The USDA requested public comment on $500M of funding that was designated to increase meat processing capacity and promote competition in the processing industry. The comment that was submitted to the USDA by FoFF was informed by our farmers perspectives/feedback and our partners at the National Sustainable Agriculture Coalition.
August 30, 2021
Friends of Family Farmers (FoFF) is a nonprofit organization working in Oregon that has
been advocating for socially and ecologically responsible family farms since 2005. We
represent thousands of farmers across the state and offer specialized technical
assistance programming in addition to advocacy work. We support farmers producing all
kinds of agricultural products but have a large number of small livestock producers in
our constituency. Our program, the Oregon Pasture Network, is a community of practice
that specifically serves pasture-based animal farmers and ranchers with education,
promotion, and community building to help make small and mid sized, socially and
ecologically responsible livestock producers viable. We serve farmers across Oregon
raising many types of animals including red meat, poultry and non-amenable species
like bison, most of whom have a diversified, multi-species farm plan. The producers we
work with are small to mid sized farms and ranches that are primarily raising food for
sale within the state through both direct to consumer (farmers markets, CSAs, live
animal shares etc.) or retail markets (local and regional grocery stores).
Does your region show demonstrated processing needs, at what levels, and for
which species?
Oregon needs more processing capacity at every level and for all species. This is not a
new problem for our state, but it has been exacerbated by the pandemic. Both the
farmers who seek USDA inspected and custom exempt processing facilities have
experienced wait times of 6-18 months since spring of 2020. Oregon’s size coupled with
the lack of facilities means farmers regularly have to drive 2-3 hours each way for
processing. For small operations, this time away from the farm leads to negative
financial impacts.
FoFF has seen a need for increased processing capacity for all animal species,
especially hogs, cattle, and non-amenable species like bison. Across the spectrum of
species, there is also demand for more certified Organic, Halal, Kosher and Animal
Welfare Approved facilities. Oregon has a thriving localized food system which is heavily
populated by farmers whose customers seek them out for their practices and need
these niche market services for their business model. There is also a lack of diversified
facilities that can accommodate more than one species. Most of the farmers selling into
these niche markets, raise multiple types of animals, and it is cumbersome and cost
prohibitive to find specialized facilities for each species in many cases.
Farmers are willing to fill the obvious demand that exists, but processing capacity for
these specialty markets is not adequate. FoFF has farmers in our network who have
had to refund pre-payments for live animal purchase, CSA shares and other bulk
orders, make the decision to cull their herds, limit their planned business expansion, or
forgo planned partnerships with committed buyers because experience has shown that
no matter how early they try to find the processing slots, they may not be able to secure
enough processing slots and those they can secure may be cancelled as they
approach. The common practice is to book a year in advance–FoFF’s farmers are not
attempting to find last minute accommodation. This reduces the ability for producers to
feed their immediate communities in culturally appropriate ways and hurts the newest
and smallest producers in the food system.
In addition to the need for more niche market certified processing facilities, FoFF’s
farmers have identified a need for greater care by USDA inspectors regarding organ
meats and offal. A rise in popularity for these products has made liver, intestines, lung,
and other parts of the animal that were regularly discarded in mass production more
valuable to producers. Better guidance on food safety around these products will help
more of them get to market with the farmers who want them and will prevent
unnecessary waste. There is also demand for more specialized, value added butchery
services to make products like jerky and sausages. While these services can be done
outside of the slaughter facility, there is not enough capacity in communities to meet
demand for these products.
In general, the meat processing infrastructure of our state (and country) only caters to
the centralized, industrial farming model. This is not the only viable production method
for meat in the U.S. and there is a significant need for additional multi-species facilities
that comply with protocols for niche market certifications, and provide value added
services and culturally specific cut lists.
How can USDA support access to processing services for smaller-scale
producers? Are there opportunities for producers to engage in cooperative or
collaborative arrangements with each other or other facilities, to both ensure
access and provide a sufficient supply for a plant to operate? If so, what
government assistance would be needed to facilitate that type of arrangement?
