30 day wait: JBS may be waiting to update plant
It is rumored, though not confirmed by TSLN that JBS has agreed not to make any changes to its newly acquired processing plant for 30 days. They had been expected to immediately begin updating the plant to make it possible for them to grind beef and cut steaks at the plant.
The foreign meat giant is then expected to begin work to retro-fit the facility for beef grinding and steak cutting, eliminating 20 percent of lamb slaughter capacity in this country. Some sheep industry participants are hoping the Department of Justice will intervene due to perceived anti-trust violations.
Jeff Hasbrouck of Double J Lamb Feeders, Ault, Colorado, said rumors are flying that the U.S. Department of Justice instructed JBS not to make any changes to the Greeley, Colorado-based Mountain States Rosen lamb processing plant it recently acquired in a bankruptcy auction.
With the fewest lambs on feed than any time in recent memory, Colorado feeders should be in a good position to market their product.
But between the COVID-19 pandemic that essentially halted food service for several months, and the closure of the nation’s second largest lamb processing plant, the market is in shambles and feeders are questioning where their lambs will go.
Hasbrouck and other lamb feeders are hesitant to buy lambs right now because of the market uncertainty. “Right now we would normally be buying lambs out of salebarns in South Dakota, North Dakota and Montana,” he said. Double J Lamb Feeders provided 150,000+ custom-fed lambs owned by co-op members to MSR annually, plus about 10,000 of their own lambs. Their lots are only about a third full. “My customers are not comfortable buying or feeding, without an outlet,” he said.
The plant, which is located across the road from a JBS cattle processing facility, was owned and operated by JBS until about 5 years ago, when the Brazilian meatpacking titan announced its plans to stop processing lambs there.
A group of sheep ranchers, working together under the name of Mountain States Rosen, purchased the plant, and continued slaughtering and processing lambs there. The plant handled many lambs owned by members of Mountain States Lamb Cooperative, but outside lambs were also purchased for slaughter and processing.
MSR faced financial struggles earlier this year, and offered the plant for sale to another entity who would continue processing lambs. JBS, who owns the rights to the wastewater and steam utility services, refused to provide those services to the potential new owner, so the sale was never completed.
Soon afterward, MSR, whose financier, CoBank, also funds JBS, called in MSR’s loan early this year, forcing them into bankruptcy. MSR president Frank Moore said his company had restructured its finances in 2018 and from that point forward had not been late on a payment. He admits that the COVID-19 pandemic could not have hit at a worse time for a lamb plant, as Easter is the best time of the year to market lamb, and that an unfunded pension liability skewed their balance sheet.
During the bankruptcy auction, a group of sheep feeders and ranchers that had formed a company called Greeley Fab put in a final bid of $14,050,000 but were outbid by JBS at $14.25 million.
Hasbrouck and Moore both expected the bankruptcy judge to grant the purchase to Greeley Fab, considering the fact that JBS made it no secret that it would halt lamb processing if it were awarded ownership of the plant.
With MSR annually handling 1/5 of the nation’s lambs, the removal of that plant from the small circle of lamb slaughter plants was sure to put the industry into a tailspin.
But despite pleas from sheep industry spokesmen including the Mountain States Co-op president, Wyoming’s bankruptcy judge proceeded to award JBS the right to purchase the plant. “It was a very unexpected blow,” said Moore.
When word of this was made public last week, many within the industry took action, urging the Department of Justice to step in and stop JBS from buying the plant, saying JBS could be violating U.S. anti-trust laws by doing so.
JBS spokesman Cameron Bruett said his company offered to lease the plant back to MSR for 90 days.
“Last week, we offered to lease back the facility to the former owners for 90 days to ensure continuity for local producers, but we were informed this was unnecessary given the opening of a new lamb processing plant in the region this fall. This was our fourth offer over the last few weeks to continue operating the facility as a lamb plant on behalf of producers,” said Bruett.
MSR president Frank Moore of Douglas, Wyoming said that indeed, JBS did make that offer last week, after MSR had let its staff go and alerted its customers that it would no longer be able to provide them with lamb. To create a new business entity that would process and distribute lambs for just 90 days would be difficult if not impossible, he said. Customers need assurance that product will be available longer term.
“It was a pretty hollow offer given that they helped put us in that position,” he said.
Bruett confirmed that JBS intends to further invest in the Greeley facility and reopen as a value-added beef operation. “This action does not eliminate hundreds of jobs, but preserves existing jobs while creating the opportunity for new jobs in our hometown of Greeley. In addition, all former Mountain States Rosen employees have been given the opportunity to apply for jobs with JBS USA,” he said.
MSR was forced to lay off around 220 employees and Hasbrouck said rumors are that JBS plans to hire only about 50 people to operate the plant.
