Rapid City packing plant: New facility expected to be the nation’s largest
With plans to finance a brand new Rapid City, S.D.-based beef and bison processing facility that would slaughter more than any single beef plant currently in operation, Kingsbury and Associates and Sirius Realty of Rapid City and Greenville, S.C., have made waves across cattle country in recent weeks.
Megan Kingsbury, president and managing partner of the debt/equity capital firm, said her goal is for the plant to process 8,000 head per day when at peak operation. This is to include bison, cull cows and bulls, as well as finished cattle. The plant will be under a recently announced “Western Legacy Development Corporation.”
Kingsbury said competition in the processing industry has been greatly reduced over the years “because what we perceive to be the big four, have controlled this. From perhaps backroom negotiating at times,” she said. “What this does is it allows transparency and competition,” she said of the planned new plant.
“We want to be sure we are buying out of our sale barns locally. Our entire procurement dimension is going to be massive. We are that second bidder in the barn, and our hope is to see an increase in sales in the barns because they know we will have a second bidder.”
In addition to purchasing cattle through the sale barn, Kingsbury expects to have to procure some cattle via AMAs or contractual marketing agreements, but she hopes to keep that need to a minimum.
MADE IN AMERICA
Kingsbury says she is “very aware” of ranchers’ concerns with imported beef being sold under the “USDA” label which can mislead consumers into thinking it is U.S. beef. “We want to be sure we are putting America first by using only American beef products — born, raised, finished, produced here in the United States. It’s important to me since this is a personal project and as a fifth generation producer here in South Dakota that it is all that.”
“Part of our research and development is developing a brand specific to South Dakota, to American beef and to feeding America,” she said.
“There will be a brand created and it will be shelf ready when it leaves the plant,” she said. She said information about the aging process and other details will be made available later.
The predicted $1.1 billion plant will be unlike any currently operating in the United States, she said, and should employ about 2,500 people, with entry level positions paying about $28 per hour and consisting of a “tech position on the line” rather than a meat cutting job.
The plant is to be privately held and privately financed through Kingsbury and Associates and Sirius Realty. “There are no other investors,” she said.
“There are no facilities like this in North America to draw a comparison,” she said, adding that the research team identified 11 similar high tech plants globally, boiling it down to four that they are researching to pick and choose aspects that could work for the Rapid City plant.
“We will take the sweatshop mentality out of the packing facility completely. We’re using air-knife technology on the line rather than actual knives,” she said.
Methane gas technology will power the facility, she said, which will “take the odor out of the equation.” She believes the plant will put power back into the grid “based on our green energy we’re creating on site.”
Industrial engineers, electrical engineers, computer engineers, robotic engineers and more have teamed up to help determine how the plant can operate most efficiently.
The recently announced Black Hills Industrial Park is the preferred site and is adjacent to Highway 79 and Old Folsom Road, just south of Rapid City.
WILL IT BE THE ANSWER?
David Uhrig, herd manager for Mt. Rushmore Angus Ranch of Hermosa, S.D., is hopeful this plant is the answer the industry needs.
“We need more packing capacity, and it should be a boon for the economy,” he said. “This is huge. To wrap our minds around this and say logistically ‘can you make this all work?’ I just don’t know, but I’ve always been for the underdog,” he said.
“The huge part is that this will be U.S.-owned and they will be killing U.S. cattle. That’s a quality that doesn’t exist on this scale right now,” he said.
He also points out that the new plant won’t be in competition with smaller, custom plants like Wall Meats and won’t compete with farmers markets and ranchers selling their own beef. “This is something to compete directly with commercially produced beef, and that’s what the industry is saying as a whole is we need that one extra bidder. Since this isn’t owned by one of the corporate packing plants, they could potentially be a new bidder,” he said.
And don’t count out the bison, said Uhrig. “I think that bison line is going to play a bigger role than some of us are giving it credit for,” he said.
Gary Cammack, a rancher, state senator and ranch supply store owner from Union Center, S.D., echoed Uhrig’s thoughts regarding bison.
“The buffalo/bison slaughter part of it is intriguing. That’s definitely a niche that needs to be filled. The buffalo industry has grown a lot and I know they are needing slaughter capacity,” he said.
