Ag Department launches cattle contracts library urged by Johnson

A recently launched program championed by South Dakota’s lone congressional representative aims to aid livestock producers in price negotiations with slaughterhouses.

The Cattle Contracts Library is meant to log basic information on the prices paid for cattle by the nation’s four major processing conglomerates: Cargill, JBS USA, National Beef Packing and Tyson Foods. 

The idea is to create a pool of data to empower smaller producers who sell to the companies, known as the “big four” in livestock circles, who control around 80% of the market for cattle. The U.S. Department of Agriculture (USDA) already has a Swine Contracts Library to serve the same purpose.

Republican Rep. Dusty Johnson introduced a bill in 2021 to create a cattle version of the library. For too long, Johnson said, producers have gone into price talks with the dominant slaughterhouses without a sense of what the companies pay to producers with larger inventories.

Johnson’s bill earned support from 410 members of the U.S. House of Representatives, but the Senate has yet to act. Instead of waiting, the USDA chose to launch the library as a pilot program. The first set of numbers went live in February.

“I don’t think anyone would allege that the cattle contract library is a silver bullet,” Johnson told South Dakota Searchlight, but he said the library is a step in the right direction.

Pandemic put attention on livestock

The COVID-19 pandemic exposed weaknesses in the food supply chain and put additional pressure on producers who’d struggled for years to draw attention to their troubles, Johnson said. 

When Johnson first arrived in Washington, D.C. in 2019, few of his fellow representatives were aware of – or especially interested in – the woes of cattle producers. That year, however, a fire at a Tyson cattle processor in Holcomb, Kansas, cut processing capacity by 6,000 head a day. 

The pandemic exacerbated the situation less than a year later, as multiple plants shut down due to outbreaks or slowed production. At one point in the pandemic, 10% of the nation’s slaughterhouse capacity was shut down. Prices spiked, and have remained high as inflation took hold in the years that followed.

Now, Johnson said, lawmakers from urban areas are paying closer attention.

“That’s when we started to get a lot of momentum,” Johnson said of the pandemic. “When I was talking cattle issues, I was having a lot more people pay attention. And it helped us get legislation passed.”

The successful House vote for the library didn’t translate to an easy path to implementation, for that program or Johnson’s other livestock-related priorities: the Butcher Block Act and a-PLUS Act. That first bill would offer loans to smaller processors through the USDA Office of Rural Development; the second would make it easier for auction owners to invest in small meat packing operations.

The legislation authorizing the library passed the House but hasn’t moved in the Senate. The other two pieces of legislation have yet to see a vote in either chamber.

Ultimately, the USDA chose to bypass Congress and implement the cattle contracts library as a pilot program. 

The Biden administration, meanwhile, has pumped dollars from the American Rescue Plan Act into processing projects. 

In late February, the USDA announced a series of awards, including a $3.3 million grant for a 4,000-head-a-year processing facility in New Underwood, South Dakota.

Rural Development spent $12 million in three meat processing projects last month, and sent $75 million to 22 meat processing projects in November 2022. 

Earlier this month, USDA Secretary Tom Vilsack announced another $89 million in guaranteed loans for meat processing, including nearly $20 million for South Dakota loan programs.

GROW South Dakota, for example, will use its $8.1 million in guaranteed loan funding to aid about 16 meat and poultry processors, with each receiving about half a million dollars for capital.

Johnson wants to encourage an increase in slaughterhouse capacity through an “all hands on deck” strategy.

“If we can have regional packers move from 300 head a day to 600 a day, good on them,” Johnson said. “If we can have mom and pop butchers move from five head a week to 10 head a week … that also helps. We want to build capacity really across the processing environment.”

Stumbling blocks for slaughterhouses, cattle producers

Like Johnson, South Dakota Cattlemen’s Association President Eric Jennings hopes to see a Senate stamp of approval to make the library permanent. Some cattle ranchers say a lack of transparency is among the reasons they earn just 39 cents of every dollar spent on beef by U.S. consumers. 

The contracts library aren’t expected to move markets, but the data will give smaller producers a better vantage point on pricing. 

“There’s a substantial number of cattle being sold without price transparency,” Jennings said.

On the capacity side, Jennings said, there are three troubles prospective small to medium slaughterhouses contend with: the cost of a facility, a workforce shortage, and the opinions of slaughterhouse neighbors.

The starting point for land acquisition, brick and mortar, coolers and the like for a slaughterhouse can run around half a million dollars, Jennings said. It can cost $100,000 in additional capital up front for each animal the facility would hope to process each day. 

If a company can muscle past opposition from neighbors to earn building permits and licenses, the same staffing struggles facing businesses nationwide – and particularly in South Dakota – become an ongoing difficulty.

Doug Sombke, president of the South Dakota Farmers Union, said this week that the full-court press of federal programming and funding is welcome news for producers. As far as the cattle contracts library, Sombke said it’s a welcome but marginal piece of producers’ overall needs.

“There’s just so few of the small- and medium-sized farmers that I know that really utilize it,” Sombke said. “It’s a good thing to have, but I really don’t think it’s going to have a lot of upside potential to help farmers in their marketing ability.”