Fraudulent Foods

Globalization and the limits of “transparency”

On February 11, millennials and guacamole lovers around the United States let out a collective gasp in response to some dismaying news: The U.S. Department of Agriculture had temporarily banned imports of Mexican avocados. The measure came in response to a threat against USDA Animal and Plant Health Inspection Service personnel, and although the specifics remain unreported, the likely source was one of the Mexican drug cartels attempting to make money off the avocado trade.

And there’s a lot of money to be made. Michoacán—the only Mexican state allowed to send avocados to the United States—is responsible for 89% of U.S. avocado imports, or about $2.8 billion worth of avocados each year. No wonder, then, that only one week after the USDA announced the ban, it was lifted. APEAM, the cooperative that represents Mexican avocado farmers, agreed to put in place an “intelligence and security unit” that would ensure the safety of USDA inspectors.

Avocados are far from the only food touched by organized crime. Criminal operations and confidence men profit off nuts, eels, limes, palm oil, beef, and many more agricultural commodities besides. Whether you’re buying products labeled as being from California, Brazil, or Indonesia, it is likely that some of your food dollars are winding up in the pockets of cartels, gangs, and savvy dealers taking advantage of the black box that is global (and local) agricultural trade.

Welcome, in short, to the “deviant globalization” of agriculture—to borrow a term from observers Nils Gilman, Jesse Goldhammer, and Steven Weber. Just as in other types of markets, the globalization of licit trade brought with it the globalization of the illicit. In 1968, for example, South Africa imposed quotas on the annual catch of abalone (which is largely exported to East Asia, where it is extremely popular). The quotas formed an opening for illicit global trade; organized crime groups bought up and sold abalone caught above the quotas. According to political scientist Jonny Steinberg, by the 1990s, when the South African Rand dropped in value, illegally caught abalone even became a de facto currency used by such groups to barter for high-value drugs to sell in local markets.

South Africa’s illicit abalone trade was made possible by transnational crime organizations, ineffective border controls, and a local population disproportionately harmed by national regulation and willing to break the law to stay in business. This has largely been the story of deviant globalization in other food trades. But lately, there’s another wrinkle in the story: Those in the trade have also found a way to exploit the values at the core of organic and regenerative agriculture. In fact, by commodifying things like health, sustainability, and more to upsell products, those movements have opened even more space for fraudulent foods.

Why Is Food Fraud so Common?

In 2019, the United States as a whole spent about $1.77 trillion on food. With so much money involved, and given that the agriculture industry is so decentralized, it isn’t surprising that cartels would smell opportunity.

The story of the Mexican avocado is revealing. Until 1997, the USDA had banned avocado imports from Mexico over concerns about pests potentially infesting U.S. crops. In the time since the agency lifted that 83-year-old restriction, the avocado industry in Michoacán has grown by leaps and bounds, fueled by the growth of U.S. avocado consumption. Between 2001 and 2018, for example, per capita avocado consumption tripled to about 8 pounds of avocado per American per year. This perfect storm of avocado toast has sent billions in revenue back to the Western Mexican state.

All that revenue attracted the attention of multiple local and regional criminal enterprises, who levy “protection” rents onto producers and shippers, facilitate trade, and in some cases, clear-cut forests for their own avocado production. Competition between rival cartels, as well as resistance from producers hoping to avoid being taxed, has led to violence. Murders in Michoacán are a daily occurrence. In 2020, the state recorded an astonishing 164 homicides per month, about 3.5 murders per 100,000 inhabitants.

Although Michoacán has long been an epicenter of cartel violence in Mexico, and the degree to which the avocado trade has added to that violence is unclear, territorial battles in avocado-growing areas have led to numerous high-profile killings. In 2019, for example, the Jalisco Nueva Generación Cartel killed 19 members of a rival gang—the Viagras—and displayed their bodies in Uruapan, the center of avocado production and trade.

Cartels’ success in extracting profit from the avocado trade has also spurred interest in other agricultural goods. The prices of limes, berries, and other products have risen as Mexican cartels have gotten involved.

According to political science professor Eduardo Moncada in an interview with National Public Radio, cartels’ success in extracting profit from the avocado trade has also spurred interest in other agricultural goods. The prices of limes, berries, and other products have risen as Mexican cartels have gotten involved.

But criminal intervention in agriculture is not unique to Mexico.

Over the past two decades, local organized crime operations have targeted California’s burgeoning nut industry. California produces about 80% of the world’s almonds, 75% of the world’s walnuts, and at least 25% of the world’s pistachios. Altogether, California’s almond, pistachio, and walnut producers raked in about $9.5 billion in 2020.

Large-scale nut thefts are commonplace. Between 2014 and 2017, criminals made off with at least $7.6 million worth. In some cases, the organization and creativity of the thieves has been staggering. The crimes often follow a similar pattern: An apparently licensed truck picks up a large load destined for a faraway warehouse, only for producers to realize after the fact that they had been duped by imposter shippers. In one series of heists, an organized crime group based in L.A. went so far as to hack a shipping company email account to bid for legitimate shipping contracts that they could then steal.

