COVID-19 has revealed price gaps between farmers and packers

Dale Oeschger took care of his first cow when he was only 9 years old.

That was almost 60 years ago, but unlike some of his peers, Oeschger never left the breeding business.

In his decades of experience, as a beef producer in Bay Port and chairman of the Michigan Beef Industry Commission, Oeschger has seen consumer demand for livestock change. He also witnessed the impact of past crises on the beef industry, such as the Mad Cow Disease epidemic in 1986 which “crippled” the livestock industry for a few weeks.

Beef production shutdowns are not unheard of, but the pandemic has forced meat packers to shut down their facilities and slow operations for an unusually long period of time due to worker shortages and COVID-19 outbreaks.

Last year’s processing plant closures resulted in a backlog of animals that were otherwise ready for harvest and months of waiting for “slaughter points”.

This backlog has taken a toll on farmers as they have been forced to keep the animals longer and bear the increased financial burden of looking after their livestock.

Initially, the increased supply – albeit lagging behind – at facilities drove consumer beef prices down, but this quickly changed as panic buying and increased retail demand left grocery stores with freezers. empty meat.

Beef prices skyrocketed in 2020 and hit near record highs across the country, but farmers were not seeing those prices spill over to them.

“The ranchers would like to have a share (of the profit), but we end our ownership and control after sending it to the processor,” Oeschger said. “Our job on the farm is to raise cattle, to do our best and try to make a profit during this time. What happens beyond is beyond our control.

Kevin Gould is a beef educator for the MSU Extension Service in Ionia County. He said that while some farmers struggled to sell their animals, the big industrial packers made record profits.

“(The packers) were buying their beef supply from the farmer at lower discounted prices and were able to move it to retail sales at near record prices,” said Kevin Gould, MSU beef educator. “It’s cracking down on all the vendors, the people who raise beef because their slice of the pie got smaller and the pie got bigger.”

According to Gould, there are four major packers in the country who check about 80% of the beef crop on a daily basis. Farmers currently sell their livestock under contract – which sets prices well in advance and outside of supply and demand trends.

“The farmer usually takes on most of the risk and a lot of the work in getting an animal from conception to consumption, and a packer can buy that animal and return it in 10 days and make a big profit, where the farmer is actually losing money on their side, ”Gould said.

Gould said price differentials are an integral part of beef production, but the widening gap and the “big four” who control most processing are the problem. COVID-19 only surfaced in disparities, with large packers receiving “sky-high” profit levels that never reached producers.

Nationally, farmers have rallied to advocate for more opportunities to bid on livestock prices and ensure packers buy into the discovery of competitive prices.

Ernie Birchmeier is the Livestock and Dairy Specialist at the Michigan Farm Bureau. He said the Bureau had formed a working group to develop solutions to the price differentials.

Before finalizing and implementing solutions, Birchmeier said there were still questions that needed to be answered first.

“Are we making a real price discovery for the livestock produced? And if we are not, why? said Birchmeier. “And then how are we going to deal with this?” I think these are important. And I think we need to look at the concentration of the packers, and has that gone too far? Are there too few who control this industry? “

Earlier this month, the U.S. Department of Agriculture announced a $ 500 million investment in funds to expand meat and poultry processing capacity to provide farmers with more choice on the market.

Birchmeier said he hopes Michigan can also expand processing opportunities to better support small and medium packers.

“I think we need to look at the regulatory burden that is placed on processors and farmers”, Birchmeier mentionned. “We need to make sure we have a good food safety inspection service in place, but is there a way to make it easier for those who own processing facilities or wish to own processing facilities? “

In a June press release, the USDA pledged to better enforce the Packer Stockyard Act, a century-old law designed to protect farmers from unfair and anti-competitive practices in meat markets. This promise is accompanied by three proposed initiatives: clarifying the application of deceptive practices, proposing a new rule for the poultry farmer tournament system, and clarifying that the parties do not need to demonstrate that they are harming competition to bring a lawsuit. action.

Oeschger said there are still long waiting lists at the small packing plants, but beef production now looks more normal.

As a producer, Oeschger has said he is in favor of supporting small packaging companies, but is reluctant to abandon contracts altogether because they ensure farmers a reliable source of profit.

“If the market goes down at the other end (and prices go down) we might be in the loss category when we try to sell, so there are two sides to this story,” Oeschger said. “I would like to contract for profit, but I would also like to profit from the market when it comes up and goes up.”

Oeschger said he has high hopes for the future of the beef industry – agriculture is essential and, he hopes, adaptable enough to survive future market shifts and even pandemics.

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