From Farm to Fork? An Empirical Investigation of the Challenges Faced by North Carolina s Small Meatpackers

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1 FromFarmtoFork? AnEmpiricalInvestigationoftheChallengesFacedby NorthCarolina ssmallmeatpackers by TinaPrevatte AMaster sprojectsubmittedtothefaculty oftheuniversityofnorthcarolinaatchapelhill inpartialfulfillmentoftherequirements forthedegreeofmasterofcityandregionalplanning inthedepartmentofcityandregionalplanning. ChapelHill Spring2009 Approvedby: ADVISOR READER

2 TableofContents Chapter1:IntroductiontotheResearchQuestion 2 Chapter2:LiteratureReview..8 ConcentrationandConsolidationInU.S.Meatpacking...8 ChallengesFacingSmallMeatpackers Chapter3:OverviewofNorthCarolina smeatpackingsector..17 Chapter4:SurveyandInterviewFindings...27 WorkingWithSmalltoMid SizeFarmers OtherCustomers&Capacity Capabilities Challenges Workforce Regulation AccesstoCapital...36 Marketing&Sales...37 BusinessPlanning&Management..38 WasteDisposal...39 Opportunities CollaborativeSolutions Chapter5:RecommendationsandConclusion.43 KeyFindings AnalysisofFindings&Recommendations...44 CustomersandCapacity...44 CapabilitiesandWorkforce..45 Regulation...48 AccesstoCapitalandBusinessPlanning&Management 50 Marketing&SalesandCollaborativeSolutions..52 WasteDisposal..53 Conclusion References Appendices AppendixA:SurveytoDetermineChallengesandOpportunitiesforNC ssmallmeatpackers AppendixB:LocationsofSmallMeatpackersSurveyed ListofTables Table1:Four FirmConcentrationRatiosforMeatpackingIndustry9 Table2:ShareofIndustryValueofShipmentsinLargePlants10 Table3:NumberofFarmsandLandinFarmsinNC18 Table4:PlantCategories20 Table5:InstitutionsthatSupportNC smeatpackingsector24 ListofFigures Figure1:MarketValueofNCAgriculturalProducts17

3 Chapter1:IntroductiontotheResearchQuestion Risingconcernsabouttheeffectsofindustrializationandconcentrationwithinour globalizedfoodeconomyhaveresultedinincreasedconsumerdemandforlocally,sustainably producedfoods.thereisavocalandgrowingsubsetofconsumerswhoaretakingahardlook atthefoodtheyconsume,itsorigins,andhowtheirfoodchoicesreflecttheirpersonalvalues. FoodsafetyscaresandenvironmentalandhealthconcernshavemanyAmericansthinking criticallyaboutthesourcesoftheirfoodandhowitisproducedandprocessed.infact, accordingtorecentmarketresearch70%ofu.s.consumerswanttoknowwheretheirfood comesfromandwouldpaymoreforlocalfoodiftheycouldfindit(packagedfacts,2007). Developingalternativelocalfoodsystemstomeetthisgrowingdemandisapotential economicdevelopmentstrategy.localfoodisnowanestimated$5billionindustry,and expectedtogrowto$7billionby2011(packagedfacts,2007).communitiesthatpromoteand developmarketsforsustainablelocalfoodsnotonlyhavethepotentialtobenefitfrom improvednutritionandenvironmentalpractices,butalsotogenerateadditionaljobsthrough value addedproductdevelopment.knowingthis,plannersandsustainableagricultureactivists throughouttheu.s.areseekingwaystotapintoandsupporttheeconomicdevelopment potentialoftheirlocalfoodsystem.however,asthisworkisundertaken,anumberof challengesarise. Mostregionslackthepolicysupportsandinfrastructurenecessaryforlocalfoodsystems toflourish.evenwhenthesesupportsareinplaceandresourcesaresecured,competinginthe marketplaceagainstlargeandglobalizedfoodcompaniescanbeextremelydifficult.the industrializationandconcentrationthathashappenedwithinourfoodeconomyoverthelast 2

4 severaldecadesfacilitatesextremeeconomiesofscalethatallowcompaniestogetproductsto marketwithgreatefficiency.consumerexpectationsforwhatfoodscostaresetbythese companies.andthepowerofretailersanddistributorswithinfoodsupplychainsisenormous. Therefore,successfullyintroducinglocalandsustainablyproducedfoodstothemarketplace demandsinnovativenewbusinessmodelsandasophisticatedapproachtomarketingandsales. Inmanywaystheeconomicviabilityoflocalfoodsystemsremainsunproven.Whatisclearis thatdevelopingandexecutingentrepreneurialsolutionsthatallowsmalltomid scalefarmers practicingsustainableagriculturetoconsistentlyaccesstheirlocalmarketsinawaythatis financiallyviableforallinvolvedcanbeextremelychallenging. Forthosecommittedtothegrowthanddevelopmentoflocalfoodsystems,meat products 1 presentauniquesetofchallengesandopportunities.oneofthemostsignificant barrierstoexpandinggrowthinlocal,sustainablemeatproductionandmarketsislimited accesstoqualitymeatprocessing 2,particularlyvalue addedprocessing.asconsolidationhas occurredwithinthemeatpackingindustry,smallmeatpackers 3 havegraduallydisappeared. Thosethatcontinuetooperateoftenfacesignificantobstacles.Small scalemeatprocessingis thereforeamissingorweaklinkinlocalfoodvaluechainsacrossthecountry.withoutthislink, smalltomid sizefarmersareunabletoaccesslocalmarketssuchasrestaurantsandgrocery stores,andcannotoptimizetheirprofitsbyeliminatingwasteandutilizingentireanimalsrather thanjustselectparts. 1 Forthepurposeofthisproject,meatisdefinedasbeef,pork,andchicken. 2 Meatprocessingreferstotheentirespectrumofservicesfromslaughtertotheproductionofvalue addedproductssuchassmokedham, groundbeef,orsausage. 3 Smallmeatpacker referstobothverysmallandsmalllivestockpackingplants.theusda sfoodsafetyinspectionservicedefinesavery smallpackingplantasonewithfewerthan10employeesorlessthan$2.5millioninannualsales,andasmallpackingplantasonewith employees(fsis,1996). 3

