The meat producer’s bottleneck

With limited processing capacity on the local level, producers are limited

Posted 7/23/20

Bridget Gallagher and her husband, Cecil, came out to Wyoming about 10 years ago to ranch. Rather than produce thousands of head to be shipped off to one of the big meat packers — such as the …

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The meat producer’s bottleneck

With limited processing capacity on the local level, producers are limited


Bridget Gallagher and her husband, Cecil, came out to Wyoming about 10 years ago to ranch. Rather than produce thousands of head to be shipped off to one of the big meat packers — such as the JBS plant in Greeley, Colorado — they market their all natural beef and pork directly to consumers in the area.

On the Gallaghers’ ranch in Clark, the animals are raised without antibiotics or hormones. They’re given a diet that’s 80% pasture grass before being finished with conventional grain. Bridget Gallagher said she likes knowing her customers, and her customers like knowing how their meat was produced.

“I think it’s important people know where their food comes from, and I like to deal with people one-on-one,” she said.

In order for the Gallaghers to sell across state lines, federal law requires the meat to be processed at USDA-inspected facilities. They use Stillwater Packing in Columbus, Montana — one of the few in the area that meets that requirement.

Like all local meat processors, Stillwater is booked up for the next few months. The Gallaghers book a year in advance to make sure they can get their animals processed. Unless there’s a cancellation, there are no free slots.

“My ability to bring in more animals to the butcher is not there because they’re so booked up,” she said. “So I have this growing demand but no ability to take in more animals,” she said.

She said there really aren’t any other processors she can use. Meeting USDA inspection standards is an expensive bar to reach. Many states, including Wyoming, have their own meat inspection programs, but meat processed at these facilities can’t be sold over state lines, even though the standards have to be at least as stringent as federal regulations.

There are also custom-exempt facilities that have to meet health regulations but are not inspected. They can only provide the processing service for the owners of the animals and cannot sell the meat to anyone else.

The long wait times at state and federally inspected local butchers show demand is greatly exceeding supply. Despite the business opportunity, there aren’t a lot of entrepreneurs clamouring to get into the business.

According to a Wyoming Business Council report in February, the state has five federally inspected facilities, 11 state-inspected facilities and 27 custom exempt facilities. All combined, the state and federal facilities process about 2,200 head of beef annually. The total inventory of cattle in the state is over 1.3 million.


Rolling downhill

The Business Council’s report found a number of challenges facing small processors, including a shortage of labor. Wyoming had some of the lowest wages among the top states for skilled meat workers. The processors also are limited for what they can do with offal, which are byproducts of the slaughtered animal. The hides of the animal make up a large portion of that, but it also includes edible tongues and livers and inedible lungs, bone and teeth.

Large processors can gather all of it together and process it into everything from upholstery to dog food. Smaller processors have to throw much of it away. These byproducts account for up to 10% of the animal’s values, meaning processors extract less value from the animal than the big meat plants. This puts them at a disadvantage.

Carter Country Meats in Ten Sleep targets a niche market in all-natural, grass fed beef, like the Gallaghers. While there’s a demand for natural beef, co-owner RC Carter says most people choose to buy the cheaper meat from grocery stores, which is often processed by the corporate packers. In some cases, it’s imported from other countries.

“Everybody wants to eat grass-fed, locally raised beef, but they don’t want to pay for it,” Carter said.

He’ll sometimes sell to restaurants who talk him down to less than $4 per pound on his ground beef, which they then sell in a $21 hamburger. According to the National Farmers Union, 1 pound of steak sold retail for $5.96 per pound, and the producer received 50% of that. In June, the retail price had risen to $7.39 per pound, and the producer’s share was down to 34%.

“S— rolls downhill. It’s the farmer and rancher that don’t get paid,” Carter said.

Carter’s experience trying to get more value from his animals from the offal illustrates the difficulty smaller producers can face when it comes to navigating federal meat inspection regulations.

Carter came up with a way to combine bone marrow with his ground beef. It added flavor to the beef and utilized more of the animal. In order to mix the parts together, he had to get a label approved by the federal Food Safety Inspection Service. Carter did that, but when he took it to the processor, the USDA inspector said he was trying to circumvent the law.

“So much of it is open to interpretation by the individual inspectors,” he said.

He said when people buy from someone they know, they’re getting a product that’s as safe, if not more so, than government-inspected meat.

“If you’re a small business, and you make your customers sick, you’re done,” Carter said. “We were raised in the tradition that you look people in the eye and you be honest. We want our customers to trust us and not have to rely on a government label.”

Carter also believes that the increasing centralization of meat processing into a handful of large conglomerates, on top of increased importation of meat, is threatening the security of the nation’s food supply.

“If we continue on the path we’re going, we’re going to starve,” he said.


Starving the rancher

In the past few months, the four large packers that process 80% of the beef in America — JBS, Tyson, Cargill, and National Beef — have come under greater scrutiny. The COVID-19 pandemic reduced their capacity, and meat prices soared. Ranchers, however, have continued to suffer low prices, making it increasingly difficult for them to turn a profit.

“They’re starving the rancher,” Carter said.

In May, attorney generals in Wyoming and 10 other states asked the U.S. Justice Department to investigate the four big meatpackers for predatory pricing. In June, the department issued subpoenas to the meat giants.

Jim Magagna, executive vice president of the Wyoming Stockgrowers Association, said to the best of his knowledge, the corporations gained their market share through a natural process of consolidation. There’s a lot of efficiencies, such as the ability to utilize offal, that come from that kind of scaled-up processing.

“Whether or not that consolidation has been used in an illegal manner is the question,” Magagna said.

In order to offer Wyoming producers an alternative to the big packers, the association is hoping to bring about a medium-sized processing facility.

Magagna said this would fit, in terms of capacity, somewhere between the local butcher and the giant packer. It would process a minimum of 100 head per day. The Wyoming Legislature in the last session appropriated $1 million for loans or grants in support of such a facility, and Magagna said they’ve seen some interest in the concept.

There’s also a push to change federal law, which would open up the big packers to more competition. U.S. Rep. Liz Cheney, R-Wyo., introduced the Expanding Markets for State-Inspected Meat Processors Act of 2020, which would allow state-inspected facilities to sell meat across state lines. And U.S. Rep. Thomas Massie, R-Ky., sponsored a bill that would let custom-exempt packers sell in-state retail.

“I think it’s a good first step,” said state Rep. Tyler Lindholm, R-Sundance, who has been pushing to put more state control of food inspection regulations.

In the meantime, local producers like the Gallaghers and Carters continue to work with what they have, with that Wyoming can-do determination, to create a more direct bridge between producer and consumer.

As Carter put it: “Know your farmers, know your rancher.”