Growing up, Brett Kenzy didn’t like working on his family’s cattle ranch farm in Gregory, South Dakota, about 160 miles west of Sioux Falls.
“I hated it. I resented that I had to work all the time,” Kenzy, now 48, tells CNBC Make It.
But Kenzy’s father, Ralph, a third generation cattle rancher, always told Kenzy and his older brother, George, that they were “never going to get rich ranching,” and that the beauty of the profession has nothing to do with money.
If there was ever a time to keep that in mind, it’s now.
With major plants closing due to sick workers and low cattle prices on top of that, Kenzy and other cattle ranchers are bleeding money and having to make hard decisions. While Kenzy has not, some ranchers have had to euthanize cattle they cannot sell, and many others have had to cut back on expenses to stay afloat.
Kenzy, like most cattle ranchers, has certainly faced tough times before, but the effects of the Covid-19 pandemic are just different.
“[It’s] just become such a survival game,” Kenzy tells CNBC Make It.
‘I’m six weeks late on loan payments’
Kenzy has worked on his family’s mid-sized ranch, which has about 2,500 cattle at various stages of production, nearly his whole life, except for the time he attended South Dakota State University (he has a bachelors degree in animal science) and during a stint in the military. He took over the farm with his brother when their father died in 2012.
The brothers have a small feedlot where they wean baby calves away from their mother at about nine months old to grow them into cattle. They then sell those cattle to meat-packers to be slaughtered for food.
Normally, Kenzy and his brother sell their cattle once a year. For 2020, Kenzy was expecting an annual payday of about $360,000 on April 1.
But by then, for example, for a 900-pound northern feeder steer (a “feeder” is an 11-month-old calf, and northern are a more expensive breed), the price had fallen so low (from somewhere around a normal price of $1.40 to $1.45 per pound to about $1.10 a pound, Kenzy says) that he decided to keep the approximately 300 cattle they had ready to sell, hoping prices would go back up.
That didn’t happen, and last week, Kenzy sold half his ready cattle. He says he lost about $200 a head.
But Kenzy considers himself lucky that he even has the option to hold on to his cattle for a few more months.
Kenzy typically sells his cows one step below what’s known as “finished.” Ranchers who sell “finishers” raise their cattle until they reach peak size of 1400 to 1500 pounds and therefore can’t keep their cattle longer — every day finished cattle wait to be sold, they gain unneeded fat, which makes them less valuable.
Most ranchers are currently losing about $300 a head on finished cattle, Kenzy says, and it’s why some ranchers have to kill their livestock.
Kenzy says his goal with the cattle was just to break-even this year, but now he knows that is not likely.
Even the partial loss forced Kenzy to get an extension on the loans the farm has taken out for for equipment and operational costs over the years.
“I’m about six weeks late on loan payments,” Kenzy says. “And the first thing your banker tells you is that you have to cut back on family living expenses.”
It was tough to tell his wife, Jessy, with whom Kenzy has five kids and two foster children. (Kenzy’s brother and mother also live on the ranch.)
“We live pretty modesty already,” he says. “We don’t go on family vacations and we don’t buy new equipment for the ranch.”
Plus, as a rancher, his family has seen lean times before. (Since 2015, when cattle prices were at historical highs because of the drought, cattle prices have been on the decline, according to the USDA.) So they know how to make ends meet, he says.
‘Meat rationing will occur’
And it’s not just about the money.
Kenzy loves cattle ranching because he loves the outdoors and the animals, but more importantly because he takes pride in providing food for people all across the country, he says.
As of late, he has not been able to do that.
Since the beginning of April, at least 20 major meat-packing plants across the country have closed. On April 28, President Donald Trump signed an executive order to keep meat plants open amid the pandemic, shielding them from state and local pressure to shut down due to Covid-19 outbreaks among workers. However, some plants remain closed and others are only partially staffed, according to map tracking the plant closures by Meatpoultry.com.
For the week ending on May 9, meat production including beef, veal, pork and lamb was down 31% from the same time the previous year, according to the United States Department of Agriculture.
” [T]he executive order had essentially no impact,” Derrell Peel, a livestock economist at Oklahoma State University tells CNBC Make It.
The problem may be that many plants are struggling to find healthy workers as many fall sick and others are fearful of getting the virus, according to reports.
If this continues, Kenzy believes “meat rationing will occur, definitely” during the summer months, he says.
“Do I think there will be shortages? Yes. Do I think people are going to starve? No. But it’s not going to be all American [meat],” Kenzy says.
Instead, he says American consumers could find a lot more foreign beef on supermarket shelves (without knowing it, says Kenzy, as the USDA does not require country of origin on labeling on foods such as beef, pork and turkey. Kenzy is a board member of R-Calf USA, a non-profit organization that helps cattle ranchers and is advocating for a law requiring country of origin labeling for beef.)
Though prices are down for ranchers and sales have declined, consumers are paying more for meat.
In April, the price of supermarket meats rose 4.3%, according to the Labor Department. And the USDA reported the wholesale price of boxed beef cutouts was at $275.75 on April 23, which was the highest on record going back to at least 1987. What’s more, Nielsen reported supermarket meat sales were up 49.6% year-over-year for the week ending May 2, a spokesperson tells Make It.
Though Kenzy says beef producers are profiting, according to Peel, they are actually also losing out during Covid-19 too.
But Peel doesn’t believe the losses will last very long for the ranchers or for the producers, as plants will begin to reopen and things will go back to normal, he says.
Kenzy, however, fears Covid-19 could be the breaking point for many U.S. based cattle ranchers, who were already struggling before the pandemic hit.
“We’ve had a lot of problems in the cattle business before Covid-19 [but] this is definitely the climax event that, if we don’t be very careful, this will take a lot of independent [ranchers] out because we came into this event pretty weak,” Kenzy says.
Still, he says, “we haven’t given up hope.”
Correction: This story has been revised to correct the prices of northern feeder cattle.