Mr. Tupper visits Washington | Local News
ST. ENGO – With increased interest in the domestic livestock market from federal lawmakers, congressional delegates are looking to the Midwest to help bridge the gaps in the industry between producers and packers.
“There is a crisis in rural America. We are losing our producers at an alarming rate. While watching big feeder companies, slaughterhouses are making record profits with the threat of vertical integration looming over our heads, ”said Justin Tupper, General Manager of St. Onge Livestock and Vice President. of the US Cattleman’s Association.
Tupper was invited to testify at the Senate Agriculture, Nutrition and Forestry Committee hearing on June 23.
The committee also heard testimony from supporters of the meat packaging industry, who say that the gaps seen in the industry today are normal economic ebbs and flows, and that the market will correct itself once that. new production plants will come online.
“Cattle are not beef. Livestock is one of the many inputs to beef production, other major inputs include labor, physical capital and technology, ”Dr Dustin Aherin, animal protein analyst at Rabo AgriFinance in the group told the committee. RaboResearch Food and AgriBusiness.
Typically, ranchers sell their animals at the sales barn for cents per pound. These animals can then be sent to a feedlot where more weight is added before being processed into beef. While the breeder can walk away having made only $ 60 to $ 150 with a single animal, the meat conditioner could easily make up to $ 1,000 with that same animal just from the consumable beef they produce. Adherin’s argument postulates that the market inputs he mentioned at the processing level add costs at the packers end of the industry, so the profit margin gap may not be as important that some think.
Aherin also said that these market inputs seek to balance and fail to balance, and that when one input trumps another, it creates an imbalance, which must be compensated for by another.
“Input imbalances are communicated through prices, whether it is livestock prices, wages or investments. Aherin said.
Aherin suggested that a major fire at a Tyson factory in 2019, along with labor shortages during the pandemic, helped packers need to generate income from other inputs, such than paying less for cattle and charging more for beef.
“The imbalance in the supply of surplus and ready-to-market cattle in the face of reduced operational conditioning capacity has put downward pressure on livestock prices. Meanwhile, consumer demand for beef and all animal protein has reached record highs fueled by pandemic stockpiling, increased and reallocation of consumer income, and most recently the reopening of restaurants, without talk about export demand. This dynamic, combined with high processing costs, has widened the gap between the price of beef and the price of livestock, ”he explained.
Tupper refuted Adherin’s position in an interview with the Pioneer.
“I think one thing the pandemic may have taught the packer … instead of having to kill more (which increases costs) they can scare the consumer and charge a little more at the counter. meats and kill less and make the same amount of money or more, ”he said.
Tupper said that since 2015, the profit margins of the four major meat packers, Tyson, JBS, Cargill and National Beef, have grown from around $ 100 to $ 200 per head of cattle to over $ 1,000 today. .
“We have huge disparities, right now the packer is paying around $ 1.25 (per pound) for large cattle and making him around $ 1,000 per head in profit,” he said. “All the while, the producers who keep the cattle are barely making ends meet or losing money. “
Tupper said the Big Four packers control 85% of the market, including the amount of beef sold to consumers at big box stores.
“(With) consumers paying what they pay, some of that market share should definitely go back to the producer and we just don’t see that happening right now,” he said.
The argument that market inputs would correct themselves as more beef producers go online, thus creating more outlets for cattle producers to sell their cows (also known as of “shackle space”) “just doesn’t hold up,” Tupper said.
“We need this manila space to be bigger and there is no doubt about it, but it shouldn’t be the only neglecting factor that decides whether we as producers make money,” he said. he explains.
Tupper said the danger came as the big packaging companies were buying out the smaller butchers, mom and pop, again putting more space in the chests of the Big Four.
“They talk about the efficiencies that these big factories can have versus a small factory because they can do it cheaper, well if we get efficiencies and we have to give up the competition, we really haven’t gained anything.” , did he declare. “The key is that we have to make sure they’re sustainable and that they have a place in the market. The Big Four packers also control most of how meat is sold to big box stores like Wal-Mart, Safeway and all of those.
Tupper said the situation with the Big Four is an oligopoly, which has caught the federal government’s attention.
“There’s a precedent in other industries, in the oil industry and the phone industry where the DOJ and the antitrust got in place and they broke them because they had too much market power. and that it has become unfair market practices in a free market. system, ”he explained. “We’ve been battling this thing for a long time and they’re finally starting to see the light that we need to get things done and I think COVID-19 has probably accelerated that a bit. “
Over the past few months, several bills with bipartisan support have circulated in Congress, many of them from our representatives in South Dakota.
“I think this might be the only issue in Washington that isn’t partisan, that they can do something about together. … Our South Dakota delegation is very knowledgeable on this topic, ”said Tupper. “Senator Thune was one, we were waiting to hang his hat on one side and certainly during the hearing he spoke on the side of the small farmers, ranchers and local producers here in South Dakota. “
As our representatives strive to start tackling anti-competitive practices in the beef industry at the federal level, Tupper said it is paramount that consumers stay connected and engaged in their local beef community.
“If there was one good thing coming out of COVID-19, a lot of people realized that if it wasn’t available at the meat counter in big box stores, ‘let’s go to our local producers and let’s take them to the locker and we’ll cut one up ourselves, ”he said. “Get involved, stay informed. If we want our way of life to continue as it is in these rural communities, we will have to fight and fight for it every day.
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