What factors are important for survival?

URBANA, Ill. — Meat processing plants in the US have attracted a great deal of public attention in recent years, often focusing on production and labor issues. The COVID-19 pandemic underlined the vulnerability of large and concentrated factories, as massive closures led to reduced production and higher meat prices for consumers.

Policymakers have launched state and federal initiatives to increase meat processing capacity and industry resilience, often supporting small and medium-sized factories. But little research exists to determine what factors make plants more likely to succeed. A new study from University of Illinois Urbana-Champaign looking at meat processing plants across the United States, aims to identify characteristics associated with plant viability and provide important information to legislators.

“Even before the pandemic, many focused on meat processing. When the pandemic hit, factories with thousands of workers closed due to the COVID outbreak. Meat processing capacity was reduced by around 40% at the height of the lockdown, and ongoing efforts to break down factories were intensified,” said Sarah Lowprofessor and chairman Ministry of Agriculture and Consumer Economypart of College of Agricultural, Consumer and Environmental Sciences in Illinois. Low is a co-author of the study, which was published in Journal of Association of Agricultural and Applied Economics.

“Our goal is to understand what factors are associated with plant survival, so we can better inform policy makers looking to invest in these crops,” added Low.

The researchers analyzed data from 1997 to 2020 for US non-poultry meat processors with more than five employees (poultry were excluded because of the unique industry structure). The analysis covered 7,839 plants, focusing on plant-level characteristics, local context, and concentration.

The study shows the majority of meat processing plants are located in the eastern US, although small and medium-sized factories are more widely distributed across the state. Many factories are clustered around large cities close to a large customer base and available workforce — in fact, 86% of factories are located in metros or metro-adjacent counties.

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

“We found differences in factors associated with the survival of small and medium crops, compared to large crops, as well as urban versus rural crops. For small plants, survival is closely related to business diversification. If they add a retail or wholesale meat market, they are more likely to survive,” he explained Catherine Island, senior business analyst at Context Network and the lead author of this study.

“For the larger mills, we found that the local context, including labor-related variables, was more closely related to plant survival. We did not find much evidence of a concentration impact, except for large non-metro plants, where concentration is associated with increased survival. These findings suggest that policies that aim to support small and medium meat processors by disbanding larger processors can have a negative impact on industry output and capacity,” he said.

If factories are spread across the country, then workers must also be spread out, said Low. “There are locations in Nebraska or Kansas, where entire communities are established to serve immigrant workers. If you wanted to destroy these big processors and own a factory in a small town, who would work there? At the moment we are understaffed nationwide, and many factories rely on immigrant labor,” he said.

Policy initiatives for large factories need to address labor availability issues and support the workforce effectively, Low and Isley said. 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 manufacturers, there are a different set of policy implications.

“In order to allocate federal or state dollars in the most efficient way, it makes sense to support crops that are diversified and more likely to survive,” Isley said. “But on the other hand, the aim may be to support crops that tend to fail, because otherwise those local communities would have no crops. However, this approach will only work in areas where the market can support a value-added niche product. There isn’t necessarily a one-size-fits-all solution for small plants.”

The researchers also found that small crops managed by women in rural areas were less likely to survive. Thus, additional targets for investment could be technical assistance for small women-operated factories in rural areas, including entrepreneurship training and ecosystem building. Low suggests leveraging the expertise of Cooperative Extension Services, such as Illinois Extensionuniquely positioned to provide support and resources to small businesses in the local area.

Editors Note:

That article“Survival of meat-processing plants: Role of plants and regional characteristics,” published in Journal of Association of Agricultural and Applied Economics (doi.org/10.1002/jaa2.55). The authors are Catherine Isley and Sarah Low. This research was supported in part by USDA OCE collaboration agreement #58-0111-21-009, “State and Regional Agricultural Finance Analysis” and by Missouri Ag. University of Missouri Experiment and Extension Station.

That College of Agricultural, Consumer and Environmental Sciences (ACES) in University of Illinois has top-rated programs, dedicated students, and world-renowned faculty and alumni who are developing solutions to the world’s most critical challenges of providing abundant food and energy, healthy environments, and successful families and communities.