USDA investments in meat processing to benefit small farmers

By Tucker Larson, Swette Center Student Worker

On Friday, July 9th, the USDA announced that it would be allocating $500 million to increase competition and “level the playing field” for meat and poultry processing. These funds will come through the American Rescue Plan and are intended to increase capacity, giving farmers and ranchers more choices when it comes to meat and poultry processing. On top of this $500 million, the USDA will also be providing $150 million to existing small and very small (SVS) processing facilities. Small facilities have anywhere from 10 to 499 employees and very small facilities have less than 10 employees or annual sales of less than $2.5 million. A third of this will be going to increasing the SVS plants processing capacity, while the other two thirds will go to producers who saw an unexpected increase in costs from overtime inspections and other variables caused by the Covid-19 pandemic.

The $500 million coming from the American Rescue Plan will be used to create a more resilient meat processing system by decentralizing meat packers, giving farmers and ranchers more options. Current meat processing infrastructure in the United States has become top heavy, with a few meat processing companies owning a majority of the system’s capacity. The result of systems built like this is a fragile infrastructure with a limited network that, when disrupted, results in a rupture in the supply chain.

In 2020, as Covid-19 forced certain large-scale meat processing facilities to shut down, farmers were left with no options for processing and consumers saw grocery store shelves run empty. States dedicated some early federal Covid-19 relief dollars to “depopulation” - that is, mass euthenasia and composting or incineration of animals that were unable to be processed because of the meat processing plant closures. By increasing the capacity for meat processing and creating a more competitive, diverse landscape of meat packers, farmers and ranchers will have more freedom to decide how they sell their product, and the food system will benefit from this increased resiliency and redundancy.  

The $150 million that is being allocated for SVS processing plants will be split up into two categories: financial relief caused by the Covid-19 pandemic; and improvements to existing infrastructure. When larger processing facilities shut their doors due to Covid-19, the farmers and ranchers turned to SVS processing facilities. As these facilities tried to manage the demand from farmers, they were oftentimes forced to work past their USDA sanctioned hours. Facilities have a scheduled time that they can operate under USDA inspection. Depending on the size of the facility and processing capacity that window can fluctuate. SVS processing facilities worked to meet the demand being shifted over from large processing facilities by working longer hours and more days. When a processing plant works outside of the time slots made available by the USDA they have to request overtime hours for plant inspectors, and those overtime hours are paid for by the plant, cutting into the already slim profit margins. $100 million of this $150 will go toward reimbursement for these overtime costs, mitigating the financial impact seen from the SVS plants trying to meet the needs of the local farmers. The remaining $50 million will be to improve the infrastructure of existing operations. Infrastructure in meat processing facilities is expensive and to increase the capacity of a facility, the infrastructure needs to be improved. Having enough space to operate efficiently is extremely important. Refrigeration space is essential in meat processing and can be very costly to build. These funds will  help SVS processing facilities improve operations and alleviate the financial burden on the business.

Increasing competition in meat processing means increasing options for all forms of marketing products. In recent years direct-to-consumer meat processing has gained traction in many different forms from butcher boxes to whole or half animal purchases.  Direct-to-consumer is an approach where the farmer sells the product directly to the customer, whether that’s an individual, or an institution like a restaurant or hospital. For small scale farmers to have access to this marketing style, there needs to be SVS plants that are available and ready to work with them. The limitations of current capacity for these processing plants can be seen by looking at the scheduling or availability for processing. Most operations are fully booked for the next year or so leaving farmers little wiggle room to try new marketing strategies. The increased capacity for SVS processing facilities would give farmers flexibility in how they run their operation and tap into markets like direct-to-consumer.

SVS processing plants play a large role in direct to consumer sales, and the relationships between farmer and processing facility are extremely important as the breakdown of each animal varies. All animals are slightly different and it is the butcher's job to be able to navigate these differences and still produce a quality product. For SVS plants that work with more small-scale farms, they have to tailor their production to the needs of the farmer. This can mean that every animal is processed differently, saving certain cuts while trimming out others for ground meat and sausage. This type of processing is less efficient and requires more attention to each individual carcass but is more personalized and allows the farmer more control over what and how they sell their product. The current makeup of the United States’ top heavy meat systems puts a greater stress on less common forms of processing like direct-to-consumer as the amount of SVS plants and their availability are extremely limited. Developing more SVS plants and improving their infrastructure would help reduce the stress on relationships between farmer and processor. 

The USDA also committed to examine their role in interactions with SVS processing plants and put out a report on Guidance and Outreach. The Food Safety and Inspection services (FSIS) is the USDA Agency responsible for inspecting processing facilities to make sure that their practices fall in line with USDA standards. SVS processing facilities are different from their larger counterparts. Larger plants have more resources across the board, this includes managerial resources. Throughout the day inspectors will make requests to ensure that operations are meeting the requirements outlined by the FSIS. Smaller facilities whose management is either working production or handling administrative work do not have the same availability as a larger plant who has an employee whose role is to handle requests that come from inspectors. A more straightforward example that will highlight the differences is looking at the physical size of plants. Very small facilities can be around 5000 square feet where large facilities can be as big as 850,000 square feet. Infrastructure and resources play a large role in meat processing, the USDA should focus on ways to maximize capacity in all size plants by aiding in infrastructure and interacting with resources knowing that not all plants have the same availability. One of the recommendations by this study is to examine the potential inspection inconsistencies that occur across these different groupings of processing facilities, and understand how the impacts of these inconsistencies are felt by increasing communication from SVS processing facilities to FSIS leadership.

Having a more inclusive system that allows farmers and processors to operate feasibly at all levels is extremely important in developing a more resilient food system. Increasing capacity across the board for meat processors and alleviating the financial stress that was put on SVS processing plants from the Covid-19 pandemic is a step in the right direction. By looking at how different size plants operate and interact with inspectors, the USDA is examining their role in meat processing which can help strengthen relationships between farmers and processors, as well as processors and inspectors, allowing for facilities to operate more efficiently. While these funds represent a shift in the mentality towards our meat processing supply chain they are just the start of what is truly needed to make a lasting impact, improving the sustainability of our food systems.

Image source: USDA Flickr