By P.J. Huffstutter and Lisa Baertlein
(Reuters) - Standing before a crowd of McDonald's Corp shareholders at its headquarters last spring, an unlikely investor prepared for battle.
Paul Shapiro, a senior official of the Humane Society of the United States, brandished a sheet of paper. The fast-food chain was serving eggs to Americans from caged chickens, he said, each living in a space smaller than the paper rectangle. Why was that?
Shapiro, the group's senior director of farm animal protection, said some in the audience clapped.
Shapiro's bit of stagecraft was part of a fight under way in the American heartland that reaches into corporate boardrooms. Farmers and agribusiness are on one side and food safety groups and animal-rights organizations are on the other.
It is fueled, in part, by politicians eager to court influential backers during an election year. Farm groups, too, want to be heard as Congress picks up its review of the federal farm bill.
And although food-safety activists and animal-rights organizations have different agendas, they both agree on one thing: Much of the public is unaware of what happens to their food before it arrives on their plate.
The recent furor over so-called "pink slime" beef filler underscores how social media have given activists and consumers a powerful weapon to influence that process. Using tools such as Twitter and the threat of spending boycotts, consumers and activists pressured retailers to abandon Beef Products Inc's ammonia-treated lean, finely textured beef.
"WHAT DO YOU HAVE TO HIDE?"
BPI idled three plants, affecting 650 workers. AFA Foods, one of the largest ground beef processors in the country, filed for bankruptcy in early April, citing the uproar over pink slime. Agribusiness giant Cargill cut production of the meat scraps and warned the public's resistance to the filler could lead to higher hamburger prices this barbecue season. Wal-Mart Stores Inc and Kroger Co, among other grocery sellers, dropped it.
"What do you have to hide?" is the new battle cry for food activists, said Amanda Hitt, a director at the Government Accountability Project, a group that protects whistleblowers.
Stung by the setbacks, farm groups and agribusiness heavyweights are spending hundreds of thousands dollars on political campaigns to block critics from stepping inside barns.
Tech-savvy farmers have launched social media campaigns about farm life and trained their peers on how to tweet critical food bloggers. The agribusiness sector spent $123.8 million on lobbying efforts in 2011, up from $110.2 million in 2007, according to OpenSecrets.org.
Critics are equally determined. Tens of thousands of dollars have been plowed into lobbying efforts this legislative year by activists on proposed laws regulating the raising of hogs in six states. Activists are pushing for legislation that would bar farmers from housing pregnant sows in certain types of crates.
The Humane Society is snapping up shares of agriculture and food companies to press them to change corporate purchasing practices.
The fight has gotten so intense that Nebraska Governor Dave Heineman recently told a crowd of cattlemen that he had a message for the Humane Society: "We're going to kick your ass and send you out of the state."
BATTLE LINES DRAWN
The Humane Society and other activists say their goal is to pull back the curtain on the nation's food supply. But what is behind that curtain is often a messy sight - particularly in the meat industry, where production methods can be less than appetizing.
The outcry over BPI and its "pink slime" worries farmers and food processors. They argue that they are being sabotaged by opportunists who have infiltrated farming operations.
They also fret that agriculture is misunderstood by a public whose ties to farming were cut generations ago. About 2 percent of the nation's population lives on a farm, according to government data.
"We have to stop them," Forrest Lucas, founder of the Lucas Oil Co, said of the activists. He owns a 16,000-acre cattle breeding ranch in southwest Missouri.
Lucas said he invested more than $600,000 to start the agriculture advocacy group Protect the Harvest and plans on spending "much, much, much more" to help back political candidates and social media campaigns to thwart critics this election year.
But amid this outrage, an unsettling realization is growing among the farm set: Some of these battles may already be lost.
"We have to do a better job of communicating with the public and that includes listening to what they say," said Don Lipton, spokesman for the American Farm Bureau.
WEIGHING THE RISKS
This conflict has raised concerns in the financial and commodities sectors, where the fallout from the "pink slime" uproar is still being felt.
Some agricultural lenders say they now weigh whether a company has a plan in place to deal with the "media risk" of activists portraying them in a negative light.
"I don't know that anyone can anticipate something like what happened" to BPI, said Brian Klatt, senior vice president of capital markets for CoBank. "But we're looking at whether someone has the ability to withstand these kinds of shocks."
