Research Article on Meat Plant Survival and The Need for Providing Support

This is an interesting article on factors that affect survival of small meat establishments.  Nothing really new, but certainly validates what we have probably recognized.  But as governmental funding has become available for small establishments, it provides some direction for how monies should be spent.

"An effective way to increase industry resilience among smaller processors might be encouraging diversification and vertical integration. The success of smaller retail meat markets is likely contingent on local demand, however.7 Retail meat markets may not be successful in areas where demand for niche products is weak, or where incomes are not high enough to support sales of high-value-added products."

Not claiming to be an expert on this topic, but the work I have seen done by our group here at Penn State, in conjunction with the meat associations AMP and PAMP,  have done a tremendous job in helping facilities become better at what they do - specifically diversifying products.  Attending the PAMP Meat Judging contest over the past decade, I have seen a proliferation of different meat products, thanks in large part to the support these processors receive.  So if I am the government giving money to support this industry, this is a good place to start.

Another factor touched upon is local demand, and creating local demand.  How many of us frequent a local meat market?  Personally, I love meat markets.  But they are like hidden gems that most people are not aware.

But starting a meat establishments has many challenges - environmental, supply, and labor to name a few.  But what we can do is to make sure we support the ones we have.

Journal of the Agricultural and Applied Economics Association
https://onlinelibrary.wiley.com/doi/full/10.1002/jaa2.55
Meat processing plant survival: The role of plant and regional characteristics
Catherine Isley, Sarah A. Low

First published: 26 April 2023 https://doi.org/10.1002/jaa2.55

Abstract

Federal and state governments are making major investments in expanded meat processor capacity and improved industry resilience. To improve decision-making, this research identifies characteristics related to the probability of meat processing plant survival using hazard analysis and establishment-level data on US meat processors (including beef, pork, goat, lamb and mutton, and large game processors) 1997–2020. We find plant survival is associated with both plant characteristics and local context, though specific factors related to survival vary with plant size and rurality. Smaller plants are less likely to survive than larger plants, and for smaller plants survival is most strongly related to business diversification. For larger plants, local context, including workforce variables, has the strongest relationship with survival. Our analysis shows little relationship between meat processing industry concentration and plant survival, though we find weak evidence of a positive relationship between industry concentration and large nonmetro plant survival.

6 POLICY IMPLICATIONS AND CONCLUSION

Given the large current investment in improved meat processing industry resilience, this paper has identified characteristics associated with probability of meat processing plant (excluding poultry and small game) survival. Using hazard analysis and establishment-level data on US meat processors 1997–2020, our results suggest that plant survival is associated with both plant characteristics and local context, though the importance of each (and the importance of individual variables within these vectors) varies with plant size and rurality. Smaller plants are less likely to survive than larger plants, and for smaller plants, survival is most strongly related to business diversification—operating a retail meat market or wholesaling business in addition to meat processing. For larger plants, local context, including workforce variables and workforce availability, is more important. Availability of animal inputs is related to survival for both smaller and large plants, though not in the direction economic principles would suggest, likely due to cyclical variation in animal supply and plant failures during supply downturns. Additionally, we do not find evidence that concentration is associated with lower survival odds—rather, evidence suggests high processing industry concentration may be related to increased survival for large nonmetro plants, though this finding has caveats.

Several policy implications can be drawn from our analysis, most notably:

An effective way to increase industry resilience among smaller processors might be encouraging diversification and vertical integration. The success of smaller retail meat markets is likely contingent on local demand, however.7 Retail meat markets may not be successful in areas where demand for niche products is weak, or where incomes are not high enough to support sales of high-value-added products.

Regional context likely affects large, nonmetro plant survival through the workforce. For these plants, our results suggest competition for workers with nonmeat manufacturing establishments may be one factor driving plant failure. Increased survival of large plants in areas with thick labor markets (metro counties), and the relationship between survival and foreign-born population, also suggest the ability to find workers may be related to plants' long-term resilience. Actions aimed at increasing the pool of meat processing workers, such as investing in workforce development or increasing the number of visas available for food processing workers, may increase large nonmetro plant resilience in the long run. However, workforce availability issues for these plants could also be driven by the dangerous and undesirable nature of meat processing work, especially given meat processors appear to be failing at increased rates when other manufacturing work is available. Encouraging the adoption of safety technology and automation may address these issues.

Related to recent state policies to increase the number of processing plants, we find that, counterintuitively, the higher the supply of hogs and cattle in a plant's year of birth, the more likely it is for that plant to fail. Given the cyclical nature of hog and cattle supply, we hypothesize that processing capacity brought online at the height of supply peaks struggles to remain profitable when supplies drop. Thus, incentivizing new plants in a reactionary fashion during times of high supply could increase plant failure rates after some lag. However, we caution that preventing market-driven capacity expansion during supply peaks could hurt farms and food system resilience, as a backlog of animals could develop in times of high supplies.

Evidence weakly suggests that concentration may increase survival for large nonmetro plants, perhaps through agglomeration effects. We did not find evidence that concentration is negatively related to meat processor survival. Thus, policies intended to increase meat processor resilience through decreasing concentration could be counterproductive.

We find the probability of failure is highest for smaller plants, which has implications for government investment in these plants.

Technical assistance for very small, female-operated processors in rural areas may be warranted, and the Cooperative Extension Service may be well-suited to assist.

Policy intervention may need to differ across the rural-urban continuum; what may work in a metropolitan context may not work, or even be counterproductive, elsewhere.

This timely study is the first meat processing survival study in decades. Our use of three different areal units for local context variables allows better policy-relevant conclusions, buoyed by a large N (nearly 8000 plants over 24 years), and enables us to calculate industry concentration measures and conduct our analysis across four different size categories, as well as metro and nonmetro areas. Limitations of our analysis, discussed throughout the paper, center on proprietary data quality (including the lack of important plant information, such as average salary, level of automation, etc.) and our inability to draw causal conclusions. However, we believe the benefits of using these data outweigh the concerns, and that our use of lagged independent variables mitigates any potential endogeneity.




Looking forward, on the eve of significant investments to expand capacity and increase competition in meat processing, future work may consider the use of quasi-experimental methods to better understand the impact of workforce characteristics, regional demand for niche meat processing, and input availability. Future work may include a more detailed spatial location analysis, as well as explore how datapoints unavailable for our study—such as plant automation, management style and work culture, and employee pay and benefits—are related to plant survival.