MPR: Luverne Slaughterhouse Closing Part of a Trend

Luverne Slaughterhouse Closing Part of a Trend
By Mark Steil
March 6, 1998

When the nation's largest red-meat processor shuts down a packing plant in southwest Minnesota later this week it will hurt more than the employees. Farmers who sell cattle to the IBP plant in Luverne are worried, too. Some say the situation underscores complaints that the few remaining meatpackers are too powerful.

SLAUGHTERHOUSE SHUTDOWNS are becoming a common experience in southwest Minnesota and across the border in Iowa and South Dakota. Last year a Campbell Soup chicken plant in Worthington and a hog processor in Huron, South Dakota closed. The IBP announcement that it will close its Luverne cattle slaughter plant and end 370 jobs angered Luverne resident James Sanden.

Sanden: I think it's a terroristic tactic. We've been a partner with them, any amount of money has been spent on IBP by the community. And now they're going to walk out. And we got 370 people out of a job. And evidently this partnership doesn't include caring about these people.

The plant shutdown is bad enough, but what makes locals even more bitter is IBP says it will not sell the plant to another meatpacker. The company intends to gut the building, leaving no chance it will ever reopen as a slaughterhouse. That means an uncertain future for area cattle producers.

On a blustery winter day, workers drive a line of cattle up a wooden ramp into a trailer. The cattle belong to Dennis Swan, and are part of the last herd he'll ever truck to IBP's Luverne plant.

Swan: There's 203 head in this pen.

Swan has sold cattle to the plant since it opened more than 30 years ago.

Swan: I'm sad that it's closing. I am 45 miles away from it, I guess the next plant will be 160 miles at Dakota City, which is extra freight. I would love to see the plant stay open, there's no question about that, but I guess that isn't going to happen.

The extra freight will cost Swan and other producers about $6 per animal. That adds to the losses they're already experiencing. The price farmers receive for their animals currently is below what it costs to fatten the cattle for market. Swan says producers lose about $100 a head. Iowa State University livestock economist John Lawerence says it's likely more Midwest packing plants will close. He says many of those plants were built in the 1960s, when the Midwest was the center of US cattle production.

Lawerence: Much like the Luverne plant, many of them were built on a smaller scale than what is cost effective today. And so I think that there's going to be a re-evaluation of some of those facilities.

IBP officials declined to be interviewed for this story, but in the past have said one reason they closed the Luverne plant is because it needs millions of dollars of repairs to stay competitive. Another reason for the Luverne shutdown is because IBP says there aren't enough cattle in the region to supply the plant. That's disputed by many farmers, who say there are more cattle than five years ago. ISU economist Lawerence says that may be true, but it's a temporary spike. He says long-term cattle numbers will continue to decline.

Lawerence: Our cattle cycle has peaked in numbers; 1997 will likely be our largest slaughter for the next ten years. 1998 will see cattle numbers begin to decline nationally, and that's likely to carry on for another four or five years before we hit a bottom.

The shutdown of the Luverne plant is the latest chapter in an often contentious relationship between farmers and the meatpacking industry. After farmers complained in the first decades of this century that meatpackers conspired to pay low prices for cattle, Congress acted. It passed legislation in the 1920s designed to guarantee farmers fair livestock prices. But that didn't settle things - farmers still complain today the legislation is not enforced. Herman Schumacher is a livestock dealer in Herried, South Dakota. He says small cattle producers may disappear if things don't change.

Schumacher: I don't want to sound gloom and doom, but it is gloom and doom for 'em. I see that they're going to be in a really, really tough position. We've seen this fat cattle market just completely collapse, along with the futures market.

Schumacher and others say three large meatpackers, IBP among them, control the cattle industry. They believe the Luverne plant shutdown further limits farmer options for selling cattle, increasing the big three's grip and causing lower cattle prices, especially for family farmers. The argument is that meatpackers give special deals to large corporate feedlots which can supply huge numbers of cattle. ISU economist John Lawerence says the 1920s legislation is not precise enough to deal with that complaint:

Lawerence: What the packers and stockyards act says is that it was unlawful to unduly discriminate against a producer by price discrimination due to size of the operation. But what does "undue" mean?

The US Agriculture Department has charged that IBP violated that law by paying premium prices for cattle from some large Kansas feedlots, prices the giant meatpacker did not offer to other farmers. IBP won the first round before a federal administrative law judge, but the government has appealed. Luverne city officials are scrambling to find a business interested in buying the IBP plant. Since IBP says it will not sell it to a competitor, the city hopes someone who's not in the meat business, maybe a manufacturing company, might be interested.

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