Beefing up their bottom lines
Ranchers look to build own slaughter plants to combat low prices, consolidation
DES MOINES, Iowa — Like other ranchers across the country, Rusty Kemp for years grumbled about rock-bottom prices paid for the cattle he raised in Nebraska, even as the cost of beef at grocery stores kept climbing.
He and his neighbors blamed it on consolidation in the beef industry stretching back to the 1970s, giving the processors more power to set prices while ranchers struggled. Federal data show that for every dollar spent on food, the share that went to ranchers and farmers dropped from 35 cents in the 1970s to 14 cents recently.
It led Kemp to launch an audacious plan: Raise more than $300 million from ranchers to build a plant themselves.
“We’ve been complaining about it for 30 years,” Kemp said. “It’s probably time somebody does something about it.”
Crews will start work this fall building the Sustainable Beef plant near North Platte, Nebraska, and other groups are making similar moves in Iowa, Idaho and Wisconsin. The enterprises will test whether it’s possible to compete financially against an industry trend that has swept through American agriculture and that played a role in meat shortages during the coronavirus pandemic.
The question is whether smaller plants can pay ranchers more and still make a profit.
An average 1,370-pound steer is worth about $1,630, but that must be divided among the slaughterhouse, feed lot and the rancher, who typically bears the largest expense of raising the animal for more than a year.
David Briggs, the CEO of Sustainable Beef, acknowledged the difficulty but said his company’s investors remain confident.
“Cattle people are risk takers and they’re ready to take a risk,” Briggs said.
Consolidation of meatpacking started in the mid-1970s, with buyouts of smaller companies, mergers and a shift to much larger plants. Census data cited by the USDA shows that the number of livestock slaughter plants declined from 2,590 in 1977 to 1,387 in 1992. And big processors gradually dominated, going from handling only 12% of cattle in 1977 to 65% by 1997.
Only four companies — Cargill, JBS, Tyson Foods and National Beef Packing — control over 80% of the U.S. beef market thanks to cattle slaughtered at 24 plants. That became problematic when the coronavirus infected workers, slowing and even closing some of the massive plants, and a cyberattack last summer briefly forced a shutdown of JBS plants until the company paid an $11 million ransom.
The backers of the planned plants have no intention of replacing the giant slaughterhouses, such as a JBS plant in Grand Island, Nebraska, that processes about 6,000 cattle daily — four times what the proposed North Platte plant would handle.
However, they say they will have advantages, including more modern equipment and, they hope, less employee turnover thanks to slightly higher pay of more than $50,000 annually plus benefits along with more favorable work schedules. The new Midwest plants are also counting on closer ties with ranchers, encouraging them to invest in the plants, to share in the profits.
The companies would market their beef both domestically and internationally as being of higher quality than meat processed at larger plants.