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26 minute read
Why Can't Ranchers Sell Meat Directly to Consumers?
by Heather Smith Thomas
Ranchers and consumers have been frustrated in the past several decades with growing regulations that impede direct marketing. Every community used to have local meat markets and butchers; there was always access to locally-grown meat. Today America’s consumers no longer have this source; all meat has to be state inspected if states have inspection systems, and to cross state lines it has to be federally inspected, and there’s a shortage of federal inspectors; they only service the large packing plants.
This issue dramatically became apparent during the COVID pandemic in early 2020 when meat was unavailable and/or very high priced at grocery stores and consumers were trying to find alternative places to buy it. Many producers had beef animals they couldn’t sell, and consumers had no dependable source of beef. How did this huge disconnect evolve?
Bill Bullard, R-CALF USA (RanchersCattlemen Action Legal Fund) says that back in the 1980s there were hundreds of meat packers who distributed meat across the U.S. and hundreds of thousands more cattle producers—and tens of thousands more feedlots, and hundreds more local auction yards.
“We had a very robust disaggregated system that could continue to operate even in the face of a crisis. Even if there was a crisis in one area of the country, we had enough packers and processers to pick up the slack from other areas,” he says.
“Then through the 1980s and into the early 1990s we went through what even the USDA described as merger-mania. The largest packers were merging and acquiring smaller and mid-sized packers. Then they centralized the packing industry in the high plains region of the U.S.—basically six states. So we have about 75 percent of our packing capacity and about 80 percent of our feedlots all located in Nebraska, Kansas, Oklahoma, Texas, western Iowa and Minnesota, and eastern Colorado. Everything now is centralized,” he explains.
There are federal regulations in effect to ensure or attempt to ensure that these huge packing plants are producing safe food, in a sanitary manner.
“This takes more regulations than for small plants, but there was no distinguishing between the size of the plants. Thus we have discriminatory regulations because we don’t allow a state-inspected beef plant to ship across state lines, even though that state-inspected plant essentially does the same thing as the federally-inspected meat plants,” he says.
“Even though we don’t have federal inspectors in foreign packing plants (Brazil, Australia, etc.) we allow foreign beef to cross our border and then go anywhere in the U.S. The state-inspected plants are thus being discriminated against and held back from competing in the national market. They are limited to their state market, which limits the size of their operation. If they wanted to engage in interstate commerce, they had to meet stringent regulations that didn’t even apply to the smaller operations,” Bullard says.
“We have been trying to address this for over a decade. In the 2008 Farm Bill we succeeded in getting a provision to allow state-inspected meat plants to ship beef across state lines, but the USDA wrote the regulations in a manner that was so cumbersome that very few states could comply. So the problem persisted.”
Then the COVID pandemic hit, and for the first time in our lifetimes, consumers who went to the grocery store could not buy the food they needed for their families. This raised more alarm signals.
ROADBLOCKS TO SELLING DIRECT TO CONSUMERS
We currently have a huge shortage of custom butchers across rural America; there’s usually a waiting list to get an animal butchered.
“America is just now realizing this, even though this shortage has been in existence for the past two decades,” says Bullard. “Congress, and all of the trade associations were inattentive, and now they are forced to address the issue, and they are doing so—which is very promising. We need more custom butchers, and more packers, which means more competition,” he explains. This may be the silver lining in the black cloud of the COVID pandemic.
“Also, when consumers went to the beef cases at the grocery store and found them empty, it made them wonder where their beef was coming from. This created a revival in demanding mandatory country of origin labeling. In April we put a petition out on our website and now have more than 393,000 consumers and producers who signed it, calling on the president and Congress to require mandatory county of origin labeling for all beef, pork and dairy products sold in the U.S. This is a positive move that has come out of the pandemic.” It seemed so illogical that there wasn’t enough beef in the grocery stores to meet the demand (and the limited supplies were high priced), and yet ranchers or feedlots couldn’t sell their animals. The system is broken.
