Beef State: The Omaha Stockyards

The Birth of South Omaha and the Stockyards 

In 1882 Alexander Swan, a Wyoming rancher who had emigrated from Scotland, urged Omaha business leaders to consider creating a stockyard. He and other ranchers, including C. R. Schaller, an English imigrant, argued that shipping cattle the additional 500 miles to Chicago caused them to lose weight and lowered profits.

They noted that Omaha was a transportation center served by both the Union Pacific Railroad and Missouri River freighting. The Missouri also provided the water and drainage needed for a stockyard, and they also praised the Omaha area’s abundant corn and grass. The city, they contended, could supply everything needed to care for and fatten cattle.

In 1884 a group of investors built cattle pens on ten acres south of the city. Soon meatpackers, starting with G. H. Hammond in 1885, began building processing plants adjacent to the yards, and the Omaha stockyards grew quickly as the number of animals processed there increased.

In 1886 the investor group built the Livestock Exchange building, and more meatpacking companies set up shop, including the Fowler Brothers in 1886 and Armour-Cudahy and Swift in 1887. By 1890 South Omaha was the hub of a burgeoning western meat industry.

Exploding Stockyards and Packing Houses

In the first quarter of the 20th century new technology dramatically changed the beef industry. Refrigerated railroad cars ended the days of shipping live cattle, a change the railroads initially resisted in order to protect their large investments in the yards where they fed and watered cattle in transit.

But live cattle took up a lot of space in a rail car, and shipping a live animal meant transporting the low value and waste parts as well as the meat: hides, bones, hooves, horns, and guts. Moreover, live cattle lost weight in transit and occasionally injured each other. Shipping refrigerated carcasses made better economic sense.

The introduction of gasoline-powered engines made some of the most radical changes in beef production. A farmer with a tractor could raise more corn and deliver it to a cattle feeder more efficiently. As farming became more mechanized, more feedlots appeared throughout the state.

As roads improved and trucks grew larger and more efficient, they began to compete with the railroads as a means to ship livestock to the stockyards. As more cattle arrived in South Omaha, the stockyards continued to grow, eventually covering more than 200 acres.

Meat packing changed and grew as well. In 1906 Upton Sinclair’s “muckraking” novel, The Jungle, stirred a public outcry against unsanitary condition and labor abuses in the packing industry. Beef sales and exports declined, and in response, and with support from large packing houses stung by the market losses, the federal government passed the Meat Inspection Act and the Pure Food and Drug Act. This legislation created a system for independent meat inspection. Today’s Food and Drug Administration—the FDA—is rooted in that 1906 legislation.

The four major packers, Armour, Cudahy, Morris and Swift, continued to expand and improve their operations. In 1915, Armour built a new plant, one of the nation’s largest, and the independent city of South Omaha merged with Omaha proper.
 
Cattle on a Roller Coaster
In 1926 a magnificent new Livestock Exchange Building towered over the South Omaha stockyards, symbolizing the optimism and strength the livestock industry—and cattle in particular—had enjoyed for nearly a quarter of a century.

Throughout the state mechanization was revolutionizing agriculture. Cars, trucks, and light tractors, along with a growing network of roads and highways, helped ranchers increase the amount of hay they could produce and market. Farmers could cultivate more acres, and with a vibrant cattle market, feeders paid good money for corn.
 
In late 1929, all that ended. Prices for livestock and grain dropped to unheard of lows, and the rains stopped. Farm income slowed to a trickle, banks collapsed, and mortgages came due. The Great Depression threw agriculture in Nebraska—and throughout the nation—into turmoil.

The Great Depression
The Great Depression and the coincidental drought proved ruinous to farmers throughout America, but in Nebraska many ranchers seemed to do fine. Why?

In a February 1944 the Sunday Lincoln Journal and Star, ran an article by Winn Nelson about Christopher J. Abbott, in which Abbott, the owner of seven ranches and president of nine banks, talked about the Nebraska Sandhills and its unique qualities for raising cattle.

Nelson wrote, “It [the Sandhills] is the only agricultural region that remained financially intact when the bottom fell out of the farm situation in the 1930’s and Old Man Drought stalked the Midwest in his trailing gown of dust.”

