Building A Better Beef Supply Chain

The beef industry status quo benefits a few dominant players. Industry advisor Steve Polski at Live Better Beef sees a complementary and more sustainable way of doing beef business.

In 1865, as the Civil War came to a close, a Midwestern businessman named William Wallace Cargill bought a grain warehouse in Conover, Iowa. A year later, his brother Sam joined him. Within a decade, the Cargill brothers built more grain warehouses, opened a lumberyard, and expanded into other commodities and business lines.

A century and a half later, Cargill is the largest privately-held company in America by revenue. It lies at the nexus of global food production, particularly the production of beef. Cargill is one of four dominant players in American beef production, along with Tyson Foods, JBS, and National Beef Packing Co. According to the U.S. Department of Agriculture (USDA), those four companies slaughtered about 85% of U.S. grain-fattened cattle that were made into steaks, beef roasts, and other cuts of meat for consumers in 2018.

This level of industry consolidation is relatively new. The number of cattle slaughtered by the four firms rose from 25% in 1977 to 71% in 1992, according to USDA data. But this isn't the only dimension of major consolidation in the American beef sector. It used to be that most cattle were slaughtered in plants that processed less than half a million head of cattle per year or less than 1,500 per day. By 1997, that figure had dropped to 20% compared to 84% in 1977. 

Today, a typical beef processing plant slaughters many thousands of head of cattle every day. These plants are industrial operations that contrast sharply with pastoral imagery of cows grazing on lush, green grasslands with plenty of food to eat and space to roam. Given the importance of food production and the degree to which the Western diet is tied to animal protein, it's hard to imagine any other way of making meat. But a businessman with a very different professional background has gained a new perspective after joining the industry almost by happenstance.

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Insights From Industry Advisor Steve Polski

Steve Polski spent about a decade at Cargill, gaining a deeper understanding of the global food supply chain that, along with some valuable industry connections, proved key when he co-founded a beef advisory business called Live Better Beef. The company helps investors in the beef and cattle supply chain maximize their business potential and provides advisory services to emerging food and agriculture businesses.

Given Polski's past and current work, he has developed a consumer-backed perspective on the state of the beef industry. With a background in supply chain management, Polski sees a complex system that is both enormously influential but leaves room for improvement.

"There's waste in every supply chain, and I'm not saying that to suggest that it's bad. I'm suggesting that every supply chain has an opportunity to get better and better. You've heard of continuous improvement, right? It's a discipline in business today because there's no perfect business, and there never will be. And I think that the lessons learned in the discrete production world can really be transferred in a similar fashion to the food production space, particularly animal protein."

The onset of the COVID-19 pandemic highlighted one aspect of many industries Polski finds flawed: excessive globalization that can lead to massive supply chain disruptions with limited recourse in times of great need (like a global pandemic).

"I realized not just in the world of food but in everything from automotive production [to] computer chips that we had a global supply chain challenge. It took a global pandemic to force us to realize that globalization is wonderful, but at the same time, [it] presents risks that have impacted virtually every industry, from food to toilet paper to phones. We [at] Live Better Beef collectively believe there are other production models that complement the current [model]."

The Beef Industry As It Stands

The predominant production model in the beef industry hinges on beef processing plants that process between 4,000 and 7,000 head of cattle per day. A select few industry giants depend on this model, which breeds economies of scale. As with many other supply chains, there are certain production components needed to process beef regardless of how big a given processing plant might be. Therefore, greater scale cuts production costs, which translates to lower prices and more sales. 

These large plants can be highly efficient but given their size, their misfirings can have an industry-wide ripple effect. This happened in 2020 as plant workers contracted COVID and were unable to go to work, leading to plant closures and massive supply chain disruptions that, combined with economy-wide fluctuations in demand for food, drove rising beef prices at grocery stores. 

When a small handful of companies produce the vast majority of goods within an industry, one slight disruption can lead to a collapse of the supply chain with little sources of diversification for the consumer. If a big processing plant that churns through thousands of head of cattle a day shuts down, cattle prices drop.

When a small handful of companies produce the vast majority of goods within an industry, one slight disruption can lead to a collapse of the supply chain with little sources of diversification for the consumer.

Combined with the lack of competition among beef processors to buy cattle, small-scale ranchers become shortchanged. Any small disruption can exacerbate the problem. A global pandemic like COVID-19 can make it nearly impossible for ranchers to subsist since consolidation has left them with very few buyers for their cattle.

Polski thinks it's critical to assess the industry from the vantage point of every stakeholder, especially the consumer. 

"When you look at supply chains from the voice of the consumer back, and when you really break apart and understand the physical flow up against the financial flow, you learn a lot about a supply chain. You learn a lot about leakages and waste and value allocations."

