By Stan Maddux

WEST LAFAYETTE, Ind. —  On Jan. 10 Wal-Mart started packing Angus steaks and roasts for 500 of its stores across the southeast from a 201,000 square foot plant in Thomasville, Georgia.

 According to Michael Langemeier, an agricultural economist at Purdue University, potential upsides and downsides exist, but it’s too early to know the impact on producers from Wal-Mart becoming a supplier of beef to its stores. “Is it going to be rather tough competition for the other players in the industry?  That’s yet to be determined.  We’ll just have to wait and see how this works,” Langemeier said.

The objective is offering higher quality cuts at a lower cost through quality control and eliminating outside suppliers.

Wal-Mart first became its own supplier in 2018 when it opened a milk processing operation near Ft. Wayne, Indiana.

Industry experts said the move eliminating Dean Foods from the supply chain added to the struggles of the longstanding dairy provider which filed for Chapter 11 bankruptcy in November.

Many lower volume providers of milk to Dean Foods feeling squeezed by Wal-Mart doing business strictly with large producers were reeling about prospects of finding other buyers if Dean Foods cut back on suppliers to help survive bankruptcy protection or folded.

Wal-Mart said it’s working with a select number of top companies to supply its store with Angus beef shipped from Texas to Kansas for slaughter. The meat is then packaged and sent to store by 250 workers at Wal-Mart’s South Georgia plant which could add 100 more workers.  “Our new Angus beef supply chain is a perfect example of Wal-Mart’s dedication to bringing customers high-quality food at a great price,” said Scott Neal, senior vice president of meat at Wal-Mart U.S. 

Bob McClaren of 44 Farms in Cameron, Texas states, “No bigger paradigm change has taken place in the beef industry than what is happening with Wal-Mart bringing truly high-quality, all-natural, and no hormones-added Black Angus beef to its customers.” His company is among Wal-Mart’s suppliers of beef.  

Langmeier said demand for beef has been in longstanding decline from health conscience consumers turning more to poultry. But, he argued Wal-Mart’s decision could halt or reverse the trend if enough consumers are enticed by the higher quality beef at lower prices the major store chain intends to provide, he said. That would mean stability for ranchers in the Wal-Mart supply chain but not for producers left out. At least for now, Langemeier said beef producers don’t seem as vulnerable to changes in the supply chain as the dairy industry.

Langemeier explained how finished cattle predominantly come from states like Texas and Kansas where providers have resources to compete.

Small and medium sized producers from states like Indiana, Kentucky and Tennessee usually supply calves for finishing elsewhere and higher beef consumption would mean greater demand for calves, he said.

Langemeier cautioned any change especially from a company as large as Wal-Mart can have a ripple effect and suppliers need to look for efficiencies and other adjustments to stay on top of demand.

“I can’t say for sure how big the ripple will be but certainly when Wal-Mart gets into the business they’re going to want a specific product,” he said.

The plant costing $140 million represents a growing trend of retailers like Kroger and Costco becoming their own suppliers of food products like milk and rotisserie chicken to eliminate the middleman from supply chains.