This week I had the opportunity to read through a prospectus for a regional beef harvesting facility planned for North Platte, Nebraska. You likely saw the press release announcing this in the Star Herald, or other news outlets, several weeks ago. The company is called “Sustainable Beef LLC” and is projected to provide an additional marketing alternative for fed cattle for local feedlot operations.
Let me say at the outset: I am neither writing in support nor opposition to this particular company or business endeavor. Rather, I am writing this column of “Jack’s Insights” to inform and educate, just as I strived to do during my 34-year career as a university professor prior to retirement. My attempt is to describe a very complex industry in less than 1000 words, so read on.
Numerous components have converged as motivating factors for the Sustainable Beef company to develop. Perhaps a key factor has been disruptions that have occurred in the beef supply chain over the past few years. Like most large integrated industries in today’s economy, a relatively small interruption in one area of a supply chain can have a ripple effect across a wide spectrum of that industry. In this case, a major fire in a beef processing plant in Holcomb, KS in summer 2019, and the impact on labor forces in many beef plants, caused by the pandemic in early 2020, triggered disruptions in harvest, processing, marketing, and transportation of the beef supply chain. Another motivating factor is the decrease in competitive bidding for live cattle at the time of harvest.
While many of the supply chain disruptions have been tangible, physical disruptions, some have also been the result of psychological impacts on markets due to the very real results of risk/reward business decisions in the many segments of the beef supply chain. Our 24-hour news and rapid information society of today allows a “hiccup” in one facet to sometimes cause an “earthquake” up or down the entire chain.
There are several types of marketing agreements used across the beef supply chain. I do not claim to be an expert beef supply chain economist, but as I see it, these marketing agreements are generally all driven by three key components: supply, demand, and quality characteristics. Feedlot operators, such as those in Western Nebraska, are often “price takers” and less frequently “price setters”. The reasons for this are complex, but generally are due to limited competitive bids by the major beef packers and the fact that the beef supply chain is built on a perishable product.
The Sustainable Beef plant to be built in North Platte is projected to harvest 1,500 fed cattle per day or approximately 400,000 annually. They will be considered a medium-sized beef plant. As a comparison, based on statistics from National Cattlemen’s Beef Association (NCBA) DIRECTIONS magazine of Fall 2020, JBS USA, headquartered in Greeley, CO, is the largest beef harvest operation in the United States and daily harvests 27,000 cattle in 9 plants across the Midwest; Tyson Foods, Inc., headquartered in Springdale, AR ranks second with 6 plants. The daily harvest at Tyson is not published but is between 27,000 head of JBS and 23,000 head of Cargill; Cargill, the third largest packer, headquartered in Wichita, KS harvests 23,000 head daily at 6 processing plants. JBS, Tyson and Cargill are often referred to as “The Big Three” in the beef industry. A similar medium-sized beef plant to the planned Sustainable Beef plant is Agri Beef Company, the 10th largest beef processing operation headquartered in Boise, ID has a daily harvest of 1,650 in its plant in Boise.
Beef is a perishable product, whether it is in the live animal state or as meat. This is true since the U.S. beef chain is almost exclusively managed as fresh, rather than frozen meat. Fed cattle have some flexibility for time of harvest; however, once cattle are programmed for a feeding schedule the economics associated with feeding cattle dictates that they be harvested in a relatively narrow window of time, ideally no broader than about 3 weeks.
As I noted above, Sustainable Beef LLC is projected to provide another source of competition for fed cattle in our region. This will be a good thing. A good thing, not only for beef feedlots, but for all associated and integrated segments of the cropping and support industries prevalent in the Panhandle. The Sustainable Beef plant will also have a significant impact on the economy of North Platte with its $50 million payroll.
Another component of the Sustainable Beef LLC business plan is to facilitate a level of supply chain management by inviting investments in “Shackle Space”. In brief, a shackle is the hook that a beef carcass is attached to as it proceeds through the harvest and processing stages. In other words, the plan is to have a predetermined supply of 1,500 fed cattle ready to fill the shackles for each day’s harvest. A portion of this predetermined supply is designed to come from those who purchased shackle space as a right and obligation to supply fed cattle to fill the number of shackles they invested in. This arraignment is designed to be a positive component for both the Sustainable Beef company, and for feedlot operators.
In the earlier press releases, Sustainable Beef CEO David Briggs said, “The team we have put together to help us build this new plant is top notch and committed to Nebraska Beef and to our tag line; Right People – Right Place– Right Time”.
In my opinion, it will be exciting to watch this new endeavor develop and provide another marketing opportunity for the high-quality cattle produced in the Nebraska Panhandle region. Have a good month and get out and enjoy the beauty of a Nebraska springtime.