-This story is part of an SDPB series on the food supply chain.-
Whenever I interview people in the cattle business, I know it’s only a matter of time before they ask, “So, are you related to Wayne?” Or, “Are you related to Justin?”
My dad, Wayne, owned Kimball Livestock Exchange for about 30 years. My oldest brother, Justin, is the owner/manager of St. Onge Livestock and vice president of the U.S. Cattlemen’s Association.
So, when we started our series on the meat supply chain here at SDPB, I wanted to tap into my family’s expertise. Justin, especially, has been vocal about the pandemic-related problems in the beef supply chain.
Eventually it occurred to me, why not film our conversation? Perhaps that would give listeners and readers the same inside perspective that my brother gives me.
So that’s what I did. What follows is the video recording and a transcript of that conversation. The transcript is edited for length and clarity. My questions are in bold, followed by my brother’s answers.
What effect has the pandemic had on the cattle business?
The pandemic itself has definitely had some negative effects on the food supply chain and the slaughter issue that we have. A couple things happened. First off, when restaurants were shut down, then they had to refit all of that food - the meat that was going to those restaurants in different-type boxes and sizes and all those things - they had to refit it to go to grocery stores. And we saw some problems with that early on. Some of these grocery stores weren’t able to be stocked up because they were using all their supply, and there was some panic buying, and the supply chain had trouble adapting to that.
At that time, we were still killing plenty of cattle, getting through the slaughter facilities. As time went on, we had some trouble keeping those slaughter facilities up to speed, and we still today are not all the way up to speed. So the supply chain has had some problems due to a slowdown, not because we’re short of cattle, but because we’re having trouble getting them through the whole supply chain.
So what’s happening to those cattle, if you can’t get them moving through the supply chain?
We’re just getting into some of that. The near-term is they’re in a waiting pattern. And it becomes an economic loss to start with. They’re feeding them and they’re not gaining, they’re just kind of maintaining. And then the cattle can get so big that they’re unhealthy, and you can have a lot of problems, especially going into summer, into some of these hotter weather conditions. But they’re trying to ramp up speeds at the plants. I know they’re adding some shifts, and we’ll see how that goes.
Will the cattle industry get in a situation like the hog industry, where people are talking about euthanizing hogs when they can’t find a place to slaughter them?
I probably would’ve at one time said that would never happen, but in COVID-19 era, I’m not sure I would ever say never. I think it’s unlikely. There’s still quite a little value there. The trouble with hogs are, the feed costs become way more than the hog’s worth in a matter of a very, very short period of time. These cattle are still worth quite a little money, so, yeah, you’re losing some, but the value of the animal will probably keep that from happening. That would be my guess, but I would never say never.
I’ve heard you and other people involved in the cattle industry express a lot of frustration, and I suppose it must be frustrating to have the cattle but not see meat on the store shelves.
I think there’s two things to come out of that. One, the price. When you do find meat now, it is three and four times higher than it’s ever been. We went way past all-time highs.
Now, that in itself is troubling, because you start to shutter demand once the panic buying goes by, and we wonder when that’ll pick up. And when people aren’t working, you wonder if they can afford to buy some of this beef. So I would say it’s had a very costly effect on demand. We’ll see how we come out of that, when prices start to come down and we get back to some sort of normalcy. But I’m sure it’s going to have some effect on that, and that’s very worrisome.
You talked about the effect on demand, and I’ve read that sales of -- if you want to call it fake meat, veggie burgers, whatever -- have been up during the pandemic as people look for something to buy. Are cattle people nervous about losing market share to something like that?
You know, yes, it’s on our minds, but I can tell you because I tried it, it’s crap, and so I think most people, we’re going to come back to what’s a wholesome, better meal and taste. Competition is competition, but we think we have a far superior product to that. And I don’t think the people that like beef are going to continue to buy that when the supply chains and everything comes back into line.
I have to ask about that burger -- what did you try and when?
I tried the Burger King thing they had, and it was horrible.
Why did you do that?
I had to know. Everybody was telling me, so I had to know. And I can honestly say it doesn’t taste much like competition.
People have been talking about “packer concentration” for a long time. But now people seem to be talking about it with even more frustration and anger, and the general public seems to be more aware of it. So what is the problem, and what can be done about it?
I think when you have four main packers and three of them are multinational companies controlling the bulk of the kills, up to 85 percent, that in itself tells you that we’re going to have problems selling our beef at the prices that we need. They get their heads together, and they decide what the price is, and it doesn’t matter whether we’re making or losing money, or if there’s a lot of cattle out there.
Up until COVID-19 we had shown that the demand was out there, that people were eating it, we were moving it, our cooler space was emptying out, and things were moving along at a good pace. But we still weren’t getting paid for fat cattle. Why? Because those four multinational packers control it all. And there’s no competition. Many of these feed yards that you feed at, they get one bid. Or they turn the cattle in on a Tuesday, and they tell them what the weighted average is the next Monday, and they tell them what they get for them, and that’s crazy.
You know, coming from the salebarn business, where it’s all about competition, that’s what we do. We’re competitive with other salebarns, and we’re competitive when we sell the cattle. That’s how we decide the price. And I think if you have competitive marketing you’ll drive the price up that way. And we hope that sheds a light, that the DOJ investigations and the USDA investigations [into alleged packer price manipulation], are things for us we hope make a difference.
