A major beef: Farmers hope COVID-19 troubles expose ‘collusion’ among meat packers

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KINGSPORT, Tenn. (WJHL) – Supply chain issues and workers’ exposure to COVID-19 aren’t the only problems in a meat-packing industry dominated by four giant corporations, area farmers say.

“A lot of manipulation, a lot of collusion by the packers are keeping the prices down,” Zane Vanover said as cows and calves grazed behind him Thursday at his 400-acre farm. Reedy Creek ran full in the background, a field of hay rising behind it a few weeks from a first cutting.

The pastoral scene belied a business climate that’s gotten more and more difficult for livestock farmers, the president of the Sullivan County Farm Bureau said.

Zane Vanover at his farm along Reedy Creek outside Kingsport, Tenn.

“People ask me how the cattle business is now and I say not good and they can’t believe it,” Vanover said. “They say, ‘I go to the grocery store, I’m paying this amount for a steak or ground beef, why aren’t you getting more?'”

Along with conditions at meat packing plants and a bottleneck that’s led to shortages in stores, the COVID-19 crisis has widened a gap between the profits made by meat packers and those made by farmers, if any.

Vanover said the disparity accelerated after a fire at a Kansas processing plant last summer. COVID-19 made it worse.

“It’s so frustrating that you can work hard, do everything right and still lose money on your cattle, when there’s somebody in an office somewhere with a suit and tie and an ink pen that’s controlling the market more than you are,” Vanover said.

A few weeks ago, Vanover sold a cow that had reached the end of her breeding life. Normally such cows, which are used for ground beef, fetch 50 or 60 cents a pound. After COVID-19 hit, those prices actually climbed briefly as the industry rushed to stock shelves with the type of meat that’s easy to process quickly.

“I was about a week too late,” Vanover said. “The market just went back below where it had been and she brought 10 cents a pound.”

Straw that broke the steer’s back?

From agricultural extension agents like Anthony Shelton in Washington County, Tenn. through Tennessee Farm Bureau President Jeff Aiken right up to Agriculture Secretary Sonny Perdue, no one is denying that a problem exists.

A cow and two calves at Vanover’s Cleek Road farm.

Perdue tweeted April 8 that the United States Department of Agriculture’s Packers and Stockyards Division would “extend our oversight” and look to “determine the causes of divergence between box and live beef prices.” That investigation would span a time period from the Aug. 9, 2019 fire at a Tyson plant in Kansas through the COVID-19 period.

In both instances, the “live to cutout spread” jumped dramatically. That represents the difference per pound between what a farmer or feed lot operator receives for a live steer or cow and what a packer receives from an end buyer.

A recent Farm Bureau study showed that spread more than doubled from the last week of February to late March. That’s what sparked the investigation, but Aiken — who has a farm in Bowmantown and serves on Gov. Bill Lee’s economic recovery group — said consolidation in the packing industry set the stage.

“You’ve got four left — Tyson, Smithfield, JBS and Cargill — and they control most of the market,” Aiken said. “That allows for greater efficiency, but from the farmers’ perspective the decreased competition puts them at a disadvantage. COVID-19 has made it more significant but it’s something farmers have been concerned about for a long time.”

Vanover said the trend of consolidation has created tremendous volatility. He said one of the largest operators in Sullivan County recently sold a large shipment of live steers to a feedlot, where they’ll be fattened up for a few weeks before slaughter.

“He turned out to have good timing, because he said if he’d waited just a little longer to sell he would have lost about $80,000,” Vanover said.

Vanover also raises hay and other crops.

While farmers and their advocates have complained about the situation for years, Vanover is holding out some hope this crisis might actually produce some change.

“If anything good has come out of all this coronavirus it’s brought attention to the market, brought attention to the collusion that’s going on. I’ve never seen so many people upset and aware of the situation before.”

Iowa Republican Senator Chuck Grassley pushed for an investigation in the days prior to Secretary Perdue’s tweet. He’s also proposed legislation to ban meat packers from owning livestock, something Vanover said gives the packers additional leverage over independent farmers and ranchers.

“A lot of them raise their own cattle and they’re gonna market them first,” he said. “What’s left, if they need to buy some they’ll buy some. If they don’t they’ll just take them as cheap as they can.”

In 2017 Grassley reintroduced legislation meant to curb that vertical integration among the packers. His office cited a USDA study showing that from 2005-2015 the amount of cattle traded on the cash market decreased from 52 percent to 21 percent, showing “the outsized power of packers in the marketplace.”

Is decentralization in the cards?

The local food movement has prompted some increase in farmers using small processors closer to home. Tony Slaughter, who farms near the Sullivan/Washington county line, sells a steady stream of hogs to regional restaurants and other buyers. They’re processed at a small operation near Bristol, Va.

For that kind of shift to take hold on a greater level would require a lot of change. Aiken noted that Valleydale used to operate a large processing plant in the Tri-Cities. Vanover has heard plenty of stories about a day when there were more people in farming, it was not far above subsistence level, and most of what was raised for sale was sold and processed locally.

“The current situation’s got a lot of people like me not wanting to take their animals to the market, wanting to take them to the packing houses directly to make a little more money off them,” Vanover said. “So many are doing that and so few packing houses that there’s a backlog of it.”

Vanover and son-in-law Kody Morgan in the equipment shed.

Aiken said Tennessee’s department of agriculture was considering a program to start state inspection of beef products in processing facilities. He expects that plan to be put on hold due to the pandemic’s hit to the state budget.

“There has been a demand for a number of years for more small facilities across the state of Tennessee,” Aiken said. “The COVID-19 has only elevated and highlighted the need for those smaller facilities so local producers can provide local food, local beef to consumers.”

With some of the certified USDA facilities backed up for months, he said the trend creates what could be a fine business opportunity.

“Hopefully we will get some resolution as we move forward. It will not be a quick resolution, but with the investigation of USDA and with interest in smaller facilities across the state hopefully in the future we won’t have these challenges that we’re afraid that we might be fixing to have today.”

Those changes might even bring people like Kody Morgan, Vanover’s son-in-law, into full time farming. It’s something he has an interest in — he was helping out at the farm Thursday morning — but without changes, his father-in-law wouldn’t recommend Morgan quit his day job.

“It’s just so frustrating,” Vanover said. “Everything can go just perfectly, you think you’re gonna have a good crop of calves and then the market, for some reason the bottom falls out and you lose money.”

Aiken said despite the advantages of consolidation, some elements of the nationalized system don’t make sense.

“East Tennessee produces a lot of beef and in many instances that beef is hauled somewhere else, processed and then brought back into East Tennessee to be used. So we are losing some efficiency by not having those processing facilities here in East Tennessee.”

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