Long-time meat packer issues intensify under pandemic as retail prices surge
(Originally published in the Douglas Budget print edition 06-03-2020)
The sizzling meat on the grill lights up the senses – the snapping sounds, the savory smells – as the Neil Forgey family gathers for an impromptu Sunday afternoon barbecue on their ranch northeast of Douglas.
The BBQ is sandwiched between brandings (their own and their ranch neighbors’) on other weekends, yet it provides an idyllic respite from the immense pressures all of them are feeling this spring. COVID-19 issues have exacerbated an already difficult and volatile time in the ranching business, but those long simmering issues are now being thrust into the everyday lives of the rest of us as grocery stores and consumers feel the effects that independent ranchers have been dealing with for years.
While consumers are seeing surging prices – often record highs per pound – for beef, pork and chicken as well as shortages in some stores (including in Converse County), independent ranchers are being punished by lower prices for their product. That fact seems contrary to the supply-and-demand forces behind a free market.
The problem, according to many ranchers the Budget contacted, is much deeper than the pandemic, and they have been around for a long time. Some, like Mitch Falkenburg, are promoting their beef directly to the consumer, by-passing a log-jam caused by COVID-19 closures and a pricing scheme that squeezes ranchers’ bottom lines and hits consumers in the pocketbook. Others are just trying to adjust to the lower prices and difficulty getting their product to market.
The truth is, times are tough for independent cattlemen everywhere. In many cases, prices paid to ranchers are what they were a decade ago.
Neil Forgey remembers those times 10 years ago, and many other rough patches for cattlemen over the years.
At 63, he jokes that he has been a rancher since the day he was born in Casper. Even as a toddler wobbling behind his pop on a South Dakota ranch, he was emulating the hardworking men around him and learning how to run his own cattle operation.
The average age of ranchers these days is 57.7, according to farmprogress.com; it’s not an easy life and it’s been made more difficult for younger people to tackle the daily chores when profitability can be hit or miss. Wide open spaces, lack of traffic and clean air help make up for it a little.
He, his wife Clarice and their son, J.C., raise about 500 head on the LaBonte Creek Angus Ranch straddling the Converse/Niobrara county line. Blue skies dotted with puffy, cottonball-like clouds speckle the sky. The gravel road is lined on either side with acres upon acres of lush, nutrient-rich grass of an intense shade.
They’re doing okay this year, the elder Forgey said, but he still has concerns about the future of ranching.
THE PROBLEM LIES
The ranchers said it’s a much deeper issue than simply blaming the pandemic, though COVID-19 certainly has made a bad situation worse.
Many point the finger at a monopoly of sorts by the “Big Four.” Tyson Foods, Cargill Meat Solutions Corp., JBS USA and National Beef Packing Co. are the largest packing companies which, many like Forgey believe, control the livestock markets and prices.
Of the 35 million cattle slaughtered in the U.S. annually by about 60 major beef-packing operations (who process around 26 billion pounds of beef a year), those four companies control anywhere from 80-90 percent of the total number, depending on whose numbers you want to believe.
Consumers are feeling the heat of skyrocketing meat prices, yet ranchers aren’t seeing any of those profits. The four companies are.
Last week in Douglas the price for a pound of hamburger was $5.99 (80/20) to $8.99 (90/10). In Bentonville, Arkansas, a pound of 80/20 ground beef was $7.98 on May 18 and $9.49 in Cincinnati, Ohio. Last winter, hamburger was under $4 per pound in Douglas, with some offering it for far less during sales promotions.
Just a couple of weeks ago, one of Forgey’s friends sold a 1,240-pound, weigh-up cow for $818 at market. The price that day was $66/per 100 pounds, or 66 cents per pound. The store selling the meat could bring in as much as $3,380, quite the jump in price for the same cow, Forgey explained.
“Ranchers go to the lots to sell their cattle. What the rancher gets priced per pound as to what the grocery stores get isn’t pound-per-pound. You have to take into account deboning. At 1,240 pounds . . . probably yield about 48 percent, that’s 595 pounds hanging weight, then you debone that. Say 357 pounds of hamburger, multiply that by $9.49 in Cincinnati equals $3,548 – that’s how much it would go for retail in the grocery store. The rancher got $818.
“The rancher owned ‘em for a year; the processor owned ‘em for two weeks.
“Packers have the price so high because they can. A packer owns ‘em two weeks and (look at) the kind of money they’re making.”
Glenrock area rancher Rick Grant agrees, noting the current pricing on both ends of the spectrum are not your typical supply-and-demand issue.
“It’s one of those situations where there’s been questions if they’re playing above board for a long, long time. Back in time, regulations were put in place so the packers didn’t own the cattle. It made for a fair and open market for the cattle to be sold. Through the years, the packers, through third parties, bought up the big feed lots and didn’t have to pay the market rates. They low-ball the independent feeders. When COVID-19 hit, it gave them another opportunity, this time to shut down plants because people were sick. Then they couldn’t kill enough cattle, (and) they didn’t have enough people working in the plants to process them.
“It’s not a cattle shortage by any means,” said Grant, who is also a Converse County commissioner. “It’s not an oversupply, either, but an under-utilization of what we’ve got. The (big four packers) are big conglomerates that can do what they want to do. They’re a monopoly, they work together. Grocery stores can’t get all of their meat, so they jack up the prices or the packers are jacking them up before they get to the stores. Either way we on the back end are getting shortchanged a lot,” he said.
Forgey knows he’s fortunate because he has someone lined up who buys his livestock in advance, so he doesn’t have to haul his cattle to a market. He’s been selling to the same buyer for more than 25 years.
“Basically, I sold my calves in November, so right now, it hasn’t affected me,” he said.
