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What's The Future For Northern Beef Packers?

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An Aberdeen, SD, beef processing plant is struggling to keep its doors open.

Editor's Note: This blog has been updated. 

The old saying, “A day late and a dollar short,” might apply to the South Dakota beef industry these days.

Several years ago, South Dakota ranchers were excited to learn about a new beef label, South Dakota Certified. Introduced by the South Dakota Department of Agriculture and then-Gov. Mike Rounds, the label held the promise that consumers would pay more for this premium South Dakota product, and foreign markets would perceive it as a product they could trust.

While the program had good intentions, the reality was that producers at that time had to ship their cattle too far to a packer. That was because the on-again, off-again company, Northern Beef Packers (NBP) in Aberdeen, SD, was delayed in opening its doors, and there was really no outlet to market and sell these cattle.

A few years later, NBP was still struggling to gain its footing, but finally opened for business at the end of 2012. Just a few months later, however, the company laid off 108 of its 420 workers. Last week, the plant announced that employee paychecks would be delayed.

What is going on?

northern beef plant

According to the Minneapolis Star Tribune, “The plant is not releasing how many workers are currently employed or how many cattle are being slaughtered, citing 'competitive reasons'. The plant started up last fall after years of delays ranging from financial problems to lawsuits to flooding. It hopes to eventually process 1,500 cattle a day from the Dakotas, Nebraska, Iowa and Minnesota, but it has put the ramp-up plans on hold while it tries to raise another $20 million to go with the $150 million that enabled the plant to finally start operating.”

This week, Northern Beef Packers voluntarily filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of South Dakota on Friday. The company reported assets of between $50-100 million and debts of between $10-50 million owing to between 200 and 999 creditors in its voluntary position.

As the beef industry further integrates and the number of folks who are involved in the beef production chain from cow-calf to the packer dwindles, I’m concerned about the future of those who hope to be a part of this fast-changing business. This concern is evident in my home state, where a struggling packing plant and a state-branded label have been unable to make a successful go at it thus far.

What do you think? Where does the future of the beef industry lie? Are you concerned about the consolidation of the beef industry? How do we turn this situation around? Share your thoughts in the comments section below.

 

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Discuss this Blog Entry 5

Frank Schlichting (not verified)
on Jul 22, 2013

Not only are cattle numbers down but with trade barriers such as COOL less Canadian live cattle are exported to the USA. With less cattle to slaughter plants are going to close.

Chapter 11 Cases (not verified)
on Jul 22, 2013

Northern Beef Packers filed for bankruptcy protection on Friday. More information on the bankruptcy filing and copies of key bankruptcy court documents: http://chapter11cases.com/northern-beef-packers-l-p-files-for-chapter-11...

Mark Mulhall (not verified)
on Jul 23, 2013

You have answered your own concern: "there was really no outlet to market and sell these cattle." The free market said, "No," to the idea. Competing for livestock with Tyson and the like is suicide, I feel.

Fear of consolidating the beef industry? That thought was rejected 50 or so years ago.

Anonymous (not verified)
on Jul 23, 2013

Anyone failing to understand the basic laws of marketplace economics ultimately ends up costing someone money, theirs or someone else's, whether they are a producer, a politician, or a businessmen. Get a group of like-minded economic illiterates together and inevitably the loss is large. There are no such things as free lunches or easy profit opportunities without increased risk. If it looks too good to be true, something's wrong; most likely someone is setting you up to run off with your hard earned dollar. Promoters often set things up so they are richly rewarded in success but aren't left holding the bag in failure, having left the risk on the naive investor.

urolog (not verified)
on Jan 19, 2014

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BEEF Daily Blog is produced by rancher Amanda Radke, one of the U.S. beef industry’s top social media “agvocates.”

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Amanda Radke

A fifth-generation rancher from Mitchell, SD, Amanda grew up on a purebred Limousin cattle operation in which she and husband Tyler are active. She graduated with a degree in agriculture journalism...

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