Just last week it was announced that the Black Hills of South Dakota will be the home of a brand new $1.1 billion “state of the art” monstrous meat plant able to process 8,000 head of cattle and bison per day. It’s no small venture at 1.1 million square feet employing 2,500 workers. That makes at least two or three similar new plant announcements over the last year or so.

This latest one will be a “tech driven” plant, according to the announcement, and will have all the bells and whistles of robotics, with easier, safer and more efficient processing that is environmentally friendly, using less employees than a typical plant of its size, blah, blah. The minimum wage will be $28 per hour and the plant’s owners are desirous of helping ranching families through difficult financial times. Construction won’t begin until 2023 and three years or so later it will open for business.

Where in the world are all these cattle and buffalo going to come from? And, more importantly, where will all the meat be sold? Are the owners going to cut into the Big Four beef behemoths’ market to gain share or will they attract more consumers to eat more beef? I don’t see how this plant can be successful. The beef big boys will quickly adopt any new processing techniques that the new plant will initiate and do so more efficiently, at a lower cost with a less expensive labor force earning a maximum hourly rate of $20 or nearly 30% lower than the lucky ones at the new plant. Such a new plant simply will not be able to compete.

For argument’s sake, let’s just say that the new plant will process 7,000 and 1,000 head per day of cattle and bison, respectively. That’s 1,820,000 cattle and 260,000 bison annually or nearly 6% of all the fed cattle currently processed and 60% of all the bison alive in North America today. Delusions of grandeur to the nth degree, in my opinion.

With this plant announcement as a backdrop, and as promised in my last blog post, this blog is a continuation of my beef industry integration plea. I am suggesting that the current beef processing sector is awash with capacity, and it must first fill that up before any more is built. My solution to maxing out the current underutilized capacity is to break up the Big Four beef companies — JBS, Tyson, Cargill and National — into regional entities and integrate each of these new cattle/beef continuums, so when a calf is dropped that in two years, those involved will consistently supply their affiliated, integrated companies.

The current plants’ efficiencies are then maintained and can certainly be enhanced as capacity becomes used up. But, the inefficiencies of any “greenfield, build it and they will come” mis-adventure is avoided. If processing is the fulcrum or constriction point in beef marketing in the conception-to-consumption, cattle-to-consumer continuum, then why build more cattle/beef processing capacity when plenty is currently available and underutilized?

Rather than integrate, maybe the regional beef processors/marketers become independently owned and operated subsidiaries of the Big Four and proudly market their individual brands of beef as a way of growing beef consumption. This avoids all the machinations of “breaking up” the big boys and forces beef marketing to come to the fore. I do know that any beef consumption growth will not come from higher priced beef no matter the depth or breadth of any altruistic new beef processing plant and associated techniques, advancements or ownership desires.

Who will lose money on all these ill-advised, new plant ventures? Certainly not the nonaffiliated venture capital suppliers once they see the folly of such an investment. No, for the most part, it will be the supplying cattle ranchers who are pinning their hopes on a new plant because the old ones controlled by the Big Four are “screwing” them and reaping all the profits.

That ain’t so. But, even if it is, a way to cure such a “screwing” is to somehow integrate the process and involve all the participants in the ownership and management of such an entity with each integrated profit center’s returns equitably distributed.

Integrate the beef industry?

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