Initially, USDA should increase inspector availability across the country. Inadequate
inspector availability limits the hours of production for plants already in operation and
would exacerbate system bottlenecks when new plants open. USDA should also
provide Inspectors with training on processing standards for the certifications listed
above, which is o necessary to ensure that plants designed to meet these needs are
able to provide the correct service.
In terms of awarding funding (both grants and loans) for new facilities, USDA should
earmark funding for different sized plants to ensure that funding does not only go to
large plants held by conglomerate companies. The four companies that currently control
the majority of meat processing in the country do not need further subsidies. Their
approach has created cracks in the system that have failed many producers and
communities and this funding should be used to fill in the gaps left by the current system
with locally owned, small plants. USDA should require that plants maintain local
ownership for a certain time after funds are received in order to support small scale
processors. In addition to local ownership requirements, there should be strict
separations of funding earmarked for plants of different sizes. Small plants should be
given a bigger pool of funding than larger plants because as the current system shows,
these plants largely have not had success securing enough funding to sustain the initial
stages and bring facilities into viability.
We stand with the suggestions of our partner the National Sustainable Agriculture
Coalition and believe the following rules should apply to this funding in order to address
the problems with processing in Oregon and around the country:
● USDA must invest at least $250 million in a small plant infrastructure and
expansion grant program for small and mid-sized processors.
○ A small plant grant program should be created in a manner that is more
comprehensive and flexible than the Meat and Poultry Inspection
Readiness Grant Program.
○ Applicants should be able to submit a proposal for funding for a grant
ranging from $100,000-500,000.
○ The grant program must serve the small and mid-sized plant sector, by
defining eligible applicants as any small or mid-sized federally inspected,
state inspected, CIS inspected, exempt, or new facility with less than 200
employees, and ineligible applicants as any large plant, defined as a plant
with more than 200 employees.
○ Priority should be given to applicants that are Black, Indigenous, or People
of Color (BIPOC)-led processing establishments and establishments that
would increase access to slaughter and processing within a 200-mile
radius for independent farms and ranches in that area.
○ The grant review process should require new processing plants to have a
feasibility study and commitments from independent producers and/or
branded meat marketing programs to ensure a certain demand for
slaughter and fabrication services per year exists in their region.
○ Cost share requirements should be waived or be minimal to ensure these
are not a barrier for small business participation.
● USDA should allocate approximately $200 million to create a small plant
expansion direct loan option. Direct loan amounts should range from $1-3 million
per eligible applicant.
In addition there should be more funding available for planning costs without the
requirement of matching funds. Many of these projects will require new construction and
the technical planning will require a big investment in professional services of architects
and engineers. In order to improve accessibility of the funding and help low-resource
cooperatives have competitive applications in the process, there should be a portion of
the $250 Million of funding mentioned above for small plant infrastructure and
expansion for planning services. USDA should aid partnerships between lenders and
borrowers to ensure viability, including during the initial feasibility studies. Existing
programs like VAPG, REAP and the Business and Industry Rural Loan program can be
examples that can be improved upon.
There should also be care put towards adjacent industries like cold storage. The distinct
lack of cold storage facilities in communities where processing exists or is needed will
create further bottlenecks for small producers and limit the success of new facilities
constructed with these funds.
How do processing needs and challenges vary by species and by value-added
product types (e.g., organic, local, grass-fed, kosher, halal)?
There is a distinct lack of options in Oregon for producers who raise animals specifically
for the specialty and value added market. USDA should prioritize applications that fill
the need for certified organic, Animal Welfare Approved, Kosher, and Halal meat
processing in areas with documented needs for those services. These are growing
markets in our state and we know that there is more demand for these products from
local and small producers than is currently met. There is also a need for grant or loan
funding to cover the certification costs of these additional programs. This funding should
prioritize plans for small plants with dedicated producer support so they know the
additional certifications are appropriate and necessary for their audience.
There is not necessarily a greater deficiency of processing options for small/midsize
producers based on species, but rather a lack of options for diversified farms to get
more than one species processed in one location. We need more processors with the
ability to handle multiple species instead of heavily specialized plants which mean more
travel time for small farmers providing a variety of products to their communities. The
need is for more plants focused on the small, diversified and specialty markets as
opposed to more plants with only the ability to move through large quantities of a single
species.
