Beef “pipeline” to South Korea received with mixed reviews

This corn field is where Future Food Energy would build it's beef packing plant, just down the road from the factory where sugar is made from local sugar beets. (Photo by Grant Gerlock, NET News/Harvest Public Media)
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July 5, 2013 - 6:30am

A proposed new beef packing plant in Scottsbluff, Neb. would provide a source of American beef for its South Korean investors. The plans may hold promise for area ranchers, but Scottsbluff residents are divided on how to move forward.

The Nebraska Panhandle is cattle country and Scottsbluff is in the middle of it. It’s the kind of place where you don’t have to go far to be surrounded by cattle instead of people.

Leo Hoehn has three feedlots in the area where he feeds a total of 16,000 cattle. The problem with being in the this part of cattle country, though, is that Hoehn has to travel to take animals to market.

“Ft. Morgan, Greeley, Lexington, and Liberal and Dodge City,” Hoehn said, listing distant packing plants in Colorado, Nebraska, and Kansas where he ships livestock. “Anywhere from 120 to 500 miles.”

A company called Future Food Energy, or F2E, would change that. F2E wants to build a $135 million packing plant on the edge of Scottsbluff, Neb. It would be just a few miles away from Hoehn’s lots.

Photo by Grant Gerlock, NET News/Harvest Public Media

Leo Hoehn feeds 16,000 cattle in the Scottsbluff area.

Photo by Grant Gerlock, NET News/Harvest Public Media

Meat for the South Korean market needs to have more marbling, or fat in the meat tissue. Ranchers will have to adjust their genetics and feed cattle longer to make the meat F2E is looking for.

Keith DeHaan, F2E’s general manager, said the plant would eventually slaughter up to 1,500 cattle per day which is actually fewer than a typical modern packing plant.

“The plant is just the means to the end,” DeHaan said. “It’s not about the plant, it’s about the pipeline.”

The F2E slaughterhouse would become a beef pipeline, of sorts, to South Korea. A group of South Korean investors are the primary investors behind the proposal. DeHaan, an American from Kansas City, Mo., described them as meat marketers. They would be both the plant’s owners and customers.

The U.S. already provides 40 percent of Korea’s beef supply, but DeHaan said the F2E investors are not among those buying it.

“They don’t buy imports,” DeHaan said. “They have a choice to. Their customers don’t trust it.”

That goes back to 2003 when South Korea stopped imports of U.S. beef after BSE, or mad cow disease, was found in Washington state. Exports to South Korea never resumed until 2008 and remain about half of what they were in 2003.

The new free trade agreement between the U.S. and South Korea also makes it an ideal time to get into the export business. The current 40 percent tariff on American beef will be phased out over the next 15 years. A tariff on Australian beef, the United States’ main competitor in South Korea, will remain intact.

DeHaan said the growing middle class in South Korea is demanding more beef, but South Korean beef production has been declining.

“Because almost 100 percent of their feed that they feed these animals come from the United states and the price of corn has gotten exorbitant,” DeHaan said. “They can’t afford to feed them anymore. They have to replace that pipeline. They have to replace that production.”

F2E wants to do that from Nebraska. About half of the meat would stay in the U.S., such as inexpensive cuts and trimmings for ground beef. The prime cuts would go to South Korea and cattle producers like Leo Hoehn would earn a welcome premium for providing more prime meat.

Hoehn wants the plant to be built. He said the last two years have been difficult, dealing with lower than expected beef prices and higher than expected feed prices driven by the drought.

“I think it’s maybe the only time they’ll ever have an opportunity like this and they shouldn’t pass it up,” Hoehn said.

View Proposed Future Food Energy site in a larger map

Photo by Grant Gerlock, NET News/Harvest Public Media

Scottsbluff City Manager, Rick Kuckkahn stands by the 43 acre corn field where Future Food Energy would build it's beef plant. F2E offered the city $10,000 per acre, more than double the land's appraised value in 2010.

The choice is ultimately up to the Scottsbluff City Council. F2E wants to buy city-owned land to build its plant.

However, opinions are mixed on whether approving the sale is a good idea for Scottsbluff long-term. Convenience store manager Kim Teters is opposed.

“They want to bring this into the community and we already have an old factory that used to be Packerland sitting empty,” Teters told me in downtown Scottsbluff.

The Packerland plant was across the river in Gering and shut down in 2005.

Teters also doesn’t like the idea of immigrant workers moving to Scottsbluff. F2E has said its first priority is to hire locally, but the company also intends to recruit Korean Americans from across the U.S. That made Teters uncomfortable.

“You’re bringing in a lot of people from someplace else but the local jobs I just don’t think are there,” Teters said.

Others in Scottsbluff point to stagnant population growth and say any new jobs are welcome.

City Manager, Rick Kuckkahn, said it’s not a clear cut choice. Highway 26, southeast of the sugar beet processing plant, is where Future Food Energy wants to build its packinghouse. Right now it’s a 43 acre corn field next to the North Platte River. F2E is making the city a strong offer for the land.

“We established a price for this property in 2010, between $3,000 and $4,500,” Kuckkahn said standing next to the property. “The offer for the property at this point is $10,000 per acre. So it’s more than double the highest number that an appraiser suggested a few years ago.”

The area economic development board has come out in opposition of F2E’s proposal. The Twin Cities Development corporation recently questioned the group’s business plan and capitalization. The city has also been asking for more information about F2E’s financing and investors.

But on the final ledger, Kuckkahn said, the Scottsbluff City Council may simply have to decide, “Should Scottsbluff be a meatpacking town?” That may seem like a strange question since cattle outnumber people in Scotts Bluff County. But Kuckkahn said the answer could have an economic impact down the years.

“Because there are some negative connotations there,” he said. “If a new business person wants to move into Scottsbluff, a software engineering firm, is he going to move those kind of high tech workers to a town that’s known as a, quote unquote, meat packing town?”

No final decision is expected on the proposed packing plant until possibly late 2013.



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