LAMB INDUSTRY IN CRISIS

 

By Robert Stevens

Managing editor

8-6-2020

 

A meat packing monopoly is threatening the livelihood of Utah’s lamb growers, but one Mt. Pleasant rancher is pushing back against what might be an immovable force.

The Brazilian meat packing titan JBS is making moves to acquire Mountain States Rosen (MSR), a failing lamb packing plant in Greely, Colorado. The plant is the only available option for processing of an annual 350,000 Western U.S. produced lambs each year, but JBS has announced it’s going to shutter the lamb packing for the plant and convert it to all beef.

The MSR plant is a co-op, owned by more than 150 ranch families across the U.S., but the plant has filed for bankruptcy after CO Bank called their loan in full, despite being current on all payments, leaving JBS in a position to purchase it and make these sudden changes—changes which they have said are happening immediately.

This move is leaving thousands of lambs from Mt. Pleasant, Utah family ranch dynasty Skyline Sheep Co., and many other lamb growers, with no place to get processed, packaged and sold. If the change-over to beef from lamb happens at the bankrupt MSR plant, it means the end of a way of living for lamb growers across the American Southwest, says Carson Jorgensen of Skyline Sheep Co.

Jorgensen and his family, like many Utah lamb growers, depend on the income from their lambs. They’ve been doing it for generations, and the JBS shake-up stands at odds with their way of life, and leaves them with no alternatives, says Jorgensen.

In an attempt to prevent the lamb industry catastrophe, Jorgensen penned letters to Vice President Mike Pence, the Utah Congressional Delegation and representatives from several Western states who also stood to lose their lamb industries with the buyout.

“The abrupt closure of this plant before ranchers can make arrangements to replace it will force sheep ranchers across several Western states into financial ruin and extinction,” Jorgensen said in his letter. “This will result in the loss of hundreds of millions of dollars, hundreds of jobs and the end of a historic American industry.”

It couldn’t come at a worse time, says Jorgensen. Complications from the COVID-19 pandemic, unstable meat prices and a steady stream of cheap foreign lamb imports—many of which are backed by JBS themselves—have already put the American sheep industry at risk.

With the failure of MSR and the impending JBS buyout seeming like the nail in the coffin for the lamb industry, Jorgensen believes the only way to stop it now is through the power of government intervention. Although he considers himself a believer in the free market, he says this hasn’t been a free market for a while, with foreign lamb import interests benefiting from zero taxes and dramatically lower overhead, which has put the American lamb industry at a severe disadvantage for decades.

By purchasing the MSR in the way that it has, Jorgensen says JBS is violating antitrust laws, and he is asking the U.S. Department of Justice to stay the MSR sale.

“I believe this crisis rises to the level of the Trump administration invoking the Defense Production Act,” Jorgensen pens in his letter to D.C. and Western politicians. “Our industry and others need time to assess the damage, understand the short and long term impacts and determine the path forward. American consumers deserve a source of U.S.-grown lamb. Time is of the essence. Without immediate action, lamb production in the Western United States will be destroyed. We must have time to solve this devastating crisis.”

This isn’t the first time a Jorgensen of Skyline Sheep Co. has appealed to higher powers to seek fairness in an already difficult market. In the 1980s, Jorgensen’s grandfather, Neil Jorgensen, successfully fought in international court for tariffs to stem the massive tide of cheap foreign lamb imports to the U.S., which were unfairly choking out American ranchers. The tariffs didn’t last long, however.

Jorgensen says JBS’ own lamb industry interests, which are firmly based on foreign imports, are part of why they are making this move. By crushing the American lamb industry, they put themselves in a position to raise prices on their own foreign-imported lamb once their U.S. competition is dead and buried.

The Brazilian meat giant is already under investigation for antitrust violations, along with the other three big meat packing giants, Cargill, Marfrig/National Beef and Tyson. These entities are currently being looked into by authorities to see if they have illegally manipulated meat prices in the U.S. during the public health crisis.

Ironically, the MSR plant was once owned by JBS already, and made similar moves in the past to snuff out the lamb processing capabilities of the plant, but it was purchased via a co-op agreement between the 150 plus American ranch families with an interest in keeping the lamb industry afloat. The co-op struggled to keep the plant open on their terms, and, after CO Bank called in their loan, made an attempt to sell to a company with shared interests in preserving the U.S. lamb industry, but since the plant shared resources such as wastewater and steam with an adjacent JBS-owned plant, JBS was able to block that sale by denying the necessary resources and position themselves for the takeover again.

Jorgensen’s efforts have not fallen on deaf ears. Utah Senator Mike Lee, five other senators and six members of the House of Representatives penned their own letter to Justice Department Antitrust Division Assistant Attorney General Makan Delrahim after hearing of the lamb industry’s plight.

“We urge you to immediately open an investigation into this acquisition and demand that JBS cease from any irreversible actions that might harm the ability of American sheep ranchers to get their products to market until the Department can determine how best to protect competition in this significant part of America’s food supply,” Lee wrote.

The senator co-signers of the letter were Steve Daines (R-MT), Mitt Romney (R-UT), Jon Barrasso (R-WY), John Thune (R-SD) and Michael Rounds (R-SD).

The representatives that added their names to Lee’s letter were Chris Stewart (R-UT), Greg Gianforte (R-MT), Rob Bishop (R-UT), Devin Nunes (R-CA), Dusty Johnson (R-SD) and Liz Cheney (R-WY).

Although the push to protect the lamb industry made a lot of noise real fast, and some real results and attention from U.S. decision-makers, says Jorgensen, it appears to be too little, too late. JBS took control of the plant last week and is moving forward with its plans

Jorgensen says the only option now may be finding some way to open a new plant, which would be a monumental task. If the stars all aligned and collaboration between American sheep interests happened smoothly, or some powerful outside investor stepped in, Jorgensen said it could take as many as a few years to accomplish in a worst case scenario, leaving the already financially burdened American lamb industry to waste away in the meantime, but he hopes they can find a way to accelerate that timeline.

The new plant would likely have to be one that was already closed, and was available for recommission. Even then, Utah lamb growers are looking at higher transportation costs, since the most likely areas will be places such as Iowa, Texas or Chicago.

Another looming problem, says Jorgensen, is if JBS hears they have plans to recommission a closed plant, the meat packing giant could step in and make more moves to foil them, including advanced purchasing of any plants they are considering for the project.

“We made more efforts towards our problem in the last week than we have in the past 10 years, but it’s anybody’s guess how it will play out now,” Jorgensen says.