/ s5 AH 513/7/78

GUIDELINES

FOR ESTABLISHING

BEEFPACKING PLANTS

IN RURAL AREAS

"o

UNITED STATES

DEPARTMENT (

AGRICULTURE

^/DEPARTMENT OF

AGRICULTURE PREPARED BY

HANDBOOK SCIENCE AND

NUMBER 513 EDUCATION

ADMINISTRATION
On January 24, 1978, four USDA agencies—Agricultural Research Service

(ARS), Cooperative State Research Service (CSRS), Extension Service (ES),

and the National Agricultural Library (NAL)—^merged to become a new

organization, the Science and Education Administration (SEA), U.S. Department of Agriculture.

This publication was prepared by the Science and Education Administration's Federal Research staff, which was formerly the Agricultural Research Service.
PREFACE

This publication provides guidelines for determining the feasibility of

establishing cattle-slaughter plants in rural areas. It identifies specific

prerequisites for a successful cattle-slaughter operation and demonstrates

how an industrial survey can be used to determine the potential of a

particular livestock-producing area. The approach is primarily one of

applied research or interpretive analysis, using basic research published

on the subject to make valid decisions about establishing such plants.
CONTENTS

Page

Procedures for evaluating feasibility 2

Community interest and acceptance ______ 3

Availability of local livestock 5

Cattle procurement distance 5

Estimating annual supply of cattle for

slaughter 6

Evaluating cattle supply 9

Seasonality of marketings 9

Quality specifications 10

Buying procedures 10

Feedstuffs and feeding efficiency 11

Extent of local competition 14

Sales and distribution 18

Meat consumption trends 18

Potential market outlets 24

Distribution requirements 26

Inspection and grading 27

Federal meat inspection 28

State meat inspection 28

Talmadge-Aiken inspection

program 29

Federal meat grading - 29

Capital investment requirements 30

Economies of plant size 34

Financing sources . 35

Page

Labor and management requirements 38

Labor__ 38

Management ^ 40

Plant sites 41

Utilités and environmental pollution

control ^ 44

Utilities 44

Wastewater pollution control 46

Facility planning and projected plant

income 50

Planning facilities. 50

Budgeting 61

New industry trends 63

Carcass-breaking and boxing

operations 63

Industry changes translate into new

rural job opportunities 64

Portion-controlled and precooked beef

manufacturing 65

Potentials of manufacturing consumer

packaged frozen meats 66

Competitive forces outside the packing

industry 67

Selected references = 71

Appendix 77

Mention of commercial organizations in this report is solely to

provide specific information. It does not constitute endorsement by

the U.S. Department of Agriculture over other organizations not

mentioned.

Washington, D.C. Issued July 1978
GUIDELINES FOR

ESTABLISHING BEEFPACKING PLANTS

IN RURAL AREAS

By H. RONALD SMALLEY^

The meatpacking industry is rapidly changing. Obsolete slaughter plants in large cities

are being shut down as packers shift their

operations to rural areas, where livestock is

abundant and substantial savings are being

realized. Livestock procurement is less complicated and expensive when packers can obtain

animals directly from farms and feedlots. Live

animals deteriorate in value through shrinkage, bruising, crippling, and death while en

route to distant markets. Meat can usually be

shipped more economically than live animals.

Capital investments in land and facilities tend

to be lower in rural areas, as well as labor,

taxes, and maintenance costs. Many packers,

both those entering the industry and well-established firms, have already participated in

decentralizing and updating their facilities.

Others are expected to follow.

These changes in the meat industry benefit

rural communities in many ways. The local

packing plants provide jobs for local labor and

help the community to broaden its economic

base. They stimulate livestock production in

the area. This often encourages feedstuff production. Feed mills prosper and provide local

employment. When livestock producers have

nearby outlets for their animals, their marketing and transportation costs are reduced and

their net returns may be increased.

Many rural communities try to solve problems of chronic unemployment and severe population declines by increasing business devel1 Animal Products Marketing Laboratory, Beltsville

Agricultural Research Center, Beltsville, Md. 20705.

opment in the area. Communities in livestockproducing areas often consider meatpacking as

a potential new industry, since it could enable

them to utilize existing resources more fully.

To benefit from the transition taking place

in the meat industry, rural communities must

be able to attract a beefpacker to their area.

But make no mistake about it—beefpackers

only locate where they think a profit can be

made. Capital requirements are large and profit

margins are small in the beefpacking business.

Therefore it is essential that investors eliminate as many financial risks as possible before

deciding to build. Even the most aggressive

firms are not eager to invest in new plants

without detailed knowledge of a community's

resources and interest in their industry.

The best way to find out whether a community's resources can support a packing plant is

to conduct an industrial feasibility survey. The

study would identify and analyze factors that

affect a packing plant's success. If the findings

are favorable, the study provides a sound basis

for encouraging plant development. If weaknesses are uncovered in the investigation, a

potential business failure can be avoided.

The objectives of this report are to provide

guidelines for conducting a feasibility survey

for a beefpacking plant and to point out to

interested persons the prerequisites for a packing plant to succeed. The report considers only

the slaughter of cattle and the processing of

beef. However, the same analytical approach

can be used to evaluate a community's potential for establishing plants to slaughter other

animals such as hogs or lambs.
AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

PROCEDURES FOR EVALUATING FEASIBILITY

Civic groups, such as chambers of commerce

and rural area development committees, often

call on government and private organizations

to help them decide whether a new packing

plant can successfully be established in their

area. This is referred to as the "experts' visit

approach/' in which outside specialists in various fields assist community leaders by providing technical knowledge {39)J^

Such studies can be conducted by one person

with broad industry experience, but usually

they are handled more effectively by a team of

specialists versed in marketing and engineering

aspects of the livestock and meat industry. The

evaluators should know thoroughly the resource advantages and disadvantages of the

area for which the facility is proposed. Assistance is available from the Cooperative Extension Sei^vice, State departnients of agriculture,

State agricultural colleges, as well as from

private consulting firms.