5 Onemightexpectthatsmallmeatpackerswouldbewellpositionedtoservegrowing marketsforlocal,nichemeatproducts.however,thisisnotusuallythecase.therearea numberofpossibleexplanationswhy.conventionalwisdomsuggeststhattherearestructural characteristicswithinthemodernmeatindustrythatexplainthechallengesfacingsmall meatpackers,aswellasfederallawsandregulationsthatputsmallprocessorsata disadvantage(petersen,2005).inaddition,itiswidelyassumedthatfindingandretaining capablelaborandtrainingemployeescanbeverychallengingforsmallmeatpackers,andthat lackofaccesstocapitalandlimitedbusinessskillsarealsopervasiveproblemswithinthesector (NMPAN,2008).Still,verylittleempiricalworkhasbeendonetodeterminetheactual obstaclesandconstraintsfacingsmallmeatpackersacrossthecountry.researchisneededto bettermeasureandunderstandregionalchallengeswithinthesectorandtodeveloppolicy optionsforremovingbarrierstoalocalmeateconomy. NorthCarolinaisbetteroffthanmanystatesintermsoftheaccessthatsmalltomid size farmershavetosmallmeatpackers.staffofnorthcarolinacooperativeextensionandthe NorthCarolinaDepartmentofAgriculture&ConsumerServices(NCDA&CS)maintaina directoryofthesmallmeatpackersinthestatewhohaveexpressedawillingnesstoservesmall tomid sizefarmersseekingaccesstolocalmarkets. 4 Therearecurrentlytwentysmall meatpackerslistedinthisdirectory.however,inspiteoftheexistenceofthesewillingsmall meatpackers,small scalemeatpackingisstillviewedasabottleneckbythoseworkingto rebuildthestate slocalfoodeconomy. 4 The IndependentFarmers DirectoryofSlaughterFacilitiesinNorthCarolina isadocumentthatidentifiesthesmallmeatpackersinthestate willingandabletoservesmalltomid sizeindependentfarmersseekingaccesstolocalmarkets.itwasoriginallypublishedinnovember2004 bymikelanier,anccooperativeextensionagentbasedinorangecounty,andwasupdatedandpublishedagaininjuly2007.thedirectory wascompiledbyfirstworkingwithstaffofthenorthcarolinadepartmentofagricultureandconsumersservicestodeterminewhichslaughter andprocessingfacilitieswerecandidatesforservingindependentproducersseekingtoselltheirmeatproductsinlocalmarkets,andthen contactingeachofthesecandidatestodeterminetheirwillingnesstoworkwiththeseproducers. 4

6 Thispaperprovidesacriticalexaminationofthecurrentbarriersandchallengesto integratingthissetofsmallmeatpackerswhoarewillingandabletoworkwithsmalltomidsizefarmersasmoreviablelinksinnorthcarolina slocalmeatsvaluechain.itservesasa regionallyspecifictestofconventionalwisdomregardingthechallengesfacedbysmall meatpackers,andshedslightonhowthesechallengescancauseeventhemostcommitted smallmeatpackerstofunctionasbottleneckswithintheirlocalfoodsystem. Inadditiontoidentifyingthemostsignificantchallengesfacedbythissetofsmall meatpackers,thispaperrevealswhattheyviewastheirgreatestopportunities,andoffersaset ofspecificrecommendationsforpotentialinstitutionalandothersolutionstoaddressthese challengesandopportunities.itismyhopethatthismaster sprojectwillserveasaguideto anypolicychangesorothernextstepsnecessarytodevelopnorthcarolina ssmallscalemeat processinginfrastructureintoamoreviableanddynamicaspectofthestate slocalfood economy,andasasortofrealitycheckonwhetherornotthisisarealisticordesirablegoal.in contributinganempiricalstudyoftheregionalneedsofasetofsmallmeatpackersitismy intentionthatmyfindingsandrecommendationswilloffertransferableinsightstoplannersand sustainableagricultureactivistsseekingtobuildviablelocalmeatsvaluechainsinotherregions throughoutthecountry. Thefindingspresentedinthispaperaredrawnfromtheresultsofasurveyadministered tothetwentysmallmeatpackersinnorthcarolinaidentifiedinthe IndependentFarmers DirectoryofSlaughterFacilitiesinNorthCarolina.Thesepackerswereselectedasthefocusof thisresearchprojectbecausetheirexpressedinterestinworkingwithsmalltomid sizefarmers 5

7 makestheirperspectiveaspotentiallinksinadynamiclocalmeatsvaluechainparticularly valuable.thesurveydistributedtothemhasbeendesignedtoidentifythechallengesfacedby NorthCarolina ssmallmeatpackersandtoassesslocalattitudesandinterestswithinthe sector. 5 AcopyofthissurveycanbefoundinAppendixA. Inpersoninterviewswerealsoconductedwithasubsetoftheidentifiedpackers,during whichthesurveyquestionswereasked,toursofmeatpackingfacilitiesweregiven,andindepth discussionswerehadwithfacilityownersinregardtothehistoryandoperationsoftheir business.thissubsetwasselectedasarepresentativesampleofthediversityofsmall meatpackersinthestatethatarecurrentlyworkingwithsmalltomid sizefarmerstoaccess localmarkets. Interviewswerealsoconductedwithasetofinstitutionalandindustry stakeholderswhohaveregularinteractionswithnorthcarolina ssmallmeatpackers. Further detailsonsurveyandinterviewmethodologyareprovidedinchapter4. Theremainderofthispaperisorganizedintofourchapters.Chapter2providesa reviewoftheliteraturethatthisresearchprojectisinformedbyandinconversationwith.it outlinesthehistoryandtrajectoryofconsolidationinthemeatpackingsector,andprovidesa summaryofconventionalwisdomregardingthechallengescurrentlyfacedbysmall meatpackers.chapter3providesanoverviewofthemeatpackingsectorinnorthcarolina, revealingwhythestateisaparticularlyinterestingplaceinwhichtoexaminethechallenges andopportunitiesofsmallmeatpackers.thefindingsofthisresearchprojectaredetailedin Chapter4,whereIdivideandrankthechallengesfacingNorthCarolina ssmallmeatpackers 5 IreceivedassistancewithmysurveydesignfromArionThiboumeryandLaurenGwin,ProjectCoordinatorsfortheNicheMeatProcessor AssistanceNetwork,anationalnetworkofpeopleandorganizationsassistingnichemeatprocessorsandthelivestockproducersandniche meatbuyerswhodependonthem. 6

8 intosixcategories:workforce,regulation,accesstocapital,marketingandsales,business planningandmanagement,andwastedisposal.thefinalchapteroffersasetof recommendationsandaconclusionbasedacriticalanalysisofthesefindings,suggestingthat whiletherearecurrentlyanumberofresourcesavailabletosupportnorthcarolina ssmall meatpackers,moreproactivestrategiesareneededtofullyleveragetheseresources.the conclusiontothispaperalsoassertsthat,inconversationwithotherfindings,theexistenceof excesscapacityamongstthepackerssurveyedforthisresearchprojectsuggeststhataddressing keychallengeswithinthesectorcouldresultinamoreviableanddynamiclocalmeatsvalue chain. 7

9 Chapter2:LiteratureReview Thischapterprovidesbackgroundinformationcriticaltounderstandingthehistoricand currentcontextinwhichsmallmeatpackersoperate.itengageswithabodyofliteraturethat providesanindepthandcriticalviewofconcentrationandconsolidationwithintheu.s. meatpackingindustry,anditseffects.forthepurposesofthisresearchproject,themost notableoftheseeffectsisreducedaccesstomarketsforsmalltomid sizefarmersproducing livestock,andstrongcompetitivepressuresforsmallmeatpackers.thesetwoeffectsare deeplyintertwined,assmalltomid sizefarmersrelyonsmallmeatpackerstoaccesslocal markets.sustainableagricultureactivistsandothersinterestedinremovingbarrierstothe growthanddevelopmentoflocalfoodsystemsarethereforebeginningtoexaminethe challengesfacedbysmallmeatpackers,andthewaysinwhichtheymightsupportandrebuild thesector.thischapteralsoprovidesasummaryoftheconventionalwisdomandinitial researchfindingsthathaveemergedfromthiswork.inchapter5,iputthesemoregeneral findingsaboutthechallengesfacingsmallmeatpackersintoconversationwithmyownresearch findings,whichprovideamorefocusedexaminationofspecificregionalchallengesforasetof smallmeatpackerswithanexpressedinterestinworkingwithsmalltomid sizefarmers. ConcentrationandConsolidationInU.S.Meatpacking ThemeatpackingindustryintheU.S.isintensivelyconcentrated,withjustfourlarge packingcompaniescontrolling81%ofthebeefmarket,59%oftheporkmarket,and50%ofthe poultrymarket(stull&broadway,2004).thisisacontemporarydevelopmenthowever,and historicallywasnotalwaysthecase.u.s.meatpackinghasdramaticallytransformedoverthe 8

