Rancher Rusty Kemp for years grumbled about rock-bottom prices from meat plants for his cattle, even as the cost of beef at grocery stores kept climbing. In the 1970s, 35 cents of every dollar spent on food went to ranchers and farmers. Now they get only 14 cents.
So Kemp launched an audacious plan to raise more than $300 million from ranchers. His plan? For ranchers to build a plant themselves, cutting out the middleman and putting their future in their own hands.
Kemp intends to build the Sustainable Beef plant near North Platte, Nebraska. Other groups are making similar moves in Iowa, Idaho, and Wisconsin.
The seasoned cattleman and his neighbors blame the low prices on consolidation (businesses combining or being bought by others) in the beef industry. Currently four companies—Cargill, JBS, Tyson Foods, and National Beef Packing—control over 80% of the U.S. beef market. Those processors have more power to set prices.
Since 2016, the largest processors’ profits have steadily increased. Meanwhile, prices paid to ranchers have barely budged.
Operating the new plant will be a big challenge. Its huge competitors run highly efficient plants and can sell beef at prices that smaller operators will struggle to match.
The question is whether smaller plants can pay ranchers more and still make a profit themselves. An average 1,370-pound steer is worth about $1,630. But that value must be divided between the slaughterhouse, feed lot, and the rancher, who typically bears the largest expense of raising the animal for more than a year.
Smaller plants are much less efficient. It costs more to slaughter each animal. Unless smaller plants can keep expenses down, they will need to find customers who will pay more for their beef or manage with a lower profit margin than the big companies.
The biggest challenge, for both large and small plants, is a shortage of workers.
However, the ranchers say they will have some advantages, including more modern equipment. Besides paying ranchers and employees more and encouraging ranchers to invest, the hope is that their success will spur more plants to open. The new competitors will give ranchers more options.
David Briggs, the CEO of Sustainable Beef, knows the difficulty the plant faces. But “cattle people are risk takers and they’re ready to take a risk,” Briggs says.
For the scripture says, “You shall not muzzle an ox when it treads out the grain,” and, “The laborer deserves his wages.” — 1 Timothy 5:18
Why? As Christians, we’re called to do business not just for our own benefit, but for others and for God’s glory. The story of the ranchers helps us consider business concepts of the middleman, consolidation, competition, and efficiency.
Actions have consequences. Click to see a bubble map that shows how one event (ranchers deciding beef prices are too low, for example) can lead to another.