I was intrigued by a piece written by two Virginia Tech faculty members in the Department of Agricultural and Applied Economics regarding the domestic food supply chain’s resiliency amid the outbreak of COVID-19. This article reminded me of the impressive consolidation, mechanization, and integration of the Nation’s agriculture sector. Large producers of virtually every crop and livestock enjoy economies of scale that allow consumers to access high-quality agricultural products at affordable prices. This sector’s slow march towards optimization, however, has left many small farms that don’t enjoy the same competitive advantages as their larger counterparts in its wake.
This is relevant to me for two reasons. First, I spent the majority of my life working on my family farm. For 24 years, my father raised chickens for Tyson, one of the world’s largest poultry producers. We would raise approximately 100,000 chickens from hatchlings to 6-7 pound, ready-to-eat chickens in the course of seven or so weeks. For better or worse, this experience gave me an understanding of the sheer awesomeness of industrial agriculture. We raised our chickens quickly and efficiently; they were processed at a state-of-the-art plant 70 miles away, and packaged and distributed throughout the Mid-Atlantic. Simply put, we raised chickens almost twice as fast and at a fraction of the cost of a small, non-industrial producer.
Second, I have also been involved in cattle production for the better part of my life. Prior to attending Virginia Tech, I helped managed my family’s small herd of, at most, 200 head of cattle. More recently, I led a feasibility study for a meat processing facility in Russell County, Virginia. One theme dominated both experiences: Virginia producers seeing lower and lower returns on live animal sales. Why? Virginia is simply too far from the Nation’s cattle production and meatpacking apparatus, which is largely concentrated in the Midwest. Specifically, the Midwest is home to the vast majority of the Nation’s feedlots, where young cows are fed at a rate and schedule that causes them to gain 3-5 pounds daily. Typically, a 600-pound cow is fed until it reaches a finished weight of 1,000-1200 pounds. The animal is then processed at a meatpacking facility – many of which are also located in this region.
Poultry and cattle represent two poles of livestock production. Poultry production is quick, comparatively cheap, and each step of the process, for the most part, is overseen by a corporate component that maximizes efficiency and minimizes cost. Cattle production is quite the opposite – it is costly, time-consuming, and comparatively decentralized. A growing similarity between the two, however, are prices for finished meat. Poultry has emerged as the nation’s leading protein with consumer demand for beef and per capita consumption falling year-by-year. For instance, the average American consumed 68.4 pounds of beef and veal and 95.3 pounds of poultry in 2000, according to the Organization for Economic Cooperation and Development (OECD). Fast forward to 2018 and American consumers are eating 10.8 fewer pounds of beef and 14.1 more pounds of poultry. Why? Several factors are at play. First, Americans are eating less red meat across the board, most notably for health reasons as this protein has been tied to increased risk for heart disease, among other complications. Second, the average American has less disposable income compared to past years and are more likely to choose cheaper poultry products.
This shift has spelled ongoing revenue decreases and belt-tightening for cattle producers at every link of the supply chain. Nationally, this industry collected $69.2 billion in revenue in 2019, marking a 4.9% decrease from 2014 figures. Additionally, prices for packaged beef fell at a rate of 6.2% over the same 5-year period, according to IBISWorld. High feed prices further complicate things, as cattle producers compete with a number of other industries (namely oil) for the same crop of corn. Simply put, returns are falling and costs are increasing. The industry response to this has been massive consolidation and integration, both vertically and horizontally, which favors large producers and feedlots located in the Midwest. Approximately two-thirds of the Nation’s feedlots are located in Nebraska, Kansas, and Texas, according to the U.S. Department of Agriculture (USDA). Next in line are other midwestern states, such as Iowa and Colorado. These states account for the majority of the nation’s cattle herd and the bulk of recent growth in the nation’s cow and calf inventory.
The most recent Census of Agriculture confirms these widely-observed trends. For instance, the Nation saw an increase of 3.7 million additional head of cattle from 2012 to 2017 with over 30,000 fewer farms. For the most part, the farms that are being eliminated are those that don’t meet the qualifications listed above: smaller farms outside of the Midwest. Additionally, farms are being eliminated at a much faster pace for those states with declining cattle inventories. According to the USDA, 18 states saw declining cattle inventories from 2012 to 2017, while the more productive states saw increases over the same period. Of these 18 states, Virginia saw the third-highest rate of decline, with a 5.3% decrease in cattle inventories and a 15.7% decrease in cattle farms – nearly twice the national rate.
These are not new trends in Virginia. Excluding a period of growth between 2007-2012, state cattle inventories have been falling since 2002. Virginia is losing its footing in the national cattle production supply chain as a result; the state accounted for a mere 1.6% of the nation’s cattle inventory in 2017. Virginia’s waning role has exacerbated the national supply-side trends negatively impacting all farms. Distance from the corn-belt makes feed prices higher in Virginia and property values and real estate development trends make having adequate land for grass feeding a challenge, especially considering recent summer droughts. Furthermore, Virginia is more than a day’s drive to feedlot territory, meaning buyers face higher transportation costs and, in turn, offer producers lower prices.
It is also important to note that many of Virginia’s cattlemen operate small or “hobby” farms, typically with small herds that provide supplemental income to producers. USDA data suggests that these farms are the most at-risk for closure in that they cannot be as adaptive to market changes as their larger counterparts. One or two bad market years could quickly put these farms in the negative and smaller producers may favor liquidating their herds rather than invest further with no indication for market improvement. The vast majority of the more than 4,000 Virginia cattle farms that ceased production between 2007 and 2017, for instance, had less than 100 head.
This is concerning for a number of reasons. First, the elimination of cattle farms represents a loss in supplemental income for farming families. Second, the further elimination of cows and cattle farms will continue to harm Virginia’s position in the national supply chain, further solidifying producer’s roles as price takers. Third, removing cattle from pasture land robs these large parcels of a productive use; without grazing cattle, these lands lay dormant and become quickly overgrown. Finally, and most sentimentally, eliminating cattle farms does a disservice to the state’s rich agricultural heritage, which is a source of great pride for those of us from agricultural communities.
While I wish I had solutions to this issue, I do not. Our research seems to point toward there being few opportunities for struggling farmers outside of traditional cattle feeding that could provide the same immediate returns necessary to keep their operations afloat. Instead, my call is for more thought leadership in cattle production to support more meaningful outcomes for the state’s remaining cattle producers. While much of what the data slates for cattle production in Virginia seems unavoidable, at least in the short term, I am hopeful that opportunities for calculated intervention exist and confident that the expertise to implement these solutions already exists across the state’s robust agricultural institutions. Rather, it is my hope that this piece can call attention to these issues and spark conversation amongst the entities involved.