Farm and Food File for the week beginning Sunday, Aug. 28, 2022
All hats, no cattle and little chance
Two groups–one of South Dakota investors, the other tied to Texas cattle ranchers and feeders–are preparing to spend a collective $1.8 billion on two meatpacking plants that they say will be so innovative each will pay cattle suppliers more for their cattle and bison than any of today’s Big Four packers.
Most meatpacker pros, however, think both projects are all hat and no cattle. Why?
Because one of the oldest stories in cow country is how big, bad packers ride roughshod over regional and local cattle markets to acquire an unfair share of the beef dollar while powerless ranchers and feedlot operators take it in the saddle every time they deal with a packer.
Then, just when it seems no rancher or feeder can go on, a white-hatted newcomer rides into town to extoll the virtues of a “producer-owned” slaughtering plant that will plow profits back to local ranchers and shareholders.
Rarely, however, is the plant built and, worse, if it is, most quickly sink in a pool of debt.
Still, hope returns to cattle country with every new calf and every new “local” meatpacker plan. The latest, a $670 million “beef processing facility,” is planned near Amarillo.
That plant, already named “Producer Owned Beef LLC,” is a “significant move… in an industry controlled by four multi-billion dollar companies”–Tyson, Cargill, JBS, and National Beef–“that aren’t run by cattle producers,” noted the non-profit Franklin News Foundation project, The Center Square.
Its business plan is to “shore up the supply chain, enhance food security, increase competition, and benefit Texas cattle producers” in an effort to “keep hundreds of millions of dollars in Texas.”
The South Dakota plant, planned for Rapid City, is even more ambitious; it will cost an estimated $1.1 billion, employ 2,500 workers, pay $28-per-hour wages, and slaughter and process 8,000 head of cattle and bison per day. That scale would make it the largest “single beef plant currently in operation,” according to Tri-State Livestock News.
And, notes the News, the billion-dollar bet, to be known as the “Western Legacy Development Corporation,” will be “the first of its kind in North America to use the methane gas from the facility as energy from the plant.”
While both plans are noteworthy, neither outlines how either facility will implement the First Rule of Meatpacking: Put more blood on the floor faster and cheaper than any competitor.
That is, after all, the most important–and some say, only–rule in the butchering business. And while it sounds quite simple, there’s nothing simple about meatpacking. It is one of the most complex juggling acts in or out of a circus tent.
Think of it this way: The South Dakota investors say they’ll put $1.1 billion on the table to get in the meat game against the world’s four largest meatpackers who already are the lowest cost, most ruthlessly efficient beef slaughterers, processors, and sellers on three continents. Is that a bet you’d make?
No way, says long-time packer critic and Kansas rancher Mike Callicrate, the founder of Ranch Foods Direct, an online, direct-to-consumer beef marketplace. In fact, he adds, “The bet I would make is that the plant will never be built because there just aren’t enough cattle to support a new plant that size. Not in South Dakota, not anywhere. This is all talk.”
And the Texas cattlemen group that says it will put $670 million into a new beef packing plant in north Texas? “Same deal, maybe worse,” says Callicrate. “Producers aren’t mean enough and tough enough to last in meatpacking. It’s a brutal business.”
Still, it’s understandable that ranchers and feeders are tired of being gutted by the Big Four. “But spending $1 billion or $700 million to compete with them on their field is crazy.”
Crazy, too, is that few in government even mention challenging meatpackers where they might be most vulnerable–in a federal courtroom facing antitrust charges.
Instead, ranchers and feeders get more pie-in-the-sky talk while the Big Four continue to carve up markets both here and abroad.
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