Stung by pandemic and JBS cyberattacks, US ranchers build new beef factories
June 18, 2021
U.S. cattle ranchers and investors are investing hundreds of millions of dollars in new beef factories after temporary slaughterhouse closures at the start of the COVID-19 pandemic left farmers with nowhere to send supplies. animals intended for processing into meat.
Reuters reports that a cyberattack on the U.S. unit of Brazilian meat-packaging giant JBS SA that slowed nearly a quarter of U.S. beef production earlier this month once again highlighted vulnerabilities in the chain the country’s meat supply and caused more headaches for farmers.
The ranchers, along with the United States Department of Agriculture (USDA), say the sector is over-consolidated and therefore dependent on a handful of large processors and their industrial meat packing plants.
Four industry giants – JBS USA, Tyson Foods Inc, Cargill Inc and National Beef Packing Company – slaughter 85% of grain-fed cattle cut into steaks, ribs and roasts for consumers.
Small start-up meat factories aim to provide local ranchers with more places to slaughter livestock, especially those raised to produce better quality beef. They say adding factories can keep meat production going if large facilities close.
When large meat factories close, meat supplies tighten as ranchers find themselves stuck with cattle that would otherwise have been slaughtered. This means that the price of livestock generally goes down, while the price of meat in supermarkets goes up.
Extended closures of some of America’s largest slaughterhouses due to COVID-19 outbreaks hampered meat production in the spring of 2020, leading to limits on consumer purchases at grocery stores and lower frozen stocks that processors did. have not yet replenished.
Rusty Kemp saw the need to increase processing capacity after a 2019 fire at a Tyson Foods plant in Holcomb, Kansas, left meat buyers scrambling for supplies and cattle producers with nowhere where to sell their cattle. Then the pandemic and the ransomware attack on JBS struck.
Kemp now plans to open a $ 300 million beef plant in Nebraska this fall.
“We thought the Holcomb fire was a real train wreck and then COVID came along and Holcomb didn’t look that bad,” he said.
The Kemp plant, named Sustainable Beef, will kill 1,500 cattle a day and use blockchain technology so consumers can follow a piece of meat to the ranch, he said.
Sustainable Beef is co-owned by cattle ranchers who will provide animals for slaughter at the plant, rather than major packers, Kemp said. He hired former executives from one of the largest processors, Cargill, as consultants because of their expertise.
But Kemp said he’s not trying to fight with the top four processors and that bigger factories are still needed to produce high volumes of meat.
“We absolutely need more capacity and more players,” Kemp said.
No more room to slaughter
Nationally, at least five new treatment facilities of varying sizes have opened or are planned following supply shocks at the start of the pandemic. Combined with expansions at existing plants, including one owned by JBS, daily slaughter capacity in the United States is expected to increase by around 5%, according to a Reuters calculation and data from the North American Meat Institute industry group.
Market conditions are favorable for new entrants. The supply of cattle is plentiful, while beef prices and packer profit margins have skyrocketed due to strong exports and demand from U.S. consumers.
In Butler, Missouri, Todd Hertzog and his family opened Hertzog Meat Company this month after considering the project for five years.
Although the $ 3.75 million plant slaughters only about 20 cattle a day, it serves neighboring ranchers who want to produce better quality beef, said Hertzog, who manages the operation.
“The pandemic has opened our eyes to the needs of local producers,” he said.
Production disruptions during the pandemic prompted Cliff Welch to begin construction of a meat processing plant near Central City, Ky., At a price of more than $ 1.2 million. The cyberattack on JBS then reinforced Welch’s decision to build the facility, which is slated to open in late 2021, he said.
Welch aims to slaughter 75 cattle per week to begin with, with the capacity to eventually kill 300 head per week. He said he would produce custom cuts of meat using an “old-fashioned butcher shop” and plan to sell them locally.
“I’m starting from scratch,” Welch said. “It’s a big company.”
Welch said he received a grant of $ 250,000 from Kentucky for the project.
The U.S. Department of Agriculture has pledged to support increased transformation as part of a $ 4 billion initiative to strengthen the nation’s food system.
“The hope would be that by expanding, by creating a diversity of size and ownership and a diversity of operations, we create greater resilience,” USDA Secretary Tom Vilsack told reporters. after the JBS attack.
Last year, Missouri gave about $ 17 million in grants to meat processors with fewer than 200 employees who wanted to expand or build new facilities, state agriculture director Chris Chinn said. .
The payments doubled the amount of red meat inspected by the state under a program triggered by the pandemic, she said.
“It has added stability to our local communities and our rural areas,” Chinn said. “They didn’t have to depend on a single local source for their food.”
Smaller factories, same problems
Small facilities find that they face the same challenges as large businesses, including a labor shortage, without the help of a large company behind them.
After opening in March, Missouri Prime Beef Packers struggled to find workers for a plant in Pleasant Hope, Missouri, which now kills about 200 cattle a day, despite advertisements running in newspapers and on the radio, said Dallen Davies, director of corporate culture.
The facility slaughters livestock raised under special guidelines, such as being grass-fed or certified for humane handling, to add value to ranchers and provide a better product for consumers, Davies said.
Factories need to differentiate themselves as they cannot compete with industry giants in terms of volume or low prices achieved with mass production lines.
Former President Donald Trump said last year he urged the Justice Department to look into allegations that the meat packaging industry violated antitrust law because the price slaughterhouses Pay farmers for animals has fallen even as meat prices have risen. U.S. governors and lawmakers are pushing the department to continue investigating.
Those involved in the expansion of slaughterhouses say they still have to do something to give ranchers more options in the meantime.
“We really don’t want to wait and see if the government is going to fix this problem,” Kemp said. “We have decided to take matters into our own hands and do it.”