Jay Platt, a third-generation cattle rancher near Saint Johns, Arizona says there are several problems with trying to sell direct.
“Our family is trying to start an e-commerce business with meat. We don’t want to just sell a half beef or whole beef; we want to use e-commerce and basically do what Amazon does. You can order from us and there will be a box show up on your doorstep—attractively packaged and exactly what you ordered,” he says.
“We’ve looked at a lot of models, of people who are doing this, but the problem when you do e-commerce is that you must have a federally-inspected plant to process the meat, and there are not enough of those around the country to do it. In Arizona there is only one that does custom, federally-inspected processing—at the University of Arizona meat lab—but I am a five-hour drive from there, to get that inspection,” he says.
“There are actually four federally-inspected plants in Arizona but one is owned by JBS and they don’t do custom processing. Two others are small plants that similarly do not custom process. The fourth is the University of Arizona—the federally-inspected plant that will do custom processing. We also have seven state-inspected plants, one of which is only 50 miles from me, but with state inspection we cannot ship meat across the state line,” says Platt.
“There are other plants that will do a custom kill for you, but you must sell the live animal to the customer and then they have it processed. I was on a phone call with a number of people with our Arizona Department of Agriculture in mid-June to discuss this problem. Apparently there are 22 states right now that have state-inspected facilities that are trying to get regulations changed so that state inspection will enable you to cross state lines. They have not been able to get this through,” he says.
“One of the fellows who was on this call runs the inspection service for Arizona for these state-inspected plants. He said that all state inspections have to follow identical standards that USDA follows. I thought this was interesting. If it’s a foreign meat packer, it has to be an equivalent standard and not an identical standard, but if it’s a state plant, it must be identical, and yet you can’t ship interstate! We are harder on our own country’s producers than we are on foreign
meat producers! I sent an e-mail to our State Director, but haven’t heard back yet, asking what exactly is the reason why we can’t have state inspection cross the state line. I want him to tell me what that is, and he hasn’t done so yet,” says Platt.
“If there are 22 states with state-inspected facilities, and they are indeed identical to USDA standards, there’s no reason why we shouldn’t be able to send beef across state lines. Rather than trying to sell a half or a whole beef to someone (which is expensive, and they need to have enough freezer space), we could sell not only across state lines but it would be easier to sell meat because people could buy just the cuts they want. If people understand that the state inspection is the same as the USDA inspection, they’d have the comfort level they want,” he explains.
Many consumers want to buy just a few cuts of meat at a time, and there’s no reason the rancher can’t sell it that way. “I think that the packing industry doesn’t want this to happen. There has been a big upswing in people wanting to buy meat direct from the producer. The consumers want to know who produced it, how it was produced, fed and processed. This is one thing we ranchers can offer that a meat packer can never do.” More people today want to know where their food comes from, and how that animal was produced and handled.
“I think the packing industry is smart enough to realize that if we can ship meat and have local customers, and sell them packages of meat that’s state inspected—which is just as good as USDA inspected—we’ve basically beaten them at that point. That empowers us and gives us the ability to do the one thing that they can’t do, and that’s provide consumers with the information they really want.” Ranchers can also provide the actual product they want, rather than some unknown entity at the grocery store. They don’t have to wonder where that piece of meat came from. Is it Brazilian? Canadian? Mexican? And how was it inspected?
“This is something that absolutely needs to happen. If it does, and assuming we can’t break up the meat packers through antitrust action, if we can just solve this problem on selling direct, that would be the next best thing that we can do to ensure our survival.”
There have been a number of articles recently on these topics. “I saw one in Forbes magazine and it was predicting that 25 percent of food sales would be e-commerce by 2023 but we hit that point already this year in 2020 and the year is not even over. The thrust of the article was that this is the wave of the future because consumers want to know where their food comes from,” says Platt.
“When you couldn’t buy toilet paper or meat, people were frustrated and are now saying, ‘That will never happen to me again!’ They want a source where they can always get meat.” There was already a growing trend toward direct marketing, and the pandemic ramped it up and showed the need for it.