It IS advisable to precede the study itself with

informal discussions between local civic leaders

and the outside consultants to determine

whether or not the proposal has merit. If the

prospects are favorable, then the local leaders

should work with the consultants to organize

and collect the necessary data. The evaluators

must be completely objective in determining

the statistical accuracy of all data and be

unbiased in appraising local conditions against

those necessary for a successful slaughter operation. They must include all relevant factors,

both favorable and unfavorable, and maintain

a broad perspective of the industry's present

and potential trends.

Key environmental and economic factors to

consider in comparing local resources with

those necessary for profitable packing-plant

operations are (1) broad community acceptance

of the proposed packing plant; (2) capacity of

the plant to avoid air, soil, and water pollution;

(3) local availability of slaughter cattle; (4)

extent of local packing-industry competition;

(5) potential outlets for the proposed plant's

beef and animal byproducts production; (6) capital requirements and available financing; and

^ Italic numbers in parentheses refer to Selected References, p. 71.

(7) availability of labor and management skills.

These critical factors should be evaluated

first. If any of them are decidedly negative,

further study will be unnecessary. However,

the results may indicate that although current

conditions do not justify immediate construction, a local plant may be feasible in the future

if certain criteria are met. In that event, the

project should be deferred until a more favorable time.

If these basic factors are all favorable, the

community's suitability for cattle slaughtering

should be further evaluated. Other important

factors to consider are the availability of plant

sites, local utilities, and sewage-treatment facilities.

In the final steps of the investigation, an

analysis of projected income and expenses

should be prepared to determine whether the

plant could be operated profitably. A preliminary plant layout is necessary to estimate land,

facility, and equipment costs. These will be

part of the plant's fixed operating expenses.

Other costs for livestock procurement, labor

and management, insurance, taxes, distribution, and other operating items must also be

estimated. Estimates are also needed for the

plant's probable sales revenues, based on its

anticipated production of beef and animal byproducts.

This projected financial statement will provide an estimate of the plant's probable earnings. If the forecast is favorable, it may be

used later as a means of promoting the venture.

Findings that tend to rule out the possibility

of success are as important as favorable findings in arriving at an objective evaluation and

recommendations. To encourage unfounded

hope renders a disservice to the community

and may cause waste of rural development

funds that could have been channeled to more

promising local enterprises. Once established, a

packing plant has literally no economical alternative uses. Therefore an accurate feasibility

survey is useful whether the final recommendations are positive or negative. Many packing

plants established in the past were doomed to

failure the moment the decision was made to

start because one or more important prerequi-
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS

sites were either overlooked or not evaluated

carefully enough. Some of the most often cited

causes of packing-plant failure are (1) an insufficient supply of livestock on a year-round basis,

(2) inexperienced management, (3) lack of operating capital, and (4) unsatisfactory sales outlets.

Findings and recommendations should be

presented concisely and logically so that valid

decisions about establishing and financing the

plant can be based on them. If establishment

of a beefpacking plant in the community is

found to be economically feasible, the contribution of the outside consultants should not be

terminated when they present the results of

their study. Followup assistance with additional information and technical advice is valuable to help the plant succeed if problems arise

in production scheduling, merchandising programs, or other vital segments of the business.

COMMUNITY INTEREST AND ACCEPTANCE

Community approval can substantially enhance the success of any new venture. Lack of

it can cause severe problems. Attitudes toward

new industry development can often be determined by observing a community's previous

economic history. Communities with initiative

and a desire to attract industry usually prosper. Those that resist change often become

dormant, causing many to seek employment

elsewhere.

A proposed industry needs broad support

from the entire community, rather than just

local endorsement from those who may be

associated with the plantas establishment. To

accomplish this, all such industrial development

projects should be evaluated to assure their

compatibility with the community's long-range

goals and objectives in solving such problems

as unemployment and low income. This might

mean that only certain types of new industries

should receive support and encouragement. A

community might compile lists of those industries it prefers, those that are both harmonious

with existing industries and stable from the

standpoint that newly created jobs will be of a

permanent nature.

Effective communication with all areas and

levels in the community is also needed to gain

public support. This is particularly true of a

slaughter operation, which may generate odors

and other nuisances. There must be assurances

that, if built, the plant will be located where it

will not cause local residents to complain or

institute court proceedings that could hinder

operations or even force it to close.

To stimulate interest and gain public acceptance for the project, local leaders should point

out the advantages of having such a local

industry. Immediate community benefits would

include an increase in local employment based

on the number of people the plant would employ. As a secondary or multiplier effect, additional employment opportunities would be generated in both basic and service-type industries

to support the new industry coming into the

area.

For example, a new packing plant could

stimulate additional cattle and feedstuff production. By locating in a strategic cattle-production area, a local packer's procurement costs

would be less, permitting him to bid higher for

his cattle requirements. Therefore local producers might realize higher prices for their animals and be encouraged to increase production.

In the service sector, a new packing plant

would have a direct impact on the economic

activities of local feed mills, public cold storage

facilities, transportation services, and communication facilities, as well as local merchants,

such as gas station operators and retail store

owners. These service-type businesses would

expand and hire additional employees and in

turn would further stimulate demand for local

services. Such increased industrial activity contributes to sustained local prosperity and financial stability for the community.

