November 16, 2021
Small meat packing plants, many of which were phased out in the early 80s and 90s, have become a popular outlet for Americans to process and purchase locally grown beef. Since the pandemic, those plants, once booked three to six months out, are now booked 13 to 16 months ahead, leaving economists wondering if the trend will continue or if it will die down as the pandemic subsides.
Oklahoma State University Agriculture Economist Rodney Holcomb discussed the current state of small meat processing plants and in particular, small slaughter plants, at the recent Rural Economic Outlook Conference, Stillwater.
But before he dug in, he said it's important to understand the difference between cattle producers and beef producers, terms often used interchangeably in the livestock industry.
Oklahoma-Texas Meat Processors Association executive director, Jake Nelson, demonstrates how to cut the meat. (Photo by Mandy Gross, FAPC)
"Cattle is one commodity and it's sold as cattle by the head. Beef is a few hundred different products derived from that one head and they all have specialized markets. So, there's a lot of inputs that go into this concept of what we call beef."
The challenge? Finding the sweet spot, "that perfect mix" to make the industry run smoothly and efficiently and ensuring that's what's being supplied meets demand for every product that comes off that animal carcass, said Holcomb, the Charles B. Browning Endowed Professor, Department of Agricultural Economics, Robert M. Kerr Food and Agricultural Products Center.
"We never get there. We're never hitting the sweet spot," he said in an interview with Farm Press, "we're just getting close every now and then."
Over the last 20 years, the demand for locally grown food has risen. Prior, small processing plants were declining while big plants were being built throughout regions such as the Texas Panhandle and Southwest Kansas.
"They came into play years ago in areas of the country where land was cheap, they had access to water and they could build these huge, expensive, very efficient plants that cost a lot of money," Holcomb explained. "If you had a lot of cash in your pocket when interest rates were high, you could buy that land. You could set up this big system, and it changed the way the meat industry operates."
By the end of the 20th century, a large portion of the small plants had disappeared which is about the time the local food movement began to grow. "Everybody's wanting that locally grown, locally processed, all-natural grass-fed organic meat. The big plants weren't going to carve out a niche for that, so they went to the small processors of whom were in short supply. So, if they were stilling running, we had a lot running well past capacity and booked months in advance.
"Then you throw COVID on top of that and everybody got worried because they couldn't find meat at the store. So, first thing they did was go to those small plants and they wanted to bring animals in and have those animals slaughtered. All of a sudden, those plants went from being booked three to six months in advance to well over a year. So, you had to schedule the slaughter before the calf was even born and that's a problem."
While state and federal programs have been developed to help small plants either renovate or expand or build new plants, Holcomb has concerns.
"As an economist, you're always worried about are we making long-term decisions based on short-term circumstances? In other words, we don't want to knee-jerk because we had a pandemic, but at the same time, we do want to make sure that we find that mix of inputs that's as close to the sweet spot, so that we maintain a healthy, small processor industry for coming years."
One of the challenges, as for most industries, is labor. Small plants require more specialized employees. "Unskilled laborers – with no meat cutting skills, hired to do nothing more than clean up the facility – are being paid close to $20/hour. If they’re hired at a large plant to cut meat, they’ll be placed beside an experienced meat cutter and told to ‘do what they do’ – which is usually cut up meat from one part of the carcass. Those people could easily make $25/hour learning to do one thing. While a large plant can afford to do that, a small plant can’t pay someone $25/hour to learn one cut. They need people who can come in and break down the entire carcass on day one," Holcomb explained.
"We've kind of lost that old school meat cutter training program we used to have. So, not only are we worried about, do we have the facilities? But if we build the facilities, we don't have the people. And it'll be a while before we have enough of them trained to match the need."
Another challenge is determining whether those who bought a steer from a local rancher and had it hauled to the local processing plant will continue to do so following the pandemic. "Maybe their parents or grandparents used to do it, but they haven't, and now they've gotten a taste of that. They might like having meat available in the freezer and knowing the farmer who raised that animal and the conditions in which that animal was raised and processed. Are they going to keep going back to that or are they going to go back to eating out more and depending on the restaurant to buy the meat for them, or are they going to go back to the supermarket and buy some of the meat products we already see case-ready in the cold storage case?"
To aid expansion or updates in the meat processing industry, some states are utilizing CARES Act funding. "Oklahoma did that with $10 million. It went to 39 plants in the state of Oklahoma, some new and some existing ones that were looking to expand with the intent to make sure that they can increase capacity to have inspected meat products that could go into grocery stores, restaurants, that sort of thing," Holcomb said.
There are also federal dollars coming from USDA-Agricultural Marketing Service, Rural Development, and USDA Food Safety Inspection Service. "They have different programs designed to help. Recently, it was pointed out that there's hundreds of millions of dollars for the Build Back Better program. USDA is going to set aside those funds to address expanding meat packing capacity, working with those small and mid-size meat plants."
While Oklahoma is not home to large meat processing plants like its neighbors, Texas and Kansas, it does have a strong small processing plant system. "What we do have is Seaboard in the Oklahoma Panhandle and that's strictly pork," Holcomb said. "We've got about 60 custom exempt plants, about 20 state-inspected plants, and 10 plants that are federally inspected or Talmadge-Aiken, which is a federal plant, but the inspector comes from the state department of ag, not USDA. So, we've got about 90 slaughter pants distributed all around the state."
Holcomb said several plants have said while they can handle the growing demand and don't need a larger slaughter facility, they do need cold storage. "We just need a place to keep meat cold. So, that's probably the biggest thing."
Bottom line, the meat processing industry is complex, Holcomb said. "Whether it's a large plant or a small plant, there are a lot of things in play. It's a challenging time for anybody in the manufacturing sector.
"But on the meat side, you still have big growth in demand over the last seven years for red meat, 25 pounds per capita per year, so that's a big jump. If you look at 350 million people and they average 25 more pounds of meat a year, that's a lot of ground to make up. It's like we have a horse in the race and we want to win the race, but we've hobbled the horse. So, the horse is trying to run and that's a little challenging."
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