The giant Cargill Beef slaughter plant on the east edge of the city is a factory — in reverse. It takes 6,000 cattle a day and within a few hours divides the carcasses into hundreds of cuts of meat and byproducts.
"It's like Henry Ford in reverse," said Mike Martin, spokesman for the company, as he made his way through a main processing room during a tour.
In one of the main processing rooms, hundreds of workers with hooks in one hand and incredibly sharp knives in the other stand along lines as large chunks of beef move along overhead cables. They each make a couple of quick cuts on the same spot on each piece before it moves down the line.
Workers are bundled in hooded sweatshirts or coats under chainmail shirts and white Cargill smocks in the chilled air. On their hands and arms, Kevlar protects against a slip of the knife.
Cargill focuses intensely on that disassembly process to squeeze out more profit and to control contamination.
Cargill has been very successful on the first and labors with imperfect success on the second.
Cargill Meat Solutions, based in Wichita, is an umbrella for seven companies involved in pork, beef and poultry processing, marketing and distribution.
Cargill Beef, the largest of the units, had sales of $9.7 billion in 2010, and expects sales between $10 billion and $11 billion in 2011.
The unit processes nearly 7 billion pounds of beef and beef byproducts a year in its six plants, including the one in Dodge City. It sells that beef and byproducts around the world.
It's not the largest beef processor, but it is one of the big four — along with JBS, Tyson and National Beef — with a 23 percent market share.
And it stretches far beyond the U.S. to more than 60 countries. Its meat winds up in tacos in Mexico and as steaks in Japan. The tallow winds up as cooking fuel and the hides as seats in luxury cars.
In the Wichita headquarters, brokers and salespeople spend their days making deals with grocery chains days, weeks or months away from delivery.
Other employees talk to the plants, deal with government regulators or forecast cattle production.
Cargill Beef president John Keating, who has run several smaller Cargill business units before this, said it's an operation of enormous complexity.
"You get the same stresses as any business, (but) you just add zeros," Keating said. "It's a big business."
The business landscape for Cargill Beef presents challenges this year.
Keating said the cost of finished cattle for slaughter has gone up 31 percent from a year ago, but so has the price of the beef they sell.
Cargill is a middleman, buying feeder calves for its feedlots or as finished cattle for its slaughter plants. Because of its size, it has been able to survive sharply higher costs, passing along the increases to customers.
Driving the increases are the shrinking size of the global cattle herd and the rising costs of other inputs, particularly corn. Keating is no fan of ethanol.
Keating blames the decline in the number of cattle on the difficult economics for producers.
Ranchers are choosing to sell the herd for production rather than hold back heifers to build the herd. Even if ranchers decided to expand, it would take three to five years.
"The U.S. herd is the least since 1956," Keating said. "It will continue to drop, but we see that slowing down."
He also cited as reasons for the drop in numbers: increased government regulation globally, drought in parts of the U.S., and the fact that U.S. ranchers are growing older and might be more interested in cashing in now.
Although the average size of cattle continues to grow by five to 10 pounds a year, producing more meat per animal, the tight supply means that beef prices will remain high for the foreseeable future.
Grocery chains traditionally have tended to absorb the rising costs, but now they are passing them along. The result is higher beef prices at the store.
Last year, Secretary of Agriculture Tom Vilsack proposed rules that he said would promote competition in the meat industry.
Consolidation, Vilsack said, has given the packers ever-greater control over producers and allowed them to keep a larger share of revenue.
In the beef industry, for example, the four largest packers process about 80 percent of the country's feedlot cattle.
The number of cattle producers has fallen from 1.6 million in 1980 to 950,000 today, according to the U.S. Department of Agriculture.
Vilsack has argued that the reason ranchers have had such a tough time financially — and cut their herds — is because they've lost the ability to command higher prices from packers such as Cargill.
The proposed rules would make it easier for farmers to sue under the Packers and Stockyards Act. Instead of existing rules requiring that farmers prove that a company had reduced industry competition, the new rules require a farmer to show only that a company has engaged in discriminatory acts against the farmer, such as offering higher
prices to preferred suppliers.
That provision likely would unleash a wave of litigation, forcing feedlots and packers to buy cattle more as a commodity, rather than differentiate by producer and by quality.
Cargill is not shy about objecting to the proposed rules. Beef packers have spent a great deal of time trying to escape commoditization by creating brands such as Cargill's Sterling Silver brand. Branding products allows the packers to charge higher margins.
These new rules would discourage paying for higher quality — and greater investment in food safety, Keating said.
"If you are going to be serious about food safety, you're going to need a lot of Ph.D.s in your business," Keating said. "There are just so many food safety issues that it's tough for smaller companies to compete these days."
Fight against E. coli
But Cargill's biggest challenge might be its ongoing effort to produce safe food...
Source: newsroom - meattradenewsdaily.co.uk
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