Hasbrouck says that the rumored 30-day hold on plant changes provides little more than moral support to the industry.
He hopes the DOJ takes action soon, to provide the sheep industry the opportunity again to utilize the Greeley facility for lamb processing.
“Because of this 30-day stay, we don’t know what to do. Do we go out and try to find a new facility? This put us in a sticky situation and lamb feeders and producers are in panic mode.”
He and his father, who owns Double J Lamb Feeders with him, are exploring options for processing the lambs in their feedlot, including seeking slaughter slots at the country’s biggest lamb plant owned by Superior and located in Denver. The company’s other lamb facility is in California.
Rick Stott, president and CEO of Superior Farms, the country’s biggest lamb processing company, said his enterprise seeks to help lamb producers achieve stability and certainty. “We recognize the impact of the Mountain States Rosen bankruptcy and COVID-19 upon our industry. While difficult in the short term, we are very optimistic that we can work through these challenges together to become a stronger industry that can increase the market share of American lamb and deliver a premium product to our consumers.” As the largest processor of American lamb, we are continuing to aggressively invest in our facilities in order to increase production capacity and throughput at our Dixon, California and Denver, Colorado plants,” he said in a statement. He added that plant upgrades will increase their processing capacity.
“It’s kind of handcuffed us on what to do next because we don’t want to lose the industry, everyone is scrambling to figure out, can we kill our lambs in time, before they get over fat? Time isn’t on our side. Once you get behind, then you are slaughtering an overfed animal. We don’t want to put a bad product out but it’s not like you can tell an animal ‘we’re putting you on a diet until a plant has a slot for you.’”
Hasbrouck said some producers who would have historically retained ownership on their lambs in the feedlot are leaving them on pasture a little longer and selling a grassfed animal at a slightly lighter weight – a 130 pound lamb off grass rather than a 160-180 pound lamb out of the feedlot.
Other sheep ranchers benefitted from the Muslim holiday, Eid al-Adha, by selling freshly weaned lambs weighing around 70-90 pounds, but that local demand has dropped significantly with the passing of the July 31 holiday.
Hasbrouck said at this point he and many other producers are thankful for the press covereage of JBS’s acquisition of the plant because it has shone a light on the fact that about 75 percent of the lamb eaten in the United States is imported.
“We need to get more of our industry back so our industry can recover. We need to be able to supply at least half of the demand with domestic product. That’s what we’re working toward,” he said. Hasbrouck referenced President Trump’s recent comment that the U.S. needs to consider stopping or slowing beef imports at least until the pandemic affects have slowed. “Whey are we importing beef when we have the best here in the U.S.? It’s the same with lamb.”
With the MSR plant closure, Hasbrouck fears that customers seeking lamb products will have trouble finding it, and importing companies like JBS will fill their need with foreign lamb, creating long-term agreements that will put American sheep ranchers out of business.
A new lamb slaughter plant in Brush, Colorado, that is expected to begin operating in August or September will ship whole carcasses, not individual meat cuts, said Spence Rule, one of Colorado Lamb Processors owners.
The plant should be able to handle as many as 2,000 lambs per day and employ 50-60 people when at full capacity which will be potentially more lambs than MSR was slaughtering, but without the carcass breakdown capabilities. Rule expects most carcasses will be shipped to facilities on the east coast specializing in breaking them down into food service and retail cuts.
Katelyn McCullock with the Livestock Marketing Information Center said that without lambs being processed at the plant now owned by JBS, that no cash prices for slaughter lamb purchases were made available to their office. “There are not enough packers buying in the market,” she said. Confidentiality rules call for certain criteria to be met including at least 3 active bidders.
“It will be difficult to get a price without more market participants,” she said.
Because of the lack of information, a market forecast is even more challenging than usual, but McCullock said she is expecting lamb prices to be 20 percent below 2019 levels from now until the end of the year.
Slaughter lamb prices took a bigger hit than feeder lamb prices, as a result of the pandemic, she said, and she expects slaughter lamb prices to recover by 2021 to somewhere near 2019 levels.
Erica Sanko, director of analytics for the American Sheep Industry echoed these thoughts, pointing out that traditionally, half of the lamb produced in the U.S. is utilized by the food service industry – restaurants, catering, casinos, cruise ships and the like. “Any slowdown in the marketing of slaughter ready lambs can increase total lamb supplies and pressures lamb prices lower. Lamb prices are currently 30-40 percent below a year ago due to the loss of the foodservice segment to our industry in response to the pandemic,” she pointed out. She said the pandemic and the plant closure together have rocked the sheep industry. “Expect to see increased price volatility as the lamb industry and market adjusts to all these unknowns,” she said.
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