Making meat local: $32 million flows to South Dakota processors since ’21 - Over 100 projects have received state and federal grants
Wed, 10/18/2023 - 12:13pm admin
Joshua Haiar, SD Searchlight
Drive any direction in South Dakota, and it won’t take long to find cattle. The same can’t always be said for South Dakota-raised beef products, but that’s changing.
After the COVID-19 pandemic exposed problems with large meatpacking monopolies, entrepreneurs are capitalizing on government grants to put more local links in South Dakota’s meat supply chain.
Randy Gruenwald, owner of Dakota Butcher, is one of the people leading the charge.
Founded in 2009 in Clark, Dakota Butcher has expanded to five additional locations in Madison, Pierre, Rapid City and two in Watertown.
“We are hoping to get a location in Sioux Falls next,” said Gruenwald, South Dakota’s 2020 Small Business Person of the Year.
He slaughters and processes cattle at his Clark location, but he doesn’t have enough capacity there to supply all of his store shelves. So he buys meat from regional processors to supply the other locations.
Gruenwald hopes that will soon change. He was approved for a $200,000 federal grant to expand the Clark location, which would allow him to process meat that can be sold across his network.
Dakota Butcher’s success as a small- to mid-sized meat processor is a rarity in an industry dominated by global conglomerates. The U.S. Department of Agriculture reports that four companies – Tyson, JBS, Cargill and Marfrig – control 85% of beef processing.
During the height of the pandemic, production slowed at some major meatpacking plants when workers got sick. Grocery stores ran low on beef, and prices shot up. When consumers went looking for local lockers and processors to fill the gap, there weren’t enough to meet the need.
Gruenwald is happy to be filling part of that void.
“Ranchers love it,” he said. “They like seeing more options out there.”
State and federal grants
In 2021, Gov. Kristi Noem announced $5 million in federal COVID-19 relief funds would be allocated to South Dakota meat processing. The state has paid $4.98 million in grants to 95 projects since the announcement. Grants ranged from about $9,500 to $200,000.
About $1.64 million went to 12 new facilities spread across the state.
The remaining $3.34 million went to 83 existing facilities, like Dakota Butcher, which received about $39,000 for a freezer expansion in Clark and about $43,000 for trucks and equipment in Watertown.
The federal government has also issued grants.
The American Rescue Plan Act of 2021 allocated $1 billion to help expand the capacity of small and mid-sized meat and poultry processors around the nation, through several programs. About $27 million has been awarded to South Dakota so far.
The bipartisan Butcher Block Act – which Rep. Dusty Johnson, R-South Dakota, sponsored – was implemented as part of the American Rescue Plan Act’s $1 billion allocation. The act proposed grants for new and expanding operations.
“With the Butcher Block Act, we had a bipartisan, very popular concept that the administration liked,” Johnson said. “Congress is not the most efficient creature that’s ever existed, and so there are times when the administration likes where we are headed, and they will implement a program administratively.”
Johnson said the spending is designed to create a freer market in the highly consolidated, global beef industry. He said the alternative is forcibly breaking up the biggest packers and processors, but “it’s hard to know how to do that when these are global enterprises.”
Troy Hadrick is a Faulkton-area rancher who wants to open a small processing plant by 2025. He was awarded $2.2 million from the federal program.
Hadrick has found demand for his beef among the restaurant community in Sioux Falls and is already supplying some meat to Vanguard Hospitality.
“They were looking for a quality, local product,” Hadrick said.
His ranch paid for a feasibility study, which found that a $13.5 million, 25-cattle-per-day facility would be ideal. Then came the federal grant application process – which he said was over 400 pages.
“About 200 of which were to ensure minimal impact on the environment,” Hadrick said.
Wall Meat Processing received a $3.3 million grant for a new facility in New Underwood capable of processing 4,000 livestock per year, including cows, pigs, sheep and bison.
A sub-program for product inspection awarded grants including another $185,430 to Wall Meat Processing, $197,209 to a Pine Ridge Reservation bison startup, and $200,000 to Bad River Jerky in Chamberlain.
Another sub-program awarded grants for revolving loan funds to serve processors who want to start up or expand their processing capacity. The Farmers Union Foundation, which represents South Dakota and other neighboring states, received $834,000. And in South Dakota specifically, GROW South Dakota received $8.13 million, Planning & Development District III received $4.48 million, and the West River Foundation received $6.99 million.
Up to $50 million is allocated to tribal nations for projects related to meat from animals traditionally harvested by Native Americans, such as bison, reindeer or salmon. The USDA has not yet announced which tribal nations have been awarded grants.
Ranchers are excited
While more small and mid-sized processors “don’t have much of an effect on the overall supply chain,” more of them are great news for the state’s ranchers, according to Eric Jennings, a Spearfish rancher and president of the South Dakota Cattlemen’s Association.
“Because it’s an opportunity to utilize these plants for direct sales, which can add value to their product,” Jennings said. He said that cuts out middlemen.
Historically, South Dakota ranchers have faced challenges in getting a fair price for their livestock, often needing to work through large processors and retailers that dominate the industry, he explained.
In 1977, the largest four beef-packing firms controlled just 25% of the market, compared to about 85% today. And as recently as 1997, Americans bought 21% of their groceries from the then-four largest retailers. In 2019, the top four chains sold 43% of all groceries, with Walmart alone commanding a quarter of the market.
Such consolidation tends to hurt ranchers at the bottom of the supply chain. In 1990, ranchers received 59 cents of each dollar spent on beef while retailers received 33 cents; today those figures are 38 cents and 51 cents, respectively.
In addition to helping ranchers financially, localizing the meat supply chain has ancillary benefits – like shorter distances to transport cattle, resulting in reduced greenhouse gas emissions; new facilities creating local jobs; and higher quality meat for South Dakotans.
“The South Dakota cattle that end up going through those large processing facilities, the high-quality meat goes to the coast or to the hotel and restaurant trade,” Jennings said. “And so, buying locally, you’re able to capture that high quality, local beef before it leaves the state.”
As funding flows to processors, the Governor’s Office of Economic Development is pursuing a feasibility study to assess the viability of small meatpacking projects.
The department will hire an independent consultant for the study, focusing on areas such as available cattle supply, sales and marketing, the economics of processing, and workforce availability.
“Since meatpacking projects have become increasingly common in recent years, and feasibility concerns should be addressed in a fair and honest way, GOED wants to determine (1) how many of these projects the regional economy can sustain and (2) what the impact will be on established companies,” said department spokesperson Missy Sinner in an emailed statement.
Sinner said the state needs to know whether, for example, one or two new projects getting started will end up putting three or more existing companies out of business.
“It can be a fine line between promoting healthy industry competition and hurting an industry, and GOED wants to find where that line is so that South Dakota, farmers, ranchers, and consumers benefit,” Sinner said.
The state’s U.S. senators are also involved in efforts to strengthen the meat supply chain.
Mike Rounds is sponsoring and John Thune is co-sponsoring a bill that would allow meat and poultry products inspected by state programs to be sold across state line.
Rounds said in a press release that while South Dakota producers raise some of the highest-quality meat and poultry in the world, state-inspected products are limited to markets within the state “even though they are required to go through inspection at a state facility that meets or exceeds federal inspection standards.”
“This is a disadvantage to producers and consumers alike,” Rounds said. “Our bipartisan bill would allow these high-quality products that pass federally-equivalent state inspection standards to be sold across state lines, which would open up new markets for our producers and give consumers more choices at the grocery store.”