The cattle ranching industry may undergo some changes in the turbulent wake of the COVID-19 pandemic, but the changes may not include the one cattlemen fear the most: loss of independence.
It could, in fact, encourage development of local markets if the state legislature is willing.
Many Arkansas cattlemen found themselves caught in a tight spot when the pandemic swept through processing plants in the midwestern United States. Starting in March, prices dropped dramatically for their cattle as major processing plants had to temporarily close or scale back production, which created a vast backlog of livestock in feedlots.
Meanwhile, consumer demand for beef remained high as the threat of production shutting down sent consumers to their local grocery stores to buy any available meat. Retail prices rose as grocery stores found their meat displays suddenly picked clean.
For beef-packing corporations such as Tyson Foods Inc. of Springdale and JBS USA of Greeley, Colorado, two of the largest processors in the world, times were good even though volume slowed; the price they paid for cattle dropped but the price they got for processed beef rose. Tyson Foods declined to comment.
As they will be the first to tell you, cattlemen don’t work for Tyson or JBS or any other corporation like chicken and pig farmers do. That independence was threatened as the pandemic crushed the price they could command for the cattle they had already paid to raise.
“What it turned into for that month, if you had cattle in the feedlot, it turned into a bidding war on the low side,” said Steve Anderson of Mountain View, who is a marketing representative for Superior Livestock Auction. “Someone might say, ‘I’ll take $1 [a pound] for mine,’ but if you want to get yours killed, you say, ‘I’ll take 95 cents for mine.’ But the packers were selling that stuff at unheard-of levels. There wasn’t as much movement as normal, but those packers went through a period we will probably never see again.”
Although prices have come back up as more processing plants have reopened, many ranchers operate on such thin margins that the delay in selling or selling at a loss could prove fatal.
Independence or Bust
The federal government gave aid to many cattlemen through the Coronavirus Food Assistance Program, but the hundred or so dollars per head is more subsistence than profit.
Nathan Crouch, the co-owner of Black River Cattle Co. in Newark, couldn’t afford to sell his cattle at a loss, so he shipped part of his herd to a crowded feedlot and another part to a grass range, both in Kansas, in hoping the market would return to normal quickly. Crouch said he would lose $200 a head if he sold at 98 cents a pound, which was the going price when he was interviewed recently.
Crouch, like other cattlemen interviewed, declined to specify how many cattle he had been forced to sell, but he said it was several hundred in each location, and that he had more on his farm. At $200 a head, 200 cattle would be a $40,000 loss, and there is no guarantee that the price will go up as he loses money waiting.
“This will put a lot of guys out of business,” Crouch said. “The cattleman is the last of the free guys out there. [The corporations] control the hog industry and they control the chicken industry. The cattleman is the last one, and they would love to control it.
“Can they ever do that? I don’t know because it is a stout industry. They can keep it from being a free market. They keep their thumb on it pretty hard.”
Crouch said his wife works full time and he grows other crops, so he is confident he will survive the pandemic financially. If faced with a choice of giving up cattle or raising cattle as a contractor for one of the corporate packers, Crouch said he spoke for most cattlemen.
“We are going to bleed pretty hard, but we are going to survive,” Crouch said. “I’ll sell [my cattle] and go get a town job. I don’t know many cattlemen who want to do [contracting].”
Creating a Market
Cody Burkham said there is another option for cattlemen if the state can pass legislation.
Burkham, executive vice president of the Arkansas Cattlemen’s Association, said he wants to see more processors open up in the state to give ranchers local options for their livestock. Arkansas now has about two dozen processors, but only three are certified by the USDA, which is required for the retail sale of beef in Arkansas.
Arkansas needs to restart a state inspection program, which it had until 1981, that would allow retail sales of locally processed beef within the state, Burkham said.
It would give cattlemen the chance to make arrangements with local restaurants or markets to sell their wares directly to the consumer and bypass the packing conglomerate.
“Our food situation is in a completely different place in 2020 than it was in 1981,” Burkham said.
“This wouldn’t be a silver bullet by any means, but what it would allow is a producer with 20 or 30 or 40 head to take it to a local butcher shop and sell it. We want to see a market created for the Arkansas producer.”
Anderson said that business model is exactly what Arkansas needs. Anderson told the story of a cattleman who recently sold a herd of 50 to someone south of Boston, which was odd so the cattleman asked for details of what the buyer planned to do with a herd of cattle in urban Massachusetts.
The buyer said he had arranged with a local butcher to process the cattle, for which he had already arranged buyers among the city’s restaurants and markets. Another cattleman butchered some of his own herd and then sold it piece by piece at a market for $3,500 a head, about 250% more than he would have gotten from a packer, Anderson said.
Arkansas ranchers covet the same opportunity. Anderson said that years ago, ranchers raised cattle to sell in the local community, and the production shutdown because of the pandemic has reinforced the need for local and regional processing.
“[The pandemic] is absolutely going to launch farm-to-table,” Anderson said. “We are going to come out better diversified. We’re going to go backward 50 years. It was already gaining traction, but it was like a bomb going off underneath them.
“I think the [traditional] business model will survive, but I do think the business model is going to change because there are going to be a lot more smaller packers regionally. There are people who saw how much money the packers were making.”
Anderson said he already knows an independent butcher who is in the process of opening a plant in Springfield that will be capable of processing several hundred cattle a week. If Arkansas had state inspections, it could inspire such expansion in this state, he said.
Burkham made much the same point when he testified May 12 in front of a joint state House-Senate committee about the need for a state inspection program.
“Vertical integration, that is every cattleman’s worst nightmare,” Burkham said. “No cattleman wants to be a contract grower for one of the packers like you see in the poultry industry.
“We love growing cattle. I don’t know anyone who loves it enough to say I think I will just contract to Tyson.”