Pandemic Widens Gulf Between Packers And Producers

Jun 2, 2020

Cattle are auctioned at St. Onge Livestock
Credit Paul Schackow / SDPB

Rancher Rick Fox said there aren’t as many buyers for his cattle anymore, because the four major beef processors are so big they’ve pushed out competition. 

He said that drives down the price of cattle. 

“It’s kind of like going to a farm auction and if you wait till the end of the sale when everybody leaves, you get a pretty good deal,” Fox said. 

That good deal for meatpackers is bad for Fox's ranch near Hermosa. He fattens his calves on grass until they weigh about 600 pounds. Then he sells them. Last fall, each calf cold for up to $1,000. He said that’s $300 short of what he needs. 

Meanwhile, Fox watches the big four meatpackers make money. Tyson Foods, for example, reported $2 billion in profits last year. 

“They’re sure not wanting to give up any part of their gravy to us,” Fox said. 

The other three big beef packers are JBS, Cargill and National Beef. They or their parent companies all report profits in the tens of millions or billions of dollars. No one from those four companies or two major meatpacking trade groups would talk for this story. 

During the pandemic, Fox said the gap between the fortunes of producers and meatpacking companies is growing.  

Fox and other ranchers say one reason for that imbalance is that big companies have a supply of their own cattle. They get that supply by signing private contracts with operators that feed a lot of livestock. The big companies also import foreign cattle. 

When the pandemic hit, beef plants slowed down or shut down. That means they didn’t need as many cattle. Ranchers claim the companies slaughtered their own cattle first, and made everyone else get in line. 

Meanwhile, ranchers and small cattle-feeding operations have animals that are ready to sell. But they’re stuck, because the meatpackers don’t need to buy. And when the packers do start buying, the producers will have to take whatever price they get. 

Fox has some calves he kept last fall, hoping for a better price this year. 

“I guess these calves that we kept over the winter and fed them, we just pretty much threw our feed away,” Fox said. “I mean, we're not going to get any more, or much more, out of them now than what we’d have gotten last fall.” 

When Fox gets low prices for his calves, the effects ripple through the ag economy. 

One person who feels those ripples is Vaughn Meyer. He raises Angus bulls on his ranch near Reva. Ranchers buy the bulls to breed cows. When ranchers don’t have money, Meyer doesn’t get as much for his bulls. 

“We’re running down to about zero right now as far as cash available on this place,” Meyer said. “And I see neighbors that are running way worse than that, and have already sold out or put their herds up for sale.” 

Small operations that fatten cattle for slaughter are also feeling the pain. Troy Deberg feeds around 1,000 cattle in large pens near Henry. He’s so angry about the prices he’s getting, he posted a protest sign on his barn. It says, “You think beef is high now? Wait till the packers control the farms.” 

Deberg said the losses he’s taking now might drive him and others out of the cattle business. And that would give the big four meatpacking companies even more control over the cattle supply. 

“It’s a broken system, and if they don’t get it fixed this time, she’s gonna be all over, I think,” Deberg said. 

In Nebraska, there’s an organization that’s been working against corporate consolidation in agriculture since 1998. It’s the Organization for Competitive Markets.  

The group’s interim executive director is Ben Gotschall. He said the federal government needs to enforce antitrust laws and break up the power of the packers. And he said the pandemic is a do or die moment. 

"We can’t go back to the way things were six months ago, because six months ago they were already on a downward trend,” Gotschall said. “And the coronavirus exacerbated that, and quite frankly, there are already producers that aren’t going to make it through to the end of this, whatever the end might look like.” 

If current trends continue, Gotschall said the ranchers who do make it could be forced into contract work for the big meatpackers. Now, he said, cattle ranchers are some of the last independent livestock producers. Fewer than 20 percent of cattle are sold under contract.  

But unless something changes, Gotschall said the beef industry could go the way of poultry and pork – where 75 percent or more of the animals are under contract.