Unhappy with prices, ranchers look to build own meat plants
DES MOINES, IOWA » Like other ranchers across the country, Rusty Kemp for years grumbled about rockbottom prices paid for the cattle he raised in central 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 that resulted in four companies slaughtering over 80% of the nation’s cattle, giving the processors more power to set prices while ranchers struggled to make a living. 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, putting their future in their own hands.
“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 on nearly 400 acres near North Platte, Nebraska, and other groups are making similar surprising moves in Iowa, Idaho and Wisconsin. The enterprises will test whether it’s really 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 move is well timed, as the U.S. 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, going up against huge, well-financed competitors that run highly efficient plants and can sell beef at prices that smaller operators will struggle to match.
The question is whether smaller plants can pay ranchers more and still make a profit themselves. An average 1,370-pound steer is worth about $1,630, but that value must be divided between 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.
Currently 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 concentration 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 Biden administration has largely blamed declining competition for a 14% increase in beef prices from December 2020 to August. Since 2016, the wholesale value of beef and profits to the largest processors has steadily increased while prices paid to ranchers have barely budged.
The backers of the planned new 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.