The cattle market is a complicated industry that is difficult to explain to those outside of the business. Even those in the business are having a hard time trying to understand.
Ranchers do know one thing -- their cattle are selling at record low prices. However, it’s not for a lack of demand.
“It’s the packers,” said Dirk Henderson, owner of Henderson ranch in northeast Kansas. “Instead of them giving us a fair price for the beef we’re raising they’re docking our pay and raising the price to the supermarkets. It’s frustrating because those of us that produce the product, can’t control what we get for the product.”
Henderson knows now more than ever, that the American rancher has very little control against the four major packers in the United States - Tyson Foods Inc., JBS USA Food Company, Cargill Inc., and National Beef Packing Company LLC.
Figure 1 demonstrates Packing Defendants’ dominance of the market for the purchase of fed cattle. (Courtesy of the amended class action complaint)
Cattle producers are losing $100-200 per head while packers are making $500-600 per head. Just because they can.
“The packers know that we (the producer) have to sell our product,” said Henderson. “We can't put it on a shelf if we can’t get the price we want. We can’t just not sell these cattle.”
That’s where the complicated variables of the cattle business come into play. Ranching is a delicate system operated like clockwork, calculated so that producers can make the most off their investment. packers can take advantage of that.
The coronavirus’s heavy impact on the world is exposing flaws in the American economy, especially in the agriculture industry. Many ranchers fear that if action isn’t taken now, it never will be.
“It’s really bad right now,” said Henderson. “But this isn’t a once in a generation story.This happens all the time, multiple times a year.”
This isn’t the first time there has been a call for change.
In 2010, over 500 ranchers and feedlot owners gathered to talk about changes that needed to be made, addressing the U.S. Department of Agriculture and Department of Justice Officials. HighCountryNews wrote an article following the conference that gave all the history between packers, producers and the government, placing emphasis on the issue as if it was the worst it’s ever been.
Now ten years later, and the issue has only gotten worse, but it hasn’t been from a lack of combating effort.
R-Calf USA (Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America), is the largest producer-only national organization “dedicated to ensuring the continued profitability and viability of the U.S. cattle industry.”
R-Calf was leading the charge at the conference in 2010, and they remain dedicated to their purpose since their founding in 1998. They are currently one of the ten plaintiffs in the national, class-action antitrust lawsuit against the nation’s four largest beef packers.
The complaint alleges that starting in January, 2015 Tyson, JBS, Cargill, and National Beef conspired to fix and suppress – and succeeded to fix and suppress – the price of fed cattle in the United States.
R-Calf is asking the Court to declare the Defendants’ actions violated federal laws outlined in the litigation and that restitution for damages and equitable relief is considered for plaintiffs.
Last week Matt TeaGarden, CEO of the Kansas Livestock Association (KLA), sent a letter to the USDA and the Commodity Futures Trading Commission requesting an investigation into illegal activity in the market.
“In these unprecedented times, KLA volunteer leaders also took the step to seek federal assistance for cattle producers in the recently passed stimulus package,” said TeaGarden. “KLA is working with the National Cattlemen’s Beef Association to design a disaster program that will provide the support needed by many KLA members.”
But ranchers can’t afford to sit around and wait for the investigation and lawsuit to be done. Kansas ranchers like Henderson, are taking their own necessary measures to stay afloat.
“Start marketing and spreading the word to the community of what’s going on,” said Henderson. “That’s been my initiative over the last 8 months.”
Henderson markets his beef locally, on Facebook and by word of mouth. He takes it to local meat lockers where it gets prepared, packaged and USDA inspected. Then he will deliver the meat to the customer.
There are also websites like USAbeef.org, which allow producers to sign up to sell their beef and customers to search for their nearest producer so they can buy locally.
Henderson believes buying local beef is smarter than buying it from a supermarket for four main reasons: it’s less expensive, it tastes better, it’s more convenient and you're supporting the local community.
“The reason more ranchers don’t sell locally is because they’ve been in the mindset that when you finish a cow you take it to the packing house,” said Henderson “There is more marketing involved with selling beef locally, but not much more work for the local rancher.”
Cattlemen are slowly coming out of the mentality from the past 50 years, when they could make money without having to market their beef, simply because they have to.
Ranchers all across the country are hoping that change will come from the lawsuit so the relationship between packers and ranchers can improve. The cattle market can’t afford for the packers to just disappear.
“Packers and processors serve an important role in the “middle” of a vertically connected industry,” said Glynn Tonsor, K-State Agricultural economics professor and Livestock and meat marketing specialist. “That is, they are intermediaries between livestock producers and end-product distributors (retailers, exporters, etc.). Given the large operational size, packers and processors directly employ many individuals.”
Ranchers, like Henderson, are simply asking for packers to be held accountable in some way.
“I have no issue with packers making money because that’s what this country’s about but we have got to do it in a responsible way,” he said. “They’re profiting off the guys who are doing 95% of the work, getting them ready from the time their baby calves all the way to the dinner plate. But we aren’t even covering costs. It’s not the right way to do it.”
Jasmine Pankratz is a University of Kansas senior from Abbyville, Kan. studying journalism.