To ensure that there is adequate labor and expertise in these areas USDA must ensure
approximately $50 million for small processor education, technical assistance, and
workforce development grants and cooperative agreements. Training in these specialty
areas and cooperative models more common in small plants are essential for the
sustainability of new and expanded facilities.
Should the processor be required to purchase a minimum volume through
auctions or other public transactions?
Yes, in the case of large scale plants. Filling all processing slots with contract
agreements lowers the price of meat (regardless of production costs), favors large
producers only, and reduces processing capacity available to producers selling directly
to their customers. There should be a minimum requirement for processors to purchase
from, or leave some processing slots available for small producers. There should also
be a requirement that plants using federal funding, like the loans and grants available
here, have some processing capacity for independent producers who do not want to sell
their product to the processor, but need processing to bring their product to the
direct-to-consumer market. Meat processing infrastructure is one aspect of food system
security and communities deserve the option to buy directly from their farmers and
ranchers. The USDA has an obligation to step in to ensure that this is possible to
ensure regional food security.
However, this type of processing should not be prioritized over small plants when it
comes to earmarking this funding. As stated earlier, the true need is for this funding to
address the lack of small scale processing (fewer than 200 employees and not owned
by a larger corporation). This processing is most often a fee-for-service model where
the processor does not take ownership of the product and returns it to the producer for
retail sale. This model usually does not use contracts, and therefore is not relevant to
this question. Changing buying requirements for large plants will not solve the
processing bottleneck for small producers. Only opening more small facilities with more
slots for the small, diversified, specialty producers currently left out of the system will
strengthen our localized food systems.
If contracts are utilized, should practices like tournament systems, that have been
found to be prone to anti-competitive abuse, be prohibited? Should contracts
have at least a portion of the payments to producers be based on wholesale meat
prices?
Any practices with documented ties to anti-competitive abuse should be prohibited in
plants utilizing federal funding. Processors that do not want to do away with these
systems which only benefit the largest and most industrialized producers, and artificially
lower the price of meat, do not need to pursue funding from the government for their
operations. Because these processors have prioritized profit over providing a community-based service that benefits small producers, localized and rural economies, and providing food that aligns with the values and cultural needs of their community, they should not receive public assistance. The funds available through the USDA’s Build
Back Better plan should not be used to prop up the current, brittle system. The U.S. is in
this situation because of the practices commonly used with contracts, and this funding
should be used to improve the current system, not stabilize the status quo. USDA also
needs to ensure that increasing meat processing capacity is not done in a vacuum.
Other USDA commodity policy needs to be addressed so there is a level playing field
across the board. For example, the rules for the Packers and Stockyards Act need to be
finalized.
This funding should focus on small plants with fewer than 200 employees, which often
focus on fee for service style processing and do not often take ownership of the animals
they process. It is important to recognize that the need to solve the bottleneck of
processing in this country does not start or end with reforming the largest plants. The
demonstrated need remains for small scale and specialty plants in communities whose
producers support these efforts. No reform of practices at the largest plants should be
used to justify allocating less funding for small (less than 200 employees) and specialty
plants with strong community and farmer/rancher support.
If contract grower relationships are used that require a purpose-built production
facility, should the contract be required to cover at least the length of your loan
term?
As stated above, the facilities that are most lacking in the landscape are the small plants
that use a fee for service model, and do not rely on contracts, nor take ownership of the
animals they process. Long term community buy-in and producer need should be
considered in all applications, but especially those in the target group of small plants. It
is more important to have a strong community of producers who are committed to these
facilities (whether through cooperative ownership or not) than to focus on long term
contracts. Short term contracts are preferred.
As stated above, the more realistic and meaningful measure of a community’s desire for
processing would be a requirement in the grant review process should for new
processing plants to have a feasibility study and commitments from independent
producers and/or branded meat marketing programs to ensure a certain demand for
slaughter and fabrication services per year exists in their region.
