An antique hook-and-pulley system still hangs from the ceiling of the butcher shop at Everett's Foods in south Minneapolis, the relic of a bygone era when sides of beef from Minnesota farmers were shipped directly to the store and cut up for customers.
Today, all the beef that Everett's buys is processed in Omaha. Like many industries, beef processing over decades has been reshaped by scale and specialization to bring consumers more products at lower prices. And it's cheaper for Everett's and most groceries to sell beef from the global supply chain than from farmers down the road.
"We'd like to be able to buy from local producers, but it's not cost-effective," said Evan Pregler, the meat buyer at the family-run store.
But now, there are signs that the drive for efficiency and low prices may have gone too far in the beef industry. More than 80% of the beef consumed in the U.S. is processed by just four companies. The vulnerability of that concentration surfaced at the onset of the coronavirus pandemic last year when stricken workers forced processing plants to close temporarily.
Lately, another effect emerged. As the economy recovered and food prices surged as part of an inflationary wave — consumers paid 12% more for beef last month than a year ago, the government said last week — processors captured far more money than farmers did. Meanwhile, drought damaged grasslands across the Midwest this summer, sending feed costs soaring for cattle growers.
"At a time when beef was at record sales we were losing $100 on almost every animal we processed," said Don Schiefelbein, who farms several thousand head of cattle with his seven brothers near Kimball, Minn.
Schiefelbein, who is also president-elect of the National Cattlemen's Beef Association, said the lament on farms and ranches is nearly universal: "Why, in record prices, am I not making enough to pay my bills?"
Now, Washington is getting involved, with the Biden administration taking steps to ease the effects of consolidation in meatpacking.
What's clear is there aren't enough slaughterhouses to keep up with all the cattle ready for slaughter. This oversupply often forces farmers and feedlots to sell cattle at discount. Processors cite labor shortages and COVID-19 safety protocols for slowing their output, creating a surplus of cattle.
But signs of trouble in the nation's beef supply chain predate the pandemic.
A 2012 drought killed off vast supplies of grass throughout cattle country, queuing up a livestock shortage. The big processors, including Minnetonka-based Cargill, shuttered a handful of major slaughterhouses around the country because they didn't have the cattle to support them.
The cattle numbers rebounded, but the capacity never did.
Then, in August 2019, a fire at a Tyson beef packing plant in Holcomb, Kan., severely curtailed the nation's beef production capacity. Allison VanDerWal, executive director for the Minnesota State Cattlemen's Association, called it a "black swan event."
Then, the early weeks of the pandemic brought worries of food shortages as plants closed due to outbreaks. In late April 2020, then-President Donald Trump ordered the government to ensure that meat plants stayed open, leading many to operate at reduced capacity.
Even so, profits remained steady or better for the big four processors — Cargill, JBS Food, National Beef Packing Co. and Tyson Foods — and they also took a greater share of overall sales.
Two years ago, processors paid cattle farmers about $1,550 per animal, a figure derived from what's known as the carcass weight, or the weight of meat. Processors at that time received about $1,900 per animal when they shipped meat to groceries and restaurants.
Today, farmers are paid on average about $1,700 per animal while processors are getting around $2,500, widening the revenue gap to more than $800. The difference in profits per animal is likely even greater, farmers say.
"It's ridiculous," said Dan Owens, a livestock farmer in Truman, Minn. "The big processors — those guys are making a thousand bucks a head right now. All of these producers, they're lucky if they're getting $100, $150 a head."
At a Senate Judiciary Committee hearing on beef prices in July, Tyson executive Shane Miller said the change in financial outcomes has "everything to do with the law of supply and demand." He cited "unprecedented shocks" from the pandemic and severe weather that left processors unable to operate at capacity.
The profitability of farmers and processors diverged like this every five or so years over the last two decades, said Michael Swanson, chief agricultural economist for Wells Fargo. He found only one instance in 22 years of pricing comparisons where cattle producers had better margins than processors.
"This is an industry prone to cyclical outbursts of imbalance," Swanson said.
Forecasters predict farmers will be paid more for cattle next year, due to large sell-offs of herds this year in drought-stricken areas, he said. That could ease the financial imbalance and some of the tensions between farmers and processors.
Another strain on Minnesota cattle growers: They aren't fetching the same prices for their cattle as counterparts in the southern U.S.
Under what's called a "live negotiated" process in the north, a representative from a meatpacker will give the farmer a base price. The rates are reported to the USDA and publicly available. "It's like buying a car," VanDerWal said.
But cattle growers in the southern U.S. typically sell under a "formula" system, which aren't considered live cash sales and don't carry a reporting requirement. That leaves southern growers able to set their own pricing formula — often higher — based on publicly-reported sales rates without having to participate in that disclosure.
Mike Landuyt, who runs a 700-cattle feedlot near Walnut Grove, Minn., said cattle producers are skeptical that the federal government can fix the system given that the north-south discrepancy arose from the 1999 Livestock Mandatory Reporting Act, which itself was a product of growing political concerns over meatpacking consolidation.
But last month, the USDA took a significant step toward fixing this glitch by publishing a new daily report that includes total head sold using formulas and what the average price was.
"We are certainly excited we are getting some of these numbers now. It's definitely a partial solution," VanDerWal said. "Now we want to know what these formulas are based on, how they are determined."
Meanwhile, in early July, the U.S. Department of Agriculture took a swing at the processing bottleneck problem by promising $500 million to spur construction and expansion of smaller meat processing plants.
Agriculture Secretary Tom Vilsack told Minnesota farmers last month the money is meant to increase capacity and reverse the effects of industry consolidation. Funds will be used to offset inspection fees for struggling small processors, and be distributed as grants and loans for existing small packers to expand.
Cargill declined to comment on the USDA's efforts and plans to decentralize the nation's meat processing.
"We want to make sure we can help small and very, very small processors," Vilsack said in Cannon Falls, Minn., as he urged Congress to increase funding further. "We don't have enough capacity."
Long-time cattle farmers remember when there were more players in beef processing.
"There used to be five, six, seven packing plants in operation in South St. Paul," said Tom Pyfferoen, 70, who farms a few hundred head of cattle south of Pine Island, Minn. "And often there were days when all of them needed more cattle. So the farmer had a market to compete in. That doesn't exist anymore."
These days, he sells mostly to a buyer representing Arkansas-based Tyson, which lately has been setting dates up to a month in the future when they want to make a transaction. That, Pyfferoen said, leaves him on the hook to keep feeding the animals. "Absolutely, I wish I had more choices," Pyfferoen said.
Just as Pyfferoen ships his livestock several states away for processing into beef, Everett's buys all its beef from JBS and National Beef processing facilities in Nebraska.
Everett's has been in business under the same ownership since 1956. Jane McCormick, the store manager and daughter of the founder, said the store sees little benefit from the recent jump in beef prices. "If anything, we see a hit because more people can't afford to buy it at a higher price point," she said.
Some cattle farmers are finding options outside the commodity market controlled by the Big Four. Jared Luhman keeps about 220 pasture-fed cattle on a Goodhue County farm, selling most to a small independent cattle cooperative and the rest directly to consumers through a website.
"In one way, the price of commodity beef coming up makes my price a little more competitive," Luhman said. "We're definitely high-priced, but if everything rises a little closer to us, all of a sudden I'm a little more competitive."