A study measuring the effects of industrialization in Oklahoma {17) found that agricultural

processing had a higher level of multiplying

effect on both production and income than

eight other business sectors. And it was second

only to manufacturing as the best employment

multiplier in generating new jobs. These findings are summarized as follows:
AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

The total dollar increase in business volume

generated by a dollar increase in basic production by the business sector in Oklahoma was as

follows:

Total increase

Business sector (^multiplier)

Agricultural processing $2.50

Livestock production 2,25

Manufacturing ^_ 2.15

Services 1.76

Mining, including oil 1.65

Crop production 1.55

Real estate, finance, and insurance 1.54

Transportation, communication, and

utilities 1.46

Retail and v^holesale trade 1,46

The total dollar increase in total personal

incomes generated by a dollar increase in personal incomes by the business sector in Oklahoma was as follows:

Total increase

Business sector {^nultipUer)

Agricultural processing $4.32

Manufacturing 3.35

Livestock production--^ 2.81

Services 1.58

Mining, including oil 1.57

Real estate, finance, and insurance 1.46

Transportation, communication, and

utilities 1.44

Crop production 1.40

Retail and wholesale trade 1.28

The total job increase resulting from the

creation of one new job by the business sector

in Oklahoma was as follows:

Total job increase

{niultiplier)

Business sector Number

Manufacturing 2.93

Agricultural processing 2.82

Mining, including oil 2.56

Real estate, finance, and insurance^ 1.55

Transportation, communication, and

utilities 1.45

Services 1.33

Retail and wholesale trade 1.32

Livestock production -__ (^)

Crop production Q)

1 Employment multipHers were not computed since

productivity has been increasing while the number employed has been decreasing. This reflects the rapid increase in technology used in these sectors and the low

amount of their interaction with other business sectors.

The multiplier effect, as defined in the study,

is the relationship between some observed

change in the economy and the amount of

economic activity that this change creates

throughout the State economy. Interpretation

of these multipliers can help measure the impact of new business ventures on local business

activity, employment opportunities, and personal incomes. It answers such questions as—

Wliat might be the effect on the overall local

economy if a new plant were built? What

industry tends to create the greatest economic

activity per dollar invested for specific rural

areas?

Industry representatives frequently are interested in knowing how specific features of

the community might affect its desirability as

an environment in which to locate and operate.

Some questions should be investigated:

Is financing available now and for future

needs?

How does the local tax structure affect new

business? What concessions or tax relief will be

granted to attract a new industry?

How will the State and local ordinances, the

industrial zoning and building codes, and the

structure of municipal government affect the

construction and operation of the plant? Will

local officials and voters be willing to support

zoning changes, if necessary? Are the police

security and fire protection adequate?

Is a desirable site available? Is it sufficiently

isolated so that odors, dust, and early morning

noises will not become a nuisance to area

residents? Are adequate water and sewage-disposal facilities available? Can air, soil, and

water pollution be avoided? Are costs of land,

utilities, and transportation services reasonable?

What is the makeup of the local labor force,

its productivity, need for job-training programs,

and prevailing wage rates? Are relations with

the local trade unions likely to cause problems?

Has the community planned for any future

growth? What is its capacity to absorb population increases? If personnel are brought into

the community to live, what amount and kind

of housing, education, health services, and general services will be available for these employees?
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS

Many rural communities prepare brochures

to furnish such information about their services

and resource potentials. Some progressive communities also establish steering committees to

assemble additional data that may be requested by firms seeking to locate in their

community. Legal services may be donated,

once the decision to establish a local plant has

been made.

Other communities rely largely on economic

incentives to attract new industry. In addition

to tax relief, they may offer such financial aid

as a free site and a building loan. They may be

v^illing to acquire land, build the facility, and

then lease it to the firm, with an option to buy

the building later. Such assistance is often

very helpful to small businessmen.

Whichever promotional plan or combination

of financial inducements is used, the general

community must show an active and positive

interest if it hopes to encourage new industrial

development in its own rural area.

AVAILABILITY OF LOCAL LIVESTOCK

The prime requirement for establishing a

rural beefpacking plant is an ample supply of

slaughter cattle dependably available on a

year-round basis. These animals must be reasonably near and relatively uniform in quality,

weight, and finish. To establish a new plant,

the local supply of such cattle must exceed the

slaughter capacity of the existing local plants.

Before the adequacy of the supply can be

evaluated, it is necessary to determine the size

of the proposed plant in terms of an hourly

kill. This kill capacity is then related to an

annual livestock procurement requirement. The

size operation to plan on depends on the purposes and the market outlets being considered.

Local planners may wish to consult the evaluators about what might be the most efficient

and practical slaughter-plant capacity to consider.

In this handbook, small plants are considered

to be those with an hourly kill capacity of 1 to

20 head of cattle, medium plants about 60

head, and large plants 120 or more head. Some

new facilities have slaughter capacities of 250

head and kills may go as high as 300 per hour

in the future. Many packers operate an average

of 252 days per year, with 7.2 hours of productivity per workday. These figures allow for

weekends, holidays, daily work breaks, and

production delays.

The location of the plant should combine an

assured supply of cattle at low procurement

costs. New packing facilities should be strategically located in areas with high production of

cattle for slaughter.

Cattle Procurement Distance

King and Logan {37) found that on a dressedweight-equivalent basis, the cost of shipping

100 pounds of live slaughter cattle was lower

than that of shipping the same amount of

carcass beef for distances up to 120 miles.

However, neither livestock shrinkage nor costs

of assembling trucklot loads were included in

this analysis of transportation costs. Both factors would tend to reduce the distance over

which cattle are cheaper to haul than beef.

This and other research (5, AS) indicate that

the cattle and beef industry can reduce total

costs by slaughtering grain-fed cattle near feeding locations and shipping meat rather than

live animals to areas that consume more beef

than they produce.