“It’s a haymaker’s heaven,” wrote Abbott. “Nature gave Nebraska an ideal water storage area when she formed the Sandhills. . . . That’s why a complete hay-crop failure is unknown to the Sandhills.”

Unlike farmers, who have to borrow money to plant crops in the spring and then hope for a good harvest in the fall, ranchers need no loans. As long as they have cows that calve, hay to feed, and access to water, their herds grow.
 
Even when cattle prices fall, Sandhills ranchers at least have cattle to sell. In 1929 the state produced 2.9 million head of cattle that sold for an average of $59 each. In 1934 cattle prices had dropped to $17.50 a head, but 3.9 million of them were produced. During the Great depression prices rose and fell, but production continued at about 3 million head per year. Cattle certainly helped Nebraska weather the hard years of drought and depression.

Eventually aid from the federal government improved conditions and bought modernization such as rural electrification and highway construction. In the 1940s World War II created a demand for beef, and brought new technologies that would allow the cattle industry to grow. It also brought price controls and black markets.

World War II Price Controls and Black Market Beef
Even before the United States entered World War II on December 7, 1941, food was a strategic commodity. Through the Lend-Lease program established in March 1941 the United States was providing critical foodstuffs to Allied Nations including England, France, China, and the Soviet Union. 

With its entry into the War, the United States faced a huge problem in assuring an adequate supply of food for its troops and its citizens. Beef was a critical element in the food supply chain.

One strategy used by the Roosevelt administration was to create the Office of Price Administration (OPA) to control wartime inflation and ration scarce essential commodities. The OPA set ceiling prices for beef, hogs, and corn designed to keep profit margins at about the same levels they had been in the pre-war years.

The OPA controlled prices from cattle sales, through packing house production, to retail prices for meat at the butcher counter. They also established a rationing system of assure that everyone had an adequate supply of meat and other essentials. Ration stamps were issued to every man, woman and child, and households struggled to budget stamps and put meat on the table.

So, if a consumer wanted a pound of steak he or she went to the meat market and—if there was meat in the butcher’s case—paid the ceiling price of sixty cents plus one red ration stamp.     

The ceiling price for beef was low, but the OPA set corn prices artificially high.  They also placed a floor (the lowest price paid) on hogs. These price differentials encouraged hog production a desired goal for several reasons: First, hogs mature faster than cattle, shortening the time from birth to slaughter and increasing available supplies. Second, lard was used in the manufacture of munitions.

For ranchers and feeders the high price of corn and the low ceiling price on cattle made it economically unfeasible to fatten cattle on corn. Instead, ranchers kept their cattle in pastures and brought them up to sale weight on grass, which took more time than fattening them on corn. Moreover, because of the ceiling prices that meat packers could charge meat markets and grocery stores they preferred to buy the lighter, cheaper grass-fed cattle rather than the more expensive, fatter corn-fed animals.

The result, however, was a beef shortage that, in turn, created a lucrative black market.

The black market avoided price controls at every level of production. Unscrupulous cattle buyers paid ranchers higher prices for cattle sold straight from the fields than they could get at the sale barns, which had to comply with price controls.

The buyers sold these “extra” cattle, processed them, and sold them to meat markets with empty shelves for the ceiling price plus some additional “under the table” money. The meat market held back the extra meat for customers willing to buy it at a premium price. Thus a customer might pay unrationed black market beef for a dollar per pound rather than rationed meat at the legal price of sixty cents per pound.

As Nebraska Sandhills herds came to weight, many ranchers did not sell because the ceiling prices were below the cost of production. So while there was a meat shortage on the East and West coasts, in Nebraska there was a cattle glut.

In an article headlined “Beef Plentiful ‘Out Where West Begins’” (Lincoln Journal, Feb. 20, 1944) Winn Nelson wrote, “Countless herds of big steers having beef to the hocks darken the rolling [Sand]hills ... The herds are a sight which might panic a beef-starved New Yorker, as he remembers that in his city the department of agriculture posts each day not only regular ceiling prices but also black market prices of meat ...”

