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Chick-News.com Poultry Industry News, Comments and more by Simon M. Shane

National Chicken Council Responds to USDA Announcement to Expand Processing Capacity

09/06/2021

The American Rescue Plan involving expenditure of $1.9 trillion includes $500 million to expand meat and poultry processing capacity. According to Secretary of Agriculture, Tom Vilsack, "the COVID pandemic led to massive disruption for growers, food workers and consumers alike".  He added, "COVID exposed the food system that was rigid, consolidated and fragile".  The comments by Secretary Vilsack are valid only with respect to the red meat sector that experienced noteworthy reductions in processing capacity due to COVID infection among plant workers during March to May of 2020.

 

There were no evident shortages in the supply of chicken as only a few complexes were affected that were limited to a short period during April and May of 2020.  There are currently over 150 plants processing chicken with an average throughput of 1.1 million birds per week.  The largest of plants processing 2.5 million birds per week each represent 1.5 percent of total weekly production.  In contrast large red-meat plants such as the Holcomb KS. beef plant operated by Tyson Foods or the Tar Heel, NC. hog plant operated by Smithfield Foods are responsible for up to 7 percent of the national production of their respective species.  Four major companies are responsible for 80 percent of red meat production, representing extreme consolidation.  In the U.S., the top ten broiler companies collectively represent about 75 percent of broiler output by live weight and also dispersed over many complexes in multiple states.

 

The broiler industry was active in implementing CDC recommendations to prevent transmission of COVID in plants as evidenced by the relatively low rates of transmission recorded, compared to the red meat sector.  Major broiler integrators were proactive in implementing health screening with paid quarantine and using of all available resources to protect workers from infection introducing vaccination as soon as it was available.

 

In their analysis of impacts from COVID, the NCC pointed out regulatory restraints including specific labeling requirements that prevented products to be redirected from food service to supply unprecedented retail demand.  Other problems experienced by producers included a shortage of skilled labor, truck drivers and inconsistency in USDA inspection.  All integrators honored contracts with growers. The major disruption in the chain of production of both hogs and beef did not occur in the broiler industry due to the higher level of integration and geographic dispersal of complexes. 

 

The National Chicken Council suggests that the USDA consider increasing cold storage capacity and expanding the long-haul trucking fleet to eliminate bottlenecks in the supply chain.  The need to expand access to credit for small businesses was emphasized by the NCC.

 

The USDA initiative in expanding meat and poultry processing capacity appears to favor small-scale local slaughter of beef and hogs.  It is apparent the USDA is involved in an economic exercise counter to efficiency and sustainability as expressed by Secretary Vilsack "to shift the balance of power back to the people, USDA will invest in building more, better and fairer markets for producers and consumers alike".

 

A proliferation of small-scale broiler-processing plants will not in any way contribute to greater food security in the chicken industry. Obvious restraints will exist related to the supply of live birds or the ability of small companies to implement effective marketing programs due to inadequate scale and efficiency. Funding “small and local,” is a preoccupation of Secretary Vilsack and his Department. Funding small plants is in accordance with his concept of reforming agriculture and creating an approach to food production opposing scale of operation. The chicken industry has evolved over 70 years to achieve the current level of integration, consolidation and efficiency reflected in low shelf prices. Dynamic and fair competition among broiler producers coupled with investment in technology, personnel and equipment is reflected in lower prices at the checkout counter.

 

Why revert to a model that was rendered obsolete by macroeconomic forces to satisfy either altruistic aspirations or political expediency? We have been there and we progressed to a more productive industry, beneficial to contractors, shareholders, suppliers and consumers as joint stakeholders. The USDA is urged not to expend public funds on Quixotic schemes to reinvent the chicken industry. While it is acknowledged that there are problems in the red meat sector, with respect to the chicken industry Secretary Vilsack would be well advised to follow the adage "if it's not broken don’t try and fix it".


 
Copyright © 2021 Simon M. Shane