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Ranchers Build Own Meat Plant 10/17 09:56

   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. 

   DES MOINES, Iowa (AP) -- Like other ranchers across the country, Rusty Kemp 
for years grumbled about rock-bottom 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.

   However, they say they will have important 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 relationships 
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.

   Chad Tentinger, who is leading efforts to build a Cattlemen's Heritage plant 
near Council Bluffs, Iowa, said he thinks smaller plants were profitable even 
back to the 1970s but that owners shifted to bigger plants in hopes of 
increasing profits.

   Now, he said, "We want to revolutionize the plant and make it an attractive 
place to work."

   Besides paying ranchers more and providing dividends to those who own 
shares, the hope is that their success will spur more plants to open, and the 
new competitors will add openness to cattle markets.

   Derrell Peel, an agricultural economist at Oklahoma State University, said 
he hopes they're right, but noted that research shows even a 30% reduction in a 
plant's size will make it far less efficient, meaning higher costs to slaughter 
each animal.

   Unless smaller plants can keep expenses down, they will need to find 
customers who will pay more for their beef, or manage with a lower profit 
margin than the big companies.

   "We have these very large plants because they're extremely efficient," Peel 
said.

   According to the North American Meat Institute, a trade group that includes 
large and mid-size plants, the biggest challenge will be the shortage of 
workers in the industry.

   It's unfair to blame the big companies and consolidation for the industry's 
problems, said Tyson Fresh Meats group president Shane Miller.

   "Many processors, including Tyson, are not able to run their facilities at 
capacity in spite of ample cattle supply," Miller told a U.S. Senate committee 
in July. "This is not by choice: Despite our average wage and benefits of $22 
per hour, there are simply not enough workers to fill our plants."

   The proposed new plants come as the USDA is trying to increase the supply 
chain. The agency has dedicated $650 million toward funding mid-size and small 
meat and poultry plants and $100 million in loan guarantees for such plants. 
Also planned are new rules to label meat as a U.S. product to differentiate it 
from meat raised in other countries.

   "We're trying to support new investment and policies that are going to 
diversify and address that underlying problem of concentration," said Andy 
Green, a USDA senior adviser for fair and competitive markets.

 
 
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