Although shipping rate differentials between

cattle and beef vary between areas and from

one time to another, the above criterion is

useful in establishing cattle procurement guidelines for locating new packing-plant sites.

Acquiring full trucklot loads of cattle at one

location to qualify for minimum hauling rates

normally depends on livestock-assembly concentration points like auctions and terminals,

though rural packers purchase most of their

livestock directly from producers rather than

through such markets. Although many feedlot

operators are large enough to ship full trucklot

loads, such producers may not always choose

to do so because of market conditions or lack of

uniform finish among cattle. Therefore to compare both shipping methods fairly, truck rout-
AGRICULTURE HANDBOOK 513, U.S. DEPT. OP AGRICULTURE

ing costs should be considered as an additional

expense of shipping livestock where such routing would be needed to form full trucklot loads

prior to arrival at packing plants. Likewise,

additional expenses due to cattle shrinkage,

bruising, and death loss also must be charged

to the cost of livestock shipments.

Rural packers prefer to obtain most of their

cattle within 50 miles of their plant. Long

hauling distances add to the costs of procurement, and dependable schedules for daily

slaughtering are more difficult to maintain.

Longer hauling distances also increase the

amount of animal shrinkage, injury, and death.

Buying cattle beyond 120 miles may be uneconomical unless the price in that area is significantly lower. The primary procurement area

for a proposed plant site would include the

counties that lie mostly within a 50-mile radius

of the community. Those counties from 50 to

120 miles away from the site would be the

secondary trade area. Cattle procurement potential beyond 120 miles should not be considered as typical in evaluating local slaughter

supplies.

However, factors such as continuous plant

use at full slaughter capacity, regionally lower

processing costs, particularly labor, and efficiencies associated with plant size can tend to

obscure the total savings concept of shipping

beef rather than cattle.

The evaluators may wish to extend the suggested perimeters for procurement of cattle

because of special circumstances in the area or

because of the extremely large slaughter capacity of the proposed plant. The larger packers

tend to reach out farther for slaughter supplies.

Seasonal scarcity of local raw material would

also force firms to buy at greater distances

than normal. Nevertheless any foreseen need

for an unusually extensive trade area would

indicate that the community was not an ideal

location for a new packing plant.

Estimating Annual Supply of Cattle for

Slaughter

To estimate the available livestock, statistics

can be developed on the number of beef cattle

in each county within a 120-mile radius of the

community. Figure 1 illustrates how the possible trade area can be approximated. The comSECONDARY PROCUREMENT AREA

-PRIMARY PROCUREMENT AREA

FIGURE l.—Approximating a trade area for procurement

of cattle for a proposed beefpacking plant.

munity or town requesting the study should be

used as a focal point for the proposed site until

adequate slaughter cattle supplies are verified

and actual sites considered. For counties that

overlap the boundaries, all cattle listed in the

county should be included to simplify the calculating. Counties that are mostly outside the

120-mile radius should be excluded. Such a

trade area would cover more than 45,000

square miles. The primary source of cattle for

one successful high-volume packer is generally

within a 35-mile radius of each plant, and his

total supply comes from an average of about

20,000 square miles of trade area per packing

plant.

The cattle inventory data should be used for

January 1 of the most recent 10-year period

available. The January 1 inventories of livestock published by the U.S. Department of

Agriculture are computed only by State totals.

The prime source of data at the county level is

the department of agriculture of the State in

which the study is being conducted. If the

trade procurement area overlaps into another

State, information would be needed from each

State department of agriculture. Some States

provide comprehensive livestock marketing

data by counties, and these figures can be

used directly. Unfortunately most States do

not compile county marketings, and therefore

the inventory data available must be analyzed

for an estimate of slaughter supply potential.

Some States do not even compile livestock

inventory data by counties. Therefore the anal-
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS

ysis must be based either on estimates prepared by the State's crop and livestock reporting service or on estimates from questionnaire

surveys.

The procedures used to analyze the cattle

inventories will depend on the type of livestock

programs followed in the area being surveyed.

Each of the following situations would require

a different method of evaluating the statistics.

In situation A, grain-fed cattle would be slaughtered in an area where both feedlot and cowcalf programs are common. In situation B,

grain-fed cattle would be slaughtered in an

area that supports mainly feedlot operations.

In situation C, cull cattle would be slaughtered

in an area where most operations are cow-calf

programs, or dairying, or both.

Situation A

To support a packing plant in an area that

contains both cattle-feeding and cow-calf programs, the counties in the trade area should

have a beef-animal population of at least four

times the plant's proposed annual kill. The

grain-fed cattle marketings from this area will

be equivalent to about 25 percent of its current

beef-cattle inventory level. This ratio is not

constant nor similar for all areas, particularly

where nongrain-fed cattle are marketed for

slaughter. Estimates must be adjusted for local

factors and recent marketing conditions. The

local calving rate, the average annual growth

rate in local herd numbers, and local practices

of cow replacement all affect the ratio of animal

inventories to grain-fed cattle marketings in an

area.

Cattle and feed prices or unusual weather

may cause some producers to change their

usual marketing activities. Death loss in herds

may deviate from normal. Nationwide it averages 2 percent for all cattle 1 year old and

over. Pronounced local fluctuations in both

inventories and marketings are possible and

should be allowed for in estimating. Farm

slaughter of grain-fed cattle should also be

considered.

Of course major technological breakthroughs

in future reproduction research, such as induced twinning and sex control (32)^ would

substantially alter the basic 4-to-l factor suggested for estimating grain-fed cattle slaughter

potential.

Situation B

In areas where feedlot activities are concentrated, most of the feeder stock is brought in

from other areas instead of being raised locally.

