Ranchers Seek Meat-Processing Diversification
Downsides of a Consolidated Meat-Processing Industry
Cattle ranchers and investors are pouring hundreds of millions of dollars into new meat-processing plants in an effort to reduce their reliance on the four main meat processors in the US.
These four companies, JBS USA (JBSAY), Tyson Foods (TSN), Cargill, and National Beef Packing Co., currently control 85% of the market. If these companies run into problems, ranchers are left with nowhere to send their livestock.
This issue was on display earlier this month when a cyberattack against JBS in Brazil and the US impacted close to 25% of US beef production. This left ranchers in a difficult situation. Now, ranchers are voicing concerns about how the meat-processing industry is too consolidated and are looking for solutions.
The Impact of Pandemic Shutdowns
The pandemic also exposed issues in the meat-processing industry. Shutdowns at the leading slaughterhouses during the pandemic hampered meat production last spring, leading to limits at grocery stores and headaches for ranchers. Because ranchers are so dependent on a small number of large processing plants, if one shuts down there can be repercussions across the entire supply chain.
Startups are aiming to address that problem by opening more meat plants, particularly for ranchers who are raising higher-quality beef. With access to a larger number of plants, ranchers won’t have to worry about production coming to a halt when one large facility is forced to close.
Meat-Processing Capacity Increasing
Since the pandemic, at least five new meat-processing plants have opened or are in the process of opening. At the same time, existing plants, including one at JBS, are being expanded. As a result of these efforts, daily meat-processing capacity in the US is forecast to increase by about 5%.
The current market is favorable for new companies opening meat-processing plants. There is an ample supply of cattle, and beef prices are soaring amid strong demand both in the US and abroad. Analysts expect conditions to stay this way for some time. It will be interesting to watch developments in the ranching and meat-processing industry in the coming months.
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