“Locally produced” is one of the hottest terms in the food business today, and some consumers will pay premium prices for foods, including meat and dairy products, grown on local farms.
But developing reliable supply and marketing chains can present a challenge, particularly for the smaller producers and processors typically involved in local-foods efforts. That’s especially true in the case of meat products according to a new report from USDA’s Economic Research Service. The report, titled “Local Meat and Poultry Processing: The Importance of Business Commitments for Long-Term Viability,” outlines some of the challenges and potential solutions for building viable local markets.
For producers to market their meat locally of course, they need a local processor. But for a local processor to remain economically viable, they need steady, year-around business rather than dramatic seasonal swings in demand for slaughter and processing services.
The study draws on in-depth case studies of seven meat and poultry processors across the country, interviews with long-time observers and other experts on this topic and cost analyses developed using data from a financial analysis of small meat plants from 2009 through 2011.
The authors describe three types of local-meat supply chains, each with their own regulatory and logistic challenges.
- Very local – farmers sell live animal directly to one or more household buyers, who buy by the whole, half, or quarter carcass. A mobile slaughterer2 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 their meat, typically frozen.
- Local-independent – The farmer arranges and pays for processing and handles distribution and marketing through a variety of direct and local channels.
- Regional-aggregated – Multiple farmers sell finished animals to a central brand entity that arranges for processing and distribution and handles marketing, largely to wholesale accounts.
The case studies included in the report generally fall in the local-independent or regional-aggregated categories.
Based on the case studies and other research, the authors conclude that improved relationships, communication and commitment between farmers and processors. They list the following observations:
- Increased commitment on the part of both farmers and processors involves not only enhanced coordination and communication but “hard” commitments. Farmers commit, individually or in coordinated groups or brands, to providing the processor with sufficient, steady business. Processors commit to processing those livestock to farmer specifications, consistently and on time.
- Strengthening commitments between processors and farmers, as well as along the entire supply chain, is essential to maintaining and expanding the processing infrastructure necessary for growth in local meats.
- Having a few key “anchor” customers provides steady volume and consistent business. Some processors are their own anchor customers, providing the majority of the throughput.
- When farmers aggregate into a single niche brand, that brand can be a valuable partner for processors because it can deliver steady throughput and coordinated communication that can often be difficult for farmers to deliver individually.
- Processors can use tools like active scheduling systems and variable pricing to assure that throughput is steady, week by week and over the year. This is part of their commitment to farmers, who know they will have processing dates for their livestock.
- Processors who help their farmer customers with business advice, marketing, and distribution, for free or for a fee, can build good working relationships and long-term loyalty.
- Deeper commitment comes when farmers invest in their processors financially, for mutually beneficial development.
- Investments in local processors by their downstream wholesale customers can also be important for success.
- Ongoing communication underpins the entire relationship. Whether about scheduling or services, costs or prices, meat quality or market conditions, processors and farmers need to communicate effectively with each other to develop and maintain strong business relationships.
Read a summary or the full report from USDA/ERS.