After Another Chaotic Year, Some Say It's Time To Change The Beef Industry
So far, 2020 has not been kind to beef producers. Farmers and economists say the food system fielded a one-two punch that triggered huge market disruptions and losses.
When the pandemic closed restaurants and schools, which account for a little over half of food prepared in the U.S., demand shifted, sending cattle prices tumbling even as shoppers were stocking up. And after COVID-19 closed some of beef’s big-name meatpacking plants, cattle sales slowed and farmers found themselves forced to feed cattle for longer than planned.
Congress acted swiftly to prevent a worst case scenario for U.S. farms, pledging the agriculture industry $16 billion in direct aid under the Coronavirus Aid, Relief, and Economic Security Act (CARES). In August, President Trump announced billions more, though it’s unclear how much of that money will carry over from the first set of payments.
Yet some ranchers and lawmakers want to see more than federal assistance. They hope COVID-19 is a tipping point for long-standing complaints about price transparency and consolidation within the beef industry.
Take Sharon and Keith Portenier, who own a family cow-calf operation raising hundreds of cattle near Elmwood, Neb. Around 400 of the cattle wandering their 3,000 acre property right now will head to feedlots in early 2021, eventually ending up on a dinner plate.
On a recent fall day, the Porteniers were rounding up the animals to vaccinate them for fall. They were joined by daughters Allie and Jessie, their partners, and 3-year-old grandson Curtis. Most of the couple’s extended family works with livestock.
“We've always taught our kids that it's a family operation,” Sharon Portenier mused. “That's kind of our motto.”
So far, the Porteniers’ business will emerge from 2020 mostly unscathed by COVID-19. They sold off their cattle early last winter before markets began to contract. But while beef production has almost completely recovered, cattle prices haven’t. It’s not clear when ranchers will be out of the woods.
“We can't put a price tag on our calf when we take it to the sale barn, and say, ‘Okay, we have to have $2 a pound for our calf,’” she said. “And we are one of the few industries that can't do that.
That’s partially why corn belt cattle producers are getting the biggest cuts of the Coronavirus Food Assistance Program (CFAP) payments: 64 percent in Missouri, 70 percent in Kansas, and 93 in Oklahoma.
Without aid, a recent report found ranchers in Nebraska alone — the country’s top beef producer — might have lost over $970 million.
“I didn’t even want to apply, I hated to apply, but my God, it's there,” said Doug Korth, a lifelong Nebraska rancher. “If you don't take it, you're a blessed fool.”
On a phone call in July, Korth said he was grateful to receive nearly $30,000 from the USDA, but he said it also felt like being handed a bandaid for a gunshot wound. Payments for each wave of aid max out at $250,000. Between longstanding low cattle prices and the impact of the pandemic, he expects to go out of business within the next few years.
“I loaded 117 steers last week, lost $285 a head,” he said. “That's $34,000 on one pen of cattle, and I said I've got 9,000 of ‘em.”
He thinks the country’s biggest meatpackers, including Tyson, JBS, National Beef, and Cargill, drove down spring cattle prices while retail prices soared. The companies, often nicknamed the “Big Four”, amassed control over 80 percent of the national market over the past fifteen years.
“We let the big boys buy up all these little plants and shut them down,” he said. “So we let them take the competition away from us.”
That’s a longtime complaint from ranchers. Many lobbed similar accusations after a Kansas Tyson Foods plant caught fire in 2019, triggering record discrepancies between what processors were paying ranchers and the prices they were selling boxed beef at to grocery stores. As the coronavirus gripped the U.S., retail beef prices increased 10.5% while companies saw record profit margins.
Korth says that’s a problem that can only be fixed with more diversity and price transparency within the industry — not another $14 billion in aid.
"When they over double the price of beef to you guys and take $100 to $250 per head away from us, that's corruption,” he said. “Who the hell can afford that?”
Ranchers and beef organizations have made it clear they want action from Washington. The USDA released a report on how the Tyson fire and COVID-19 impacted cattle markets and is further investigating possible violations of antitrust laws.
Some lawmakers are also pushing bills inspired by COVID-19. Nebraska Sen. Deb Fischer recently penned an amendment to the Packers and Stockyards Act of 1921 that would force packers to haggle more with ranchers and make public what meatpacking companies pay for cattle.
Back on the family ranch, Sharon Portenier supports the idea of more negotiation between companies and marketers, even though it would likely help ranchers selling directly to meatpackers first. She says all ranchers’ fates are tied, regardless of what point on the food chain they operate in.
“It's the trickle-down effect,” she explained. “If it helps the feeders, then it's going to help us as the cow-calf producers.”
Another bill called the RAMP UP Act, proposed by a bipartisan coalition of House representatives, would create grants for smaller meat processors to become federally inspected. That would increase competition and production nationwide.
The policies could also benefit shoppers by helping to buffer supply chain issues and retail price hikes. Keith Portenier said he thinks most Americans don’t understand how little agency ranchers have over the price they end up paying at the store.
“[Consumers] didn't know that the packer was the one making all the money,” he said. “If you weren't involved in agriculture, you'd walk into a grocery store and say, ‘Man, these cattle people are making way too much money.’”
In the meantime, he says ranchers aren’t dwelling on the industry’s fate.
“There's tough times ahead, we all know it,” he conceded. “But we'd rather talk about the weather, or the election, or the rodeo next weekend or something.”
“And that falls into the pride of the ranchers, you know,” Sharon Portenier quipped. “They don't want the consumers to feel sorry for them.”