Cattle feeders up against a wall

WATERTOWN, S.D. — The signs on the Deberg Farm along U.S. Highway 212 west of Watertown, S.D., always say “EAT BEEF.”

But an unhappy cattleman, Troy Deberg, 47, says he recently ordered an extra banner to warn consumers: “Think beef is high now? Wait ‘till the packers control the farms.” One of the family’s displays is decorated with macabre skeletons, wearing COVID-19 masks.

Troy and his wife, Kristine, operate an 1,800-head feedlot and have a 200 cow-calf pairs. They also raise soybeans, wheat and corn. Despite being third generation on the farm, he’s steering his son Cole, 21, of Sioux Falls, S.D., away from it and toward a construction-related career.

The Debergs sell cattle on the open market for dressed beef and basically must take whatever price the packers offer.

“When they get fat you’ve got to sell them,” he says. “You can’t tell them, ‘Go and not eat for awhile,’ because then you’ll be going backwards. When they’re ready, you need to ship ’em off. They go to packing plants.”

When the COVID pandemic hit, the market reduced prices by $40 per hundredweight. They’re worth roughly $150 more than what they paid for them as yearlings as 900 pounds, Troy says.

”You’re going to run all of your feed through them, and you’re going to lose $300 to $400 (per head). It’s not going to work,” he says.

Kristine, who grew up in nearby Clark, S.D., works as a physical therapist in an out-patient facility at Watertown. That work has slowed from the COVID effect, so she stayed home to help with the planting and calving.

“All of the hard work is a lot more stressful,” she says, because of the financial concerns.

Adding to the frustration is that the Debergs in the 1990s chose to do some sub-surface tile drainage of a wetland. They withdrew from federal farm programs, which Troy says means he won’t qualify for COVID-19 federal livestock aid announced on May 19 in the Coronavirus Food Assistance Programs.

For starters, they won’t get CFAP payment of $214 a head on slaughter cattle marketed from Jan. 15 to April. He sold 450 head during that period, so that’s a $96,300 hit based on a decision made decades ago.

Longer term, Deberg says the bigger issue is packing industry control. He thinks packers are using the COVID-19 crisis against cattle producers. In the past there were ups and downs in the cattle transactions, but recently it’s been “down and down and down and down.”

“We’re basically running on Dad and Grandpa’s assets, right now,” he says. “We keep losing assets every god-dang year, and it ain’t going to work if the packer wants to make $1,200 or $1,500 every (on every animal). But they don’t need to take $400 out of our pocket every time.”

Recent annual losses on livestock can run to hundreds of thousands of dollars, and the “grain side isn’t working either,” he says. His lenders understandably will want their borrowing producers to sell cattle under contracts with the packers but says that further reduces the open market transactions.

“You play right into … the packer’s hands again,” he says. “They’ll know exactly how many cattle they’re going to get from you, and they’re going to be able to price them accordingly.”

Meat prices are on the rise because of COVID-related restrictions in meat packing plants.

U.S. President Donald Trump on April 28 ordered meat processing plants to remain open to protect the nation’s food supply, using the 1950 Defense Production Act. Brazilian-owned JBS USA and Tyson Foods temporarily closed 20 meat plants. JBS reduced exports to focus on meeting U.S. demand during the pandemic, the company told Reuters. Kroger Co., and Costco Wholesale Corp, restricted shoppers' meat purchases.

Troy says he thinks people need to get on the phone to their U.S. senators. He likes one idea that would limit packers to owning 50% of the cattle they process. The rest would be bought on the “open market,” but he is not sure if that will happen.

He thinks the packers have slowed down their packing plants and that too many cattle killed are owned by the packer.

“When they slow down the packing plant, guess whose cattle they’re going to kill? They’re going to take care of themselves,” he says.

Deberg worries that beef prices will get so high for consumers that they’ll “go to chicken or something else.” Today the effects are primarily on cattle feeders, but the next effect is on the cow-calf industry.

“Pretty soon, I think everybody will be broke out here,” he says.