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How Raising Cattle Can Mitigate Climate Change

It's important to state the obvious: cattle production doesn't exist in a vacuum that starts on the farm and ends at your dinner table. Raising the millions of heads of cattle killed every year for human consumption requires a large quantity and array of resources. As The Nature Conservancy reports, cattle are grazed on 775 million acres of grasslands, rangelands, and pastures in the United States. Corn grown to feed those cows is grown on 30 million acres of farmland. Combined, 40% of American land is used to raise cattle.

Raising cattle produces a lot of greenhouse gasses. Livestock accounts for 37% of all U.S. methane emissions. Cattle are responsible for about 86% of that methane. About two-thirds of cow emissions come from burps, with the rest coming from manure. American beef production is relatively more sustainable than the global average, but global livestock production is inordinately demanding on our environment, generating about 14.5% of all greenhouse gas emissions from human activity. Furthermore, overgrazing all of the land can degrade soil health and biodiversity. Sadly, many industrial agriculture operations do just that, putting short-term profits above long-term ecological health. 

Polski recognizes the potential harms of cattle ranching, but he also thinks there's a piece of the story that often isn't discussed enough in the mainstream discourse. Echoing the findings of many scientists and researchers, Polski believes that proper cattle grazing management can help mitigate climate change. Cattle can help restore healthy soils, conserve sensitive species, and enhance the overall ecological function of grasslands.

"If you're looking at the opportunity to truly sequester carbon, it's through the agricultural practices associated with ruminant production: rotational grazing on ranches, cover cropping, and multi-species crops rather than just [monocropping]."

Polski believes that proper cattle grazing management can help mitigate climate change. Cattle can help restore healthy soils, conserve sensitive species, and enhance the overall ecological function of grasslands.

Polski recognizes the long-term decarbonization of the global economy that is happening based on both economics and physics. But he sees another way to offset the methane produced by cattle. 

"I believe we're going to be fracking for fossil fuels for decades to come. Electrification is in the future (but) it isn't going to happen overnight, and we've got an opportunity, thanks to our beef production system, to look at capturing waste from cattle and then taking that methane and converting that into renewable natural gas."

Polski points to Waste Management, the largest hauler of waste in the United States. The company's vast fleet of trucks runs on compressed natural gas, which allowed Waste Management to eliminate diesel from its fleet. The dairy industry has embraced this waste-to-value mentality more than the beef cattle area that Polski operates within, so he believes there's a lot of room for growth.

Existing within the sustainable beef production model practiced by Live Better Beef, Polski feels optimistic about where the industry is headed in the face of climate change.

Conclusion:

In Polski's view, one of the most exciting possibilities afforded by improving technology is traceability. Polski envisions a purchasing landscape in which everyday consumers can easily trace the food they're buying from farm to fork or in beef production, pasture to plate... He sees this development as revolutionary, given one key difference in raising livestock relative to other industries.

"If you look at when an animal comes into [it], the big difference in agriculture versus any other kind of a production model is [that] when you build a car, you're assembling something. When you're processing an animal or grain or an oil seed, you're disassembling something. And when you disassemble, it's hard to preserve traceability. So, when you look at cattle coming into a processing facility, once that ear tag, that hide, or that branding is ripped off, it becomes very difficult to know which farm or which state that animal came from." 

Polski reiterates that based on publicly available market data, consumers are paying a premium to know where their food comes from and how it's produced. He emphasizes the pride that many consumers feel in having that information. In some areas, an element of local pride might even enter the equation. You might buy a steak at a grocery store and find out that a neighbor or friend played a part in getting that steak from the farm to your shopping cart. Industry advisors like Polski might not be able to quantify the intangible emotional benefit of knowing where your food comes from and how it's produced, but the emotions are real.

"[A] systems approach to looking at the supply chain will deliver the consumer more information to make more qualified purchasing decisions. Would you rather buy -- whether it's food or a car -- would you rather buy something that came in a vanilla box that had a generic brand, or would you like to know everything about how that car or that animal was processed? It's kind of like a no-brainer, right? You don't make a car purchasing decision unless you do the research and safety and all that stuff. Why should you behave any differently with what you're putting in your body every day?"

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Key Takeaways:
  1. According to the U.S. Department of Agriculture (USDA), four large companies slaughtered about 85% of U.S. grain-fattened cattle that were made into steaks, beef roasts, and other cuts of meat for consumers in 2018.
  2. It used to be that most cattle were slaughtered in plants that processed less than half a million head of cattle per year or less than 1,500 per day. By 1997, that figure had dropped to 20% compared to 84% in 1977. 
  3. Livestock accounts for 37% of all U.S. methane emissions. Cattle are responsible for about 86% of that methane.
  4. Project Drawdown, which analyzes climate solutions, estimates that what it calls managed grazing (defined as "carefully controlling livestock density and timing and intensity of grazing") can sequester about 14 to 21 gigatons of carbon dioxide by 2050.