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Justice Dept. can’t fix meat industry’s consolidation problem

John Vogel Rep. Collin Peterson speaking
Rep. Collin Peterson (D., Minn.) speaks about issues with the House-proposed farm bill.
Reps. Peterson and Conaway support more smaller meat processors, but challenges still exist.

House Agriculture Committee chairman Collin Peterson (D., Minn.) said waiting for the U.S. Department of Justice to come in and address the growing issues of consolidation in the meat industry is a “pipe dream.”

“We need some 1,000 head-per-day processing plants to start up,” Peterson said during an Ag & Food Policy Summit hosted by Agri-Pulse on Sept. 21, noting that livestock producers need more options than the four to five plants located 100 miles away from them that are processing 20,000 head per day.

Peterson added that it’s unfortunate that more hedge funds or outside investors don’t choose to invest in expanding smaller U.S. meat processing operations, like the growing interest seen from foreign entities in purchasing U.S. meat processing.

“What’s going on is not a good situation,” Peterson said. However, while he knows the problem, finding the solution is more difficult.

He stated, “We need to figure out a way to develop some competition for these guys,” Peterson said of the larger facilities. Instead more 1,000- to 2,000-head-per-day plants need to be spread out more geographically.

House Agriculture Committee ranking member Michael Conaway (R., Texas), also supports a movement toward allowing smaller processors to get into the system but warned that it shouldn’t come at the expense of ruining the gold standard of the U.S. Department of Agriculture’s Food Safety & Inspection Service inspectors at meat plants.

In looking to expand smaller entities, it will be an important point of discussion on how to continue to federally inspect operations that maintains the level of food safety expected.

“The USDA is the gold standard for food safety around the world. We rely on that reputation,” Conaway said. Trading partners are often looking for excuses to not trade with the U.S., so Conaway warned not to ruin the U.S.'s reputation.

Conaway recognized that it may be harder to find additional funding for federal inspectors in the years ahead with the high federal deficit. Spending taxpayer dollars to help a commercial entity – in this case, a smaller meat processor – could be harder to sell. He said Congress would be more focused on offering relief to producers rather than aid to processors.

There are a few existing federal programs that could be expanded to further support small, local and regional meat and poultry processing plants and increase farmers’ access to slaughter and processing options.

The Niche Meat Processors Assistance Network (NMPAN) issued a report that analyzes 20 years of USDA’s Agricultural Marketing Service (AMS) competitive grants that have invested in small meat processing activities. The programs included 12 Federal-State Marketing Improvement Program (FSMIP), 21 Local Food Promotion Program (LFPP) and two Farmers Market Promotion Program (FMPP) projects. 

For example, one LFPP project ensured that an older, small federally inspected plant could not only stay in business but also expand, which increased area farmers’ access to slaughter and processing options.

Frequently, the proposed answer to bottlenecks in small meat processing is to build new facilities, especially during the pandemic crisis. However, in several parts of the country, a new facility may not be successful, which is why LFPP planning grants are so important when they help determine if there is enough demand to make new infrastructure financially viable, the National Sustainable Agriculture Coalition said in recent coverage.

NMPAN’s report recommends that potential applicants be advised about the importance of working with experienced businesses to expand this sector. NMPAN also suggests that feasibility studies funded by these grants clearly analyze the demand for processing services and that the demand will ensure financial stability of the project.

The 2018 farm bill created the Local Agriculture Market Program (LAMP), which combined the Farmers Market & Local Food Promotion Program and the Value-Added Producers Grant Program.

The COVID-19 response package passed by the House, the HEROES Act, includes an additional $50 million for LAMP to fund COVID-19 related projects. In the Senate, Sen. Corey Booker (D., N.J.) introduced the Local FARM Act of 2020, which would provide an additional $500 million for LAMP to fund COVID-19-related projects. The increased grant funds could help ensure that processing and slaughter options remain available and are expanded to include additional farmers and ranchers.

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