Searching for a silver lining

COVID-19 clouds cattle industry
Thursday, May 21, 2020
Searching for a silver lining

Montana cow-calf ranchers, being self-reliant by nature, work toward solutions to help resolve issues with the cattle market’s structure overall, as well as counter the added challenges due to COVID-19.
All Photos Courtesy of Kate Loose/Seven Diamond Photography

Searching for a silver lining

Kinsey Mikkelson of the Mikkleson Ranch near Hobson raises quality registered Herefords. Bulls are also sold at their bull sale.

Article Image Alt Text

Taten Erickson of Hobson stands with his trusty horse, Lil jet, in 2014. The Erickson’s also have a roping arena where Taten spends much of his spare time.

Searching for a silver lining

Montana rancher Tracy Watson works cattle on a clear day. She has over 40 years of ranching experience, while she and her husband continue to raise a daughter and help feed the world during a pandemic.

Montana ranchers and agricultural producers are, by and large, resilient problem solvers by their nature and occupation. Weathering storms is something with which they are all too familiar, and the current COVID-19 world pandemic is a stark reminder of the interdependent nature of the cattle industry in an otherwise relatively isolated livelihood.

Many recent news articles have painted a rather dismal picture of the effects of COVID-19 on multiple industries, including cattle and food supply. Still, others believe that by working towards solutions, a brighter dawn will be on the horizon.

“It’s bleak on the immediate front, but I am impressed with the way Montanans have responded to the COVID-19 pandemic,” said Gilles Stockton, a rancher out of Grass Ranch and the president of the Montana Cattlemen’s Association. “The only way out of this is somewhat long-term and to actually have the resolve to do something about the cattle market. It is important to ask, what can be done in the next six months that is truly meaningful?”

Profit disparities before pandemic

While COVID-19 is undeniably having a weighty impact on the cow-calf industry, in addition to countless other industries, problems existed in the cattle industry before the pandemic. In one aspect, COVID-19 pandemic has shined a light on issues in the cattle market, especially when it hits consumers.

“Awareness that there is a problem is a start,” said Kevin Keller, a rancher outside of Stanford. 

Presently, the individuals raising cattle, the ranchers, are receiving very low prices for their hard efforts, while the large out-of-state meatpacking facilities processing cattle are profoundly profiting.

The cost of meat is also emptying consumers’ pockets.

"In the framework of capitalism, people should be able to earn want they want, but still it should be within reason,” said Keller. “It would certainly help to add some competition in the meatpacking enterprise and adjust the pricing formulations.”

In Keller’s view, fairness in the market should be based more simply - on supply and demand. As it stands, cattle pricing is complex, using a formula that relies on futures markets, rather than on a cash basis. Currently a large part of the futures market is being driven by fear, fluctuating alongside the stock market.

"There is a ripple effect in the price of cattle that is not necessarily tied to what is on the shelf,” said Jay Bodner, vice president of Montana Stockgrowers Association.

Bodner added, “There is renewed interest nationwide in setting a better market structure overall.”

For example, live cattle prices plummeted before the pandemic, primarily after a fire occurred at a Tyson Foods beef processing plant in Holcomb, Kansas. Tyson is one of the big four meat processors in the United States. COVID-19 has not improved matters.

Even as live cattle prices may be extremely concerning, especially to those close to or within the industry, Montana agricultural producers will continue to feed others.

“We can fix this problem with the cattle industry and come out stronger, or we can come out weaker. It is on us,” said Stockton with the Montana Cattlemen’s Association.

A complex industry

The cattle industry is more complex than one might recognize at face value. As supplies are reduced on the shelves, such as in the present pandemic, individuals have started to more intensely examine the industry overall. It may have even taken a pandemic for increased attention at the federal level.

“The cattle industry is getting hammered right now ... Congress needs to get very vocal,” said Senator Jon Tester responding to a question from the Judith Basin Press during a rural press call in April.

There is not a lack of supply at the production level. There are plenty of stock animals being born and growing every day to add to the world’s food supply. However, there are bottlenecks in processing these animals for consumption. Further, the primary meatpackers at the national level, while critical in the supply chain, are also taking in record prices. Meanwhile cattle producers/ranchers who could be thought of as the obstetricians and family practitioners of the plains, are seeing plummeting prices.

“The cattle market is not a healthy, competitive market,” said Stockton.

The ‘Big Four’

There are four dominant meat processors in the United States - JBS Holdings Inc. (headquartered in Greely Colo.), Tyson Foods (headquartered in Springdale, Ark.), Cargill Meat Solutions Corp. (headquartered in Wichita Kansas), and National Beef Company, LLC (headquartered in Kansas City, Missouri).

The meat processors often employ workers elbow-to-elbow, and the jobs at the plants are not ones many Americans desire, according to sources. Now, across the nation, some meatpacking facilities have become hotspots for COVID-19, causing temporary shutdowns, illness and fatal casualties of the novel coronavirus. This is even with the plants taking precautions to get ahead of the virus.

“We’re relatively isolated in Montana. The real risk is in the packing plants where people work shoulder-to-shoulder,” said Jim Fryer, vice chairman of National Cattlemen’s Beef Association. “Overconfidence can disconnect us from the supply chain ... The best-case scenario is that people will start to feel better about going to work."

Local meat processing plants in Montana

Past economics have not signaled that a large-scale plant in the State of Montana would be profitable, Fryer and others have acknowledged. However, interest appears to be returning to ramp up meat processing in Montana. Regardless, building and expanding takes time, and there remains a shortage of labor, according to several sources interviewed.

