In Meat Wagon, we round up the latest outrages from the meat industry.

Suddenly, Whole Foods can’t get a break. Its share price has plunged about 70 percent since the end of 2005. Its marketing execs are scrambling to shed the company’s reputation for premium-priced offerings — a market position they once reveled in. The natural foods titan used to wow Wall Street with seemingly endless announcements of new-store openings. Now it’s scaling back expansion plans.

Amid these ill tidings comes news that Whole Foods is embroiled in an E. coli 0157:H7 outbreak. The Washington Post reports that seven people in Massachusetts got infected with that nasty E. coli strain after buying ground beef branded Coleman Natural from Whole Foods. The company swiftly recalled Coleman beef from all of its stores nationwide.

Evidently, Coleman Natural — which a Whole Foods spokesperson called a “relatively small supplier for Whole Foods Market” — had been using a meat packer called Nebraska Beef to slaughter its cows.

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That probably wasn’t a great decision. Even by U.S. standards, Nebraska Beef has a lamentable food-safety record. Here is The Washington Post (article linked above):

From September 2002 to February 2003, USDA shut down the plant three times for problems such as feces on carcasses, water dripping off pipes onto meat, paint peeling onto equipment and plugged-up meat wash sinks, according to agency records.

Gnarly. But it gets worse. In 2004 and 2005, the Post reports, the company repeatedly ran afoul of new USDA regulations designed to protect the food supply from mad-cow disease. Last year, “federal meat inspectors threatened to suspend operations at the packing house for not following requirements for controlling E. coli,” the Post reports.

The company supposedly straightened those problems out. Yet this year has brought two massive E. coli-related recalls in rapid succession, the second one ensnaring Coleman Natural and its customer, Whole Foods.

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Now, no one should really be surprised that a company like Nebraska Beef has trouble maintaining food-safety standards on the kill floor. It’s merely a large beef packer striving to survive in a field of behemoths.

According to this 2006 list of the nation’s top ten beef packers, Nebraska ranked number eight, with a daily slaughter capacity of 2,600 cows. Sound impressive? By contrast, then No. 1 packer Tyson had a capacity of 36,000 cows per day, and No. 2, Cargill, could do in 28,000. Even the then-fifth-biggest packer, Smithfield Beef Group, could take down 8,000 cows per day — making it more than three times bigger than Nebraska.

But in the last year, the Brazilian meet-packing monstrosity JBS has bought up the Nos. 3, 4, and 5 largest U.S. beef packers. If U.S. government regulators approve those deals — and there’s no indication they won’t — JBS will emerge as the largest U.S. beef packer, with a daily kill capacity of 42,500. It alone will slaughter one in three cows raised in the United States — and the three largest beef packers will control something like 90 percent of the market.

For a relatively small company to survive among such giants is tough in any business climate. But the recent surge in feed prices has been brutal for the beef-packing industry. With corn prices near all-time highs and cattlemen reducing their herds, packer profits have plunged.

That puts tremendous pressure on packers to keep costs at a minimum. Huge corporate packers like Tyson and Cargill face such pressure, too, but they have the cash to ride out such crises. Relatively small packers like Nebraska don’t have that luxury — and I think that makes them more susceptible to cut corners.

Remember Hallmark/Westland, the California beef packer so spectacularly caught torturing downer cows to force them through the kill line, and into school-cafeteria kitchens? It, too, was a a smallish packer trying to keep a toehold among giants.

So now Whole Foods, self-described “America’s first certified-organic grocer,” has been dragged into the emerging scandal of industrial meat through its association with Coleman Natural.

At this point, I think it’s fair to ask what Coleman Natural really offers Whole Foods and its customers. People who buy Coleman Natural might think they’re getting beef from cows finished on grass. (Grass-fed cows are much less likely to carry the deadly 0157:H7 E. coli strain than corn-fed ones.) But Coleman makes no such promise. According to its website:

Animals are comfortable with open-air access and reduced-stress living environment.

That does not translate to access to pasture. Indeed, with corn prices elevated as they are, there’s no guarantee that Coleman cows are even getting corn. As I showed last week, cattlemen are actively searching out cheaper feed options, including potato chips and M&Ms!

And for months, conventional feedlot operators have been using heavy rations of “distillers grains,” the leftover from the industrial ethanol process. There’s strong evidence that cows that are fed heavy doses of distillers grains are even more vulnerable to E. coli 0157:H7 than corn-fed ones.

With the meatpacking industry almost comically consolidated and corn prices likely elevated for the foreseeable future, I predict more and more outbreaks and scandals around meat. And I doubt that “natural” producers and retailers will be left unscathed.

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