As for the success of the plant overall, Cammack said it remains to be seen, but if it becomes a reality, it is sure to help the cattle industry locally.
“It certainly will have a positive influence. As much as anything, it gives one more aggressive buyer on the scene to give an alternative bid,” he said.
Cammack said he has “considerably more questions than answers” at this point, although he did speak briefly with Kingsbury before the announcement was made.
Others have doubts, including access to sufficient labor, cattle numbers, and buying practices of the big four packers.
Darrell Hoar, who bought cattle for Rapid City’s Black Hills Pack from 1960 until it burned in 2002, has concerns about the future of a mega plant in the Black Hills of South Dakota.
“There aren’t 8,000 head of cattle per day to be procured. There aren’t that many cull cows and bulls in the trade territory,” said Hoar. He fears that rising fuel costs and a growing number of absentee cattle owners who may already have their cattle contracted, will make it difficult for the that the plant to maintain an 8,000 head per day slaughter.
“There aren’t ma and pa feedlots left. The cattle in the feedlots are owned by absentee owners out of the area and many of them are already committed to a buyer.”
Black Hills Pack, built in 1910, slaughtered beef and pork. When Hoar took a job there in 1960, the plant was slaughtering about 40 head per day, but had grown to about 700-800 head per day when it burned in 2002. The Pack processed mostly cull cows and bulls, but also processed finished cattle. “We bought from five states and even a few from Canada. In those days, we bought them direct from ranchers, feedlots and auctions. A lot of those feedlots are dead and gone today,” he said.
Because of his experience in the packing business, Hoar knows a lot of the “what ifs.” He says 2,500 willing employees will be difficult to procure, and he fears that the big packers will undercut the fledgling plant to prevent it from getting a foothold in the beef industry. “The big boys, whoever they may be, will outbid or raise the price just to drive them out of the country. They raise the cost of cattle to take any margin out. They will lose money but in the long run they’ll run the new plant out of business.”
“I’ve seen this come and go. And I just hate to see individual people get involved and lose a lot of money,” he said.
The local cattle industry took a blow when Black Hills Pack burned, he said.
Hoar said he witnessed many packing plants close their doors during his time as a cattle buyer. “A lot of them were old and outdated. They couldn’t keep up with USDA regulations,” he said.
He said he saw the following plants close down during his tenure with Black Hills Pack: Midland Empire in Billings, Mont.; Pierce Pack, Billings; Great Falls Meat, Great Falls, Mont.; Miles City Pack, Miles City, Mont.; Rocky Mt Pack, Casper, Wyo.; Sheridan Meats, Sheridan, Wyo.; Gering Pack, Gering, Neb.; Swift Pack, Gering, Neb.; Swift Pack, Watertown, S.D.; Barnes Pack, Huron, S.D.; Huron Dressed Beef, Huron, S.D.; Meiliman Pack, Sioux Falls, S.D.; Morell, Sioux Falls, S.D.
But Kingsbury believes she can keep costs low enough to be successful. “We’ll be the low cost producer and the low cost producer always wins.”
Her hope is to reverse some of the trends that Hoar sees as troublesome. “This allows feedlots to dust the cobwebs off and have a buyer next door. It brings back that competitive advantage we’ve seen slip through our fingers the last 20-30 years,” she said.
Kingsbury said her mother grew up on a ranch in the Kadoka area and her father’s family is from the Rapid City and Keystone areas.
Calling herself a fifth generation Angus cow/calf producer, she said she grew up in the Minneapolis area but spent about half of her time on the family ranch in South Dakota.
Her grandfather gave her a bred heifer when she was 5 years old, as he did for all of the grandkids.
“We all kept going in the cattle business,” she said.
Kingsbury graduated from an East Coast college, “put down roots in South Carolina” and worked there until about a year and a half ago when she decided to begin to move her business to western South Dakota. “I wanted to bring those offices to Rapid City and fundamentally fix the problem (low profit margins for ranchers) by putting in a packing facility that would move the needle and fight the big four,” she said.
“There is plenty of wealth to go around, we just need to be sure it’s not being held at the top.”
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