With the exception of paper towels and toilet paper, no other grocery category captured more attention and created more concern among consumers than meat products – or rather the shortage of them – during the spring 2020 outbreak of COVID-19. Agriculture economists morphed into media mavens appearing on just about all the network and cable television news programs and contributing articles and analysis to major newspapers and news syndicates. The crisis in meat aisles and at butchers’ counters everywhere was a shock. But not necessarily unforeseen. By Dennis McLaughlin, McLaughlin Writers, LLC

COVID-19 Exposed Animal-To-Meat-To-Market Bottleneck

… And The Need For Local Smaller Processing Plants

Back in July 2020 speaking virtually at the Agricultural Business Council’s meeting, Glynn Tonsor, Ph.D., Professor, Kansas State University’s Department of Agricultural Economics, singled out a couple of “shocks” the meat industry absorbed with COVID-19. The first one was the shift to social distancing and self-quarantining from mid-March through April. With millions of Americans staying closer to home, the meat industry had to reevaluate the benefits and costs related to its retail, food service and export channels. Shock number two, he said, was the “animal-to-meat bottleneck” in April and May 2020, creating a surplus of animals and a shortage of meat in stores.

In follow up remarks a few days after speaking at Kansas State University’s recent annual Cattlemen’s Day Symposium, March 5, Jayson Lusk, Ph.D., Distinguished Professor and head of the Department of Agricultural Economics at Purdue University, said, “Supply chains for many agricultural products have an hour-glass shape; and in between a sizable number of farmers and consumers is a small number of processors.”

The concentrated nature of the meat processing sectors in the U.S., Dr. Lusk wrote in a March 11, 2021 follow-up post, implies that disruption of the processing capacity of any one plant from accidents, weather or, case-in-point, pandemic illness can lead to system-wide disruptions and possible meat shortages. At the KSU symposium, Dr. Lusk pointed out that ten processing plants slaughter 63% of all cattle and 15 plants slaughter 59% of all hogs.

Small Plants Get Traction

In the wake of supply problems caused by processing plant closures last year, one solution has become increasingly expedient: Expand the number and size of smaller meat processing operations to reduce reliance on big plants. Movement in this direction started in May 2019 when a bipartisan group of Congressional representatives proposed legislation to amend the Agricultural Marketing Act of 1946, which would direct the USDA to make grants available for improvements to meat and poultry facilities and to allow for interstate shipment, as well as for other purposes.

But it has been states like Kansas and Missouri that have made significant moves to smooth the way for small plants to develop capacity and proficiency to take up the slack in meat processing and packing.

The Coronavirus Aid, Relief and Economic Security (CARES) Act passed in March 2020 paved the way for states to access federal funds to create grant programs to aid local small meat producing and processing businesses to upgrade their facilities. Last May, Kansas Governor Laura Kelly introduced the Strengthening People and Revitalizing Kansas (SPARK) Taskforce to rebuild Kansas economy. At the time, Gov. Kelly said, “The state’s recovery effort must serve urban and rural areas alike across the state and all sectors of the economy.” Small food animal producers and processors received grants to maintain their operations and upgrade facilities.

By the end of last year SPARK approved more than $130 million in relief funding for economic development and connectivity in the state. Federal allocations were provided in the form of grants to eligible businesses through the Kansas Department of Commerce. The Kansas Livestock Association (KLA) and the Kansas Department of Agriculture supported the need for assisting small processors in capacity-related improvements.

In particular, KLA urged its members to look into the Securing Local Food Systems grant program, created to support small meat processing facilities, food processors, food banks, local direct-to-consumer producers and retail outlets “to address supply chain disruptions as a result of the pandemic.” The program is based on the need to increase capacity of local food systems. Specifically, KLA said the program was targeted at small meat processors needing funds to expand cold storage, upgrade equipment and renovate or expand existing processing areas.

