USDA Rural Development seeks to build food supply chain capacity

“We know the beef processing industry is pretty consolidated by big companies,” Frescoln said. “So what we’re looking at is how can we increase capacity? How can we get a more reliable supply chain? »

Eligible uses for the loan guarantee program may include business conversion, expansion,

repair, modernization or development activities such as:

• The purchase and development of land, buildings and associated infrastructure for commercial or industrial properties.

• Purchase and installation of machinery and equipment, supplies or inventory.

• Debt refinancing when such refinancing improves cash flow and creates jobs.

• Acquisitions of businesses and industries when the loan makes it possible to maintain commercial activities and create or safeguard jobs.

The program offers more favorable terms to potential borrowers, including an increased borrowing limit of $40 million per project from the usual USDA limit of $25 million, and waives loan origination fees from the USDA. It is available for urban businesses as well as rural businesses, “so if you have a cold storage [business] around Des Moines or Cedar Rapids, for example, they would qualify,” Frescoln said.

Frescoln said the loan guarantees will allow lenders to offer longer repayment periods and therefore smaller monthly payments, which will help these small businesses stretch their cash flow, he said.

“Right now, we are seeing interest from organizations such as producer groups who are working on [opening] a processing plant,” Frescoln said. “We’re also getting a lot of activity now bubbling up from local meat lockers. So I think we’re going to see some of the bigger projects, but we’re also reaching out and cheering on the smaller ones.

Dan Julin, co-owner of Arcadia Meats in Carroll County, said he hopes the program can help provide timely financing for the planned expansion of the family business, which has been in business for 40 years.

Historically, “our industry has had a very difficult time getting loans,” he said. “So that could be a very positive aspect if it’s properly integrated.” He and other small meat producers in Iowa have been frustrated by delays in receiving approvals for US Small Business Administration loans; he has been waiting eight months for an SBA refinancing application. “If the USDA takes six, eight, 12 months, that puts us even further behind,” Julin said.

“I hope [USDA Rural Development] can move forward quickly,” he said. “When you’re waiting for a decision, you’re just hoping to get materials and a contractor to build it, because they often can’t wait.”

Therese Greenfield, USDA’s state director of rural development for Iowa said the agency is ready to handle potential demand for the new program.

“We have a full staff here and are ready to work with processors, lenders and communities – that’s what we do,” she said. “Last year we invested about $700 million in Iowa – that’s a pretty big amount, and we did it all during COVID. And so I think our teams are ready to go, both here locally nationally, to implement the programme.

Greenfield said project proposals she heard about included mobile meat processing plants to serve rural communities. “There are just a lot of creative ways to do it,” she said. “We can finance equipment in a medium-sized facility to increase their production capacity so they can add [new product] lines or packages.

As part of this effort, USDA Rural Development recently launched its website, which offers comprehensive training for lenders and detailed information for processors.

“My advice: if you want to expand the supply chain, whether through processing or manufacturing, or food storage and distribution, contact your lender or contact us here at USDA Rural Development,” Greenfield mentioned.” And together, we’ll help you navigate the process, prepare an eligible application, and hopefully build our capacity right here in Iowa.

ISU’s Swenson: problem should have been solved 30 years ago

David SwensonA longtime economics professor at Iowa State University, believes the Biden administration’s current efforts to expand the meat supply chain are a story of “too little, too late.”

“I don’t think the policies and funding the president has proposed so far will seriously address the incredible market power that large processors possess,” Swenson said in an email. “All of this should have been disrupted in the late 1980s, when I was working at [the Iowa Department of Agriculture and Land Stewardship] and we were screaming about it then.

Once horizontal integration became so desirable, first for poultry, then for pork, “people basically turned a blind eye,” Swenson wrote. “I am of the opinion that the entire poultry, pork and meat processing industry needs to be thoroughly investigated, and whether laws need to be written or changed to break their power to market, then it has to be done.”

In response to Swenson’s position, Greenfield acknowledged the “huge consolidation” within the meat processing industry.

“The Big Four meat processors control about 80% of the market, and now we have a president who not only recognizes that, but is investing resources and effort to address these food system challenges that date back decades. … Now is the time for these investments – for medium-sized and more local processors to level the playing field.”

A 2011 study by Swenson examined the potential economic impact that increasing the capacity of small-scale meat, poultry, and dairy producers could have on the state’s economy. The study found that 56% of Iowa meat processing establishments had less than 10

paid employees in 2008. The study concluded that “maintaining the viability of small processors has a noticeable impact on employment in areas of the state that are not dominated by Iowa’s major processors.”

However, the study cautioned that because the state “fully satisfies its residential demands for meat, poultry, and dairy products through on-site production and processing,” regional gains in new productivity in an area could occur at the expense of another region of the State.

An update Swenson conducted on the study in 2018 found that a $1 million increase in output from small-scale meat processors would generate more than double total wages and nearly three times the number of jobs. per processor – 11.2 jobs per location – compared to an average increase. four jobs for a large meat processor to add so much extra production.

The Iowa Department of Agriculture and Land Stewardship was at the time considering a proposal to grant exemptions to certain Iowa meat processors from federal inspections so they could sell to buyers. outside the state. In May 2020, the USDA approved Iowa’s entry into the Interstate Cooperative Shipping Program, which allows small state-inspected meat lockers to apply to sell their products in other states. .

Small producers received a boost in June 2021, when Governor Kim Reynolds signed into law the Butchery Innovation and Revitalization Fund Act. The law allocated $750,000 to the Iowa Economic Development Authority to provide financial assistance in the form of business grants for projects related to small-scale meat processing, licensed custom lockers, and mobile slaughter units. At the end of January, the IEDA awarded grants to 15 small producers for a total of $725,250.

About Keneth T. Graves

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