10 courseofthelastthirtyyears.farfewermeatpackersnowslaughterlivestockthanwasthe caseinthelateseventies,andtheirplantsaremuchlarger. 6 Firmconcentrationratiosareawayofmeasuringtheshareofanindustry soutputheld bythefourlargestproducersinthatindustry.changesintheseratiosarewidelyusedas summaryindicatorsofstructuralchange.usingcensusbureaudata,thetablebelowreports firmconcentrationratiosovertimefortheslaughterofcattle,hogs,andchickens. Table1:Four FirmConcentrationRatiosforMeatpackingIndustry Year Cattle Hogs Chickens Source:LongitudinalResearchDatabase,U.S.BureauoftheCensus(MacDonaldetal,2000) Firmconcentrationincattleslaughterremainedfairlystablefrom1963through1977,but thenrosesharplyfrom25%in1977to71%in1992.suchachangeinconcentrationisquite unique.accordingtocensusbureaudatanootherindustryhasshownsuchadramatic increaseinanyfifteen yearperiod(macdonaldetal,2000).concentrationinhogslaughter remainedstableuntil1987,butthenincreasedsignificantlybetween1987and1992.aftera sharpriseinconcentrationbetween1977and1987chickenslaughterhasremainedstable. Asthesechangesinconcentrationwereoccurring,thenumberoftotalmeatpacking plantsintheu.s.wasshrinkingwhiletheplantsthemselveswereincreasinginsize.from1976 to1996,thenumberoffederallyinspectedcattleplantsfellbymorethanhalf,from1655to 812.Thenumberoffederallyinspectedhogplantsfellfrom1322in1976to770in1996(Levy, 6 Forthepurposesofthispaper,consolidationisdefinedastheshifttowardsproductioninafewlargefacilities,andconcentrationisdefinedas themovetowardsfewercompaniesbeinginownershipofthesefacilities. 9

11 2001).Duringthissameperiodthepercentofanimalsbeingslaughteredinlargeplants increaseddramatically.whilenotionsof large havechangedovertime,thelargestcattle plantsslaughtermorethanhalfamillioncattleinayearandlargehogplantsslaughtermore thanamillion.thecensusbureaudefineslargeplantsasthosewithatleast400employees. Table2:ShareofIndustryValueofShipmentsinLargePlants Year Cattle Hogs Chicken ND Source:LongitudinalResearchDatabase,U.S.BureauoftheCensus(MacDonaldetal,2000) Theemergenceoflargeplantsdemonstratedinthetableaboveisquitestriking.In1963,only 31%ofallcattleslaughteroccurredinlargeplants.Butby1992plantsinthatcategory slaughtered72%ofcattle.inhogslaughter,largeplantshandled66%ofallslaughterin1963, but86%by1992.andinchickenslaughterlargeplantswentfromhandling29%ofallslaughter in1967to88%in1992.consolidationsonsuchadramaticandrapidscalearequiterareinu.s. manufacturing(macdonaldetal,2000). Oneparticularlyinterestingpatternstandsoutwhenconsideringtheconcentrationand consolidationdatapresentedabove.allthreeslaughterindustriesexperienceddramatic consolidation.however,itwasonlyincattleslaughterthatthisconsolidationledtodramatic concentration.patternsofmeatconsumptionlikelyplayedarolehere.percapitapoultry consumptionhasgrownsharplyintheunitedstatesoverthelastfewdecades,whilepercapita porkconsumptionhasgrownmodestlyandbeefconsumptionhasdeclined(macdonaldetal, 10

12 2000). 7 Thesedynamicsremindusthatmeatpackingplantsdonotoperateinavacuum,butin conjunctionwithbothmeatbuyersandlivestocksuppliers. Indeed,thelocationandoperationsoflivestocksuppliersaffecttheoptimallocation, scale,andoperationsofslaughterplants.concentrationandconsolidationinmeatpackingis intimatelylinkedtosimilartrendsintheproductionoflivestock.largecattlefeedlotsandhog andchickenfarmsaccountforhighandgrowingsharesoflivestocksales.therehasbeenashift towardlargerproductionestablishmentsandtowardlong termcontractualarrangements betweenthesesuppliersandslaughter(macdonaldetal,2000).toachievetheeconomiesof scaletheypromise,largeplantsneedlargesuppliers.bybuildingalargeslaughterplantamong anetworkoflargefarmsorfeedlots,andforminglong termrelationshipswiththosesuppliers, plantmanagerscanensureasteadysupplyofanimalsandexercisetightcontroloveron farm decisions.theyarethereforeabletomaintainhighcapacityutilizationthroughouttheyear, andmitigatetherisksassociatedwithbuildingandoperatinglargefacilities. Giventhatjustfourlargepackingcompaniescontrolthevastmajorityofbeef,pork,and poultrymarkets,itisnotsurprisingthatmanysmalltomid sizefarmersfeelshutoutofthe marketplacebythepreferencethattheselargepackershaveforworkingwithlargesuppliers. Thecurrentimbalanceofpowerandinfluenceinmeatprocessinghasbeencomparedtoan hourglass,inwhichasmallgroupofpowerfulcorporationsactastheconduitbetween thousandsoflivestocksuppliersandmillionsofconsumers(harperetal,2003).thismetaphor attemptstoprovideavisualimageofthecontrolthesefirmshave.however,itignoresthe currentpushtowardsabifurcatedsystem. 7 Percapitabeefconsumptiondroppedfrom84.7poundsperpersonin1975to66.3poundsperpersonby

13 Itistruethatsmalltomid sizefarmersoftenhaveveryfewoptionsforaccessingmarkets, andthatconsumershavelimitedoptionsintermsofthequalityandoriginsofthemeatsthey purchase.however,smallmeatpackerscananddoplayanimportantroleinhelpingsmallto mid sizefarmerstoaccesslocalandnichemarketsformeatproducts.oftenthisisachieved through co packing agreements,wherefarmersworkwithprocessorsonafee for service basistocutandpackagetheirlivestock,thensellthemeatdirectlytoconsumers.whenasmall meatpackerisavailableinreasonableproximitytotheiroperationsandwillingtoworkwith them,smalltomid sizefarmersmaybeabletoparticipateindirectmarketssuchasfarmer s marketsormeatbuyingclubs.alternatively,thesefarmerscansometimesselltheiranimals directlytosmallmeatpackerswhothenprocessandpackagemeatproductsfortheirown wholesaleanddistributionbusiness. Thefollowingsectionprovidesanexaminationofobstaclesandconstraintsfacingsmall meatpackersacrossthecountry.itshedslightonhowthesechallengescanlimittheirabilityto servefarmersandtootherwiseremaincompetitiveinthemarketplace.ihavefocusedthis researchprojectonasetofsmallmeatpackerswhohaveanexpressedinterestinworkingwith smalltomid sizefarmers.indoingso,iattempttomakeaspecificcontributiontothebodyof workreferencedbelow.iaimtoprovideinsightintohowthechallengesfacingsmall meatpackerscancauseeventhosecommittedtoactingaslinksbetweenfamilyfarmsandlocal marketstofunctionasbottleneckswithintheirlocalfoodsystem.bysheddinglightonsomeof thechallengesfacedbythesepackersihopetoassistinstitutionsindevelopingprogramsthat supportthesepackers,andthatdemonstratethemarketopportunityforlocal,nichemeat productstosmallmeatpackersnotyetcommittedtoworkingwithsmalltomid sizefarmers. 12

