Supply chain issues inspire growth in meat processing ByChing Lee
and rancher in the last eight years,”Hough said. “Ourconclusionisweneedtoshiftour participationintheprocessingandretail to be sustainableona long-termbasis.” He described opportunities for smaller plants that can accommodate nichemar- kets such as religious-based processing and specialty meats, which large proces- sors don’t serve. He said he’s also consid- ering processing locally raised sheep and goats for ethnicmarkets. Business risks involve not just the cattle market but rising production costs on the farm, especially for feed, he said. Cost to construct the plant has also jumped 20% fromthe initialbudget ayearago, henoted. Jonathan Huseman of Stockton Beef Packing is trying to build a plant in north central Texas that slaughters andprocesses 100headaday. Located inoneof the state’s maindairyregions,theplantwillbe“wellpo- sitionedgeographically”tohandledairycull cowsandsmallcow-calfoperations,hesaid. But rising cost of materials, their avail- ability and financing continue to pose “considerable risk toentry,”hesaid. Trying toobtainorganic certification for the facil- itypresentsadditional headwinds, hesaid. Two officials from the U.S. Department of Agriculture say the Biden administra- tion has made it a top priority to diversify the nation’s processing capacity for meat and poultry. They joined in the webinar topromote anew federal guaranteed loan program and other efforts to strengthen the food-supply chain and make it more secure and resilient. President Biden issued an executive order last July to promote competition in the U.S. economy and funding from the AmericanRescue PlanAct. “Wehaveaonce-in-a-generationoppor- tunity toensure that farmers and ranchers haveaccess tobettermarket choicesandto buildour local and regional foodsystems,” saidKaramaNeal, administrator of USDA Rural Business-Cooperative Services. The Food Supply Chain Guaranteed Loan programuses $100million from the American Rescue Plan Act to back near- ly $1.4 billion in guaranteed loans. The program helps finance working capital, equipment and other investments in the middle of the food-supply chain, specif- ically activities such as aggregating, pro- cessing, manufacturing, storage, trans- porting, wholesaling or food distribution. Nineteen percent of the loan program is reserved for meat and poultry processing projects. Loan fundscouldsupport startup or expansion activities. The federal government will guarantee loans made by commercial lenders, so that if there is a loss on a lender, the gov- ernment would step in and implement its guarantee, said Mark Brodziski, deputy administrator of USDA Rural Business- Cooperative Service. “With the guarantee, the lender has sig- nificant riskmitigated,”he said, saying that could lead to opportunities for higher or larger loan amounts from lenders. (ChingLeeisanassistanteditorofAgAlert. Shemaybe contactedat clee@cfbf.com.)
The pandemic exposed and exacerbat- ed vulnerabilities in the U.S. food-supply chain, creating disruptions. But it may have also ushered in a new era for meat processing by creatingmarket opportuni- ties for smaller producers. One focus has been on capturing niche andhigh-valuemarkets inwhich custom- ers favor a more farm-to-table approach to their food. Tom Tomich, founder of the Food Systems Lab at University of California, Davis, said researchers there have started work this month identifying meat char- acteristics for which consumers will pay. Theyarealso lookingathowtodeliver food in a system that people can trust and that raises profits for farmers, ranchers and meat processors. Hesharedrecommendations fordiversi- fyingandexpandingfood-processingcapa- bility inthestateduringawebinar lastweek on “ExpandingMarket Opportunities for Meat Processing.” The forumwas co-host- ed by the California FarmBureau, among other agricultural groups. “We believe that greater local and re- gional access to processing in high-value markets can increase profits by supplying chefs, medical centers, sports venues and other urban consumers,” Tomich said. UCresearchershavebeenlookingat “re- gional complexities” in the North Coast and the Sacramento Valley, Tomich said. The goal is to develop profitable business modelsandmarketingstrategies inthe two regions with the hope of expanding them across the state, he said. Theproject builds on research theFood SystemsLabpublishedlast year.Thestudy, titled “A New Era for Meat Processing in California,” found insufficient local and regional processing capacity for livestock andpoultry, especially inmore remote ar- eas “where we need grazing to reduce fire risk,” Tomich said. Because of “very limited” access to federally certifiedmeat processing, small andmid-sized producers turn to “various policy and legal workarounds” that lead to “complex inspection requirements” for meat that create bottlenecks, he noted. At the local level, multiple jurisdictions withconflictingwater andsolid-waste reg- ulationsmake it expensive, time consum- ingand“virtually impossible” tobuildnew plants or upgrade existing ones, he said. Two livestock producers shared their perspectives intrying todevelopmid-sized meat-processing facilities for their region. Theydescribedtherisks they face fromcat- tlemarket volatility, inflationarypressures andmarket entry barriers. Becausemanysmallbutchershavegone out of business during the past 20 years, Jesse Hough of Nebraska Beef and Lamb said there is now limited capacity to serve producers who want custom slaughter or tomarket their product as farm-to-table. Such supply-chain issues, he said, drove himto consider vertical integration. “Profitmarginshaveshiftedtothebenefit of theprocessorandretailerfromthefarmer
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