BIRMINGHAM, Ala. (DTN) -- It was big news in late 2021, when a beef processing plant was announced in North Platte, Nebraska. This plant, Sustainable Beef LLC, would be built on what was described as a "cooperative business model" with profits passing back to members. One of the largest new plants announced to date, with a planned 1,500-head daily capacity, Sustainable Beef was part of a trend toward new processors across the country that were announced throughout 2022.
Agriculture Secretary Tom Vilsack speaks with Henry Davis, CEO of Greater Omaha Packing Co., before a late-fall press conference announcing a $19.9 million grant to the packing plant. (DTN file photo by Chris Clayton)
What's been behind all of this? Many analysts believe COVID-19 caused a paradigm shift, as Americans experienced for the first time in their lives the sight of empty grocery shelves. It became clear that concentrating meat and poultry processing in a handful of large companies was an issue of national security.
The Biden-Harris Action Plan was announced as a result, with President Joe Biden signing an Executive Order on Promoting Competition in the American Economy, in July of 2022. The plan noted that four large meat packing companies control 85% of the beef market; four processing firms control 54% of the poultry market; and four processors control 70% of the pork market. This level of concentration created a bottleneck in the food chain during COVID.
In November 2022, USDA attached $223 million in grants and loans to the problem, with Agriculture Secretary Tom Vilsack noting that the grants would go to 21 meat-processing projects in what he called the first round of the Meat and Poultry Processing Expansion Program. Biden said in a 2022 meeting with producers that his administration plans to invest as much as $1 billion to expand competition in the U.S. meatpacking industry.
Will more processing space be a positive for the beef industry? Basic supply-demand economics says it should be good for business, because more buyers will be competing for cattle. The long-term question is whether the business model can sustain itself. There is a reason the beef business became concentrated in a handful of processors. There's not a processor anywhere that can stay in business if it can't procure cattle at a cost that will allow it to make a profit. More competition will be good for cow-calf producers in the short term, there's no doubt. But it will take a delicate balancing act to keep the doors open long-term at this growing list of meatpackers and processors.
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