Survival of the fittest meat processing plant

The pandemic highlighted the vulnerabilities of large meat processing plants in the US with shutdowns and staff shortages leading to reductions in capacity by about 40% and higher meat prices. The government is now introducing new initiatives aimed at increasing meat processing capacity and industry resilience which are often aimed at small and medium-sized plants — but is this the best use of such funding?

A new study from the University of Illinois Urbana-Champaign has looked at meat processing plants across the US to identify characteristics associated with meat processing plant survival.

According to co-author of the study Sarah Low, the main goal of the study was to understand what factors are associated with meat processing plant survival for the benefit of policymakers who want to invest in these plants. The results of the study also provide some interesting insights into optimum location and size of meat processing plants.

The researchers analysed data from 1997 to 2020 for US non-poultry meat processors with more than five employees (poultry was excluded due to a unique industry structure). The analysis included 7839 plants, focusing on plant-level characteristics, local context and concentration.

The study showed the majority of meat processing plants are located in the Eastern half of the US, although small and medium-sized plants are more dispersed throughout the states. Many plants are clustered around major cities in proximity to large customer bases and available workforce — in fact, 86% of plants are located in metro or metro-adjacent counties.

The researchers found the average plant survived 9.7 years and 62% of the plants failed at some point during the study period, with small and medium-sized plants more likely to fail than large plants.

“We did find a difference in factors associated with survival for the small and medium plants, compared to the large plants, as well as for urban versus rural plants. For small plants, survival was closely related to business diversification. If they added a retail or wholesale meat market, they were more likely to survive,” explained Catherine Isley, lead author on the study.

“For larger plants, we found that local context, including workforce-related variables, was more closely related to plant survival. We didn’t find much evidence for the impact of concentration, except for large non-metro plants, where concentration was related to increased survival. This finding suggests that policies aiming to support small and medium meat processors by breaking up larger processors might negatively impact output and industry capacity,” Isley said.

If plants are spread out across the country, then workers would have to be spread out as well, Low noted. “There are locations in Nebraska or Kansas where whole communities are set up to serve immigrant workers. If you want to break up these big processors and have plants in small towns, who’s going to work there? We currently have a shortage of labour nationwide, and many plants rely on an immigrant workforce,” Low said.

Policy initiatives for large plants need to address labour availability issues and support the labour force effectively, Low and Isley pointed out. This could include, for example, increasing the number of visas for immigrant workers, training new workers, improving working conditions and investing in research and development to automate processes.

For small and medium-sized plants, there is a different set of policy implications.

“To allocate federal or state dollars in the most efficient way, it would make sense to support plants that are diversified and more likely to survive,” Isley said. “But on the flip side, the goal might be to support plants that are more likely to fail, because otherwise those local communities wouldn’t have a plant. However, this approach would only work in areas where the market can support value-added niche products. There’s not necessarily a one-size-fits-all solution for small plants.”

The researchers also found that small plants managed by women in rural areas are less likely to survive. Thus, an additional target for investments could be technical assistance for very small women-operated plants in rural areas, including entrepreneurial training and ecosystem building.

Sarah Low (left), professor and head of the Department of Agricultural and Consumer Economics, part of the College of Agricultural, Consumer and Environmental Sciences at Illinois, and Catherine Isley, senior business analyst at The Context Network and lead author on the study. Image credit: University of Illinois.

Top image credit: iStock.com/JackF