Of the 21 USDA-certified meat-processing facilities in Montana, only five have cattle slaughtering/harvest capabilities.

If a stock animal is processed at a USDA- or state-inspected facility, the products can be sold in the retail setting, which can be at a grocery store, convenience store, deli, restaurants, fast food chains, etc. However, beef must be processed at one of the five USDA-certified beef processing facilities to be sold out of state.

The five USDA-certified meat processing facilities in Montana, who are independent and unaffiliated with ‘the big four’ national plants, include Pioneer Meats, Inc. in Big Timber, Quality Meats of Montana in Miles City, Ranchland Packing Co. in Butte, Stillwater Packing Co. in Columbus and White’s Packing in Ronan.

There are also 28 custom-exempt operations, like the Ayers Colony between Lewistown and Grass Range and the Surprise Creek Colony in between Stanford and Geyser, among several other Hutterite colonies in Montana.

A custom-exempt operation can process anyone’s stock animal, be it beef, poultry, sheep, hog, game, etc. for their individuals customers, with the product labeled “not for sale.” These facilities are a huge asset in terms of allowing many Montanans to feed their families throughout the year.

At Capacity

“There are not enough plants in Montana [to meet the needs of Montana’s cattle producers],” said Brian Engle, owner of Pioneer Meats in Big Timber.

Engle explained the meatpacking plants in Montana would only be able to meet the needs of 7% of Montana’s cattle producers.

“It costs a lot to build and maintain [a USDA-certified meatpacking facility],” said Engle, noting there is a gentleman who seeks to build a 6,000 square-foot meat-processing facility who recently toured Pioneer Meats. Engle estimated the base construction cost to total $200/sq. ft, which calculates to $1.2 million, and this is not including infrastructure like plumbing or the cost of the land.

“Even if you can find the money, you need to find the workers,” said Engle.

Finding workers in the meat-processing industry is a challenge across the state of Montana, but there are programs in place and/or being developed to educate and train workers, such as one at Miles Community College and another in Missoula. This profession might also be an opportunity for recent rural graduates, who likely also have direct knowledge attained from Future Farmers of America or 4-H. In the meantime, the state facilities are hard hit to simply keep up with the demand.

Pioneer Meats is booked until the end of January 2021, which is “way unusual,” Engle said. 

One might think being booked would be a great thing for a given business, but it really isn’t.

“It makes it more difficult for established customers because we are first come, first served,” said Engle.

Quality Meats in Miles City is also booked.

“We’re booked until January [2021],” said Alan Kuchynka, owner. “We had to turn some people away … But I think it’s going to bounce back when all is said and done and people will continue to process their meat here.”

The case is the same for Stillwater Packing in Columbus .

“We’re booked from now until the first of the year, which is really difficult because we have people we have to turn away,” said Jason Emmett, owner.

Straight to the source

“Ranchers do not want handouts. They want solutions and an improved market structure moving forward,” said Stanford-based rancher Keller.

One option is to buy a live cow directly from a rancher, have it processed and subsist on it. A group of people could even pool resources. For example, a rancher cannot butcher a cow and sell the product, like pounds of hamburger directly, unless the beef is processed at a state-instected or federally inspected facility. However, anyone could buy a live beef, which is called “on the hoof,” and have it processed wherever he or she chooses. Buying directly from the source is one way to help offset the price failings in the cattle market.

“Every bit would help,” said Keller.

Still, it is important to consider, a beef ready for harvest is not the same as a cow grazing in the field. Therein lies the process termed ‘finishing’ and is where the feedlots come into play. The cow-calf ranchers’ role is to breed and care for the calves, as well as the cows who live many years in the wide-open spaces of Montana. The feeders/feedlots finish the product for taste. Then, the packers process to product for consumers on the larger scale.

A rancher could also finish the beef directly, not utilizing a feedlot. It takes around 100 – 130 days to get a calf to be ready to be finished, said Keller. A 600 pound cow, Keller gave as an example, would take around two-thirds of a year, or 220 – 230 days, to become a finished product, which would be steak, hamburger, ribs, etc. However, the beef could also be grass-finished, as an alternative.

Looking forward not back

The COVID-19 pandemic has taught us three major things, Stockton said. Number 1: Our protective equipment for healthcare works and healthcare supplies are insufficient. Number 2: Our food supply is vulnerable. Number 3: Being reliant on supplies from other countries makes us more vulnerable.

Keller shared similar thoughts.

“A lot of good might come out of this in recognizing our food supply is a matter of national security,” he said.

Keller is optimistic that the large meatpacking plants will be able to catch up with the supply, a good part of which are the calves born just this spring. However, this in itself does not solve that cattle are selling for so little at the present. Montana ranchers may continue to struggle to break even until more solutions can be found. The important part is that there likely are solutions, if we can think outside the box, Stockton said.

When thinking of the longterm, Stockton asks, what can we do between then and now that is meaningful? Currently the infrastructure is not there for large-scale cattle processing in Montana. There used to be regional small packing plants all over the state, but they were unable to compete and folded over the years. Some are considering bringing them back, and a couple new small, local butcher shops have recently opened.

“The industrial efficiency of these large-scale plants that dominate the market can become a form of exploitation, both of the humans and the animals. Then efficiency does not become that good of a deal,” said Stockton, recognizing that this time is a pivotal opportunity for all of us to reevaluate our role in this chain of supply and demand.

One positive in this, Stockton and others believe, is that people are coming together, crossing political party lines or other dividing concepts, and working toward solutions.

Editor’s Note: Look for a summary of what is being done at the federal level next week in Part II of Search for a Silver Lining.