Across the state line, the Missouri Meat and Poultry Processing Grant Program was created to support Missouri meat and poultry processing facilities to address COVID-19-related supply chain disruptions. Missouri’s General Assembly appropriated $20 million in federal funds from the CARES ACT to help support these facilities. Missouri Department of Agriculture said grants were intended to incentivize small facilities to increase livestock or poultry slaughter and processing, and to become an inspected or exempted facility in the near term. MDA maintains that increasing slaughter and processing facility capacity will add resilience to the mat supply chain.

In the last week of December 2020, Congress passed an additional $900 billion coronavirus relief bill that included $60 million in grants for small meat processors, reported KOSU, an Oklahoma public radio outlet. “Up to $200,000 in grants can be used to update or expand a small processing facility to meet USDA inspection standards,” wrote KOSU editor Seth Bodine. Updating to federal inspection standards would mean the meat could be sold across state lines, he explained.

Gaining Momentum

On September 29, 2020 U.S. Congressmen Chellie Pingree (D-MA) and Jeff Fortenberry (R-NE) introduced legislation – Strengthening Local Processing Act – that would increase the federal share of costs for state inspection from 50% to 65%. For Cooperative Interstate Shipment (CIS) facilities, the fed’s share would bump from 60% to 80%, encouraging more states to operate state inspection programs and participate in CIS. Specifically, the Strengthening Local Processing Act intends to accomplish these imperatives:

Increase the federal share of costs for state inspection from 50% to 65%. There are 27 states that operate a state inspection program.
Increase the federal share of costs for state inspection for Cooperative Interstate Shipment (CIS) facilities from 60% to 80%. There are eight states that participate in CIS.
Authorize competitive grants to small and very small establishments, state inspected facilities, custom exempt facilities, or new small-scale slaughter facilities for activities related to COVID-19 response and recovery.
Authorize a $10 million grant program for colleges and universities to establish or expand meat processing training programs.
Authorize a $10 million grant program for small and very small establishments or nongovernmental organizations to offset the cost of training new meat processors.

Meanwhile Back At The Ranch

Referring to the Strengthening Local Processing Act, Christopher Young, executive director of American Association of Meat Processors, said it “will be a game changer for small processors.” Federal and state relief packages, programs and grants to spur processing plant development and expansion are indeed having a positive impact.

But with the recent growth in business for small plant operators, there has been growing pains. Liz Boyle, Ph.D., professor of Meat Science in the Department of Animal Sciences and Industry at Kansas State, noted a number of challenges facing small processors during her presentation at Kansas State’s Cattlemen’s Day Symposium. One obstacle is labor. “Everybody’s working overtime, trying to keep all of the customers happy,” said Matt Carselowey, president of Kansas Meat Processors Association (KMPA), which represents about 50 small processors in the state.

Another processor in Kiowa, Kansas, secured funding grants to cover repairs and new equipment to take on increased demand. It also added five new employees. “It’s a whole lot more stressful,” a manager told Dr. Boyle. “I’ve never had to keep a calendar a year out until this year; it’s just made everything harder to keep track of and [added] more paperwork.” The manager also remarked that his facility could be adding a second shift. “And I’ll be sleeping less.”

Dr. Boyle recalled that over the last decade or so many industry and public service campaigns have been launched to encourage consumers to get to know their farmers and learn more about where their food comes from. While the coronavirus pandemic accented some vulnerabilities in the meat processing industry, it inadvertently may be responsible for prescribing Americans with a much-needed Rx for positive nostalgia. The reemergence of smaller local meatpacking facilities and a greater demand for retail beef and pork has reminded the public that local processing is still round, she said. “And it is a good way to support local business.”

Source: Proceedings, Kansas State University Cattlemen’s Day Symposium, March 5, 2021; Jason Lusk, Ph.D., Distinguished Professor, Department of Agricultural Economics, Purdue University; Agricultural Business Council of Kansas City, July 2020 Newsletter; Glynn Tonsor, Ph.D., Professor, Kansas State University’s Department of Agricultural Economics; Liz Boyle, Ph.D., Professor, Meat, Science, Department of Animal Science and Industry, Kansas State University.