As recently as June of 2021, a pistachio company discovered that it had a 42,000-pound hole in their inventory.

Despite crackdowns from both state and federal law enforcement, nut crimes continue today. As recently as June of 2021, a pistachio company discovered that it had a 42,000-pound hole in their inventory. Authorities were able to recover almost all of the theft, totaling a value of $170,760, but there are few ways to completely stop criminal organizations or individuals from making off with the high-value products.

Beyond avocados in Mexico and nuts in California, there’s also European eels smuggled in suitcases from Europe to East Asia, illegally-sold Paraguayan cigarettes, and pesticides smuggled into Brazil, to name just a few. All together, these examples suggest that agriculture is ripe for fraud.

An Avocado Is an Avocado

Is there anything that can be done to remove illicit trade from agriculture? Short answer: probably not.

Agricultural products are attractive to illicit organizations and actors for a few reasons: They consistently fetch a good price, they are difficult to trace in part due to the decentralized nature of agricultural production, and they can be easily distributed through secondary markets to individual consumers.

So, to the first problem: potential for profits. While lawful agricultural practices achieve below-average profit margins compared to other industries, illicit agricultural trade can be extremely profitable. Whether it’s cartels charging protection rents on high-value agricultural products, or nut thieves selling their wares at just-below-market prices while almost completely avoiding the costs of production, criminals involved in agriculture can see great returns. While it’s unclear whether the potential profit is higher than for more conventional illicit activity—drugs, prostitution, gambling, and the rest—illegally traded agricultural goods may at least be cheaper to ship and smuggle, since the products themselves are not illegal.

Second, an avocado is an avocado. It is impossible to tell the difference between an avocado that has been grown by a cartel, one grown by a Michoacán farmer paying protection money to a cartel, and one grown completely removed from illicit activity. This is true for most agricultural goods. While differences in exact species or breed can be discerned, the actual production and distribution that brings any piece of food from farm, to trucker, to packer, to shipper, to distributor, to fork is inherently enigmatic to the final consumer. And that leaves room for fraud.

Third, there’s individual consumers. The only ideas we consumers get about the food we buy come from either labels at a grocery store or description—when available—at restaurants. While larger corporate stores and restaurants may have strong relationships with corporate suppliers who might have clear information about their supply chains, smaller and more cost-conscious food providers can easily be wooed by lower prices from shadier distributors. (This is not to say that your neighborhood bodega is doing something wrong. By seeking out the lowest priced option, they are hopefully passing those savings onto you.)

The vast supply chain and opacity of agricultural production means that there’s plenty of opportunity to mislabel items. A bag of “California Pistachios” may in fact be from California, but the label will assuredly not mention that some percent of the nuts were obtained illegally. After all, that isn’t the point of labels; they are not just neutral, if imperfect, designators of the origins of agricultural goods, they are also meant to signal implicit values associated with certain kinds or locations of production as a way to sell food.

Environmental groups, in particular, have given labels an outsized importance. Over time, they’ve come to be seen as a means to reduce the environmental and climate change related damage of agriculture. Organic producers, regenerative farmers, anti-deforestation groups, and more have sought to create certification labels to indicate to consumers not only where their products were grown or raised, but also what values were behind bringing that food to market.

Why the focus on labels? Well, for many groups that support the idea, the problem with conventional modern agriculture is that consumers are too far removed from the production of their food. Labels, from this perspective, work to reconnect consumers and producers, and allow for conscious decisions that can prioritize shared values like health, worker safety, environmental sustainability, and forest protection.

But therein lies the rub. First, these efforts are as much marketing as added value. Despite what regenerative ranchers, organic farmers, and their influencer friends may tell you, labels are primarily ways to upsell products. Second, the environmental values these labels purport to uphold are often much more complicated than proponents would like consumers to believe. Third, because they are marketing efforts, “green” certifications are subject to the same predicament—fraud and crime—as any others.

Are Premium Foods Worth It?

In fact, regenerative and organic agriculture—and deforestation-free products to a lesser extent—are already rife with fraud.

On May 23, 2021 an employee at Belcampo Meat Company, a Bay Area-based company offering up pasture-raised and so-called humanely slaughtered meats, posted an Instagram story documenting how the Santa Monica branch of Belcampo he worked at had been purchasing meat from conventional meat suppliers for conventional prices, and selling it to their customers at a 479% markup. The story immediately sparked controversy.

Belcampo quickly condemned the scandal as an isolated incident, hoping to preserve the trust of its customers who turned to the company for meat that was labeled as healthier, better for the environment, and ethically raised and killed. But the Santa Monica story was the tip of the iceberg. Belcampo had begun purchasing conventionally-raised and slaughtered meat as early as 2019, when the company had grown far too large for its 27-acre farm near Mt. Shasta. Either unwilling or unable to pay the price for the meat it claimed to sell, the company simply decided to sell the same meat that it derided as unethical, climate-breaking, and unhealthy—just with a different label.

The scandal killed Belcampo. In October 2021, the company ceased retail and restaurant operations. Their website remains functional, but it no longer sells to the public.

The reality of our agricultural production system stands firmly in the way of conscious consumerism.

