Meatpacker profits up 300% during the pandemic; producers look toward ownership to solve profit disparities

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SIOUX FALLS, S.D. (KELO) — America’s largest meatpackers saw their profit margins jump 300 percent during the pandemic, according to a recent economic analysis released by the White House.

The report hopes to bring light to the issue South Dakota producers have been facing for more than a year.  

“The retail sector beef prices went up. I don’t know that we’ve ever seen levels like that, both in demand and price,” South Dakota Cattlemen’s Association President Eric Jennings said. 

While the consumer demand for beef skyrocketed during the pandemic, Jennings says cattle prices paid to producers dropped dramatically.

“The slowdown in labor force and the decrease in capacity for the packing plants increased the supply of cattle available because they weren’t able to harvest the amount of cattle they had in the feed lots,” Jennings said. 

So even though meatpackers had a slowdown in production…

“The packing plants were making a tremendous amount of profit because they were able to buy cattle far cheaper than they had been before but they were selling meat for a far higher level than they had been before,” Jennings said. 

Bridget Bennett: How does that make you feel as a producer? 

Jennings: It’s very frustrating. It’s very frustrating from the producer standpoint because we have a historic, record high demand for beef,  people are hungry for beef, they have the money to buy the beef, but we couldn’t get the beef to them because of the slowdown in the packing plants. 

A frustration the state’s producers and congressional delegation have worked to solve for more than a year, but over the weekend the issue is getting more national attention after the White House released its economic analysis Friday.

“Everyone has been working hard at it, I’m glad that the White House is finally taking notice,” Jennings said. 

“It needs to be solved, I’m not sure government can do that,” Wholestone Farms Chairmen of the Board Luke Minion said. “Our view would be we’ve got to find a way to work together as farmers to compete.”

While the federal government debates legislative or judicial changes to address the disparity in meatpacker profits, some local producers are tackling the issue themselves.

“Producers taking a step to own packing plants is a way to find equilibrium in the sharing of the economics,” Minion said. 

This summer, producer-owned Wholestone Farms announced plans to open its own pork processing plant in Sioux Falls.

“Our plan to get the farmer closer to the consumer will minimize those sorts of distortion as to who shares in the profit. But it’s complex,” Minion said. 

“It’s [meatpacking] a tough, tough business, they typically rely on very tight margins outside of what’s happened this year,” Jennings said. 

While locally-owned packing plants are gaining more traction, Wholestone Farms says it takes a lot of time and investment to get the infrastructure off the ground. “We’re blessed that we work together with a lot of producers, over 200, that’s the only way these types of projects can happen,” Minion said. 

It also takes time to make it happen. Minion says the Sioux Falls plan is still in the permit and planning process and is roughly a year away from breaking ground and likely closer to 3 to 4 years away from being fully operational. 

“The interest and wiliness from producers is very high to start their own processing plants, but the level of difficulty is extreme,” Minion said. 

But he says it’s worth it to compete with the large, foreign owned meatpackers that currently have a major influence over how much producers in KELOLAND are paid.

“In the United States both beef and pork, there are large companies owned by the Brazilians and Chinese,” Minion said. “That’s another part of the dynamic. Foreign owned packers with a large footprint that have changed circumstances over the past decade.”

The White House economic analysis of the meatpacking industry analyzed the profits of the nation’s four largest meatpackers, including Brazilian-owned JBS, which has a processing plant in Worthington, MN.

At one point, Jennings said the Department of Justice had an investigation underway to see if there was any wrongdoing by the meatpackers to manipulate the market and earn such high profits during the pandemic.
 
“I don’t know that they did anything wrong, it was free enterprise at its finest, and they were taking full advantage of the situation. They certainly could have increased the bids for live cattle without jeopardizing the profits for their business. But really they had no reason to. There was an ample supply of cattle to buy, and they didn’t have to raise their bids or be competitive to buy it,” Jennings said. 

Jennings says he hopes these unique circumstances do not continue or repeat themselves in the future. But the bright side of the past year in the cattle market is that state and federal lawmakers are taking a closer look at the industry and seeing how it can be changed for the better. 

“I think the industry is committed to working on this situation and I think it will,” Jennings said. 

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