creekstone meatpacking plant have been reduced to 32-hour work weeks.

And Creekstone officials say the cutbacks might have been avoided if the federal government had simply allowed the company to do additional testing it wanted to do on its meat to prove to the Japanese that they needn’t worry about getting mad cow disease by eating it. About 40 percent of Creekstone’s sales were to Japan.

But the U.S. Department of Agriculture has denied the small company in an industry dominated by giants what most businesses take for granted: the freedom to do the best they can to satisfy their customers. It also is stopping the company from doing what Kansas economic development officials have long said is key to salvaging the state’s rural economy from decline: adding value to agriculture products.

“Our (Japanese) customers want the testing and we’re more than willing to pay for it,” said Kevin Pentz, vice president and general manager at the Creekstone Farms Premium Beef plant. “Like any other business, we want to provide what our customers want.”

‘Doesn’t make sense’

For almost a year, Creekstone has been fighting the USDA for permission to test each cow it butchers for mad cow, also known as bovine spongiform encephalopathy or BSE. The tests, Creekstone officials say, would let the company slip the Japanese ban on U.S. beef imports, which began shortly after the mad cow scare in December 2003.

“When I’m away from here and I talk to people about what’s going on between USDA and Creekstone, they look at me in disbelief,” said Short, the mayor. “They say it doesn’t make sense. All I can do is say it doesn’t make sense to me either. If Creekstone wants to test and is willing to pay for the test, then let them test.”

Don Stull, an anthropology professor at Kansas University who’s studied the nation’s meatpacking industry, said he doubted USDA and Creekstone Farms would ever see eye to eye on the issue because of the influence exerted by the giant meatpacking companies such as Tyson Foods Inc. and Smithfield Foods Inc.

Worker Jorge Compos uses a running air knife to remove cattle hides at Creekstone Farms in Arkansas City. About 150 Creekstone employees were laid off just before Christmas, and Creekstone officials are blaming the federal government.

“If Creekstone Farms tested its animals (in the manner the company wants), that would create pressure for the big boys to do the same and they don’t want that,” Stull said.

The big boys

Four companies — Tyson, Smithfield, Swift & Co., and Excel Corp. — control 80 percent of the U.S. meatpacking industry, Stull said.

These companies, he said, fear that if one plant tested every animal for BSE, it would only be a matter of time before the entire industry would have to follow suit. That would increase costs, reduce profits, or both.

“You’re not going to see USDA go up against the big boys,” Stull predicted.

Ed Loyd, a spokesman for USDA Secretary Ann Veneman’s office, disputed Stull’s analysis.

“Everything we do related to BSE is driven by science and by the best known preventative measures,” Loyd said. “And we’ve been very careful not to let marketing needs define that science.”

Letting Creekstone Farms stake food-safety claims on tests that are not designed to substantiate those claims would undermine the agency’s credibility, he said.

Loyd denied USDA is in the pocket of corporate agriculture.

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“Our mission is to ensure the safety of the food supply, whether it’s beef or any other product,” he said.

Satisfying the Japanese

USDA has sole control of the testing processes in meat plants. And its officials say they have rejected Creekstone Farms’ pleas because the company’s tests don’t detect mad cow disease in animals younger than 30 months. Most U.S. beef comes from 12- to 18-month-old cows.

“The tests are not designed to detect BSE in younger animals,” said Andrea McNally, a spokeswoman for the USDA’s Animal and Plant Health Inspection Service. “So for Creekstone Farms to use the test to say its product is 100 percent BSE-free would be giving consumers a false sense of food safety, a sense the test is not designed to give.”

Creekstone’s Pentz said the company knows that. But the issue, he said, isn’t whether the tests are effective, it’s whether the federal government should — or can — prevent a private business from meeting the legal expectations of its customers. In this instance, the customers want the testing.

Biggest market

“If you go to a grocery store in Japan today, in the meat section you’ll see a sticker on Japanese beef that says it’s BSE-tested — they’re already doing what they want us to do,” Pentz said. “Our (Japanese) customers tell us they want American beef, but it needs to have a BSE-tested sticker on it,” he said. “That’s what we’re trying to do and that’s what USDA is stopping us from doing.”

In 2003, no foreign country bought more U.S. beef than Japan. Total sales exceeded $1.7 billion. Kansas’ share: $171.1 million.