It should come as no surprise that Belcampo Meat Company’s downfall stemmed from fraudulent claims. Its success also came from mythmaking and illusion—a pastoral fantasy about small-scale and regenerative meat production that, like their “organic filet,” puts a fancy name onto something much dirtier and more complicated than marketing schemes are ever able to admit.

Regenerative meat, after all, is a racket. Its proponents claim that its grazing practices sequester large amounts of carbon in the soil by allowing for more biodiverse plant species than monocropping for agricultural feeds. While regenerative ranching and other practices can improve soil health in some cases, it does not live up to proponents’ claims that it is carbon neutral, as researchers at the World Resources Institute have documented.

In fact, while studies have found as much as a 66% drop in greenhouse gas emissions in regenerative beef systems, it requires more land than feedlot alternatives, nullifying the emissions reductions from soil carbon sequestration if used at scale. Regenerative ranching also spreads invasive species, damages waterways, increases erosion, and drastically impacts wildlife. And, as writer Spencer Roberts has found, regenerative certifications, like those provided by Regeneration International, may not have any basis in reality. In summer 2021, Roberts was able to get his farm—Happy Koë Farm—approved for regenerative certification through Regeneration International’s Regenerative Farm Map program. The only problem: Happy Koë Farm didn’t exist.

Belcampo is not alone in taking advantage of consumers fantasies about agriculture. In 2021, the New Yorker published a story about widespread fraud in the organic grain trade. The story was jaw-dropping.

In 2017, organic farmer Randy Constant received a 10-year sentence for wire fraud. It turned out that, through Constant’s company Organic Land Management, he had sold as much as a quarter billion dollars worth of falsely-labelled “organic” products. In the seven years prior to his arrest, Constant had sold up to 11.5 million bushels of fraudulent “organic” grain—just over 292,000 metric tons—alone. Most of Constant’s fraudulent grain went to feed “organic” livestock, which were subsequently sold for a premium.

The case was significant enough to elicit a response from the Organic Farmers Association, which was concerned that the Constant case, as well as a long history of international organic fraud, might threaten the value of the organic label. The added value of organic crops for many producers, after all, comes from the marketing value of its certification. If consumers suspect farmer fraud, and stop believing in the yeoman farmer scything the barley they’re purchasing, would they still be willing to shell out double or triple the cost of conventional food for its organic counterpart?

Green labels serve to create a binary between good food and bad food. They take advantage of simplistic conceptions of agricultural production to make consumers think that the only path toward moral consumption is through premium products.

And that’s completely outside of the question of whether such associations can ever ensure their entire supply chains. Take beef for example. Claims from large meat companies—in particular, the Brazilian giant JBS—that they can source and slaughter only deforestation-free cattle in Brazil has come up against the complexity of the beef supply chain. Recent reports have shown that JBS’s 2009 promise to remove beef from deforested landscapes from their supply chain have been mostly empty. JBS only audits the supply chains of direct suppliers—the final ranch from which JBS directly purchases cattle. That leaves indirect suppliers—the many possible sites where those cattle spent earlier stages of their life—without any oversight. This is especially egregious considering that the average Brazilian beef cow lives on three to four ranches during its lifespan. The final feedlots can thus serve as laundering points, where animals grown on deforested land are intermixed with those from certified rangeland.

To be sure, “deforestation-free” labels aim to put a premium on an unequivocally good thing. If promises of premiums can reduce—even just a little—the amount of forest cut down to grow beef cattle, palm, or soy, they are a step in the right direction. Similarly, it is laudable that consumers are interested in making ethical purchases. It’s just that the reality of our agricultural production system stands firmly in the way of conscious consumerism.

Is It Possible to Consume Morally?

Green labels serve to create a binary between good food and bad food. They take advantage of simplistic conceptions of agricultural production to make consumers think that the only path toward moral consumption is through premium products. But the reality of food’s impact on the environment, on society, and on our own bodies is far more complicated. Fraud is only one, among many, of the snags in the idea that we can consume righteously.

Instead of relying on promises of untransparent actors that flatten the complexity of real supply chains for the benefit of wealthy consumers looking to fool themselves into wholesomeness, we must be realistic about the nature and reality of a commodity system built around profit. We live in a set of mixed economies with more or less market-friendly state apparatuses governing trade and other forms of economic relations. That is unlikely to change anytime soon, and it sure won’t change through the marketing of false promises like organic, regenerative, or whatever-free products.

Rather, to make our food systems sustainable we must better the base level of production. We must turn towards innovation and technological progress to improve on the worst agricultural practices both in the United States, and throughout the world. This will mean embracing things we already know can reduce emissions at scale: use of cover crops and other effective conservation agricultural approaches; genetic modification for improved yield, reduced nitrogen dependence, and better environmental outcomes; continued improvement of industrial-scale meat production to lower impacts; and, industrially produced alternative proteins capable of replacing some portion of global meat and dairy consumption. And it means actually investing in the development of lower- and middle-income countries and reducing inequality in high-income countries so that fewer people have reason to cut down forests, join cartels or steal truckloads of nuts.