An intriguing piece appeared recently online on the WillametteLive website. Although the report focused on the situation in Oregon, it could apply to any of a dozen different states.

The focus of the article, titled, “Who cut the MEAT? -Local, sustainable meat industry faces challenges,” was on the challenges facing producers and meat marketers involved in that state’s direct-to-consumer marketing channel.

“Pay a visit to any farmers’ market in Oregon and you could easily assume that local ranchers are doing just fine,” the story began. “You might see your local pig farmer sitting at an attractive booth, interacting with customers and making sales. While it appears to be a rosy picture, Oregon’s direct-to-consumer meat industry is actually dealing with several challenges that could put ranchers and slaughter facilities at risk.”

It wasn’t too difficult to guess what those problems are: Lack of shackle space at a smaller, locally situated packing plant—due to a lack of smaller plants—and an absence of rendering facilities in-state.

Both conditions stem from the same source, industry concentration. As large, high-speed packing plants were built (and later expanded) in the Midwest in the 1980s and 1990s, the competitive status of many small, regional plants was compromised.

Thoroughly compromised.

“Improvements in technology … have made it possible [for the four biggest companies] to efficiently process large numbers of animals,” Jerry Gardner, Oregon Department of Agriculture Business Development Manager, stated. “Small-scale meat processors have not been able to compete.”

Gardner noted that Oregon’s remaining packing plants handle about 40,000 head a year, which is about two weeks’ worth of production for the larger Midwestern beef plants.

According to USDA statistics, there are only nine federally inspected meat plants left in Oregon, and although there are 1.3 million head of cattle, 670,000 dairy and beef cows, 264,000 sheep and lambs and 13,000 hogs, less than 5% of all the state’s livestock are processed under USDA inspection. That’s not good for smaller ranchers, farmers and feeders looking to sell their meat directly to the market segment interested in locally grown foods.

Truth is, the demand for locally raised meat far exceeds capacity—not in terms of the numbers of beef, dairy cattle or heritage pigs, but in terms of producers being able to cost-effectively process them without having to bear the costs for out-of-state transport.

Exhibit B&D

For example, B&D Meats, a USDA slaughter plant in Roseburg, Ore., shut down in July 2012. Gardner said that he believes the closure was caused by the necessity of facility upgrades and the lack of capital to pay for them. The closure had “a ripple effect” throughout Oregon’s central Willamette Valley, the article noted. Other plants have had to pick-up the slack, leaving many small-scale ranchers waiting weeks to get their animals butchered.

The situation with rendering is even worse. Oregon’s two rendering plants, Redmond Tallow and Southern Oregon Tallow, both closed in 2006, largely due to an inability to modernize, coupled with sinking wholesale prices following the BSE scare in 2003.

With no rendering plants currently operating in Oregon, dead stock and byproducts have to be shipped to rendering plants in Washington state, Idaho or Northern California. Given today’s fuel prices, that appears to be unsustainable, long-term. Even landfill disposal isn’t the answer going forward, and Oregon’s Department of Environmental Quality is working to develop alternatives—of which there aren’t any good ones at the moment.

“Consumers are the key,” ODA’s Gardner stated. “Unless consumers are willing to seek out locally produced and processed meat products, and unless they are willing to pay for this service, small-scale meat processors will struggle to compete.”

At some point, struggling to stay in business turns into exiting from the business, and that’s not only bad news for those consumers willing to pay a premium for local foods, it’s bad news for the smaller producers who are willing—but unable—to serve them.

The opinions expressed in this commentary are solely those of Dan Murphy, a veteran food-industry journalist and commentator.