To evaluate the availability of local cattle for

slaughter, it is necessary to determine the total

inventory capacity of feedlots within the trade

area, the average percentage of feedlot capacity

that consistently is used during the year, and

the average annual turnover of livestock in

these feedlots. For example, if local feedlots

operate at full capacity throughout the year

and the feeding period per animal averages

120 days, the availability of cattle for slaughter

could be calculated by multiplying January 1

feedlot inventories by 304 percent less the local

feedlot death loss average. This represents an

inventory turnover of about three times per

year. Continuous feeding activity at full capacity averaging 150 days per head would require

a multiplying factor of 243 percent less feedlot

death loss (normally about 1 percent or less),

or a turnover of about 2.4 times per year.

Since there is no assurance that every feedlot

will operate at total capacity throughout the

year and since feeding periods are not uniform,

evaluators must use factors that reflect actual

conditions in the area.

Some feedlot operations are used only for

backgrounding or "warm-up" programs to prepare young stock under 500 pounds to go on

full feed later. Since livestock in these warmup lots do not go directly to slaughter, they

should not be included in the availability analysis. Cattle generally enter commercial feedlots

for full feeding at 650 to 750 pounds, although

their weights can vary considerably from this

range.

Data on inventories for cow-calf programs in

the area should be treated as in situation A if

producers tend to feed out most of their own

stock. However, if most of these locally produced feeders are sold to commercial feedlots,

they should not be included, because they will

be counted as part of the feedlot inventories.

As more areas turn to feeding local cattle to

slaughter weights, competition among feedlots

for feeder replacements will become intense.

Feedlots where there are no local or nearby

cow-calf programs may find that obtaining

feeder stock is more and more difficult. To
8 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

make sure that local marketing of grain-fed

cattle will continue to be dependable, the geographic origin of feedlot cattle in the local trade

area should be reviewed. The evaluators must

appraise whether or not these same feeder

cattle supplies will continue to be available to

local feedlots. Feedlots that buy most of their

feeder replacements from distant States may

have higher transportation costs and more

transit-related death losses than their competitors. Also, feed-conversion gains are generally

very poor for several days after the cattle have

been exposed to long-distance hauling.

Situation C

If local cattle operations deal primarily with

raising feeder cattle to be fed out elsewhere or

with dair3nng, the cattle available for slaughter

would consist chiefly of old breeders and culls.

A packing plant proposed for either type of

area would be limited largely to producing beef

for manufactured meat products. The slaughter

of grass- or grain-fed cattle, as well as milk-fed

calves, may or may not be considered in combination with such a cull-cattle slaughtering operation.

Widespread use of mechanical tenderizing

equipment has significantly increased opportunities for the slaughter of grass-fed cattle in

recent years. Such equipment also enables

packers to better utilize portions of carcasses

from mature animals as well. Likewise, the

increased use of mechanical equipment to flake

and form beef into portion-controlled cuts has

also heightened the uses made of nongrain-fed

beef.

To estimate the availability of cull cattle for

slaughter, only those animals 2 years of age or

over should be considered. Statistics on inventories of total cattle must be broken down to

show those under and over 2 years of age.

Both beef and dairy cows, as well as all bulls

over 2 years old, should be counted.

The usual culling rate or annual replacement

for the area must be deterimined for these cull

animals. The average beef cow is held to about

8 years of age, which means a beef cow could

be counted as a member of the herd for only 6

years. A herd life of 6 years per cow would

require a cull replacement ratio of 16^/3 or

about 17 percent a year in order to maintain

constant brood cow inventories disregarding

death loss {lOIf), Extended periods of inventory

buildups or reductions in local brood-herd numbers would of course alter this cull-cow availability estimate. Assuming a ratio of 1 bull per

25 cows and a 5-year life cycle with 3 years'

herd service, the beef-bull replacement rate

would be IV3 or about 1 percent a year. Therefore a 17-percent herd replacement rate with

heifers, coupled with a 1-percent herd replacement rate for bulls, less an average 2-percent

herd death loss would yield about 16 percent

for annual slaughter as culls.

Assuming a milk-cow replacement age of 5

years and a 3-year herd life, the dairy cull

replacement rate would be 33.3 percent when

death loss is disregarded. With widespread use

of artificial insemination in dairy herds, dairy

bull-calf replacements would average less than

the 1 percent estimated for beef-bull replacement requirements.

Actual estimating factors used should reflect

local prevailing conditions. For example, beef

cows in the area might be replaced on an

average of every 7 years. One must remember

that such age estimates are averages and

therefore include marketings from the early

culling of nonfertile cows, for disposing of injured stock, and from, periodic upgrading of

local herds.

When comparing nationwide statistics of all

January 1 cattle and calf inventories (dairy

and beeO with annual slaughter, it can be seen

that, on the average from 1970 through 1975,

for every 100 head on inventory, 30-f cattle

were slaughtered each year, with 24+ representing grain- and nongrain-fed cattle marketings and 6+ culls or about 80 and 20 percent,

respectively. Thus it should be stressed that

these calculating procedures for determining

cull-slaughter availability are based on estimates of herd life and not on the estimated life

cycle of these animals.

Also, calf slaughter and imports of live cattle

and calves slightly affect these nationwide statistical inventory-slaughter comparisons. Calf

slaughter per 100 head of cattle and calf inventories averaged 3-h animals annually from 1970

through 1975 but is increasing. This herd extraction factor varies because calf slaughter is

inversely related to the demand for feeder

calves and cattle. It is particularly evident in
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 9

areas where packers slaughter dairy calves.

When demand for feeder animals is down, calf

slaughter goes up and when such demand is

up, calf slaughter goes downLive cattle and calf imports are insignificant

nationally, but they might be of some importance in a survey analysis if the local trade

area bordered on either Canada or Mexico.