14 ChallengesFacingSmallMeatpackers Becauseofthepotentialrolethatsmallmeatpackersplayinprovidingsmalltomid size farmersaccesstomarkets,avarietyofstakeholdershavebeguntoexaminethesector.asa resultoftheseexaminationsabodyofconventionalwisdomhasemergedinregardto challengesfacingsmallmeatpackers.anecdotalaccountsfromsmalltomid sizefarmers suggestdifficultyinfindingandworkingwiththesepackers.anddatagatheredduringrecent empiricalinvestigationsbynon profitandindustrygroupsindicatesthatthefewsmall meatpackerswhocontinuetooperatefacesignificantobstacles.belowiprovideasummaryof theinitialresearchfindingsregardingthechallengesfacedbysmallmeatpackers,andoutline someofthecompetitivepressurestheyfaceasaresultofthestructuralchangesoutlined above. TheNicheMeatProcessorAssistanceNetwork(NMPAN)isonegroupthathasbeen workingtoidentifyandaddressthechallengesfacedbysmallmeatpackers.thisgrouphas identifiedfivecriticalneedareasforthesector:1)assistancewithunderstandingregulation;2) findingandretainingcapableandwillinglabor,andtrainingemployees;3)businessplanning andmanagement;4)communicationwithbothcustomersandregulators;and5)accessto capital(nmpan,2008). DuringthecourseoftheirworkNMPANhasfoundthatthemostfrequentlycited challengesforsmallpackersconcerntheirworkforce.meatcuttersatsmallpackingfacilities havebeenfoundtohaveanaverageofbetweennineandtwenty fiveyearsofexperience, indicatingthatyoungpeoplearenotenteringthesector.thereareanumberofopinionsabout whythismightbethecase.oneofthemostcommonisthatthereisalackofmonetary 13

15 incentiveforentryintotheindustry.thosethatareenteringaretypicallytrainedonthejob. Duetothedifficultiestheyfacefindingcapablelabormostsmallmeatpackershaveveryfew qualificationsfornewhires.theyseekemployeeswithadequatephysicalstrengthaswellas goodcoordination,depthperception,andcolorrecognition(martin&lawson,2005).thishas notableimplicationsforthequalityofworkthatcanbeperformedbysmallpackers,aswellas theirabilitytoinnovateandexperimentwithnewservicesandproductdevelopment. Inspiteoftheirresourceconstraints,smallmeatpackersaresubjecttothesamesetof regulationsthatlargemeatpackingfacilitiesface.arecentdiscussionpaperproducedforthe SustainableAgricultureCoalitionbyHildePetersenidentifiesanumberofchallengessmall packersfaceasaresultofthissituation.petersenexplainsthatconsideringthevastdifferences intheiroperations,regulatingsmallandlargepackingfacilitiesthesamecausesanumberof disadvantagesforsmallmeatpackers.specifically,itisbelievedthattheintroductionofthe PathogenReduction/HazardAnalysisCriticalControlPoint(HACCP)landmarkrulein1996 introduceddisproportionateburdensforsmallmeatpackers(petersen,2005).some stakeholdershavearguedthatsystematiccostdifferentialswerebuiltintothedesignofhaccp. Infact,a2001reportbytheEconomicResourceServiceformallyacknowledged disproportionatecostsintheimplementationofhaccpwhichhampertheabilityofsmall meatpackerstoaffordtheproperfacilities,equipmentandtechnologyrequiredforcompliance (ERS,2001).Anecdotally,thecostsassociatedwithmeetingstructuralrequirementsoutlinedin regulationsleavemanysmallprocessorswithoutthecapitalrequiredtomaintaintheirfacilities ortobuytheequipmentneededtocomplywiththoseregulations.inaddition,complicated HACCPprotocolshavemadecompliancewithfederalmeatinspectionlawsextremelyresource 14

16 intensiveandburdensome,contributingtothelossofsmallmeatpackingplantsandhindering newproductdevelopmentinthosethatcontinuetooperate. Petersenalsopointsoutthatincreasedcostsandoperationalburdensarenottheonly challengeslinkedtoregulations.inrecenttestimonybeforethesmallbusinessadministration, leadershipoftheamericanassociationofmeatprocessorsclaimedthatsmallplantsare frequentlysubjecttoparticularlystrictenforcementbytheusda sfoodsafetyinspection Service(Petersen,2005).Thisisanallegationthatisfrequentlyrepeated.Stakeholdersfeel thatsmallplantsareoftensubjecttomorethoroughinspectionthanlargeplantsdueto fundamentaldifferencesinprocessingdesign.concernshavealsobeenexpressedabout unwarrantedintimidationbyfederalinspectorsaimedexplicitlyatsmallmeatpackers.itis allegedthatinconsistentandunbalancedbureaucracyiscreatingreluctancebysmall meatpackerstoseekusdacertification. InmanypartsofthecountryUSDAcertificationistheonlyoptionavailableforsmall meatpackerswhowanttoparticipateincommerce.howeversomestateshavetheirownstate inspectionprograms.whereitexists,state inspectedprocessingisbelievedtobe advantageous.stateinspectionprogramsarethoughttobemoreeasilyadaptedtotheneeds ofsmallbusinesses.therefore,statesthathavemaintainedtheirinspectionprogramsare thoughttoplayacriticalroleinassistingthesmallprocessorsfrequentlyleftbehindinthe federalsystem(petersen,2005).statesystemsaregenerallymoreaccessibleandflexiblein providingresourcestosmallmeatpackers,andareabletoprovidefortheirdiverseand individualneeds.itiswidelybelievedthatstateinspectionprogramsareintegraltothesuccess ofsmallmeatpackersandmustbedevelopedandsupportedinallstates. 15

17 Byvirtueoftheirscale,smallmeatpackersgeneratehigheroperatingcostsperunitat almosteverylevel,andstruggletoperformatthesameefficienciesastheirindustrializedlargescalecounterparts.inaddition,thesaleofby products,wherethemajorityofprofitsaremade forlargeprocessors,isnotviableforsmallplants(clauseetal,2003).smallplantsoftendonot havesufficientquantityortheresourcestorendertheirownbyproducts,andthereforeface thecostofdisposal.theabilitytosuccessfullydisposeofslaughterandprocessingbyproducts inacosteffectivemanorcanbeafactorindeterminingthesuccessorfailureofsmall meatpackers(martin&lawson,2005). Ingeneral,smallplantsproducingcommodityproductsfacestiffcostpressures,causing sometoexittheindustry.however,smallplantsproducingspecialtyornichemeatproducts havepricingflexibilityandthereforemaynotbeasaffectedbytheincreasedcostsofdoing businessthataccompanytheirscale(ers,2001).innovationanddifferentiationofproduct haveallowedasmallnumberofsmallmeatpackerstostayafloatservinggrowingmarketsfor nichemeatproducts.theimportanceofinnovationanddifferentiationtothesurvivalofsmall meatpackerssuggeststhatinterventionstosupportthesectorshouldfocusonidentifyingand understandingfactorsthatinhibitfirmsfrominnovatinginparticularenvironments.this researchprojectattemptstoidentifysuchfactorsforaspecificsetofsmallmeatpackersin NorthCarolina,andmakesrecommendationsforhowthestate sinstitutionalandother resourcesmightbedirectedtoaddresstheselocalizedchallenges. 16

