WILL $1 BILLION RESCUE THE MEAT SUPPLY CHAIN?

In July of 2021, the president signed an executive order aimed at increasing competition in the meatpacking industry. An official statement from the White House reports that the current administration “will dedicate $1 billion in American Rescue Plan funds for expansion of independent [meat] processing capacity.” (WhiteHouse.gov)

Today’s article will provide a brief explanation of the independent meatpacking sector, a brief explanation of the President’s $1 BILLION Rescue Plan, finally evaluating the historical effects of subsidies in agriculture to get a deeper look at what it means when a government begins to fund an industry.

Tyson, Cargill, JBS, and National Beef have a combined weekly slaughter capacity of 1.6 million head of beef and pork in addition to 92 million chickens. This constitutes roughly 85% of the US meat supply. The remaining 15% of the supply chain is serviced by small-scale meatpacking operations. These small scale meatpacking facilities fall under 3 inspection categories: USDA, custom exempt, and state.

USDA Meat Processors (federally inspected):

USDA meatpacking facilities are at the top of the regulatory scale. These facilities must meet USDA-FSIS operating standards. These standards vary from state to state, but Texas meat inspection laws involve roughly 26 page of regulatory measures. In addition to meeting these standards, USDA meatpacking facilities must have a USDA inspector on site at all times. This agent will inspected the animal before slaughter, inspect the carcass after slaughter, and inspect the final cuts once they are packaged.

As a small farmer, having your animal processed at a USDA meatpacking facility allows you to resell your meat product nationwide.

Custom Exempt Meat Processors:

A custom exempt meatpacking facility is at the bottom of the regulatory scale. Custom exempt facilities are required to meet USDA operating standards and periodically subject to government inspection, but no USDA agent is required to be on site. The trade off is that meat processed at a custom exempt meatpacker cannot be resold.

As a small farmer using a custom exempt meat processing facility, you must sell the beef or lamb as a live animal. This is often done via shares where the buyer purchases 1/2 or 1/4 of the the animal from the farmer. The farmer coordinates transportation of the live animal to the meat processing facility and the owner of the animal-share will pay for processing and pickup the meat.

Many market farmers will use custom-exempt meatpackers, but doing so poses some challenges in the realms of consumer-education, given that a majority of shoppers are not entirely familiar with the animal-share sales model.

In 2019 The PRIME Act was introduced to Congress. This would lift all intrastate sales restrictions on meat processed at custom-exempt facilities. This would open up huge doors for many small farmers. Unfortunately the PRIME Act has made no movement through the congressional system, despite reintroduction in 2021. Here is a link where you can get in touch with your state representative regarding the PRIME Act. (https://www.congress.gov/bill/116th-congress/senate-bill/1620/committees)

State Meat Processors

A state meatpacking facility mirrors a USDA facility with respect to regulations. The ultimate difference, however, is that meat processed at state inspected facilities cannot be sold across state lines. The exception to this is if the state processor becomes part of the Cooperative Interstate Shipment Program. State inspected facilities can be found only in the select states that have opted to undertake authority for their meat packing operations (animalscience.tamu.edu). National Ag Law Center will provide you with a complete list of states and their processing status.

Since spring of 2020, nearly every independent meatpacking facility has been booked up 12-36 months.

Defining the $1 BILLION Rescue Plan

Now for an explanation of the $1BILLION Rescue Plan. This $1 billion has 4 primary allocations:

1. $350 Million in aid to existing meat processing facilities.
2. $375 Million in financial support for projects with the greatest near-term impact with (proposals for grants are being accepted in Spring 2022).
3. $275 Million to make more capital available to independent processors that need credit.
4. $100 Million in workforce training for independent meat packers.

The USDA has been commissioned to delegate a greater portion of these funds.

Historic Efficacy of Government Subsidies in the Food Industry:

According to a business plan put out by nichemeatprocessing.org in 2011, the cost of building a small meat processing facility with a weekly slaughter capacity of 4,000 head (varying species) is $3 million (figure adjusted for inflation). This cost assumes construction in a rural area and includes infrastructure and equipment.

If the $375 Million in project grants in the Rescue Plan went entirely to new construction, it would fund roughly 125 small meatpacking facilities with a combined weekly slaughter capacity of 500,000 head.

While it may appear to some that this input of funding would be advantageous we must take a look at historic outcomes attached to agricultural subsidies.

Historically, government funding accompanies government control. The first agricultural subsidies were introduced by Franklin D. Roosevelt in 1930’s. In the wake of the Dust Bowl and Great Depression, these subsidies were aimed at elevating crop prices and reducing soil loss. In the name of stabilizing the market and reducing soil loss, FDR’s subsidies gave the Federal Government widespread control of the production of agricultural commodities for the first time in US history. Nearly 100 years later, these subsidies are still being paid out under the “Farm Bill” label at a rate of $20 billion annually. Ironically, the lion share of this money goes to corn, soybean, cotton, and rice: crops that are among the most destructive to soil health. The USDA soil portal, cites that “the cost of soil erosion is estimated at $44.39 billion in the United States” with a recurring cost of $100Million annually. (farmprogress.com)

Another important thing to understand is that the government ultimately funds nothing: we do, or our children and grandchildren will. (show national debt chart) In light of this, the first solutions should be ones that do not come at the expense of the ones you intend to help.

Solutions that would cost the taxpayer nothing:

• Reinstatement of MCOOL. Mandating country of origin labeling for imported meat products in the US marketplace.
• Removing restrictions on the sale of meat from Custom-exempt processed facilities through the passage and enforcement of the PRIME Act.
• Removing interstate sales regulations on meat from State processors.
• Increasing taxation on imported meats.
• Tax breaks for independent meatpacking startups as well as ranch to consumer meat marketing startups.

These 3 Books outline how to raise cattle on forage only!

So what is our solution: work the land that’s in front of us. Build the soil we stand on. Support your closest meatpacker, despite the fact that that they are booked to the hilt. And don’t imagine that government subsidies are the solution. In the words of Thomas Jefferson: “A government big enough to give you everything you want, is strong enough to take everything you have.”

-the Shepherdess

“Be not overcome of evil, but overcome evil with good.” Romans 12:21

Further articles and citation:

National Ag Law Center

PRIME Act