The clash has hit farmers' incomes. The price of beef trimmings BPI used fell from an average of $1.01 a pound in late February, prior to the controversy, to about 50 cents this past week, according to data from the Department of Agriculture. It also spilled over to the price of lean fresh pork trim typically used in hotdogs. That fell to nearly 49 cents a pound last week, down 33 percent from six weeks earlier.
While People for the Ethical Treatment of Animals (PETA) is better known for its anti-fur campaign and headline-grabbing antics, no activist group is more loathed by the agricultural community than the Humane Society of the United States.
Agribusiness lobbyists have written to companies sympathetic to the group, asking them to halt donations. In recent months, pick-up trucks across the nation's Corn Belt have started sporting bumper stickers that tell the Humane Society and PETA to "get your paws off our laws."
"It is HSUS and its issues that truly deserve our attention because of the threat they pose to our society," a spokeswoman for the Nebraska Farm Bureau wrote in a 2007 editorial in the High Plains Journal. "Laugh at PETA but fear HSUS."
The Humane Society is neither small nor poor. The group's total assets - including cash, investments, property and other items - were $231.3 million in 2010, according to the group's consolidated financial statements posted on its website.
Over the years, the Humane Society has become known for its undercover videos. One shot in 2008 at a California slaughterhouse, where workers were shown using chains and forklift to move so-called "downer" cows, led to the largest beef recall in the country's history.
A more recent victory: eggs.
After several years of successful political campaigns to require larger cages for egg-laying hens, or to mandate cage-free egg farm production, the United Egg Producers (UMP) joined forces with the Humane Society.
The longtime adversaries petitioned Congress to amend existing egg inspection laws to require all farmers to adopt larger standards on cage sizes for egg-laying hens.
Producers say the changes will mean overhauling housing for nearly 300 million chickens, at an estimated cost of as much as $4 billion.
But agribusiness leaders said they felt trapped: They could join forces with the Humane Society or continue to lose the fight one state at a time.
"There was legislation in Ohio and Michigan for different cages," said Mitch Head, spokesman for the egg producers. "Washington and Oregon were potentially going to require all eggs to be cage-free eggs. We realized there were 24 states that have ballot initiative potential."
PROTECTING THE FARM
Worried about a repeat in other agricultural sectors, the industry is battling back.
Much of that fight has resulted in legislative efforts to block or restrict undercover investigations on farms - or to force activists to quickly turn over evidence of potential wrong-doing to local authorities.
In February, Iowa lawmakers enacted a law that makes it a crime to enter - or try to enter - an animal or crop production facility using fraudulent reasons. They said it will help farmers protect their private property but whistleblower groups and animal rights activists say it was created to silence them and make it impossible for them to get video footage.
The idea is spreading. Last month, Utah lawmakers passed a bill similar to Iowa's. New York, Minnesota, Missouri and Nebraska are weighing similar or related legislation.
"In an economy that's very fragile, agriculture is one of the few bright spots," said Nebraska state Senator Tyson Larson, author of that state's bill. "We have to protect ag and the industries it supports."
But critics are keeping the pressure on corporations through shareholder activism. Earlier this year, when Carl's Jr. and Hardees fast-food chains failed to make good on vows to move away from buying eggs from caged hens and pork from suppliers who house their pigs in gestation crates, the Humane Society called a stock broker.
The animal rights group soon bought about $2,000 worth of shares in Apollo Global Management, the parent company of the chains - enough to submit a shareholder resolution decrying its "lack of progress on animal welfare issues," said Matthew Prescott, food policy director for the Humane Society.
So far, the fast-food companies have not changed their buying policies but the tactic has raised eyebrows.
The Humane Society's stock portfolio today includes more than 80 publicly traded companies, nearly double the number it held two years ago, Shapiro said.
The coming weeks promise to be busy, Shapiro said. They have seven shareholder meetings to attend, including one for Seaboard Foods, a unit of Seaboard Corp, the third largest hog producer and a supplier to Wal-Mart.
Shapiro will be back at McDonald's, too. The fast-food giant has started using cage-free eggs in the United States and has promised to ask its pork suppliers to stop buying from farmers using hog gestation stalls.
(Additional reporting by Martinne Geller; Editing by Greg McCune; Desking by Bill Trott)