John Hult/South Dakota Searchlight
SIOUX FALLS, S.D. — In 2024, Aberdeen’s DemKota beef processing plant bought cattle from 400 producers.
This year, they bought from 300.
“That wasn’t because we chose to,” CEO Adam Bode told the Sioux Falls Downtown Rotary Club on Monday.
It’s because the producers aren’t there any longer. Raising or feeding cattle is “a great business and an even better lifestyle,” said Bode, but it’s one fewer and fewer people — particularly young people — can afford to get into. He said the average age of a South Dakota cattle producer is 63.
In South Dakota, the Governor’s Office of Economic Development facilitates loans to beginning farmers and ranchers, but only for a handful of people each year. Since 2019, the office’s board approved a total of $4.6 million in bonds for 13 applicants statewide, an average of about $354,000 per award.
Bode sees plenty of opportunity in cattle, but others need to see the same.
“To the bankers in the room: Loan that money to that young producer,” Bode said. “It is a high capital business to get started. That’s the biggest hurdle to get new players in it, and we desperately need them.”
Volatility embedded in business
Dave Geraets, who has 2,500 head of cattle and grows row crops outside of Colton, said the cattle side of the business is wildly volatile. Diversified operations can help producers weather price fluctuations — particularly when corn prices are high, Geraets said — but adding cropland only makes it harder to start from scratch.
“No matter if it’s land or cattle, all of it is expensive,” said Geraets, who hopes to see his kids stay involved in the business.
This year, the wild price swings for cattle have been historic. A low inventory pushed prices to an all-time high in August.
The prices didn’t last. Citing a desire to lower beef prices for consumers, President Donald Trump announced his intention to push for the importation of more beef from Argentina this fall by increasing the number of tariff-free metric tons each year from 20,000 to 80,000.
“We retracted that market by 25% in two weeks,” said Ryan Eichler, founder and board president for the South Dakota Cattlemen’s Foundation. “Imagine the stock market retracting 25% in two weeks.”
Craig Bieber, vice president of the South Dakota Cattlemen’s Association, told South Dakota Searchlight last month that the Argentina move was “a gut punch.” U.S. Sen. Mike Rounds, R-South Dakota, met with the Trump team last month to discuss the concerns of ranchers.
Trump would later ask his departments of Justice and Agriculture to launch an investigation into “hyperconsolidation” of the beef packing industry. The investigation would look into the “big four” packers – JBS, Cargill, Tyson and National Beef – “for potential collusion, price fixing and price manipulation.”
Capital access hinders smaller operations
Bode, the DemKota CEO, said his company slaughters about 300,000 cattle a year, and tries to stand out by processing higher-end cuts of meat. When asked by Rotarian and former Gov. Dennis Daugaard what it would take to process more, Bode said capital investment.
Much like a young farmer, he said, the price of entry for a processor is high enough to make financing difficult.
“We have an internal joke in our industry: If you ever want to make a couple million bucks in beef processing, just start with a couple billion,” Bode said.
The large beef packers aren’t immune to volatility, either, Bode told South Dakota Searchlight after the discussion. The same low inventory that pushed prices to record levels has made it harder for the Big Four packers to keep their processing plants up and running.
Last month, Tyson announced the closure of its Lexington, Nebraska plant, which has the capacity to process 5,000 cattle a day but had recently been processing around 3,600 a day.
The closure won’t have an impact on DemKota, which is a smaller-scale operator, Bode said.
But it does show that the bigger players are having the same problem he is: too few producers raising too few cattle to meet high demand.
“There still aren’t enough animals,” he said. “Even with that giant plant, there’ll be another plant closure. It’s the first of several, really, in our opinion.”