July 28, 2021

Beef Prices Are Rising as Bottlenecks Limit Supply

But Mr. DeBruycker hasn’t made a dollar in profit on his cattle-feeding operation in four years, and he doesn’t believe it’s because of a simple imbalance in supply and demand. Cattle feeders typically buy cattle from ranchers when the animals are under one year old and feed them until they reach their slaughter weight of around 1,500 pounds. Then they sell them to the packing plant.

“Sometimes I’ve lost $400 to $500 a head, sometimes only $20 to $30 a head,” Mr. DeBruycker said. “I get capitalism, and I have a good understanding of the ag markets, but here the true supply-demand curve is broken because the middlemen, the meatpackers, are manipulating the supply.”

One outcome of the consolidation has been the closure of packing plants around the country and, therefore, a reduction in the number of cattle slaughtered each year. In 2007, an average of more than 527,000 steers and heifers were slaughtered each week. In 2019, before the pandemic set in and disrupted operations, the weekly average was fewer than 500,000, according to a report by Derrell S. Peel, an agricultural economist with Oklahoma State University.

Some critics also say the Big Four are reducing competition in the cash market for cattle in parts of the country by buying not at auction or in an open negotiation but rather through undisclosed arrangements they have with massive feedlot operators. The lack of competition in open markets, critics say, has led to a lack of transparency in pricing. Proposed Senate legislation would force the meatpackers to buy more cattle in live markets.

Another outcome of the consolidation has been sharp drops in slaughtering when a single Big Four plant shuts down, even briefly. In August 2019, a fire swept through a Tyson beef facility in Holcomb, Kan., which processed more than 6,000 cattle per day. It remained closed for several months, severely limiting capacity in the United States.

Article source: https://www.nytimes.com/2021/06/23/business/beef-prices.html

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