18 Chapter3:OverviewofNorthCarolina smeatpackingsector NorthCarolinaisknownforagro industriallivestockproduction.thestateishometothe world slargesthogprocessingplantandoneofthecountry slargestpoultryslaughterhouses. 8 Accordingtothe2007CensusofAgriculturethetotalmarketvalueofagriculturalproductsin NorthCarolinawasjustover$10.3billion.Ofthat,livestocksalescomprisedapproximately $7.7billion,ornearlyseventy fivepercent.historically,tobaccowasthecornerstoneofthe state sagriculturalactivity.butoverthelastfewdecadesnorthcarolina sagricultural economyhasundergonedramaticchanges,andlivestockhasgainedprominence.figure1 belowillustratesthisshiftawayfromtobaccoandtowardstheproductionoflivestock, specificallyhogsandpoultry.northcarolinacurrentlyrankssecondinthenationinhog productionandfifthinproductionofbroilers(nass,2008). 9 Figure1:MarketValueofNCAgriculturalProducts 10 8 SmithfieldPackingCompanyownstheworld slargesthogprocessingfacility,whichislocatedinthebladencountytownoftarheel,and processesupto32,000hogsperday(geary&sorg,2007).thehouseofraefordfarms,inc.facilitylocatedinthehokecountytownofraeford isoneofthecountry'slargestpoultryslaughterhouses. 9 Abroilerisatypeofchickenorturkeyraisedspecificallyformeatproduction. 10 ThischartwasconstructedusingUSDACensusofAgriculturedata.Allvalueswereadjustedto2007dollarsusingtheBLSinflationcalculator availableathttp://data.bls.gov/cgi bin/cpicalc.pl. 17

19 Theseshiftsinagriculturalactivityhavebeenaccompaniedbyfarmlosses,farm consolidation,andconcentrationoffarmownership.between2003and2006northcarolina lostover5500farms.in2004and2005alone,thestatelostover4,000farms,puttingittopin thenationforfarmlossesalongwithfloridaandtennessee(ncda&cs,2007).despitethese strikingfarmlosses,agriculturalrevenuesinthenorthcarolinahaveremainedrelatively constant(nass,2008).thesecontradictorytrendssuggestthatlargefarmsareexpandingin thestate,graduallysubsumingsmallandmid sizefarms.asthetablebelowreveals,the averagefarmsizeinnorthcarolinahasindeedsteadilyincreasedoverthepastseveralyears,as hasthepercentageorfarmlandcontrolledbylargefarms. Year #offarms (Thousands) Table3:NumberofFarmsandLandinFarmsinNC SalesClassEstimates Ave.FarmSize $1000 $9999 $10,000 $99,999 $100,000+ (Acres) (ThousandAcres) Source:NorthCarolinaAgriculturalStatistics2008 Asnotedpreviously,thelocationandoperationsoflivestocksuppliersaffectstheoptimal location,scale,andoperationsofslaughterplants.thus,growthandconsolidationinpoultry andhogfarminghereinnorthcarolinahasbeenintimatelylinkedtogrowthandconsolidation withinthestate smeatpackingsector.muchofthedramatictransformationoftheu.s. meatpackingindustrydetailedinthepreviouschapterhasbeenplayedoutinnorthcarolina. 18

20 In2007,morethanelevenmillionhogswereslaughteredinthestate(NASS,2008).Over90% ofthosewereslaughteredbysmithfieldpackingcompany,whichownsthevastmajorityofthe state sporkprocessingcapacity(geary&sorg,2007). Inlightoftheserecentanddramaticstructuralchanges,NorthCarolinaisaparticularly interestingplaceinwhichtoexaminechallengesandopportunitiesfacedbysmallmeatpackers. Alongsidesomeofthelargestmeatpackingfacilitiesintheworldrunbyglobal,vertically integratedcorporations,mid levelpackerscontinuetofindtheirniche,andasetofsmall meatpackersaresurvivingwithviablebusinessmodels.whilelargefarmsandprocessing facilitiesmostcertainlydominatelivestockmarketsinthestate,therestillremainsastrong traditionofsmallandmid sizedfamilyfarms.andthereareapproximatelytwentysmall meatpackersinnorthcarolinawhohaveidentifiedthemselvesaswillingandabletohelpthese farmersastheyseekaccesstolocalmarkets(lanier,2007). Accordingtothe2007CensusofAgriculture,familyfarmsaccountfor97%ofallfarmsin NorthCarolina,andabout85%areclassifiedassmallfamilyfarms.While96%ofhog productionin2007occurredonfarmssellingover5,000hogs,therewere927farmsthatraised between1and24hogs.ofthese,59%reportedsalesofhogs,indicatingthereare approximately500farmsraisingandsellinghogsonaverysmallscaleinnorthcarolina.there werefewerfarmssellinghogsfrommid sizedoperations,withapproximately168farmshaving inventoriesbetween25and99hogsand137farmsraisingbetween100and1000hogsper year(usda,2007). CattleproductioninNorthCarolinaisnotablydifferentfromhogproduction.Mostofthe cattleraisedinthestateareonfarmswithfewerthan50cows.however,themajorityofnorth 19

21 Carolinacattleranchersrunstockercattleoperations.Onceweanedtheiranimalsarefedfor threetofourmonthsongrass,thenshippedtofeedlotsinthemidwest.asmarketsforgrassfedbeefaregrowing,however,increasingnumbersofthestate sranchersarekeepingtheir cattleinstateforfinishingandentryintolocalnichemarkets. TheproductivityofNorthCarolina ssmallandmid sizedfarmsisreflectedbythegrowing numberofdirectmarketsforlocalfoodsinthestate.therearecurrentlyoveronehundred farmer smarketslistedinthefarmersmarketdirectorymaintainedbythencda&cs.in addition,northcarolinahasapproximatelyseventycsas,andmorearecreatedeveryyearas interestfrombothconsumersandfarmersgrows(ncce,2008).however,duetothe bottleneckpresentedbythestate ssmallmeatpackers,opportunitieswithinthesemarketsfor smalltomid sizefarmersproducinglivestockarelimited. ThetablebelowoutlinesthevariouscategoriesintowhichNorthCarolina smeatpackers aredivided. PlantCategory ForRegulatoryPurposes CustomPlant Table4:PlantCategories Description Productsfromthesefacilitiescannotentercommerce.Inspectedfour timesperyearbyncda&csstaffforsanitationandproperlabelingof product. StatePlant Productsfromthesefacilitiescanenterintrastatecommerce. InspecteddailybyNCDA&CSstafffordisease,sanitation,andproper labelingofproduct. TAPlant Productsfromthesefacilitiescanenterinterstatecommerceorbe exportedtoforeigncountries.inspecteddailybyncda&csstafffor disease,sanitation,andproperlabelingofproduct. USDAInspectedPlant Productsfromthesefacilitiescanenterinterstatecommerceorbe exportedtoforeigncountries.inspecteddailybyusdastafffor disease,sanitation,andproperlabelingofproduct. BySize VerySmall Fewerthan10employees,orlessthan$2.5millioninannualsales. Small employees. Large 500ormoreemployees. 20

