Reshaping Kentucky’s cattle industry
Can beef production secure a more sustainable future for Kentucky's family farmers?

By Pernell Plath

Reprinted with permission from the December 2003 newsletter of the Community Farm Alliance.

Beef cattle generate nearly as much income for Kentucky farm families as tobacco. Yet, as tobacco income continues to decline, the profit potential from cattle is rising. Kentucky farmers are poised to reap huge rewards from beef cattle production, although the lack of a well-organized system of production, processing, distribution and marketing is hindering this sector’s promise.

Community Farm Alliance members have been working to understand the way the system operates now and the possibility for creating a more farmer- and buyer-friendly approach to the cattle business. What follows is a summary of those findings and an outline of a few ways in which Kentucky's beef sector could be made more self-reliant.

The Present: Beef cattle, profits flow out of state

Although Kentucky is the largest beef producing state east of the Mississippi, most of its cattle are finished and processed outside its borders. Kentucky farmers work hard carefully tending their cow-calf herds, yet they are unable to retain much of the value of their animals when they’re sent to out-of-state, large-scale feedlots and packers. Tremendous concentration in the industry (i.e. mainly large, corporate feedlots and packers) puts smaller family farmers at a disadvantage when it comes to price discussions. Since the average herd size in Kentucky is only 29 head, most of its farmers are small farmers.

Currently, Kentucky has around 1,120,000 head of beef cattle. Average live market weight is 1,150 lbs, of which approximately 569 lbs is marketable red meat (plus 27 lbs of variety meat). Kentucky cattle farmers produce approximately 637,280,000 lbs of beef per year. With an average beef consumption of 67.2 lbs per person and a Kentucky population of 4,065,556, Kentuckians consume around 273,205,363 lbs of beef per year. Thus, Kentucky produces enough beef to meet all of its in-state needs, with 364,074,637 lbs (18,203 tons) remaining for export.

The challenge is to begin bringing cattle feeding and slaughter back to Kentucky so that producers can gain the value-added benefits of selling the end product. Under the current system, Kentucky farmers take on the high risk and intense management of raising calves, yet they are rewarded with comparatively little of the ultimate value of that animal.

Kentucky has a competitive edge in the cattle industry, since it already has the extensive infrastructure required to breed and raise calves. The next step is closing the loop, bringing Kentucky’s cattle industry home. Kentucky has only a handful of feedlots capable of handling large numbers of cattle, thus the majority of its animals are shipped to feedlots in Iowa, Kansas and Oklahoma. Even if Kentucky were to finish its cattle in Kentucky, the state has limited and underutilized slaughter capacity.

Kentucky has the capacity to slaughter up to 1,000 beef cattle per week in 58 (mostly small) facilities scattered across the state, but only about 300 head/week were actually fed out in Kentucky feedlots in 2001. Of those 58 plants, only 19 are USDA inspected. The other plants are “exempt,” meaning that they are only able to custom process beef for direct sale. The state has an enormous need to improve cattle-finishing operations and increase slaughter capacity by at least 315,000 beef cattle per year.

The Prospect: System changes could return profit

Though the challenges with reshaping Kentucky’s cattle industry are many, the potential gain is well worth the effort. The greatest opportunities for change include the formation of flexible beef networks, developing alternative finishing systems, establishing a state-level meat inspection service, upgrading existing slaughtering capacity and constructing new units when needed, and, finally, advancing local marketing opportunities. CFA envisions collaborative, appropriately scaled and flexible production, processing and marketing systems that will capture the full value of beef products for Kentucky farmers.

1. Create flexible beef networks -- A flexible beef network is a strategic alliance of farmers that collaboratively produce beef products. Networks are adaptable to the particular needs of each group and allow for sharing of different stages of the production cycle (including cow/calf herds, backgrounding, finishing). The network goes beyond production, however, to include shared processing and marketing. These networks will enable Kentucky farmers to engage in whichever aspect of the production cycle best suits their needs and abilities. Networks can be formal incorporated entities, such as the Green River Cattle Company, or very informal, like the “Barron County Beef Cooperators.” Creation of these associations will strengthen relationships among farmers while allowing them to retain a greater share of the profit.

