Growing South Dakota’s cattle business
“The beef cattle industry is huge business here in South Dakota,” said Walt Bones, South Dakota Department of Agriculture secretary. “More than $21 billion is contributed to the state’s economy from the livestock industry, with 13 percent of that from cattle. The potential to grow is great, but without a processing plant in the state, we can’t add any additional value here as we have to send cattle out of the state to be finished.”
Bones was part of a five-member panel that discussed growing the cattle industry in South Dakota, a featured forum at Dakotafest in Mitchell, SD. Joining Bones was Keith Underwood, assistant professor of meat science at South Dakota State University (SDSU); David Palmer, CEO and president of Northern Beef Packers (NBP) plant in Aberdeen; John Demmers, also of NBP; and Matt Dierson, SDSU agriculture economist.
“The new plant in Aberdeen would be excellent for the state’s cattle producers,” Underwood said. “There would be a place to harvest animals and for South Dakotans to consume locally-grown products. Aberdeen will be a wonderful opportunity to capitalize on the cattle industry.”
“South Dakota has done a great job of promoting and raising high-quality cattle,” Demmers added. “Aberdeen will have a huge impact on the cattle industry, and the number of cattle that stay in South Dakota. It will certainly help expand economics here in the state.”
Looking at the economics of the NBP plant, which is scheduled to open its doors later this fall, Dierson made some predictions.
“Growth is always good, and this will rearrange the cattle industry to when and where cattle are bought and harvested,” he said. “This will be a positive economic development, providing more diverse job opportunities for the state. For those getting out of the cow-calf industry or tearing up land for crops, they are doing so out of other incentives. Something to consider with the markets is that the cattle cycle has an incentive to put pounds on cattle without corn being the main ingredient. Distillers and grass may be better options for finishing cattle, and folks can still earn premiums. The mind set of today’s consumers is changing, and our production strategies need to reflect that.”
“The opening of NBP will bring $8 billion in economic growth for the state,” added Palmer. “The plant will employ approximately 560 people initially and grow to 660 in the next five years. I estimate the $100 million plant’s economic impact will create 7,500 new jobs in the region.”
Yet, there are challenges facing beef producers, despite the opportunities.
“I think that with the way crop insurance is set up, there is little risk in corn and soybean production,” Bones said. “We are only fueling the fire for increased land prices. Premiums are a little wide right now, but we need to get economics back into the cattle industry.”
“It’s important for producers to sit down with beef specialists and discuss what it takes to overcome the crop acres and move back towards grazing acres,” said Ken Olsen, an audience member. “The economic blast from this plant is going to put us in the black for many years to come if it’s handled properly.”
Dierson polled producers from across the state earlier this year to hear different viewpoints about the plant.
“Producers are excited to eliminate freight costs,” Dierson said. “The cattle are here to supply the plant, so we don’t have to worry about bringing them in.”
More than $1 million in cattle are raised within a 250-mile radius of the plant, with many head projected to come from bordering states. The plant has a 1,500 head per day budgeted capacity, but NBP hopes to expand to 1,800 head.
“Our intention is to buy as many South Dakota Certified cattle as we can,” Bones said. “We want to maintain high-quality beef coming out of the plant. The traceability of that program is very credible and important for our consumers. We are the only state in the U.S. to have a database program enabled to label our products.”
With an anticipated November opening, all eyes are on Aberdeen and the NBP plant. The optimism about the opportunities for South Dakota’s beef producers is heightened as a result of the buzz about the South Dakota Certified Beef Program. Time will tell whether these opportunities turn into premiums for the state’s beef producers.
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