Evaluating Cattle Supply

After the livestock statistics have been compiled for the appropriate situation, these data

should be evaluated. Are there enough cattle

available for slaughter in the trade area to

meet the proposed plantas needs? Are any

trends apparent in inventory and marketing?

If any, what is their direction and what is the

average percent change each year? Do these

local inventories and marketings reflect a pronounced cyclical pattern or part of one during

the 10~year period studied? What implications

might these combined factors have on future

availability of cattle from this local trade area?

Dairying, through cull-cattle and calf slaughter, contributes significantly though in a declining way to total beef and veal supplies. Those

evaluating cull-cattle slaughter potential must

weigh the nationwide trend in declining dairy

animal inventories against existing and potentially offsetting increases in local cow-calf operations of beef animals. Supplemental livestock

supplies in the form of grass-fed cattle should

be evaluated carefully since their availability

to a great extent will vary inversely with the

demand for feeder calves and cattle.

A dependable cattle-procurement area should

show stable or growing animal inventories

without severe cyclical fluctuations. By projecting past livestock inventory trends, a guide

may be obtained to forecast future slaughtercattle availability levels. Do not assume that if

a modern packing plant were built, feedlots

would automatically appear to supply it. Consider only those feedlots that are in operation

or those whose future operation is assured.

The overall analysis for feedlot localities

would further depend on the area^s comparative advantage in attracting feeder replacements into local lots against rising competition

from other feeding areas.

Continued feedlot growth in areas that have

abundant local feedstuffs, a good supply of

feeder cattle, a favorable climate, and relatively

inexpensive land might alter some of the guideline criteria previously mentioned. Total procurement distances in such localities may be

reduced to as little as 50 to 60 miles regardless

of slaughter-plant capacity. However, the problems of water supply and of pollution caused

by solid wastes and feedlot runoff will eventually limit cattle density within any given area.

Accumulated cattle wastes from just one

50,000-head feedlot operation are equivalent to

those from a city of 600,000 persons {105), The

offensive odors and dusts from manure concentrations and their tendency to attract and

support flies and other vermin build up objections from the community. Therefore any reduction in year-round cattle-procurement distance to less than 50 to 60 miles from a plant

does not appear likely for nonintegrated feedlot-packer operators.

Seasonality of Marketings

The supply of local cattle for slaughter must

be uniform throughout the year as well as

sufficient on an annual basis if a new plant is

to operate efficiently at or near its rated kill

capacity. Irregular flows of cattle into the plant

can create costly gluts on some days and costly

shortages on others. Therefore after the trade

area's annual cattle-production capacity has

been verified as adequate, the seasonal continuity of these slaughter supplies should be

investigated. Where monthly marketing data

by counties are not available, interviews and

questionnaires should be used to evaluate seasonal patterns. Local feedlot operators, livestockmen, commission men, local auction dealers, and others involved in marketing can help

determine the typical seasonal flow of these

local cattle. Also, where available, statewide

data on estimated placements of cattle on feed

can be useful. The U.S. Department of Agriculture publishes data listing the numbers of

cattle placed on feed by months in 7 States

and by quarters in 23 States {95).

The more stable a trade area's slaughter

supply is throughout the year, the less need

there will be to reach out for cattle beyond the

trade area to satisfy daily slaughter scheduling.
10 AGRICULTURE HANDBOOK 513, U.S. DEFT. OF AGRICULTURE

The total costs of assembling and transporting

cattle generally increase in direct proportion to

distance, particularly for light shipments that

do not qualify for the lowest hauling rates

available. Bringing cattle from distant areas to

fill daily slaughter quotas during shortages of

local cattle can become unprofitable when competition is keen.

In addition to the higher transfer charges,

buying cattle from distant points frequently

subjects the animals to severe shrinkage, bruising, crippling, sickness, and death. All of these

reduce the packer's profit potential. Table 1

shows the shrinkage of fed cattle in transit, as

determined in a University of Wyoming study

(73), This study indicates that time in transit is

the principal factor affecting shrinkage of cattle. However, hot temperatures also induce

high shrinkage. Each degree rise above the

mean temperature during the summer causes

fed-cattle shrinkage to rise 0.075 percent. The

extent of handling animals in transit also affects shrinkage.

Financial losses from bruises result mainly

from crowding, bumping, and rushing the animals, although trampling and horn damage

are also factors (57, 59),

Since cull cows normally are not marketed

evenly through the year, evaluators appraising

seasonal marketings for cull-cattle slaughter

must be very cautious. Several factors may

tend to stabilize local cull-cattle supplies during

normally slack periods. Commercial cattle are

culled for reasons other than advanced age.

The sale of nonfertile cows or injured stock as

well as herd upgrading can help even out cull

marketings during the year. A firm demand

from a local area packer for culls during offseason periods, accompanied by attractive

prices and low handhng charges, might help

persuade producers to cull more evenly through

the year. Also, strong consumer demand for

processed meats has induced many dairymen

in the recent past to hold back their surplus

calves to maximize profits by marketing them

later at heavier weights as beef animals. Local

sales auction data and a survey of producers in

the local trade area would provide an estimate of

how these factors might operate to eliminate

severe seasonal fluctuations and provide

reasonably consistent slaughter supplies.

Quality Specifications

Uniform meat quality and cutability of cattle

carcasses are other considerations in evaluating local slaughter supplies for table-ready beef.

Current consumer preference points strongly

toward a demand for lean beef with a welldeveloped flavor. Consumers look on quality in

beef as eating satisfaction vdth attributes of

tenderness, juiciness, and flavor. Most dislike

beef vdth excessive fat and waste, even if all

other quality characteristics are favorable.

