Cattle farmer explains high cost of beef to Rotarians

Rising beef prices in the grocery stores have consumers facing sticker shock. Jay Reynolds, local cattle farmer, explained to the Demopolis Rotary Club Wednesday “who has control of the beef market, who sets the pricing and why something’s gotta give or it’s going to destroy part of the American lifestyle.”

Cattle producers are complaining now that they are losing money, and many are going bankrupt while meat processors are seeing an exorbitant rise in profits, said Reynolds.

From 2012-2018 packers’ gross profit was about 6 percent, Reynolds said. Since then, the packers’ profit has risen to more than 14.5 percent, while the stockers and feeders and “people on the bottom of the totem pole have actually lost profit margin over the same period of time.”

The United States is the largest producer of beef in the world, or about 26 percent. The next largest producer is Brazil, which also is the largest importer of beef into the U.S. The next largest importer is Mexico.

The problem, said Reynolds, is that Brazil and Mexico don’t have the same rigorous controls over meat production as the U.S. At one time Congress passed laws requiring a country-of-origin label. Under the Reagan administration, however, the laws were changed so that meat could be produced in another country, but so long as it was processed in the United States, it could be considered an American product.

Giving a brief synopsis of the life cycle of beef, Reynolds said he raises his calves to about 600 pounds and then sells them to stockers. They grow the cattle to about 900 pounds and then sell them to feed lots to be finished off to about 1,200 pounds before slaughter. He said the primary feed lots are in three Western states: Texas, Kansas and Nebraska.

The largest feed lot operator in the United States is JBS, a Brazilian firm. Reynolds said the company was sold five times in three years “because nobody wants to know they’re from Brazil.” Other companies that finish cattle are Cargile and Cactus Feeders.

But it is the packers, who Reynolds referred to as the “bad boys,” where the inequity in beef pricing occurs. “There are four packers in the United States today that control roughly 85 percent of all beef.” The four are Tyson, Cargill, JBS and National Beef.

There is considerable strain on the cow/calf producer, he continued. The big four purchase as much beef packing capacity as possible, push down health directives and finance feeder operations, making it possible for them to own the cattle. They changed how beef was butchered. Instead of shipping whole carcasses to grocery stores and butcher shops, the packers process the meat in their plants, eliminating the independent butcher shops and grocery stores.

From 1970 to 2021, Reynolds said, more than 40 percent of the cow/calf operators went out of business. Independent grocer shares dropped from 80 percent to 25 percent.

In 1970, 70 percent of beef profit went to feeders, stockers and cow/calf operators. Today those three producers share 37 percent.

The beef Reynolds sold in May for $959 to a stocker. The stocker sold it for $1,428 to the packer. After processing the meat, the packer sold it for $2,428. After expenses, the packer made about $600 profit on each head of cattle it processed.