Beef shortage, perhaps; cattle shortage, no
The current crisis in our meat processing industry has brought to light many of the problems with the modern, large packing houses and the lack of small custom inspected plants. The big packers are struggling with labor issues, reduced capacity and widespread infection rates, and the small plants are swamped, most of them are booked through the first of the year and are unable to find more workers. There are record numbers of cattle on feed and they are heavier than a year ago, compounded by lower slaughter rates.
John Brown, lifelong meat industry worker and Master Sausage Maker from Libby, Montana, sees the current events as a starting point to change the way meat is harvested and processed. “I was a union certified meat cutter by the time I graduated high school. The beef industry changed, I grew up standing on sawdust, the packing houses were dry, the only place that was wet was the kill floor. If we dropped something it went in the waste bin, now everyone wears rubber boots and what drops can be washed in the sink and thrown back on the belt. They didn’t have these big huge giant farms; small operations raised them until the cattle went to finishing lots shortly before slaughter to be fed grain. We had local sale rings, and the cattle came in by rail and were processed by local packing houses. There was a patchwork of small USDA plants around the state of Washington. They were proud tradesmen, butchers that knew the industry, not an assembly line. Men who cared about what they were doing and did a quality job. Whole carcass butchering provides a cleaner better process, because tradesmen care about their job. Dry-aging beef sucks the moisture off the meat, so they have about a 15-17% shrink which is a good thing. Meat lasts longer, and there is no humidity in the plant.”
Brown worked at IBP and ran the brisket boning line for the work experience. “The plant was wet, I would have to have men wrap towels on brooms to soak up condensation on the ceiling since the USDA wouldn’t allow a plant to open with condensation present that could drip on the meat. The old way was a much cleaner, thoughtful and humane process, in the small plants everybody was like family. We need morality in the industry, morality in business and morality in processing. What Temple Grandin has done to the pre-entry process needs applied to the rest of the plant,” Brown said.
Montana is a self-inspection state with roving USDA inspectors. “We need more USDA inspectors, the small custom plants to come back and USDA inspected kill trucks. We have to go back to the old ways and do it right or go back to the jungle,” said Brown.
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Kathryn Miller is a third generation Oklahoma rancher, who also works within the packing industry. She helps small and medium sized packers move product and also is involved in food service. She has a different perspective than many in the industry. “The supply chain is broken, the packers are facing challenges to protect their labor force and find skilled workers. One in four new hires don’t make it a week, they are starting at twenty dollars an hour with a bonus if they stay a month. The fabrication room temperature is less than 34 degrees; it requires standing for long periods of time in cold, damp conditions, making repetitive movements. High school equivalency isn’t necessary, and most major packers operate a program to help their employees receive a GED, and they offer tuition assistance for employees seeking college credit.”
Miller points out that packers now have increased labor costs and PPE costs. Many ranchers and feeders are talking about the $1,000 + profit margins packers appear to be enjoying, which is publicly known because of federal reporting of the price of boxed beef reporting, and fed cattle.
The numbers “thrown around” are gross margins not true profits, she says. “They (packers) have a 500 to 600 dollar minimum to process the animal and high capital expenses. They are making a profit but not as much as advertised. There is not a great conspiracy to keep plants shuttered, they aren’t making money if the plants are closed. The trim portion used for ground beef has skewed the box beef values. The USDA calculates that they are making 300 to 500 dollars per head profit and that’s on the high side, based on fixed costs and labor which varies by plant. We don’t have a socialized economy, there is a big cry for fair cattle markets. Asking them to share profits back, is asking for nationalization or socialization of the industry. We have a supply and demand economy, we were going to have a bottleneck eventually with the record numbers of cattle on feed and higher weights. Covid19 exacerbated it sooner,” Miller said.
“Our rural economy has been a problem for at least the last 30 years, consolidation has been going on for decades, it’s not just family farms, but all the other businesses and industries have been going under. We need more rural economic development. Producers need to diversify their supply chain and change how they market their commodity. We need leadership.” Miller doesn’t see vertical integration happening to the cattle industry. “The lifecycle of the cow is too long, they need more land, costs are too high, and it’s far too segmented and not feasible. What we need is vertical cooperation in order to raise more uniform cattle that finish and grade similar.”
“We need the packers; it would take 20,000 more small plants that can process ten head a week just to handle the backlog of 200,000 fats from one week. We need more custom processors and I see that is a model that will grow but in small rural communities they have a lack of workers. We have to offer multiple ways to market our product. The grocery store model will always be there, everyone needs to eat and not everybody buys their groceries the same. But pre-Covid19 70% of Americans had less than $1,000 in savings. Today we have 30 million unemployed Americans. How many of them can afford to buy a side of beef? How many urban dwellers can move a chest freezer into a 500 square foot New York City 5 story walk up? Chest freezers are sold out. Local lockers are booked out. You cannot donate live animals to a food bank. You can’t eat a live cow,” said Miller.
“We don’t have a cattle shortage, but we absolutely have a beef shortage that is here and is deepening.”
Miller said she sees ranchers and feeders comment on social media that “producers are still working and we have plenty of beef.”
“No. You have plenty of cattle,” she responds. “We can’t eat cattle. We can’t put cattle on a retail shelf. So why do we have all these cows and no beef?
Miller says the industry is harvesting fewer cattle per week compared to two months ago and 100,000-200,000 less than a year ago. In many parts of the country, food service is starting to open their dining rooms again, and as a result of limited harvesting capacity and now more demand, boxed beef prices are going to rise significantly and we are going to be short product, she believes.
In many ways our rush to re-open the economy is creating this shortage by splitting the supply pipeline, Miller said. “Why? When we cut a purchase order to the packer/processor for delivery of beef, it takes 7-10 days for that beef to arrive. Because it is a process, it takes on average 3 days to move a beef carcass through the plant between hot kill, hanging time, carcass breakdown, packaging and staging. It takes another 3-4 days to ship boxed beef to its intended destination depending on transit time and trucking laws. It takes another day or more to get beef from the wholesaler to the consumer after it is received. This is on the retail side. In food service, they age beef for a minimum of 21-28 days before it is shipped to restaurants, so it could take more than 1 month to get ribeyes from harvest to plate.”
“Now there is lots of foaming at the mouth about buying from a local farm. I think that is great if you live in an area where there is a local locker that will harvest a beef animal and package it for home use. Ground beef leads in consumer consumption, and to make a profit there needs to be a way to merchandise the entire animal. A lot of cuts and by-products we don’t eat and can’t sell. We have to maximize profitability per carcass.” Miller said. “I encourage you to stop thinking about cattle and beef as the same commodity, and to stop pitching a one size fits all alternative to purchasing beef. We are seeing great momentum in local economies building their own food supply pipelines, and I believe that will continue. But it is not the only way to feed 330 million Americans. And it will not solve the next three-four weeks of beef, pork and chicken shortages we will face. Yes, we have plenty of live animals. Yes, we have a protein shortage.”
Brown believes small plants can find ways to market the traditionally less sought after parts of the animal. He suggests selling more smoked meat, for one. “I feel the USDA should finance meat cutting and sausage making schools, the trade needs to come back. I see this as a lot like craft beer, the same thing needs to happen in the meat industry. Processed correctly there will be a cleaner, healthier product for everybody. People need to demand a safer, healthier and better product, a better dining experience, quality product that they can’t get anywhere else,” said Brown. F
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