2. Finish cattle at the right scale -- A frequently cited myth in Kentucky is that there is not a suitable climate for finishing cattle. Though excess moisture can create mud pits out of huge feedlots, appropriately scaled feedlots do not develop these problems. As with so many other aspects of agricultural systems, scale is extremely important. Though Kentucky may not be able to build the massive feedlots of other states, the many social and environmental problems with these facilities calls into question their desirability anywhere. Thus, smaller-scaled feedlots are a more suitable option for finishing Kentucky cattle.

While it is true that Kentucky is at a comparative disadvantage with the cheap grain prices for finishing cattle of the Corn Belt states, it has something even better—abundant pastureland. Forage-fed and -finished beef offer a value-added, economical and sustainable option. A recent taste-test by chefs found that meat raised and finished on forage is as tender as, and even tastier than, grain-fed beef.

Other surveys point out that 30 percent of beef eaters actually prefer the taste of pasture-finished beef and another 20 percent had no preference between grain-finished and forage-finished meat. Forage beef thus encompasses at least half of the potential market.

Furthermore, beef raised on forage is higher in CLA (conjugated linoleic acids), which have numerous health benefits including fighting cancer and protecting nervous system functioning. Raising cattle on pasture also has numerous positive environmental benefits. Many farmers choose not to completely finish their cattle on grass, but have found that switching to grain a few weeks before slaughter is as effective as longer grain-finishing in terms of the desired beef characteristics.

3. Resume state inspection -- The Wholesome Meat Act of 1967 allowed individual states to develop their own meat inspection programs that met or exceeded the USDA’s own inspection standards. Under the law, meat processed in state-inspected plants can be sold either directly to customers or through retail outlets. The only restriction is that the meat cannot be sold across state lines (although some efforts are being made to change that requirement).

Kentucky did create an inspection service under this act. Unfortunately, the state discontinued the service in February of 1972, turning over inspection entirely to the USDA. Lack of a state inspection service is a serious impediment to creating a more locally integrated farm economy in Kentucky. Many meat processors in the state feel that the USDA inspection service is inflexible and insensitive to their needs.

Since the majority of the processors in the state are not USDA inspected, reviving the state inspection service would open the door to many processors who don’t wish to hassle with USDA inspection. Since farmers using state-inspected plants could expand sales, many exempt processors have indicated that a resumption of state inspections would bring in more business and make expansion of operations more viable.

Though reviving the service would cost money at a time of tight budgets, the community investment and multiplier effects for Kentucky’s farmers and communities would be far greater than using public money to attract large, out-of-state, unresponsive and exploitive processors.

Smaller processors have numerous other challenges in competing with mega-processors, one of which is disposing of the offal. Large slaughtering facilities are actually able to sell their offal, yet small plants pay to have it taken away, adding to processing costs. Kentucky has only one rendering plant in northern Kentucky, and constructing another which could more conveniently handle waste from other parts of the state has little political support. Thankfully, other options exist. Rendering is only one way to handle offal and dead animals; another is composting. The Kentucky Department of Agriculture states that new composting options offer “the advantage that they are more environmentally friendly, produce very little odor, and the products of degradation are usable as fertilizer.” Extensive information on methods, costs and uses of the compost is now available. Composting systems are low-cost, low-maintenance and sanitary; proper facilities can be constructed primarily with readily available materials. State law (KRS 257.160(3)) sanctions composting as a viable alternative for Kentucky. Though our smaller processors may not be able to sell offal as the larger plants do, they can certainly bypass rendering plant fees and even sell the finished compost.