Meat merchandisers consider still another

aspect of beef-animal quality—the cutability or

yield of salable beef that a carcass will produce.

They want carcasses to be meaty and high

yielding as well as high in quality. Their profit

potential depends on it.

To satisfy these demands, packers must produce beef tailored to what consumers want

and what meat distributors will buy. This

means following specification buying practices

to obtain uniform lots of young, 1,000- to 1,100-

pound grain-fed cattle whose carcasses are

meaty and will grade Choice.

To determine how well the local trade area's

slaughter supplies can meet these specifications, the evaluators should personally observe

and get appraisals from experienced local cattlemen. Such characteristics as breed, weight

when entering feedlot, age, and sex all determine the final degree of finish and conformity

that will be possible. Desirable beef cattle provide a combination of thickly muscled, highquality carcasses with rapid growth rate and

early maturity. These quality considerations

obviously do not apply to cull-cattle supplies

used for processed meats, but packers prefer as

high a yield as possible from each carcass when

it is boned.

Buying Procedures

Another important aspect of slaughter availability includes local cattle sources and buying

practices. All procurement methods currently

accepted in the trade area should be examined

so that the new plant could adopt those practices that would provide stable supplies

throughout the year at the best prices possible

for both the packer and his local suppliers.

Most rural packers employ cattle buyers to

purchase animals from local farms, feedlots,
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 11

TABLE l,~ShHnkage offed cattle in transit

Time in transit Sample Head of fed Gross shipping Gross receiving

(hours) shipments cattle weight weight Shrinkage

Nvimher Number Lb Lb Percent

1 ._. 7 615 450,300 442,620 1.70

2„ „___ 24 1,138 1,188,470 1,138,040 4,24

3 42 1,415 1,580,080 1,501,380 4.98

4-6, 24 1,001 1,001,070 946,720 5.42

7-9 50 2,132 2,253,750 2,139,640 5.06

10-1?__„.„ 852 29,769 29,938,190 28,079,320 6.20

18-35 97 5,531 4,926,350 4,451,870 9.63

36-69.-_____ 85 3,610 3,494,590 3,231,440 7.53

60--83 39 2,470 2,423,470 2,214,990 8.60

84 or more 22 1,078 1,119,070 998,040 10.81

and auctions. Many have elaborate communications systems to keep in constant touch with

their buyers to coordinate uniform daily cattle

flow to their plants. Smaller packers often rely

solely on country dealers and commission men

to buy their cattle. Some rural packers still use

nearby posted public markets, purchasing by

private treaty, but to a much less extent than

city-oriented operators. Packers also may make

contracts with feedlot operators for custom

feeding.

To learn whether local cattlemen will support

a new plant, the evaluators should interview

both producers and livestock-marketing firms

within the trade area. It is important to determine the extent of contracts, agreements, or

other affiliations that producers already have

with other packers as well as how long such

commitments have to run. The dispersement of

producers and road conditions should also be

investigated to see whether any problems

might arise in routing trucks and assembling

loads.

Customary local selling practices should be

determined. Cattle can be sold on a direct liveweight basis, on the basis of dressed-carcass

grade, yield, and weight, or on dressed-carcass

weight only. Normally sales based on carcass

grade, yield, and weight are satisfactory only if

no long hauling distances are involved, since

excessive shrinkage and bruising of the live

animals in long-distance hauling would create

many problems. The suggested trade area perimeters, which shorten hauling distance and

assembly time, favor the new and more efficient marketing by carcass grade, yield, and

weight. Properly implemented, this sales procedure brings producers the most equitable compensation for efficient feeding performance.

Integrated cattle-feeding operations were

being used in 1974 by 114 packers throughout

the country, representing 6.6 percent of all fedcattle marketings in 39 States for that year

(98), Through contract agreements or their own

feedlots, they attempt to stabilize the availability of uniform cattle and coordinate it with

efficient slaughter scheduling. Many maintain

that packer feeding provides a raw-material

buffer that will help keep per-unit slaughtering

costs down when cattle in their local trade

area are scarce.

Although virtually all fed cattle sold are

marketed direct through packers or country

dealers and through auctions and terminal

markets under standardized procedures, other

potential marketing methods do exist (25) (35).

A Nebraska study analyzed eight alternative

methods of marketing fed cattle, including consignment selling, telephone auction selling, telephone direct selling, and a teletype auction

method used in Canada to market hogs (85),

The teletype method was found to be superior

to any of the current marketing methods used

in the United States.

Feedstuffs and Feeding Efficiency

In the long run, sustained cattle-feeding activity in the local area depends on the relative

profit potential in converting livestock feed into

beef. Does the trade area have any advantage

in feeding cattle compared with other geographic areas? If it has, its potential for a

beefpacking location is strengthened; if not,

the area's suitability for such an enterprise is

weakened.
12 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

Figure 2 shows the relative surplus or deficit

of feed grain produced in each State in the

continental United States when grain production is compared with the quantity of grain fed

to livestock in the same State (2). However, to

analyze local feedstuff availability, such statistics must be brought down to county and

district levels within and adjacent to the trade

area studied. Local production data for both

grains and roughage should be related to estimates of local consumption by all Hvestock.

State college agronomists can estimate whether

current levels of local production can be maintained. The potential of expanded productivity

through increasing acreages and per-acre

yields should also be considered. Local soil and

climate, annual rainfall, reserve water-table

supplies for irrigation, and alternative land use

would all be factors. Probably the most significant long-run factor for many areas would be

the availability of water for irrigated feed-grain

production (54).

The dependability of local water resources

for current and future consumption by cattle

should also be appraised. In a feedlot the

minimum daily water consumption per head

alone is 10 gallons. Other related uses of water

in the feedlot can often more than double this

minimum consumption requirement per animal (iö, 7^).

