Pandemic turns Magic Valley meat industry upside down
| May 15, 2020 11:11 AM
TWIN FALLS, Idaho (AP) — On a typical day in May, Don Scarrow gets a handful of calls from customers looking to have a pig or cow processed. The spring is usually the slow season for custom processors in the Magic Valley.
Last Friday, the owner of Scarrow Meats in Jerome got 146 calls — on his personal phone. Hundreds more have been calling his store every day for the past three weeks, hoping to buy an animal and have it butchered so they can stock their freezer with meat.
“Normally this time of the year my average employee gets 32 hours a week,” Scarrow told The Times-News. “Right now, I have approximately 20 employees staffed and they’re all getting 80 hours a week.”
Closures or slowdowns at some of America’s largest meatpacking facilities are causing shortages and limited supplies at grocery stores, which is driving many to custom processors like Scarrow.
Some major processors have struggled to stay open, or closed outright, after workers became infected with COVID-19. The American meat industry is dominated by four companies, and a huge percentage of the country’s meat comes from just a few massive plants, so even a few disruptions have big impacts on supply.
The Magic Valley’s meat industry has been turned upside down. While grocery stores are paying processors dramatically higher prices for products, processors are paying producers dramatically less. Magic Valley ranchers are likely to see their profits either shrink or disappear entirely if they sell now. There’s a chance that low beef prices could run some out of business.
“It depends on how financially stable they were,” Twin Falls Livestock owner and manager Bruce Billington said. “If it doesn’t change by fall, there will be people who will go out.”
Closures and slowdowns at the big processing plants because of the pandemic appear to be the main reason for the meat shortage.
On top of that, COVID-19 has wreaked havoc on supply chains for most of the agriculture industry. Grocery stores and restaurants each rely on largely separate supply chains. That means food that would have gone to restaurants generally can’t be rerouted to grocery stores.
Supply chain problems and shortcomings in processing capacity have simultaneously meant low prices for producers trying to sell cattle and high prices for grocers: On one hand, the amount of meat available to grocery stores is reduced, while the number of animals ready to be slaughtered is increased. Swensen’s Market owner Ben Swensen said for some types of meat he’s had to pay 50% more — if there’s even meat available to buy — and he’s had to lower his margins.
“The beef is high priced, but the cattle are extremely cheap,” University of Idaho Extension Educator Joel Packham said. “There’s no beef because there’s no way to get (cattle) killed.”
Eleven state attorneys general, including Idaho Attorney General Lawrence Wasden, recently asked the U.S. Department of Justice to investigate whether the country’s four biggest meatpackers — Tyson Foods, Smithfield Foods, Cargill and JBS — are colluding to set prices, since they’re both paying less for cattle and charging more for beef. Those four companies control 80% of the U.S. meat market.
Rough times coming for ranchers?
In Iowa, pig farmers have had to euthanize and compost tens of thousands of animals because they can’t find processors to take them, and they can’t afford to continue feeding them. Pig farmers are also feeding their animals differently to try and slow their growth.
Cattle producers are a bit more fortunate than pig farmers. Pigs reach slaughtering size much more quickly than cattle, so pig farmers simply run out of space to store hogs. A cattle rancher has the option of keeping animals on the range a few extra months before bringing it to market — although holding onto an animal does mean losing money.
On top of that, the cattle market is more seasonal than the pork or chicken market. Many ranchers have one or two paydays a year, and the most common time to sell animals is in the fall — a lot of producers wouldn’t have been selling their animals right now anyway, regardless of the pandemic.
Producers who sold their cattle in the last few weeks got about 25 to 30% less for their animals, Billington said. In many cases that means producers are losing about $300 per animal compared to normal. It’s especially frustrating, Billington said, for producers who went to the expense and effort of keeping an animal fed on expensive feed this winter, because now that investment has turned out to be worthless.
Billington also noted that his business is seeing approximately a 30% decrease in the number of cattle coming to auction. That’s a reduction of 300 to 500 animals coming to the Twin Falls Livestock Commission every week, and it’s causing Billington’s business some financial pain — although he’s confident that his business will be OK.
Wyatt Prescott is a rancher in Fairfield. He said he has a backup of cattle ready to be harvested. Ranchers are dealing with a lot of uncertainty right now, and the amount of financial hardship will be determined by how long low beef prices last.
“If we can keep the supply chain moving, I’m optimistic that we will be OK,” Prescott said. “I’m not saying it’ll be great.”
Dawn Anderson, a Gooding rancher, raises breeding cattle, so her market is determined by how much someone is willing to pay to improve the genetics of their herd. She said that her business has felt the impacts of COVID-19, too. The spring is normally the busy season for ranchers in the genetics business, but she said her customers aren’t spending as much on genetics right now.
The big question for ranchers is whether or not beef prices will improve come fall. There’s a chance that while beef producers are doing alright today, it could just be their pain is delayed a few months.
Packham said that the futures market — which predicts the price of beef down the road — is dismal. There’s a glut of hundreds of thousands of cattle ready to be killed and the plants can’t kill them right now.
“It’s truly something that we have not experienced in this country ever,” Packham said.
Custom processing’s time to shine
The Magic Valley doesn’t have any massive meatpacking plants. One of the larger ones is Ida-Beef in Burley, which handles 200 cows a day. Ida-Beef Operations Manager Bill Gilger said that for Ida-Beef, it’s been pretty much business as usual, although his employees are getting a little ragged from working long days.
Business is not as usual for custom processors. Darrin VanHorn, the owner of High Desert Meat Processing in Twin Falls, has never been busier. The phone calls from ranchers looking for buyers and people looking to get an animal processed simply don’t stop these days. There are stretches when his cellphone rings once a minute.
“My guys are working daylight to dark,” VanHorn said. “We’re trying our very best to help people out … I want to be able to help all of my ranchers and farmers. If we have to lose a little bit of sleep to do it, then that’s what we’ll do.”
For many cattlemen, custom processors like VanHorn are the only way to sell animals right now. High Desert Meat Processing has even been getting calls from local feedlots, asking if he can process large quantities of animals.
There’s no way VanHorn has the manpower to do it.
Custom processors like High Desert Meat Processing and Scarrow Meats are only able to slaughter and process a very small percentage of Magic Valley livestock. They operate under different rules than the big meatpacking plants. You can’t go to a Scarrow or VanHorn and buy a steak, you have to buy an animal, then bring it to them.
And yet, they’re filling hundreds of Magic Valley freezers with meat.
Scarrow worked with an Iowa hog farmer to sell five semi-loads of pigs, mostly to people in the Magic Valley. Each semi holds 168, 300-pound pigs. It feels good to both help Magic Valley residents (and people as far away as Utah and Oregon) have meat for the families and to help pig farmers who might otherwise have had to dump their pigs in a ditch.
“We need to help people out and get people taken care of just in case this gets worse,” Scarrow said.
A need to make big industry changes?
Part of the reason the meat industry is in such disarray right now is because four companies control 80% of the market and so much of the supply chain relies on so few businesses.
“We need to build more resilience,” University of Idaho assistant professor of agriculture economics and rural sociology Liang Lu said. “If we do that, we will probably be better off when this type of tragic situation happens.”
The question, Lu said, is who should be responsible for building that resilience? Building resilience — decentralizing the processing industry — will mean greater costs, so its value depends on the likelihood of future pandemics.
“The U.S. Department of Agriculture has a budget,” Lu said. “They have to carefully assess their priorities. Does it make sense to build more capacity? Or does it make more sense to directly help the farmers, or buy their excess supply? That’s the key issue here.”