22 Forregulatorypurposes,meatpackersinNorthCarolinaaredividedintofourcategories CustomPlants,StatePlants,TA 11 Plants,andUSDAInspectedPlants.TheMeatandPoultry InspectionDivisionoftheNCDA&CSmaintainslistsofthemeatpackingfacilitiesthatfallinto thesecategories,andischargedwithensuringthattheplantssubjecttonorthcarolinastate inspectionproducesafe,wholesome,andproperlylabeledmeatandpoultryproducts (NCDA&CS,2009). Therearecurrentlyjustunderonehundredandninetyestablishmentsoperatingunder thejurisdictionofthencda&cs.ofthese,twenty onearecustomplants,seventy fourare StatePlants,andninetyareTAPlants.CustomPlantsaremeatpackingfacilitiesthatslaughter and/orprocessmeat,poultryandwildgameforprivateindividuals.productsproducedinthese facilitiescannotentercommerce.theyaremarked NOTFORRESALE andmustbereturned totheownerfortheirpersonaluse.somesmalltomid sizefarmersareabletosellproduct usingcustomplants,butmustdosobysellingtheirlivestockdirectlytoconsumerswhothen paytohavetheanimalsprocessed.customplantsareinspectedjustfourtimesperyear,and onlyforsanitationandproperlabelingofproduct. Incontrast,StatePlantsareinspecteddailyfordisease,sanitation,andproperlabelingof product.productsfromthesefacilitiescanbesoldanywherewithinthestateofnorthcarolina bearingalabelthatindicatestheywere"inspectedandpassedbyn.c.d.a".taplantsarealso inspecteddailyfordisease,sanitation,andproperlabelingofproduct.however,productsfrom thesefacilitiesbearalabelindicatinginspectionbytheusdaandmaybeshippedanywherein theunitedstatesorexportedtoforeigncountries.intermsofregulation,thereistechnically 11 TA referstothetalmadge AikenActof1962,alawpassedtohelpcoordinatestateandfederalfoodsafetyguidelines.Thislawallows trainedinspectorsthatarestateemployeestostaffmeatpackingplantswithusdainspectionprivileges. 21

23 nodifferencebetweenausdainspectedplant,ataplant,andastateplant onlywhoisdoing theinspection. 12 TAPlantsareinspectedtoUSDAstandards,butbystaffwhoareNCDA&CS employees.andncda&csstandardsforstateplantsareidenticaltousdastandards. Therefore,theprimarydifferencebetweenaStatePlantandTAPlantistheabilityto participateininterstatecommerce. 13 StatePlantsandTAPlantsmayalsoslaughterand/or processcustomexemptproductincludingwildgameifkeptseparatefrominspectedproducts. Inregardtosize,therearethreecategoriesofmeatpackersinNorthCarolina very small,small,andlarge.theusda sfoodsafetyinspectionservice(fsis)definesaverysmall packingplantasonewithfewerthan10employeesorlessthan$2.5millioninannualsales, andasmallpackingplantasonewith10 499employees(FSIS,1996).Allotherplantsare consideredtobelarge.oftheapproximatelyonehundredandninetyplantsinspectedbythe NCDA&CS,eightyareverysmallandtheremainderaresmall. Clearly,tobeaviablelinkcapableofhelpingsmalltomid sizefarmerstoaccesslocal marketsaplanthastobeinspectedregularlybyeithertheusdaorthencda&cs.however, notallplantsthatarepositionedtoservethesefarmersarewillingto.largepackersare generallyverticallyintegratedoperationsthatworkwithaselectsetoflargefarmersunder contract,maintainingcontroloverthesupplyofanimalstheyprocess.mid levelpackerswork withintheirownmarketniche,andforthemostparttheirbusinessmodelsinvolvecontractual agreementswithlargefarmsorotherwiseconnectthemtocommoditymarketsforlivestock. Evensmallpackerscanbehesitanttoworkwithsmalltomid sizefarmers,preferringcontracts 12 Itisimportanttonotethatnotallstateshavestateinspectionprograms,andthattheTalmadge Aikenactdoesnotapplyinallstates.Only 27stategovernmentsruntheirownmeatandpoultryinspectionprograms(MPIs).AndtheTalmadge AikenactallowstheUSDAtocontract withstateagencyinspectorstoconductfederalinspectionactivitiesinonly10states.statempisagreetomeetstandards atleastequalto thoseofthefederalstandardssetforthinthefederalmeatinspectionact(fsis,2009). 13 The2008FarmBillproposedinterstatecommerceforstate inspectedplants.asofmarch2009,thencda&cshadnotyetreceivedany requeststoadoptthisproposedchange. 22

24 withlocalbrokersasawayofinsuringaconsistentflowofproductthroughtheirfacilities. However,asnotedearlier,thereareapproximatelytwentysmallmeatpackersinNorthCarolina whohaveidentifiedthemselvesaswillingtoservesmalltomid sizefarmersseekingaccessto localmarkets(lanier,2007). SmallmeatpackersinNorthCarolinaaremostlyfamilybusinessesthathavebeenin operationforseveraldecades.theyhavewitnessedfirsthandtheconsolidationinu.s. meatpacking,andhavehadtochangetheirbusinessstrategieswiththechanginglandscapeof livestockproduction.whereasmostoncehadviablebusinessmodelsworkingonlywithsmall tomid sizefarmers,theynowfindthemselvesactinglargelyasimportantgapfillersforthe state slargescalecontractfarmers,buyingandcreatingmarketsforcullpigs 14,andproviding servicestoregionalbrokersoperatingwithincommoditymarketsforlivestock.duetothe historiclocationoftheirinputs,themajorityofnorthcarolina ssmallmeatpackersarelocated inruralareas.veryfewareincloseproximitytonorthcarolina spopulationcenters.themap includedinappendixbindicatesthelocationsofthetwentysmallmeatpackersonwhomthis researchprojectisfocused.thesepackersarespreadfairlyevenlythroughoutthestate, thoughsomewhatconcentratedinthecentralandeasternregions.allarelocatedinrural communities. ThereareanumberofinstitutionsthatworktosupportNorthCarolina smeatpacking sector.thetablethatfollowsidentifiestheseinstitutionsandtheirrespectivesupportroles. 14 Cullpigsor slowgrowers areanimalsraisedbylargecontractfarmersthatdonotmeetthespecificationssetbylargepackingcompanies. 23

25 Table5:InstitutionsthatSupportNC smeatpackingsector Institution SupportRole NCDA&CS smeatandpoultryinspectiondivision NCSU sdepartmentoffoodscience NorthCarolinaMeatProcessorsAssociation NCChoices Providestechnicalassistancewith: preparationofplansandspecificationsfornewplantsor plantupgrades preparationofhaccpplans requirementsforproductlabels requirementsforequipmentandutensils identificationofequipmentsuppliers StaffsaMeatExtensionSpecialistwhoassistswith: interpretationofregulations resolutionofcomplianceproblems productdevelopment Establishesacollectivevoiceforsmallandverysmallpackers, andfacilitatescommunicationandeducationwithinthe industry. Connectsverysmallpackerstotechnicaltrainingand collaborativebusinessopportunities. IthasalreadybeennotedthattheMeatandPoultryInspectionDivisionoftheNCDA&CS isactivelyengagedwiththestate smeatpackers.theagencyenforcesstateandfederallawsto ensurethatmeatandpoultryplantssubjecttonorthcarolinastateinspectionproducesafe, wholesome,andproperlylabeledmeatandpoultryproducts.inaddition,thencda&cs providesarangeoftechnicalassistancetothesector,particularlytosmallandverysmall packerswithlimitedresources.theyassistwiththepreparationofplansandspecificationsfor newplantsorplantupgrades,andwiththedevelopmentofhaccpplans.theyalsoprovide educationandtrainingonrequirementsforproductlabelsandprocessingequipmentand utensils,andmaintainlistsofequipmentsuppliers.seniormanagerswithinthemeatand PoultryInspectionDivisiondoconsiderableoutreachwithavarietyofagri business stakeholdersinthestate.andtheyhavedemonstratedsupportfordevelopingregulatoryand othersolutionsthatareresponsivetotheneedsofsmalltomid sizefarmersandlocalfood systementerprises. 24