Japanese markets accounted for 40 percent of Creekstone Farms’ total sales. When that market dried up because of the mad cow scare, the company began feeling the crunch that led to the pre-Christmas layoffs.

“That wasn’t an easy decision. If we had known 10 months ago what we know now, we would have done it back then,” Pentz said. “But all along we’ve been told this would be taken care of (last) summer, then by Christmas, and now we’re hearing sometime in 2005.”

A hurting town

Before the ban, the Arkansas City plant processed 1,000 head of cattle — all Black Angus, the company’s specialty — every day, five or six days a week. Today, it’s down to 750 head a day, and just four days a week.

Workers who used to put in 40-hour weeks have been cut to 32 hours.

Since the early 1990s, Arkansas City and Cowley County have lost more than 2,500 jobs with the closings of the Rodeo meatpacking plant in 1990, the Total oil refinery in 1996, and, in 1997 in nearby Winfield, closings of the Binney & Smith and Casco Plastics plants and Winfield State Hospital.

Denver-based Future Beef Operations closed its Arkansas City plant after filing bankruptcy in 2002. The company sold its 400,000-square-foot packing plant to Creekstone Farms in January 2003.

Today, Creekstone Farms is Arkansas City’s largest employer.

Senators no help

KU’s Stull said he was surprised Creekstone Farms hadn’t sued USDA.

Pentz said the company had fielded several calls from big-city law firms with expertise in suing USDA.

“I think we’d have a good case,” Pentz said. “But in the scheme of things we’re not a big company — we’re not a Tyson or a Cargill. They can do it without blinking an eye; we can’t.”

Instead of suing, Pentz said he and other Creekstone Farms executives had met several times with USDA officials. They’ve also sought help from U.S. Rep. Todd Tiahrt, whose district includes Cowley County, and U.S. Sens. Sam Brownback and Pat Roberts, all Kansas Republicans.

“We’ve gotten a lot of support from Congressman Tiahrt’s office,” Pentz said. “But we’ve not had positive support from Brownback or Roberts. They look at the Big Four and they see 6,000 to 10,000 employees out west (Dodge and Garden cities), and then they look at us, a single-plant operation in Ark City.”

It’s also true that Tyson, Smithfield, Swift, and Excel contribute millions of dollars to politicians, Republicans and Democrats.

“They’re very influential,” Pentz said.

Trade group influence

The big companies’ opposition is buttressed by the influential Kansas Livestock Assn.

“We do not support private, blanket testing,” said Matt Teagarden, the association’s director of industry relations.

“If Creekstone tested every animal they killed, it wouldn’t be long before other countries would say ‘If it’s good enough for Japan, we want it too,” and then pretty soon, the domestic market would say ‘If it’s good enough for the foreign market, we ought to have it here too,'” Teagarden said.

And sooner or later, he said, those testing costs would fall on the state’s cattle ranchers.”What’ll happen is the testing costs — about $20 a head — will get passed back until it can’t be passed back any further,” Teagarden said. “The packing houses will do the testing, so they’ll pay the feedlots $20 less a head; then the feedlots will pay the stocker operator $20 less. He’ll turn around and pay the cow-calf operator $20 less.

“But the cow-calf operator doesn’t have anybody he can pass that $20 on to,” he said. “He has to take whatever the market gives him.”

‘Getting desperate’

In September, Gov. Kathleen Sebelius led a nine-day trade mission to Japan, where she lobbied on behalf of the state’s beef industry.

Since the governor’s visit, Japan and the United States have agreed to limit beef imports to cattle no older than 20 months, though the import ban remains in place.

“It’s unacceptable that a year after the market was shut, we are still in some kind of negotiation with no end in sight,” Sebelius said during a recent interview with the Journal-World.

Sebelius and others see the agreement to limit beef imports to animals not older than 20 months as a major step forward in negotiations.

But Creekstone’s Pentz isn’t as optimistic. The agreement, he said, doesn’t take effect until Japanese officials can convince their consumers that U.S. beef shouldn’t have to be tested.

“Think about it,” Pentz said. “How long do you think it’s going to convince the Japanese, who are already BSE-testing at 100 percent, that the United States shouldn’t have to test? The Japanese producers, as small as they are, will resist that, I’m sure.”

To offset the loss of U.S. beef, Pentz said, the Japanese have turned to New Zealand and Australia.

“Guess who the largest producers are in Australia? Swift and Cargill,” Pentz said. “They can wait this thing out, while companies like us are getting desperate.”