Dr. Lora Bledsoe, a large animal veterinarian with a practice in eastern Colorado, has lobbyed in her state to try to help cattle producers. There are some differences between state rules and federal rules, and the federal government always seems to make things more complicated. “Marketing meat locally has been a challenge because we don’t have enough meat inspectors, and for the smaller plants it’s very expensive to employ federal inspectors or even get them to come out to rural areas,” she says.
The problem with government is that it tends to make things more complicated, instead of a more realistic approach. “I think they need to look more realistically at how they could be more efficient. That’s never been the trend of government, however; they always want to have more rules and more money. They never want to try to do better with what we already have,” she says.
“I think the roadblocks to getting more independent packing houses is just another example of this. They don’t want to think about loosening up control and subdividing the control. There’s no reason why we can’t have state inspectors trained better or have the standards more consistent among the states. Then everyone could kind of agree and move on, rather than having a complicated soup of different requirements and then the federal government saying they can’t trust the states to adhere to the federal standards, and that they need to make more standards on top of the state standards. In the same way that slaughterhouses need to be decentralized, control of inspection also needs to be decentralized, so we can have more outlets for meat. There is tremendous demand, at least in our area, for more independent slaughterhouses. Right now the waiting time to have a beef animal custom butchered in Colorado is nearly two years out. In essence you’d need to call for an appointment the day the animal was born!” says Bledsoe.
Many people would prefer to buy their meat from a local processer and producer and know the full history of that animal. “This would create a lot more niche markets for producers and might lead to a little more decentralization of power by the four big packers,” she says.
Having more small processors around the country would be a healthier situation than what we were faced with in the recent pandemic. There wouldn’t be such a bottleneck and there would always be meat available, if the process was not so centralized. “This really did highlight the weaknesses in our food supply. If we still had a lot of local meat processors, maybe a few of them might have been affected and have to shut down, but it wouldn’t have affected all of them. With all the eggs in one basket, it showed the chokepoint in this industry,” she says.
HOPING FOR LEGISLATIVE RELIEF
R-CALF asked Congress and the President to streamline the process, to allow state-inspected plants to engage in interstate commerce.
“Since our request, we now have legislation that has recently been filed, to do just that. The Senate filed a bill; Senator Mike Rounds from South Dakota and several others introduced a bill to expand the ability for state-inspected plants to market beef outside their borders,” says Bullard.
Then in mid-June Congresswoman Liz Cheney from Wyoming introduced a similar version in the House. “If passed, this legislation would free up the constraints that regulators have imposed on our state-inspected plants and this should provide the opportunity for entrepreneurs to enter this industry for the first time in several decades,” he says.
Another effort currently underway is called the PRIME Act. Congressman Thomas Massie from Kentucky introduced a bill that would allow custom slaughtering to be subject to state jurisdiction. “This would allow them to sell beef within their state—even though they don’t have the same inspection process as the state-inspected beef plants. So there are efforts to free up the constraints imposed on the smallest and mid-size packing plants,” says Bullard.
Meanwhile, several states are taking it upon themselves to loosen up some of their own rules. The Maine Department of Agriculture, Conservation and Forestry added three new processors in an effort to increase the supply of locally-raised meat available, and authorized 90-day grants of inspection to custom-slaughter operations in Crystal, Etna and Alexander, starting June 1. State agriculture commissioner Amanda Beal stated that this move will relieve extended wait times to schedule USDA-inspected services, and that inspected meat processing will be available in two underrepresented areas of the state. The facilities will be restricted to in-state sales, however.
The Arkansas Beef Council invited 26
processing facilities to participate in a survey (conducted January-March) to examine retail beef production practices in their state, which included questions about wait time and capacity for serving small producers selling beef locally in Arkansas. Fourteen responded, and there was quite a bit of interest in growing their businesses either to support more producers selling locally or to add a retail component to their own businesses.
