Several programs and billions of dollars have been put towards improving the resiliency of the meat processing sector since the pandemic-induced shutdowns in 2020. Not only is better resiliency a goal, but the efforts also seek to redress perceived market failures due to the sector’s level of concentration. Since the pandemic struck, the USDA has distributed over $1 billion in grants to small-to-medium sized processing plants across the country to support expansion, growth, and better technology. In Nebraska, the Legislature provided $20 million in financial assistance to the Sustainable Beef project in North Platte for wastewater treatment facilities and funded a $10 million grant program to expand and assist independent meat processing facilities. These efforts raise questions regarding the survivability of processing facilities, the factors which affect survivability, and the proper design of policies to assist meat processing facilities.
A recent paper, Meat processing plant survival: The role of plant and regional characteristics, written by Catherine Islay of Context Network and Sarah Low of Rural and Farm Finance Policy Center, touches on these issues and identifies factors related to meat processing plant survival. Islay and Low use plant-level data on non-poultry processors from 1997-2020 such as plant size, diversification, ownership structure, market access, workforce characteristics, and processing concentration to examine meat processing plant survival. Islay and Low report most meat processing plants are in the eastern half of the United States and many plants (86 percent) are located close to major cities near large customer bases and available workforce. Larger plants are most likely located in the Midwest. And only 3 percent of meat processing plants are affiliated with Cargill, JBS, National Beef, Smithfield, or Tyson.
Islay and Low find the average plant survived 9.7 years over the study period and 62 percent of the plants failed at some point. They also find small and medium plants are more likely to fail. Plant failures are cyclical with 1997 seeing the highest failure rate as a percentage of all facilities (Figure 3). Survival of small plants is closely related to business diversification. Facilities with retail or wholesale meat markets are more likely to survive. The survival of large plants in nonmetro areas is tied to manufacturing employment in the region. Islay and Low write, “A higher share of manufacturing employment . . . was associated with a decreased probability of large nonmetro plant survival, with every percentage point increase in manufacturing employment share associated with 4.1% higher chance of failure.” And the higher the foreign-born population, the more likely large nonmetro plants are to survive. Finally, Islay and Low did not find much evidence linking concentration with plant survival, except concentration is positively related to increased survival large nonmetro plants.
FIGURE 3. PLANT FAILURES BY YEAR
Source: Meat processing plat survival: The role of plant and regional characteristics, Catherine Islay and Sarah Low, Journal of the Agricultural and Applied Economics Association, 2023
Islay and Low argue their results show that policy initiatives need to differ for large plants versus small ones. For larger plants where labor availability is a critical issue, increasing the number of visas for immigrant workers, training new workers, improving working conditions, and investing in research to automate processes might be the most effective policies. For small and medium plants, allocating dollars to more diversified plants with wholesale and retail operations would be the most efficient policy support.