USDA Opens Wallet for Meat Processors

OMAHA (DTN) -- Following the fallout over livestock markets and the influence of the country's largest meatpacking companies, USDA on Wednesday announced $223 million in grants and loans to expand meat and poultry processing around the country.

Agriculture Secretary Tom Vilsack is expected to visit Omaha on Wednesday to further spotlight one of $73 million in grants that will go to 21 meat-processing projects in the first round of the "Meat and Poultry Processing Expansion Program."

"We're excited about these projects," Vilsack said on a call Tuesday with reporters. "We think it's going to expand capacity of beef, pork and mixed processing by over 500,000 head a year, and we think it will expand capacity in poultry of nearly 34 million birds a year."

The focus on meatpacking competition stems from supply chain problems that hit livestock producers and consumers during the peak of the COVID-19 lockdowns. President Joe Biden also started 2022 meeting with producers and laying out his administration's plan to invest as much as $1 billion to expand competition in the meatpacking industry.

"The president had a number of goals when he set this plan forward last January," Vilsack said. "I think he clearly wanted to increase competition and expand capacity. He wanted to strengthen the supply chain, and I think he wanted to make sure that we fostered a producer-focused business model, strengthen local and regional food systems, reduce barriers to processing, do things at scale, help create jobs and over time, lower costs to consumers by expanding choice."

USDA on Wednesday is rolling out awards for three different programs. Beyond the 21 grants in the Meat and Poultry Processing Expansion Program, USDA also will provide eight loans through the Meat and Poultry Intermediary Lending Program for $75 million, as well as more than $75 million in loans for four meat and poultry-related projects through the Food Supply Chain Guaranteed Lending Program.

Beyond the $223 million, USDA expects to announce additional projects either in December or early next year, as well as open applications for another $150 million in funding for a second round of project announcements that would come later in 2023.

While the funding, which comes from the American Rescue Plan, is meant to improve resiliency in supply chains, groups such as the North American Meat Institute (NAMI) had criticized USDA's plans earlier this year to use taxpayer dollars to compete with private packing plants. NAMI maintained the biggest problem in the packing industry was not consolidation or competition, but labor shortages.

GRANT PROJECTS

The 21 grant projects include projects in 16 states. Vilsack said USDA had received more than 300 applications for the first round of funding for the projects. A key component for the grants was community support, as well as assurances that jobs would be created and the workforce was available locally for those positions, Vilsack said.

The grants range in size from $291,900 to a startup cooperative in Montana to $19.98 million for expansion at Greater Omaha Packing Co.

Vilsack spotlighted the Montana Premium Processing Cooperative, which is a partnership between Montana Farmers Union and Farmers Union Industries. The cooperative will create a local USDA-inspected processing facility for independent cattle producers in an area that right now does not have a federally inspected processing plant.

Another project, Vermont Livestock Slaughter & Processing, will connect farmers in the Northeast with schools and businesses. USDA stated meat processing in Vermont "is currently a bottleneck in the region with many producers having to wait significant periods for the service." The $1.09 million grant will help upgrade and triple capacity at the employee-owned facility.

Most of the grant projects involve facilities that are smaller and would create 10, 20 or 30 local jobs. "These are small to mid-sized production facilities," Vilsack said. "And that was the purpose of this project, which is this effort that the president launched was to basically create local and regional capacity, not getting into the larger production facilities."

Vilsack also added the smaller operations were set up more for providing domestic and local markets. "It's not so much geared towards or structured in a way that would make you think about exports. Many of these facilities are located in the middle of the country, and again, relatively small for the most part. So, I don't think exports are really on the minds of most of these facilities.

That is not the case with Greater Omaha Packing, however. The $19.9 million grant would allow Greater Omaha to expand from processing 2,400 head a day to 3,100 head, which adds up to an additional production of 195,000 cattle per year. Greater Omaha would add 275 jobs as well. The Omaha packer also exports to 70 countries, including being the first packing plant to export beef to China when that market reopened.

Among the requirements for receiving the grants were assurances that the grant recipients do not end up being swallowed up by the largest packers in the country as a result. The grant recipient is required to provide details of ownership changes within 10 years of receiving the funds to the USDA Rural Business-Cooperative Service.

"One of the things that is a requirement of this program is that the agency is notified if a sale or change in total or partial ownership of the facility is under consideration," said Karama Neal, administrator for the Rural Business-Cooperative Service. "So that is something that we would monitor ... and that notification will trigger a review by the agency."

LOAN RECIPIENTS

Among the guaranteed loan recipients was FPL Food LLC in Georgia, which was approved for a $24.2 million loan guarantee to buy equipment to produce prepared foods.

In Iowa, Pure Prairie Farms Inc., a startup chicken processing facility in Charles City, Iowa, received approval for a $38.7 million loan guarantee.

Under the Meat and Poultry Intermediary Lending Program, rural economic development authorities in Georgia, Iowa, Minnesota, Montana, North Carolina, North Dakota and South Dakota received grants that will allow these local economic development groups to provide loans, grants and infrastructure to aid smaller processing facilities in their states as well.

More details on these projects will be released Wednesday at www.usda.gov.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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