Another option to improve efficient slaughter and processing in Kentucky is to split these two operations into separate facilities. As farmers branch out into more local and specialty markets, they often find that these markets demand unique cuts and ordering options. Farmers may encounter bottlenecks in having both slaughtering and processing handled at a single facility. For these farmers, controlling their own custom processing makes the most sense. Accordingly, though Kentucky still has a need for more inspected kill sites, the state could also improve processing efficiency by establishing more, decentralized custom-processing sites.

4. Develop varied markets -- Re-creating Kentucky’s beef industry will also require a renewed focus on the end product—the meat on the dinner table. The above-mentioned improvements to the system will only go so far towards creating a locally integrated beef economy for Kentucky without significant attention to the quality and type of beef made available for sale. Not all portions of the animal are of equal quality or have the same demand. Different markets have their own individual needs for product type, quality and consistency. Understanding marketing options is crucial to establishing an efficient, viable beef system.

Retail Sales -- Retailers’ most significant concerns are with product quality, consistency of supply and price. Meat departments prefer boxed fresh beef. Many retailers are locked into purchasing contracts with particular suppliers; however, most have at least some flexibility with where they make their purchases. This adaptability is most pronounced with smaller, independent grocery stores. Large chain stores, such as Kroger and Wal-Mart, make huge purchases through warehouses. Farmers who have accessed these markets can find that they lose control of their enterprises and that the gain is not worth the risk.

Thus, especially for smaller farmers, the independent grocers are the best option. Meat department managers in these stores are very interested in purchasing from local farmers, and even willing to pay premiums if the product is high quality and meets their needs. Nevertheless, meat buyers are not always aware that locally produced meat is an option. As with all markets, farmers and buyers must work closely with each other to ensure that the requirements of all parties are met.

Other Markets -- Though independent grocery stores present the most viable marketing option for much of Kentucky’s beef, other lucrative marketing opportunities exist. Natural food stores present a market for beef produced without antibiotics and hormones. Often these stores are willing to offer frozen cuts in addition to fresh meat. “Gourmet” food stores can also market the highest quality pieces and specialty products.

In addition, restaurants offer a great deal of potential for marketing locally produced beef. Recent surveys in Kentucky have found that so called “high end” restaurants were the most willing to purchase local meat, and were most prepared to pay premiums. Marketing prospects exist with other restaurants, too. These same surveys found that 63 percent of restaurants were interested in working with individual farmers and 72 percent were interested in working with producer organizations. Restaurants typically prefer fresh, vacuum packaged products.

Direct sale of beef to consumers is another potentially profitable option for Kentucky’s farmers. Farmers can sell live animals to customers, letting them have more input into where and how the animal is processed.

Farmers can also custom process cattle themselves and sell individual cuts without an intermediary. Often, community supported agriculture (subscription farming) services offer their members access to meat producers. Pairing with vegetable CSAs could be a profitable option for many farmers. Whether through a CSA or not, direct sales typically provide farmers with a much higher return for their labor than selling wholesale to either grocery stores or restaurants.

In terms of product type, ground beef represents 43 percent of all beef used in foodservice and 63 percent of all household beef consumption. Thus, focusing on this product alone would meet the needs of nearly half of all beef consumers in Kentucky.

Bringing the beef back home

Reshaping Kentucky’s beef industry has high profit potential for farmers and the advantage of providing fresh and safe meat to beef consumers. Currently, the system is so intricately plugged into national and international markets that Kentucky farmers must make production and marketing decisions based on forces far beyond their control. Bringing Kentucky’s beef economy home will provide our farmers with much more influence over how they raise their cattle, where they process the animals and who they market to.

A localized system will provide customers with more information about how their meat is raised and more options for purchasing the end products they prefer. As our farmers shift away from tobacco production, it is vitally important that they have more stable income sources than those provided by the current beef market.

Pernell Plath is research coordinator of the Community Farm Alliance (CFA), based in Frankfort, Ky. She can be reached at pernellrp@yahoo.com. For more information about the work of CFA, visit www.communityfarmalliance.org.


References

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