The survey was part of a project that also intended to provide an overview of program policies and costs in states that maintain a state-level inspection program.
Arkansas relies on USDA to inspect beef for retail sale. As of May 2020, the USDA Food Safety and Inspection directory listed only three Arkansas businesses as having USDA inspectors for beef. A number of processing facilities in the state offer custom-exempt services. Meat processed under the custom-exempt process is not USDA inspected and can’t be sold in stores or across state lines. Examples include beef grown on a family’s ranch and processed for family use, or cattle sold through local food networks for private use.
Producers feel there are not enough slaughterhouses and processing facilities in Arkansas that cater to small-scale producers for providing local beef. Demand for beef has increased since March, resulting in longer wait times for an appointment for slaughter and processing. Prices have also increased since then. Survey participants said marketing was a twofold problem—the challenge of making the public aware that local beef is a viable alternative to buying meat at the grocery store, and marketing their services to potential producers.
The North Carolina state legislature is discussing a bill that would provide $25 million in federal CARES Act (Coronavirus Aid, Relief, and Economic Security Act) funding to boost production at smaller meat processors and help livestock producers. The bill states that it will provide financial assistance to small and independent processors who specifically serve small livestock producers, in order to “reduce disruptions in the supply chain for fresh meat and to help small producers get their product to market.”
The $25 million will go towards “facility expansion, fixtures, on-site job training, or equipment that will expand animal throughput, processing capacity, the amount or type of products produced, or processing speed,” and will only be used for plants that
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meet both of the following requirements: The plant contracts with independent livestock producers to process animals owned by the producers. The USDA contracts with Department inspectors to conduct federal inspection activities at the plant, or the plant is a State-inspected facility. If passed, the bill would distribute funds by Oct. 1, 2020.
On a national level, six Republican congressmen, led by Jim Jordan of Ohio, are urging Secretary of Agriculture Sonny Perdue to ease regulations on small processors. In a June 9 letter to the Secretary, the congressmen stated that the high cost of complying with meat processing laws has made it hard for smaller processors to compete and has led to significant consolidation. Changing regulations would increase competition and make the market less susceptible to shockwaves such as occurred in April, with forced closures of dozens of large plants.
The letter called for changes in HACCP (Hazard Analysis and Critical Control Point) regulations, which need to be more flexible for smaller processors, and for clearer guidance to processors on labeling of meat products. It called for expanding USDA’s CIS (Cooperative Interstate Shipment) program to more states, so more small processors can sell outside their state, and for increasing flexibility and lessening the expense of small processors that need to hire USDA inspectors beyond normal hours.
This letter followed Department of Justice (DOJ) announcement of indictments of four current and former poultry industry executives for price fixing and the DOJ civil investigative demands (similar to subpoenas), to Tyson Foods, JBS, Cargill, and National Beef in a probe of alleged antitrust violations
Then on June 23, 2020, a bipartisan group of senators sent a letter to Secretary of Agriculture Perdue calling for USDA to modify regulations that create impediments to a diversified meat processing industry. The letter reiterated points made by Congressman Jim Jordan and other Republicans on the House Judiciary Subcommittee on Antitrust, Commercial, & Administrative Law, when they called on USDA to ease restrictions on small and mid-sized meat processing operations.
The senators said 80 percent of the beef market is controlled by four processing companies and this market structure exhibited its weakness during COVID-19, adversely affecting the supply chain from ranchers to consumers.
At the same time, a new law was intro
duced by U.S. Representatives. Dusty Johnson, R-S.D., and Henry Cuellar, D-Texas. The Direct Interstate Retail Exemption for Certain Transactions (DIRECT) Act of 2020 would amend retail exemptions under current law to allow meat processed under state-inspected establishments to be sold across state lines through e-commerce, providing beef producers and local processors with more options to market direct to consumers.