26 NorthCarolinaStateUniversity s(ncsu)departmentoffoodscienceishometoameat ExtensionSpecialistwhoprovidesextensivetechnicalassistancetothesector.Thisindividual worksregularlywithpackersofallsizes,helpingwithinterpretationofregulations,and providingscientificbackingandsupportingdocumentationfortheresolutionofcompliance problemsencountered.healsoassistspackerswithnewproductdevelopment.inaddition, heworkswithbothstateandfederalregulators,educatingthemaboutkeyconceptsinfood sciencesothattheycanbetterinterpretandenforceregulations. TheNorthCarolinaMeatProcessorsAssociation(NCMPA)isanon profitthatwas establishedtopromote,develop,andmaintaintheadvancementofthestate smeatprocessing industry.theirmembershipiscomprisedmostlyofpackersinthemid levelniche,thougha fewsmallpackersareinvolved,andcloserelationshipsaremaintainedwithsomeofthelarge packersinthestate.meatpackingisoneofthemosthighlyregulatedindustries.assuch,the organizationisimportanttoestablishingacollectivevoiceforsomeofthestate slesspowerful packersandtofacilitatingcommunicationwiththencda&cs,thenorthcarolinaagribusiness Council,andimportantindustryalliessuchastheNationalRenderersAssociation.NCMPA holdstwoeducationalmeetingsannually,duringwhichmembersconvenetodiscussthemost pressingissuesfacingthesector. NCChoices,aprojectoftheCenterforEnvironmentalFarmingSystems(CEFS) 15,is activelyworkingtotransformthelocalmeatsvaluechaininnorthcarolinaintoonethat equitablyandeffectivelyservessmalltomid sizefarmers,small scaleprocessors,and consumers.theorganization soverarchingmissionistoincreaseconsumeraccesstohealthy 15 CEFSwasestablishedin1994byNorthCarolinaStateUniversity,NorthCarolinaA&TUniversity,andtheNorthCarolinaDepartmentof AgricultureandConsumerServices.Theorganization sstatedmissionistodevelopandpromotefoodandfarmingsystemsthatprotectthe environment,strengthenlocalcommunities,andprovideeconomicopportunitiesinnorthcarolinaandbeyond(cefs,2008). 25

27 foodchoicesraisedorgrownlocallyandsustainably,providenewmarketopportunitiesfor smallandmid sizedfarmers,andsupportthegrowthoflocalfoodeconomies.inordertofulfill thismission,ncchoiceshasdoneextensiveoutreachtosmallmeatpackersinnorthcarolina. Theyrecentlyinitiatedapilotprojectinvolvingthestate slargestnaturalfoodsco opandtwo smallmeatpackers.thisprojecthasresultedinconsistentweeklysalesoflocalbeefandpork thatisproducedsustainablyonfamilyfarms.ncchoicesintendstoscaleupthispilot,andto playanincreasingroleinprovidingsmallmeatpackerswithtechnicaltrainingandcollaborative businessopportunities. 26

28 Chapter4:SurveyandInterviewFindings Aprimaryobjectiveofthisresearchprojecthasbeentoidentifythechallengesfacedbya specificsetofsmallmeatpackersinnorthcarolina.anothergoalhasbeentoassesslocal attitudesandinterestswithinthesectorinregardtoservingsmalltomid sizefarmersseeking accesstolocalmarkets.inordertomeettheseobjectives,asurveywasadministeredtotheset oftwentysmallmeatpackersidentifiedinthemostrecentlypublished IndependentFarmers DirectoryofSlaughterFacilitiesinNorthCarolina.Thesepackerswereselectedasthefocusof thisresearchprojectbecausetheirexpressedinterestinworkingwithsmalltomid sizefarmers makestheirperspectiveaspotentiallinksinadynamiclocalmeatsvaluechainparticularly valuable. Thesurveydistributedtothesesmallmeatpackersasksasetofquestionstocapture variousaspectsoftheirbusinessoperations,includingwhatservicestheyprovide,thespecies andvolumeofanimalscurrentlymovingthroughtheirfacility,andtheircapacitytohandle increasedinput.respondentsarealsoaskedabouttheirworkforce,theirregulatorystatus,and thetypesoftechnicalassistanceorsupporttheyhaveorwouldliketoreceive.inaddition,a numberofopen endedquestionsareincludedinthesurvey,askingrespondentstoidentify theirbiggestchallengesandopportunities,andtoindicatetheirlevelofinterestincollaborating withothersmallmeatpackers.thefulltextofthissurveyisincludedinappendixa. InordertoensureahighresponserateIinitiallycontactedalltwentytargetrespondents byphone,explainingwhoiwasandthepurposeofmyresearch.onephonenumberhadbeen disconnected,andanotherwasneveranswered.fourteenofthetargetrespondentsreached wereaskediftheywouldbewillingtocompleteasurveyinsupportofmywork.theywere 27

29 toldtheycouldcompletethesurveyoverthephone,electronically,orhaveitmailedtothem. Noneofthesepotentialrespondentswerewillingtocompletethesurveyoverthephone.Only threewerecapableoffillingitoutelectronically.sixaskedtohaveitmailedtothem,andfive askedtohaveitfaxedtothem.ofthethreesurveysdistributedelectronicallyonlyonewas completed.ofthesixsurveysthatwer edwithself addressedreturnenvelops,twowere returned.noresponseswerereceivedtothesurveysthatwerefaxed. Fourofthetargetrespondentsreachedwereaskediftheywerewillingtobeinterviewed inpersonattheirfacility.allfourindicatedthattheywereandinterviewswerescheduledat theirconvenience.thesefourtargetsforinpersoninterviewswerenotchosenrandomly,but selectedasarepresentativesampleofthediversityofsmallmeatpackersinthestatethatare currentlyworkingwithsmalltomid sizefarmers.duringtheseinterviewssurveyquestions wereasked,toursofmeatpackingfacilitiesweregiven,andindepthdiscussionswerehadwith facilityownersinregardtothehistoryandoperationsoftheirbusiness. Thenetresultofthesecombinedeffortsisthatsevenoftheeighteentargetrespondents reachedcompletedthesurvey,leadingtoatotalresponserateof39%.concurrentwiththese surveysandinterviews,formalandinformalinterviewswereconductedwithasetof institutionalandotherstakeholderswhohaveregularinteractionswithnorthcarolina ssmall meatpackers.ispokewithanumberofindividualswhoprovidetechnicalandotherforms assistancetothesector.ialsohadtheopportunitytotalktoonefarmerwhoregularlyworks withthesepackerstogetmeatproductstolocalmarkets,andtooneretailerwhoiscurrently engagedinapilotprojectwithtwosmallmeatpackersinthestate.inaddition,duringthe courseofthisresearchprojectiwasinvitedtoattendthenorthcarolinameatprocessors 28

