BUILDING more meat processing plants won't yield more local meat unless farmers and processors change how they do business with each other, according to a new report.
"Farmers say, 'There aren't enough processors,' but how can processors stay open, let alone grow, without enough steady, consistent business to pay their bills? 'I'll call you when I need you' is convenient in the short term but doesn't give either side any long-term stability or growth," said Lauren Gwin, a researcher at Oregon State University and lead author on the report.
The study analyzed challenges and innovations in local meat processing, focusing on seven successful processors around the U.S.
Gwin and co-author Arion Thiboumery, an extension associate at Iowa State University, found that long-term business commitments between processors and farmers are essential to success.
"If farmers, on their own or in coordinated groups or brands, commit to bringing a steady supply of livestock, processors could then commit to providing consistent, high-quality services," Gwin said.
Researchers found different examples of these arrangements. For Lorentz Meats and TFC Poultry, two midwestern processors, a few anchor customers provide most of their revenue. This allows them to process for small farms that bring far fewer animals each year and only seasonally.
Island Grown Farmers Cooperative is known for running the first U.S. Department of Agriculture-inspected mobile slaughter unit. Perhaps more critical to its success is that all of its members commit to slaughter dates a year in advance, even for livestock not born yet.
The commitment goes both ways: Smuckers Meats and Heritage Meats help their farmer-customers with marketing and distribution.
"Without local processors, you simply have no local meat," Thiboumery said. "We even saw examples of farmers investing financially in their processors — helping them add needed equipment or improve services."
Gwin and Thiboumery also examined efforts around the country where nonprofits, universities and state and local agencies are working together to provide technical assistance to local processors and their farmer-customers.
In the report, Gwin and Thiboumery said the definition of "local processing" depends on the definition of "local meat," noting that there is no strict geographic definition.
They used three basic definitions of local meat:
1. "Very local" in which the farmer sells a live animal directly to one or more household buyers who buy the whole, half or quarter carcass. A mobile slaughterer may come to the farm, or the farmer may deliver the animal to a processing facility.
For red meat, the household buyers place the cutting orders, pay the processor directly and pick up the meat. For poultry, the farmer is often also the processor.
2. "Local-independent" in which the farmer arranges and pays for processing and handles distribution and marketing through a variety of direct and local channels.
3. "Regional-aggregated" in which multiple farmers sell finished animals to a central entity (e.g., brand) that arranges for processing and distribution and handles marketing, mostly to wholesale accounts.
Gwin and Thiboumery said the three types may overlap.
Expense models for meat plants operating at the three local levels indicate that even a very small processing plant requires annual volumes of hundreds of animals to break even, the report says.
The report suggests that one approach to overcoming the challenges of local meat processing is "to change the relationship between farmers and processors from a series of independent transactions, conducted at arm's length on the basis of convenience, to a long-run interdependence based on commitment."
This requires an ongoing relationship in which "each party promises to deliver for the other and consistently follows through," the report says, noting that the commitment requires communication "about needs, roles, abilities and responsibilities," along with ways to measure whether promises are met.
Gwin and Thiboumery pointed out that their analysis of successful approaches that shift away from convenience and toward business commitments is a key factor in "maintaining and expanding processing for local meats."
Processors face such challenges as having enough throughput to generate adequate revenue to pay for the required human capital and equipment/physical plant to provide processing services, they said.
On the other hand, they added, farmers who want to sell meat and poultry into local and/or regional markets have a "clear motivation" to work with processors because, to satisfy and grow a customer base, farmers need long-term access to quality processing.
The reports says processors can use tools like active scheduling systems and variable pricing to ensure steady throughput, and using these tools helps farmers know that they will have processing dates for their livestock.
Also, processors who help farmer-customers with business advice, marketing and distribution — for free or for a fee — can build good working relationships and long-term loyalty.
Gwin and Thiboumery noted that there are no "one-size-fits-all" approaches, and local needs and conditions will influence what business models work best for farmers, processors, buyers and others involved with local meats.
They concluded that, while in some locations that lack processors, it may make sense to build new processing businesses to serve local markets, in most locations, the more efficient and effective strategy is to support existing processors, including helping them enhance and expand their businesses profitably.