Other ranchers, such as those who rely on sales at markets each fall, aren’t so lucky. By the time another rancher takes his cattle to market, the big packers are paying about $1 a pound live cattle prices right now. On June 1 beef was selling for .98 cents/pound – up from .84 cents a pound a month ago.
“When you see what they’re getting for it,” Forgey shakes his head as his sentence just trails off. “I wean that calf off the first of November. The next calf is born next November. I’ve got all the expense of wintering that cow, calving that cow out, standing the death loss, the sickness, all the bills associated with it for a whole year.
“Do you see the point?”
WHERE’S THE BEEF?
Numerous area ranchers have admitted they’re facing multi-tiered problems when it comes to current markets. The cattle and other animals are ready for processing now, but ranchers have far fewer places that can accept the livestock.
Meat packers are backed up and can’t take their usual amount for processing as plants are ravaged by COVID-19 outbreaks and trucking companies are overwhelmed with other demands.
“Packers are telling people they can’t take their cattle. They’re just too backed up, too busy,” Forgey said.
And, that’s a problem, because now is the prime sales time.
“Any time after that, the cattle are just getting fatter and fatter. If ranchers are keeping their livestock longer, grazing or feeding them much longer than they usually would, they’re just getting bigger and bigger. The average weight for a steer is 1,450, heifers average about 1,150 at prime time to sell.”
Since they can’t take the livestock to the packers, ranchers are keeping their cattle longer than they normally would – and those cattle have to be fed.
“You’ve heard the saying, ‘When an ear of corn is ready, you don’t leave it out for another 60 days?’ When something’s mature, it’s done. That’s what’s happening. We can keep feeding them, but that’s not what’s for the best,” he said.
The cattle business is all about timing – and a good marketing strategy.
“There’s so many things to it. Everyone wanted to calve in March, so all the calves in the world hit the feedlots in March. That’s one thing my buyer, Novak, did by backgrounding mine instead of feeding them. He can hit maybe the July 4 market. And, April’s a good market, ‘cause nobody likes to calve in January or February.”
A PROTEIN PROBLEM
Another issue facing local ranchers right now, Forgey said, is misinformation in regards to what’s really going on in the beef, pork and lamb industries.
“(Packers) are complicit in a one-world government as far as I’m concerned. That’s their main goal. With four packers owning that much, well . . . we’ve got anti-trust laws. Something’s got to give. It’s a monopoly, plain and simple,” he said.
It’s also apathy among local ranchers and farmers who have no desire to get involved unless it is directly threatening their livelihoods, he said.
One possible bright spot on the horizon, however, is COOL – legislation introduced earlier this year which will require mandatory country-of-origin labeling on all meat sold in the United States, he and others said.
In 2015, Congress ended requirements that meat labels have to inform consumers where the meat they’re buying is grown.
“Americans can no longer choose to buy American beef unless a mandatory country-of-origin labeling law is restored. America is losing its ranchers and farmers at an alarming rate as they can no longer compete with hundreds of millions of pounds of undifferentiated imported beef.
“As the number of farms decline, rural communities are hollowing out. The United States economy suffers a $13.6 billion annual loss to its largest sector of American agriculture: the U.S. cattle industry,” Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA) Chief Executive Officer Bill Bullard explained.
R-CALF is the largest producer non-profit organization representing U.S. cattle and sheep producers.
Bullard said their national, grassroots campaign hopes to raise awareness for immediate legislative or executive action to reinstate M-COOL.
“I’m glad (President Donald Trump) asked the Department of Justice to look into these schemes to see if any of the behavior is illegal,” Sen. Chuck Grassley (R-IA) said in a May 14 report in Beef Magazine.
Like Grassley, Sens. Mike Enzi and John Barrasso (R-WY) have expressed their support for both the investigation into the meat packing industry and the COOL legislation.
Since R-CALF’s signature drive in support of COOL began April 23, they’ve obtained nearly 405,500 names.
While Forgey is optimistic regarding COOL legislation and supports it, he admits not everyone is onboard.
“I went to a Converse County Stockgrowers meeting. I couldn’t get them to support COOL. The packers are going around telling us COOL is no good for us, waving some B.S. at us, full of ego and arrogance. All I can tell you for sure is, we don’t know what’s really going on. Not at all. We might think we do but the apathy is too much.
“You can’t even get people to get into the fight. I’ve told people, ‘If you didn’t have that oil play that you came across these last two years, I guarantee you’d be doing something (to change this) instead of saying, ‘Oh, it’s okay, don’t worry, go ahead and go to bed and sleep tight.’ Arrogance and ego are one of our biggest (problems). That and corruption.
“It’s terrible. It’s not just the beef industry, it’s everything. It’s not what they say, it’s the way they say it. If they’re not telling you (what’s really going on), it’s the same as a lie. You can’t get the real story out of any of them,” he said, frustration in his voice.
He is optimistic that Wyoming’s Congressional Delegation is onboard.
“Senators have started coming back (in support) of this COOL legislation. We’ve finally got Barrasso, Enzi, (and Rep. Liz) Cheney onboard. It’s everywhere – everybody wants on this bandwagon. I want to stress, this is not a beef issue. This is a world protein manufacturing issue. It’s a protein business. (The packers) want to control the protein market. They take care of chickens, hogs, sheep and cattle. And they control it,” he said.
Part II available in this week's Douglas Budget print editon (06-10-2020) or next week online: The pandemic may have lit fires under ranchers and consumers as both ends of the meat industry are beginning to take matters into their own hands when it comes to low prices for producers and high prices plus shortages for consumers. Reporters Joshua Clark and Chase Vialpando contributed to this story.