CAMPO, Colo.–Colorado ranchers are struggling to find ways to survive the downturn in beef prices caused by the nationwide shutdown of restaurants due to the COVID19 pandemic. Both reduced demand and slaughtering plant shutdowns have caused the price offered cattle growers to plummet by more than 35%, and ranchers are facing economic ruin.
Rafe Schroder, 29, owner of Schroder Ag in Campo, a tiny town in the southeast corner of the state is trying to market his cattle direct to consumers in order to survive the shutdown.
“Unfortunately, this spring the prices fell out of the bottom of the entire industry and we’ve been left with no choice but to get whatever kind of dollar value we can out of them to recoup some of our costs,” said Schroder.
The beef market is complex and burdened with regulations that make it all but impossible for individual ranchers to sell their own meat at retail.
The biggest impediment is federal law, which makes it illegal for a livestock grower to cut and pack his own meat and sell it to retail stores.
In order to sell packaged meat to grocery stores it must be inspected by the U.S. Department of Agriculture (USDA) at the time of slaughter to ensure that sick or diseased animals don’t enter the food chain. The “Wholesome Meat Act” of 1967 changed the way packaged meat is handled nationwide. The Act says, “It is essential in the public interest that the health and welfare of consumers be protected by assuring that meat and meat products distributed to them are wholesome, not adulterated, properly marked, labeled and packaged.”
Large slaughterhouses, what Schroder calls the “Big Four,” Tyson, Cargill, National and JBS, were hit hard by the virus, probably due to the shoulder-to-shoulder working conditions and, some employees claim, refusal on the part of the company to provide workers with adequate personal protective equipment early on in the pandemic. Dozens of processing plants cutting and packaging beef, pork and chicken were shut down nationwide.
The JBS beef processing plant in Greeley was ordered shut down April 10 for cleaning when 102 workers tested positive for the coronavirus and four died. The plant reopened April 24 with new safeguards in place to screen out sick employees, but demand is still weak.
The problem for cow-calf growing operations like Schroder’s is that cattle-raising is time sensitive. Past a certain point in their growth, slaughter cattle begin to lose value to the rancher.
“This is where it all starts. The calves are born on a ranch,” Schroder told Complete Colorado in an interview last week. “Normally the calves are 500 to 600 pounds when they come off the cow.”
At 800 to 900 pounds yearling cows are ready to be sent to a feedlot, where the operators fatten them up to their slaughter weight of 1,300 to 1,500 pounds.
“You’ve got your cow-calf, from 0 to 600 pounds, your growers from 600 to 800, then your finishers from 800 all the way to fat cattle, which is 1300 to 1500 pounds depending on what kind of cattle you’re raising,” said Schroder. “The feed lots are highly efficient, they do an excellent job. They can feed cattle more efficiently than we can by a long shot.”
Schroder says that due to the lack of demand and plant shutdowns some of his cows are going beyond their optimum feedlot weight. Feedlots are in the business of selling feed, says Schroder. This means that they are selective about which cattle they are willing to take on.
“They’re going to offer you less for older cattle that you’ve waited too long to bring to them because they won’t make as much money on feed,” Schroder said. “Would you rather get one set of cattle and feed them for six months? Or would you rather get one set of cattle and have the same sort of startup costs and then feed them for three months?”
With meat packers owning their own cattle, Schroder says that the system favors the large meat packers.
“The packers know what it costs to feed the cattle. As long as they have their own cattle, they control so much of the market that if we didn’t want to sell it to them that’s fine [with them],” Schroder said. “We don’t need to sell our cattle to them until they start running short on their own.”
In the market for cattle, supply and demand should set the price, but Schroder says it isn’t really a free market thanks to the dominance of the large meat packers. Only when packers run short on their own cattle do they begin bidding on other livestock.
“There’s so many cattle in the market and there’s four big packers,” said Schroder. “So, if one packer starts bidding out of line, the other three will say ‘Hey what’s going on?’ That sounds like price fixing. That’s the way we see it on our side of the industry.”
Earlier this month, Colorado Attorney General Phil Weiser signed on to a letter, along with attorneys general from other beef producing states, urging the Department of Justice to look into possible price manipulation in the industry.
But today the problem isn’t a shortage of cows, it’s a lack processing capacity, resulting in an over abundance of cattle left on the ranches, where they continue to put on weight and are worth less and less to feedlots and slaughterhouses.
Schroder thinks that selling meat on his own is the only way to salvage his operation.
“The system is broken. Our nation relies too much on the big corporate owned packing houses to feed this nation,” Schroder said. “Any disruptions in these packing houses will bring turmoil to the cattle industry and our nations food supply.”
But the rules make it difficult and are complex. He has set up more than 180 appointments with 7 processors across the region to slaughter and package meat for him through the summer, which he hopes to sell through word-of-mouth and online.
The problem is he can’t sell packaged meat at retail or wholesale to grocery stores unless it’s been packaged in a USDA-inspected butchery.
Non-USDA butchers can slaughter and package meat, but only by what Schroder calls “private treaty,” which is when someone buys a cow, or part of a cow, from him under a contract for him to raise, slaughter and pack the meat. This means a substantial outlay by the customer for a bulk quantity of meat rather than being able to buy two pounds of hamburger or a package of steaks from the grocery store.
Federal regulations allow states to take on the burden of inspecting meat processing if their system is at least as strict as the USDA requirements.
But despite a history of cattle raising going back to before it became a state in 1876, Colorado still does not have its own meat inspection system that would open up wholesale and retail sales to state-inspected butcheries, including those created by the livestock growers.