Currently, many states have State Meat and Poultry Inspection (MPI) programs approved by USDA’s Food Safety and Inspection Service (FSIS) as “at least equal to” standards set under the Federal Meat Inspection Act (FMIA) and Poultry Products Inspection Act (PPIA). Under the existing framework, state-inspected products can only be sold interstate if approved under the Cooperative Interstate Shipping Program (CIS).
The DIRECT Act would amend the retail exemption under the FMIA and PPIA to allow processors, butchers or other retailers to sell normal retail quantities (300 lbs. of beef, 100 lbs. pork, 27.5 lbs. lamb) of MPI State-Inspected Meat online to consumers across state lines. Because DIRECT Act sales are e-commerce, sales are traceable and could easily be recalled. The DIRECT Act would allow states operating under the CIS system to ship and label as they are currently doing today.
Then on July 2, 2020, the House Ag Committee Chairman Collin Peterson of Minnesota and former Chairman Frank Lucas of Oklahoma, joined several other House members to introduce the Requiring Assistance to Meat Processors for Upgrading Plants (RAMP-UP) Act. This legislation would establish a program to make grants available for facility upgrade and planning, for existing meat and poultry processors to help them move to Federal Inspection and be able to sell their products across state lines. The legislation would also require USDA to work with the States and report on ways to improve the existing Cooperative Interstate Shipment program.
The RAMP-UP Act would provide grants to help rural small businesses meet market demands, wherever their customers live. The Act gives processors the tools to become federally inspected, which widens their customer base. It would help defray costs of attaining federal inspection for meat and poultry processing facilities, and give local producers more options--easing the strain on our meat and poultry industry by cutting red tape.
This bill would help small processors increase their capacity and provide more options for livestock producers to get their product to market. By supporting local meat processors, we would safeguard our food supply and stimulate rural economies, and help accelerate recovery of our beef industry.
The RAMP UP Act addresses supply chain issues by ensuring cattle producers access to new markets regardless of where their livestock is processed. Over the past several decades, we’ve come to rely on fewer and larger facilities to process all our meat—a system vulnerable to disruptions. Small and medium-sized plants can ensure greater resilience and food security in times of crisis, as well as flexibility in marketing for farmers and ranchers. By helping meat processing plants cover the often prohibitive cost of federal inspections, the RAMP UP Act would bolster a strong and reliable meat supply chain for farmers and consumers.
PRODUCER CONCERNS
Ranchers and consumers have been frustrated about the regulations that impede direct marketing. George Wishon (a rancher who summers cattle near Colville, Washington and winters them between the Tri-Cities and Hermiston Oregon) says selling direct to the consumer has many benefits.
“There could be a lot more beef sold that way,” he says. “We have a handful of animals we sell to friends and family, but it’s difficult to get them scheduled for custom butchering. Local butchers are booked up and it’s hard to get anyone to process even one or two fat animals. Halves and quarters need state inspection,” he says.
“We need a lot more small custom processing facilities. Government regulations are tough for them, and many of these processers are thinking about retirement. We need more young people going into this, but there’s not much incentive,” says Wishon.
“There are many legislative acts in the works to try to help producers get more food directly to the consumer. I think they would help, but there is still such a labor shortage that we’ll still have some of the same problems. Selling direct to consumers is a great idea, and it works—and we could do a lot more of it—but there are not enough processing plants. It takes a lot of capital to develop these small plants; the desire is there but there is also not enough labor to operate them in an efficient manner.” It will take a while to get more of these going,” he says.
Kyle Hemmert has cattle and also runs a sale barn in Oakley, Kansas, and says there are long waiting lists to get a beef butchered at local locker plants.
“The local plant in Oakley is state-approved for inspection but not federally approved/ inspected. They can sell meat within the state but can’t ship anywhere else. We are not far from Colorado Springs and Denver where there would be a great market, but can’t ship anything across state lines. When COVID19 came along we asked the government to let these guys do some kind of emergency action and ship it over. They couldn’t do that, yet people could drive here from Colorado Springs and pick up our product and take it home! Some of that was happening when people in the cities couldn’t get meat at their grocery stores,” says Hemmert.
