Unhappy with prices, ranchers seek to build their own meat factories
DES MOINES, Iowa (AP) – Like other ranchers across the country, Rusty Kemp has complained for years about the very low prices paid for the cattle he raised in central Nebraska, even as the cost beef in grocery stores kept climbing.
He and his neighbors blamed it on the consolidation of the beef industry dating back to the 1970s, which led to four companies slaughtering more than 80% of the country’s livestock, giving processors more power to set prices while ranchers struggled to earn a living. Federal data shows that for every dollar spent on food, the share going to ranchers and farmers has fallen from 35 cents in the 1970s to 14 cents recently.
This led Kemp to launch a bold plan: to raise over $ 300 million from ranchers to build a factory themselves, putting their future in their hands.
“We’ve been complaining about this for 30 years,” Kemp said. “It’s probably time for someone to do something about this.”
Teams will begin work this fall to build the nearly 400-acre Sustainable Beef plant near North Platte, Nebraska, and other groups are taking similar surprising steps in Iowa, Idaho and Wisconsin. Companies will test whether it is really possible to compete financially with an industry trend that has swept American agriculture and played a role in meat shortages during the coronavirus pandemic.
The move is timely, as the United States Department of Agriculture is now taking a number of steps to encourage a more diverse supply in the beef industry.
Still, it’s hard to overstate the challenge, faced with huge, well-funded competitors who run highly efficient plants and can sell beef at prices small operators will find it hard to match.
The question is whether small factories can pay ranchers more while making a profit themselves. An average 1,370-pound steer is worth about $ 1,630, but this value must be divided between the slaughterhouse, the feedlot, and the rancher, who usually bears the greatest expense of raising the animal for more than a year. ‘a year.
David Briggs, CEO of Sustainable Beef, acknowledged the difficulty but said investors in his company remained confident.
“Ranchers are risk takers and they are willing to take risks,” Briggs said.
Consolidation of meat packaging began in the mid-1970s, with takeovers of small companies, mergers and a move to much larger factories. Census data cited by the USDA shows that the number of cattle slaughterhouses increased from 2,590 in 1977 to 1,387 in 1992. And large processors have gradually dominated, from just 12% of cattle in 1977 to 65. % in 1997.
Currently, four companies – Cargill, JBS, Tyson Foods and National Beef Packing – control more than 80% of the U.S. beef market from cattle slaughtered at 24 plants. This concentration became problematic when workers infected with the coronavirus, slowing down and even closing some of the massive factories, and a cyberattack last summer briefly forced the JBS factories to close until the company paid a ransom of 11. millions of dollars.
The Biden administration largely blamed the drop in competition on a 14% increase in beef prices from December 2020 to August. Since 2016, the wholesale value of beef and the profits of the largest processors have steadily increased while the prices paid to ranchers have barely budged.
Donors of the planned new plants have no plans to replace giant slaughterhouses, such as a JBS plant in Grand Island, Nebraska, which processes about 6,000 cattle a day, four times what the proposed plant of North Platte would deal with.
However, they say they will have significant perks including more modern equipment and, they hope, less staff turnover thanks to a slightly higher salary of over $ 50,000 per year plus fringe benefits as well as benefits. more favorable working hours. New factories in the Midwest also rely on closer relationships with ranchers, encouraging them to invest in the factories, to share the profits.
Companies would market their beef nationally and internationally as being of better quality than meat processed in large factories.
Chad Tentinger, who is leading efforts to build a Cattlemen’s Heritage factory near Council Bluffs, Iowa, said he believed small factories were profitable even in the 1970s, but owners switched to larger factories in hope to increase their profits.
Now, he said, “we want to revolutionize the factory and make it an attractive place to work. “
As well as paying ranchers more and providing dividends to those who own stocks, the hope is that their success will prompt more factories to open and new competitors will open up more livestock markets.
Derrell Peel, an agricultural economist at Oklahoma State University, said he hoped they were right, but noted that research shows that even a 30% reduction in the size of a plant will make it much less efficient. , which means higher costs to slaughter each animal.
Unless small factories can reduce their expenses, they will have to find customers who will pay more for their beef or who will manage with a lower profit margin than larger companies.
“We have these very large plants because they are extremely efficient,” Peel said.
The biggest challenge, according to the North American Meat Institute, a trade group that includes large and medium-sized factories, will be the shortage of workers in the industry.
It is unfair to blame big business and consolidation for industry problems, said Shane Miller, group chairman of Tyson Fresh Meats.
“Many processors, including Tyson, are unable to operate their facilities at full capacity despite a large supply of livestock,” Miller told a US Senate committee in July. “It’s not by choice: despite our average wage and our $ 22 per hour benefits, there are simply not enough workers to fill our factories. “
The proposed new factories arrive as the USDA tries to increase the supply chain. The agency has spent $ 650 million in financing for medium and small meat and poultry plants and $ 100 million in loan guarantees for these plants. New rules are also planned to label meat as an American product to differentiate it from meat raised in other countries.
“We are trying to support new investments and new policies that will diversify and resolve this underlying problem of concentration,” said Andy Green, USDA senior advisor on fair and competitive markets.
Follow Scott McFetridge on Twitter: https://twitter.com/smcfetridge
Suggest a correction