Grass-fed beef is lean, and a second version of the black market emerged to supply a demand for tender, marbled corn-fed beef that Americans had grown fond of. Some feeders would pay higher prices for cattle that had not been fed to weight on grass and would fatten them on high-priced corn. They would sell to packing houses willing to pay premium, above-ceiling prices for corn-fed cows. The packers would sell the well marbled beef to retailers with customers ready and willing to pay premium prices for corn fed beef.

The black market beef engendered new rural steakhouses located far from government scrutiny and offering high quality steaks for an equally high price. As Winn Nelson noted, “Most Lincolnites have observed that a short trip past the outskirts of a metropolitan center usually brings them to a not-so-well-lighted roadhouse where steaks are featured on the menu with large dollar signs.”
 
After the war, diesel technology added more muscle to tractors, and larger trucks further reduced cattle producers’ dependence on the railroads. Antibiotics, fertilizers, and herbicides improved corn production and led to larger and larger feeding operations.

The Forces of Change: South Omaha
After World War II South Omaha’s stockyards and packing houses were caught up in a postwar hunger for beef. In 1949 the average American consumed 144 pounds of meat per year; by 1950 consumption had jumped to 160 pounds—nearly half a pound per day for every man, woman, and child. The American Meat Institute reported in 1950 that meat constituted 24 percent of the average family food budget. And, since the “baby boom” had begun, there were more families in America than ever before.
 
Since the 1920s the major meatpackers – Swift, Armour, Cudahy, and Wilson, often called the “Big Four”—had held a near monopoly on beef production, and Omaha’s Union Stockyards was practically a city unto itself. In 1956 Omaha eclipsed Chicago as the largest meat producing city in the world. That year, too, Nebraska automobile license plates began carrying the nickname “The Beef State.”

But the dominance of the “Big Four” and preeminence of the stockyards would soon ebb.

1956 was also the year the Interstate Highway System was born. Still more cattle went to the yards by truck, further shrinking the industry’s dependence on rail transportation.
 
Before the war, Omaha meatpackers had successfully resisted union efforts to organize their workers. However in 1948 Omaha workers joined in a national strike against the Big Four, leading to a twenty-year struggle between management and labor.

The Meatpacking Revolution
While labor and management wrangled, innovation stalked them. In 1961 a new company, Iowa Beef Packers (soon known as IBP), emerged in Denison, Iowa, forty-five miles northeast of Omaha. Its founders set out to completely rethink meatpacking.
 
They located in Denison to be near corn and cattle production, and they built a new kind of plant, all refrigerated, and all on one floor. In traditional packing houses livestock was driven up a long ramp to the top floor of a multi-story building where they were slaughtered. The carcasses were moved down from killing room to the chiller and into railcars by gravity. More than one species would be processed in the same building, requiring multiple butchering departments.
 
IBP, as its name suggests, produced only beef. Automated equipment moved carcasses efficiently from process to process on one lever, creating a true disassembly line where each worker performed only one specific task in the butchering process. By keeping the entire plant refrigerated meat shrinkage from dehydration was virtually eliminated.
 
Line processing could be performed by much less skilled workers, greatly expanding the pool of qualified workers. In Dennison IBP found an eager non-unionized labor force drawn largely from people with experience in agriculture. Thus the company could pay lower wages, while the automated design facilitated higher employee output, giving IBP a substantial market advantage.
 
They also economized by buying cattle directly from ranchers and farmers, eliminating stockyards costs, and trucked cattle directly from the feedlot to the processing plant, further increasing efficiency.
 
“Boxed beef,” also developed by IBP, further revolutionized the industry. Transporting carcasses to butchers was grossly inefficient, causing the slaughterhouses to ship a lot of waste material. Further, carcasses did not fit efficiently into the rectangular space of refrigerated trucks and railcars. By cutting the carcasses into smaller pieces that could be packed in boxes they were able to load substantially more beef into a truck or railcar, dramatically reducing the cost-per-pound of transportation. Because more of the processing took place at the plant, retailers could use less skilled labor at the meat counter.
 
By 1975 the bustling stockyards and packing plants that only twenty years earlier had been the largest in the world were all but gone.