“Our local locker plant applied some time ago to be able to ship meat, and I’d like to do some business with them because I sell a lot of fat cows that could be made into hamburger, but the government won’t let them do that because they are not federally approved and inspected.”
Brett Kenzy, a cattle rancher in South Dakota, says he doesn’t think it was any accident that our industry continued to have more regulations. “Big corporations say they don’t like regulations, but they throw up plenty of regulations until they control the market. Once they have that control is when they don’t want any regulations. We saw that in pork processing. Now we let those plants inspect themselves, which has led to several problems.”
There’s increased interest in farm-to-fork food production, getting away from all the middlemen and letting farmers sell direct to consumers. This interest accelerated when people couldn’t buy meat at the grocery store and wondered why they can’t just buy it from a local farmer.
“The pandemic was a boon to local processors, but they can’t keep up. We have a shortage of small processors, and I hope this might spur more investment. Some of the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) money may now be going to some of the states, and several of those states, like Missouri, may be going to invest some of that money into local processing,” says Kenzy.
“It’s not the answer to all problems, but there is no one answer. There are many different answers, many things that could help, he admitted.”
The PRIME Act (Processing Revival and Intrastate Meat Exemption Act) would amend the Federal Meat Inspection Act to expand exemption of custom slaughter from federal inspection requirements. This would give individual states freedom to permit intrastate distribution of custom-slaughtered
meat such as beef, pork and lamb to consumers, restaurants, hotels, boarding houses, and grocery stores.
“We also hear about other bills that would allow state-inspected meat to move across state lines. I think there are 27 states that have state inspection, and I hope this would spur the other states to get state inspection so they can take part in this commerce, as well,” says Kenzy.
“What the small operations have going for them is a personal touch. Americans have gotten used to mega-companies, huge corporations, supermarkets and monopolies, but the average American has an inherent distrust of huge global corporations. If you can buy beef from your local butcher shop you get to see, with your own eyes, more of the operation and how it is harvested,” he says.
The big plus is being able to have confidence in the product. “You know you are getting single-source ground beef. It isn’t a blend from many different animals that may have come from multiple places or foreign countries. You know it’s from a healthy, wholesome animal,” says Kenzy.
Selling direct from farm to market is always preferable.
“It seems better to have a real animal, processed by a local business within your community. It’s been said that a dollar spent locally circulates five times through the local economy. Just from an economic standpoint, and future of the local community, it makes sense to buy local. One of the most exciting things is that for so long we’ve had cattle producers and beef consumers widely separated, with the corporate monopoly in between. If we can sell more direct, it starts those conversations between the beef producer and the consumer. This will certainly be a healthier situation,” he noted.
There’s been too much disconnect between producers and consumers. “We have radical animal rights people and radical environmentalists putting out false narratives (to turn consumers against farmers and ranchers); if people can see the reality, it would be much better. They could see that farmers and ranchers eat what they grow and live where we grow it. This means we take care of the animals and the environment,” says Kenzy. ▫ Efforts To Sell More Meat Direct To Consumers “W hen R-CALF first saw the reports in mid-March regarding shortage of beef in the stores, we developed an internet platform that allowed producers who could sell beef directly to consumers to include their contact information. We sent that information to consumers, to tell them they could come to this website, and find a producer in their area who can sell beef directly to them,” says Bullard. Some of these producers may only be able to sell in their state, some may only be able to sell the live animal to be butchered on behalf of the person who bought all or part of the live animal, some may be federally inspected and can ship anywhere, but they could list whatever they were wanting to sell—so consumers could order from them.
The requirement for listing on this website is that the beef has to be born, raised and harvested in the U.S.
“We now have more than 450 producers in 43 states who are on this internet platform, to connect consumers with America’s cattle producers. Thus consumers could buy beef even when they couldn’t get it at the grocery store,” he says. ▫
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