30 Association smidwintereducationalmeeting.doingsoprovidedvaluableperspectiveon industrydynamicsandgavemeawindowintosomeofthemosttimelyissuesfacingsmall meatpackers. Usingtheresearchmethodsidentifiedabove,Iwasabletomakeasetoffindingsin regardtotherangeandseverityofchallengesfacedbythesetofsmallmeatpackersinnorth Carolinawhoarewillingandabletoworkwiththestate ssmalltomid sizefarmers.belowi sharethesefindingsinthehopethattheywillhelpplannersandothersbegintoidentifythe currentbarriersandchallengestointegratingthesesmallmeatpackersasmoreviablelinksin thestate slocalmeatsvaluechain. WorkingWithSmalltoMid SizeFarmers Consideringthenumberofsmalltomid sizefarmersproducinglivestockinnorth Carolina,andtheincreasingnumbersoffarmer smarketsandotherdirectsalesoutlets availabletothem,itwasnotsurprisingtolearnthatmostsurveyrespondentsdosomelevelof businesswiththesefarmers.ifoundthatonerespondentwasprimarilyorientedtoward servingsmalltomid sizefarmers.heisconsideredthego toprocessorforanumberoffarmers inthepiedmontregionofthestatepracticingsustainableagriculture.otherswereonly workingwiththesefarmersasasmallbutconsistentportionoftheirbusiness.theremainder processanimalsforthiscustomerbaseonlyintermittently.itwasunclearexactlyhowmuchof theproductresultingfromtheseco packingarrangementswouldqualifyassustainableorniche meatproducts.twosurveyrespondentsarecurrentlyparticipatinginthencchoicespilot notedearlier,supplyingthestate slargestnaturalfoodsco opwithweeklydeliveriesoflocal 29

31 beefandporkthatisproducedsustainablyonfamilyfarms.oneofthesesamerespondents alsoprocessesweeklyordersofbeefforthewholefoodsmarketlocatedinchapelhill. Whentalkingwithsomeindustrystakeholdersthereisanunspokenbutpowerful assumptionthatmostprocessorsprefernottoservesmalltomid sizefarmersseekingaccess tolocalmarkets.yet,whenaskedwhattheirbiggestchallengesweretoworkingwithsmallto mid sizefarmersthemajorityofrespondentsindicatedthatthechallengeswereactuallyquite limited.therewasageneralconsensusthatfarmersoftendon tunderstandmeatprocessing, andthattheythereforehavespecialrequeststhatcanbedifficulttoaccommodate.butmost processorswithwhomiengagedseemedtoeasilyhandlethisbyprovidingalittlecustomer education.threeoftheprocessorsthatiintervieweddescribedusingacustomerservice orientedbusinessmodel,indicatingthatitwasacompetitiveadvantageforthemtobe attentivetofarmers specialrequests.theysawitastheirjobtoeducatefarmersabouthowto getthemostprofitoutoftheiranimals,andenjoyedadvisingthemonthebestwaytofully utilizetheanimal.tworespondentsindicatedthatinconsistentnumbersofanimalscoming fromsmalltomid sizefarmerswasaproblem.however,noneoftheprocessorswho respondedtothesurveyhaveminimumprocessingrequirementsfortheircustomers. OtherCustomers&Capacity Inadditiontoperformingfee for serviceslaughterandprocessingforsmalltomid size farmers,mostrespondentsperformthesesameservicesseasonallyforhunters,andsomedoso forregionalbrokersanddistributorsparticipatingincommoditymarkets.ifoundthatall surveyrespondentsdomorethanjustfee for servicework.alloftheirbusinessmodelsinclude 30

32 on siteretailoperations.inaddition,fiveoutofsevenrespondentssupplyproductto restaurantsincloseproximitytotheirfacility,andtwooutofsevensupplylocalretailers.three outofsevenrespondentsdistributeproductsundertheirownlabelintowholesalemarkets. Manyoftheanimalssourcedfortheseretailandwholesaleopportunitiesarecullpigsorcows. Asnotedpreviously,thesepackersfillanimportantgapforlargecontractfarmersunableto movetheir slowgrowers intraditionalcommoditymarkets.thesepackersalsosource livestockatlocalauctions. Whenaskedaboutthespeciesofanimalsbeingprocessedintheirfacilities,allseven surveyrespondentsindicatedthattheyprocessbeef,andsixofthesevenprocesspork.the onerespondentwhodoesnotprocessporkisahalalfacility,andthusdoesnotdosofor culturalreasons.onlyonesurveyrespondentindicatedthattheyprocesspoultry.interviews withindustrystakeholdersconfirmthatthisprocessorisindeedtheonlysmallmeatpacking facilityinthestateavailabletosmallandmid sizedpoultryfarmers.heiscapableofhandling upto100,000birdsannually.capacityforbeefandporkprocessorsrangedconsiderablybased uponboththesizeoftheirfacilityandthesizeoftheirworkforce.thesmallestfacilitieshandle asfewasonecoweachweekandfourhogsperweek,whilethelargesthandleuptoseventy cowsperweekandonehundredhogsperweek.whensurveyrespondentswereaskedifthey couldhandleincreasedinputtotheirfacilitythreesaidthattheycould,andtheremainder indicatedthattheycouldiftheyimplementchangessuchashiringmoreworkersorupdating theirequipment. 31

33 Capabilities Allofthepackersthatweretargetedforthisstudyarecapableofslaughteringlivestock andbreakingdowntheresultingcarcassesintoprimals,thebasicsectionsfromwhichsteaks, porkchops,andotherproductsarecut. Mostareabletoproducefreshcutsofmeatandto performverybasicvalue addedservicessuchasgrindinganddry aging.however,veryfew performtherangeofvalue addedservicesthatfarmersdesire.ofthosewhorespondedtothe survey,onlyoneiscurrentlycapableofprovidingafullrangeofvalue addedservicesincluding curing,smoking,brining,salting,andsausagemaking.industrystakeholdersverifythatthis particularpackeriscurrentlytheonlysmallmeatpackerworkingwithsmalltomid sizefarmers whoiscapableofproducinghighmargin,value addedproductssuchasbaconandham. Unfortunately,thispackerislocatedfarawayfromboththestate spopulationcentersandthe majorityofsmalltomid sizefarmerspracticingsustainableagriculture.thissituationwillsoon change,asthegoldenleaffoundationrecentlyawardedgrantfundingthatwillbeusedto considerablyincreasevalue addedprocessingcapabilitiesatafacilitythatisincloseproximity toanumberoffarmersorientedtowardslocalnichemarkets. Value addedprocessingequipmentisnottheonlykindofequipmentimportantfor helpingfarmersprofitablyaccesslocalmarkets.smallmeatpackersmustalsopossesstheright kindsofpackagingandlabelingtechnologies.allsurveyrespondentsindicatedthatthey providevacuumsealpackaging,andmanyarecapableofprovidinglabelingthatindicatesthe farmoforigin.thisformofpackagingistheminimumrequiredforfarmerstosatisfy consumersindirectmarketssuchasfarmer smarketsandlocalmeatbuyingclubs. Interestingly,noneofthesurveyrespondentsindicatedthattheyarecapableofprovidingwhat 32