Contracts awarding millions in federal aid meant to help farmers under scrutiny
Federal aid meant to distribute food to the poor has gone to a bankrupt dairy, an event planning company, as well as two meat processors under federal investigation, a Midwest Center for Investigative Reporting analysis found.
Called the Farmers to Families Food Box Program, the U.S. Department of Agriculture designed the new $1.2 billion program to award contracts to distributors and wholesalers to purchase fresh produce, dairy and meat products. The companies then combine the products into a pre-approved box and then give the boxes to organizations like food banks and nonprofits serving those in need.
But the awards have come under scrutiny, just days after they were announced.
On Monday, the United Fresh Produce Association, a trade organization representing 1,500 companies across the fresh produce supply chain, sent a letter to the USDA asking a detailed list of questions about the $1.2 billion in coronavirus aid announced Friday.
Tom Stenzel, president and CEO of the United Fresh Produce Association, says in the letter the USDA awarded contracts to companies that have no delivery trucks and gave contracts worth more than some organizations’ annual revenues.
“We understand companies may have been awarded a contract larger than their annual revenues. We understand other companies may have been awarded a contract despite the fact that they have no trucks nor delivery systems,” Stenzel wrote.
An analysis of the awards and its recipients by the Midwest Center for Investigative Reporting found about 200 companies were awarded a total of 318 contracts ranging from $1,400 to $107 million.
The Midwest Center analysis found:
- Twelve states were not headquarters to a company that received any single contract: Alaska, Delaware, Kentucky, Maine, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, West Virginia and Wyoming.
- Nearly $147 million, the most given to any one company, was awarded in three separate contracts to Dallas-based Borden Dairy Company.
- The Caribbean Produce Exchange, based in Puerto Rico, received the single-largest contract, worth more than $107 million, the Midwest Center found. The organization’s annual revenue in 2018 was $106 million, according to financial services organization Dun and Bradstreet.
- Cargill and Tyson Foods, two of the four largest meat companies in the U.S. who have had significant outbreaks of COVID-19 at their meat processing plants were awarded $7.3 million and $862,000, respectively. The USDA is currently investigating whether those companies engaged in price-fixing after processing plant closures related to COVID-19 outbreaks.
Wisconsin companies awarded contracts include:
- Alsum Farms and Produce Inc., Friesland, $424,113, fruits/vegetables
- Gumz Muck Farms LLC, Endeavor, $1.4 million, fruits/vegetable
- Heartland Produce, Kenosha, $1.1 million, fruits/vegetables
- Lamers Dairy, Appleton, 431,750, fluid milk
- Masters Gallery Foods Inc., Plymouth, $1.7 million, dairy products
- Sassy Cow Creamery, Columbus, 4176,400, fluid milk
- The Fresh Group, Glendale, $990,427, $338,008, Combination Box (containing a combination of 1-3, Fluid Milk) and fruits/vegetables
- Valley Bakers Coop Assoc., Greenville, $2.6 million, Combination Box (containing a combination of 1-3, Fluid Milk)
USDA: New Innovative Approach
U.S. Department of Agriculture officials did not immediately respond to a request for comment on Tuesday morning.
“This is a new, innovative approach to provide critical support to American farmers and families, and USDA moved as expeditiously as federal procurement rules allow to stand up the program and solicit offers,” said U.S. Secretary of Agriculture Sonny Perdue in a press release announcing the decision on Friday.
Farmers have been harmed by the closure of restaurants, schools and other places where agricultural products are used. Livestock prices have also plummeted because of disruptions to the supply chain caused by closures of meat processing plants related to COVID-19. Congress has also approved $16 billion for farmers in response to the pandemic. It is not yet clear how that funding will be distributed.
Food banks, which already serve nearly 40 million Americans, are also expected to see a large increase in the number of people they serve.
President Donald Trump praised the decision Saturday, tweeting: “Starting early next week, at my order, the USA will be purchasing, from our Farmers, Ranchers & Specialty Crop Growers, 3 Billion Dollars worth of Dairy, Meat & Produce for Food Lines & Kitchens. 'FARMERS TO FAMILY FOOD BOX' Great news for all!"
The first round of contracts, which run from May 15 to June 30, approved Friday includes $461 million in fresh fruits and vegetables, $317 million in dairy, $258 million in meat and $175 million in a combination box of fresh produce, dairy or meat products, the USDA said.
For Borden Dairy, a standalone dairy with locations from Florida to Texas to Ohio, the contract will mean a great deal, said CEO Tony Sarsam. The company, which employs about 3,300 people, filed for bankruptcy in January because of its debt burden. Since the pandemic, Borden has lost 25 percent of its business with schools being out and restaurants being closed, Sarsam said. So far, the company has had to lay off 3 percent of its employees, he said.
Borden received three contracts, worth a combined nearly $147 million, to supply fluid milk to nonprofits in the South-East, South-West and Mid-West.
The benefits are three-fold, Sasam said. The money provides certainty for the 260 independent farmers Borden purchases from, provides stable hours for Borden’s employees and helps provide milk to those in need, Sarsam said.
“It’s a big deal for a lot of folks across the entire supply chain,” Sarsam said.
The company has had to dump about 5% of its milk over the past couple months, something Borden had never done before, Sarsam said. This ability to help provides a morale boost at a hard time in the industry, he said.
“This allows us to provide something that is exciting and adds purpose and engagement. It’s what we like to do,” Sarsam said.
‘Not sour grapes’
“This is not ‘sour grapes’ from those that may not have been awarded; this is a genuine effort to ensure integrity and confidence in the program and that fresh produce actually gets to those in need in an efficient and cost-effective way,” wrote Stenzel, of the United Fresh Produce Association.
Stenzel also asked: “There are some contracts that were awarded to companies that are not located and appear to not have business locations in that region. What is the rationale for awarding those contracts while others in those regions were not awarded contracts?”
Many contracts were awarded to wholesalers and distributors outside of the region they were allocated for, the Midwest Center found.
For example, of the $39.5 million awarded for states in the Mountain Plains region, $2.9 million went to distributors with headquarters in Washington, Minnesota or Wisconsin, states that are not included in the region. Companies headquartered in Missouri, which is generally not thought of as a mountain or plains state, received $34.8 million of the awards, while Montana, Nebraska, North Dakota, South Dakota and Wyoming, all in the region, received $0.
CaliforniaAvocadosDirect.com, which normally ships and sells only avocados but just recently as a result of COVID-19 expanded to shipping lots of fruits and vegetables, was awarded a contract for $40 million, one of the largest awarded. The contract is for the South-West region, but the company is located in California, which is in the Western region. CEO Ben Holtz said in an email the contract is separate from the website’s offerings.
cre8ad8, a San Antonio-based events and wedding planning company, received a $25.8 million contract for pre-cooked pork and chicken boxes, the largest meat box contract in the South-West region, the Midwest Center also found.
By comparison, Gordon Food Service, one of the largest food distributors in the United States with $12.9 billion in annual revenue and 19,000 employees, was awarded seven contracts across three regions worth $35.1 million.
At the same time, several companies that are already government contractors were denied contracts, Stenzel wrote.
“We know of several upstanding companies that are current government contractors to USDA and the DOD Fresh program who were seemingly denied on mistaken grounds. We hope the Department will rectify those clear cases and award those bids now,” the letter said.