So what ultimately will it take to change the situation to get more competition in the packing industry. What’s the solution?
At U.S. Cattlemen’s we’ve been pushing for Senator Grassley’s bill. He’s introduced it at 50 and 14, where they would have to buy 50 percent of their cattle at each plant in the spot-cash market and deliver within 14 days.
What do they do now? What are the percentages now?
About 25 percent, maybe on average. But up here in the north we sell way more cash cattle. So these northern guys, we’re selling a lot more than that. But you get down south, Oklahoma, Texas, it’s less than 10 percent. And that’s why some of the weekly averages can be manipulated so bad, because of the very thin cash trade in the South. So we believe if we could get that cash trade up there where it was an actual competitive market, make them compete for cattle, that we could have a big impact on the price of cattle going forward.
But then you’d still have just four major packers under that scenario, right? So is there some other solution?
We’re going to see a lot of these small packing houses – I'm sure you guys have highlighted some of this, we talked about it the other day – a lot of these small packing houses are backed up. I know four or five deals just within arm’s shot of me that are going to start up some smaller packing houses. I’m hopeful that we can find some more midsize, regional-type packers like Aberdeen.
You know, a hundred years ago they broke up the packers. It was almost a hundred years ago exactly. I’m not advocating that as a solution, but it has to be a talking point on the table. If we can’t come up with ways to make sure they aren’t anti-competitively buying the cattle, then we’re going to have to look for other solutions. But we’d like to see this Grassley bill go through and see what happens, and hopefully that would take us down the road a long ways.
A couple of other solutions we hear people talking about are Country of Origin Labeling and loosening up restrictions on selling direct to consumer and selling state-inspected meat across state lines. Are those things that you think would work and would be helpful, or not?
I do. I think especially interstate transport of inspected meat, we’ve advocated for this. This a bill we’ve tried to get passed for the past four years. And again, because there wasn’t a limelight on it, and now all of a sudden there is, there’s a good chance to get that done. Now we have to be careful and make sure there’s safeguards in there, because we know we produce the safest protein on the planet, and we want to make sure we continue to do that.
What effect would that have? I assume that would be a small amount of beef being sold direct from producer to consumer. We have more than 3 million cattle in South Dakota. Would there be a real impact there or not?
I think it’s small, but I think anything you can do in this time is positive. Let’s just say that 5 percent of the cattle end up being slaughtered that way. Well that’s a good way to do it. And I think you know from us growing up, when you butcher your own beef, take it home to your freezer and use it, it’s way better than you can walk down to Walmart or Costco or whatever place and buy it, for whatever reason that is. That might be what moves that more is some of these people that buy a freezer and buy a quarter or half a beef or whatever, they may never stop doing that, because of the taste and availability and it’s right from farm to plate. So I think that has potential to grow. Can it have a huge, huge price impact right away? I doubt it. But it definitely is part of the solution.
OK, so what about Country of Origin Labeling?
Country of Origin Labeling becomes more of a food-safety issue, I think, on the minds of consumers today. That’s always been a big part of it. There’s a lot of people who believe, and I think in this COVID-19 era, they would choose, even if it was a little higher in price, to buy something if you knew it was a product of the USA instead of something like I read the other day that came in from Namibia. I don’t even know where that is, but we imported beef from Namibia.
You know exactly where your shoes, your shirt, your hat, where all that comes from, why wouldn’t you want to know where your beef comes from?
There’s a feeling among some people that there’s more momentum now to make these changes that you’ve been calling for. Is anything going to get done, or after the pandemic subsides, are things just going to go back to the way they were and these problems continue?
While the limelight’s on, we do need to make change. Because you said it. When things go back to normal, it’s easy to get passive again. We do need to get these changes, but we’ve got to make sure we get them right, too. We can’t make all these changes just on emotion. We’ve got to make them so they fit and they work down the road, and we’ve got to get these cattle ranchers to work together. That’s been a real pitfall in our industry for a long time. We’re all very independent. We all have different ideas. Trying to get everybody to go one way is very hard. Compromise does not seem to be an easy thing to get.
So what would you say to the average consumer who maybe has gone to the store and they’ve seen that they haven’t been able to get meat, or they have and the price has been way higher, and they’ve been reading about workers getting sick in packing plants, and disruptions to the supply chain. What can they do about all of that?
Buy local. That’s one way, and we have way more opportunities for that out here in South Dakota then obviously they do in some big cities. But understand the high price you’re paying is not going back to the producer. So if the consumer is upset on the other end, that’s another way we can get change done. We hope they raise holy heck. They want beef, and they want good, wholesome, safe beef, and they want it at a price they can afford. And right now the reason it isn’t at a price they can afford is because the packer is making literally billions of dollars a week – billions, with a “b” -- a week, during a pandemic, and that’s ridiculous.
If this was the gas and oil industry, in gas, we know that oil is down to $10 a barrel, and if we were buying gas for $4 or $5 at the pump, there would be uprisings everywhere. And this is exactly the same thing happening in the beef industry. So having the consumer get excited about why and understanding that it’s not the producer that’s driving the price, that the middle guy, the packer, is making all the profits on this, I think that sheds great light and gives us more credence to get something done.
-Seth Tupper is SDPB's business and economic development reporter.