Feedlots in areas of deficit grain production

are sometimes at a competitive disadvantage,

since transportation charges must be added to

their grain costs. Where grain production is

deficient, hauling costs from the nearest surplus points and the long-run potential of such

sources maintaining surpluses for sale must be

determined. Such factors can significantly af=

feet the long-run profitability in cattle feeding

for areas where production of feed grains is

deficient and not likely to increase.

Another important point to evaluate is the

local trade area's comparative advantage in

feeding cattle. Areas with weather that permits

year-round use of the feedlots have a decided

advantage over areas where extremes in temperature and humidity cause inefficient feedlot

use and poor feed-conversion performance.

YEAR BEGINNING OCT. 1

TOP FIGURE = 1972

MIDDLE = 1973

BOTTOM = 1974

PRELIMINARY ESTIMATES

QUANTITY FED ESTIMATED

BY NUMBER OF GRAIN

CONSUMING ANIMAL UNITS

FIGURE 2.—Feed-grain production over or under quantity fed to livestock by States, 1972-74.
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 13

Feed-conversion efficiency also depends on

the kinds and quality of ingredients in local

rations. A well-balanced ration for rapid gain

contains about 80 to 85 percent of concentrates

and supplement additives and about 15 to 20

percent of roughages. Table 2 gives examples

of such rations and the amounts fed per pound

of gain in animal weight in Texas and Oklahoma (16). Texas feedlots generally placed cattle on feed at lower weights than did feedlots

in Oklahoma. This practice made feed-conversion rates in Texas appear slightly better,

because the gains included additional growth

as well as fattening. Final finishing rations

often contain more than 90 percent of concentrates and supplements.

To assess the comparative efficiency of the

trade area in cattle feeding, the evaluators

should consult State college nutritionists as

well as farm and feedlot operators. In the

assessment, factors to be considered include

prevailing weather conditions; average feedlot

size and efficiency; local management skills

and practices in cattle feeding; average percentage of feedlot use; breed, weight, age, and

sex of feeder cattle entering lots; average

length of feeding programs and replacement

patterns; nutritional quality of concentrates

and roughages fed; extent of use by operators

of least cost feed-formulation practices; extent

of facilities for steam-flaking grains to increase

their nutritional values; and death losses in

feedlots.

Overall profitability in cattle feeding depends

largely on an area's capacity to raise or obtain

feedstuffs at reasonable prices and its feedconversion efficiency. This assumes that an

adequate supply of feeder cattle is available at

competitive prices. Basic determinants for cattle-feeding profits, including demand factors for

fed cattle and dressed-carcass beef, are discussed by King and Schrader (38). Ideally the

optimum packing-plant location for fed-cattle

slaughter would occur in those areas capable

of efficiently carrying out both feed-grain production and cattle-feeding programs simultaneously.

For areas concentrating in dairying or cowcalf operations, local forage availability would

be of primary concern. Grains and supplements

fed are often shipped into such areas. Consequently, a packing-plant location for cull-cattle

slaughter does not depend on local availability

of grain nor on feed-conversion efficiency. Local

dairymen and livestockmen depend on fluid

milk or feeder cattle as their principal source of

income; cull marketings represent supplemental income.

The evaluators should appraise production of

local roughages and grazing conditions to determine whether the trade area can maintain

current dairy and brood-herd inventories and

TABLE 2,—Average volume offeedstufffed per pound of animal gain in

Texas and Oklahoma feedlots

Feedstuff Texas Oklahoma

Lb

Concentrates:

Grain sorghum 5.50

Barley and corn .12

Premixed supplements — .48

Molasses .28

Fat ,15

Other concentrates .16

Total

Roughages:

Silage

Cottonseed hulls

Other roughages

Total

Grand total 8.41

Percent Lb Percent

65.4 5.75 63.5

1.4 .61 6.7

5.7 .55 6.1

3.3 .37 4.1

1.8 .05 .6

1.9 .09 1.0

6.69 79.5 7.42 82.0

.39 4.7 .74 8.2

.54 6.4 .25 2.7

.79 9.4 .64 7.1

1.72 20.5 1.63 18.0

100.0 9.05 100.0
14 AGRICULTURE HANDBOOK 513, U.S. DEFT. OF AGRICULTURE

whether local roughage productivity and grazing can be expanded. Climatic conditions are

important. Areas in the Southeast, with green

pastures most of the year, can maintain cowcalf operations with about 2 to 4 acres of

gi^azing land per animal unit. Ranches in the

West may have stocking rates varying from 6

to 8 or up to 100 acres or more per animal unit.

Generally about 12 to 15 pounds of cured

roughage or an equivalent amount of dry matter from grazing material is required to produce 1 pound of animal gain. Average amounts

of feedstuffs needed to maintain dairy and

brood cows can be obtained from each State, as

well as grain and roughage consumed per animal on feed by State (2),

During periods of short feed-grain supplies

and resulting high feedlot expenses, nongrainfed beef production rises, with pasture, hay,

and crop residues being the primary source of

nutrients. In the long run, however, grains are

and will remain an important part of the beefcattle ration because gains are obtained more

rapidly and more beef can be produced from an

acre of grain than from an acre of forage.

Attempting to forecast the extent and dependability of grass-fed cattle supplies, therefore,

will remain difficult since the type of beef

produced and the feed rations used to produce

it will be determined by economics. When grain

prices are high relative to other feed sources,

then less grain will be used for beef production

and when grain prices are low, the reverse will

occur (52a),

EXTENT OF LOCAL COMPETITION

After establishing the fact that local slaughter-cattle marketings exceed the proposed

plant's anticipated requirements, the next step

is to determine whether these cattle will be

available, considering the current extent of

local slaughter-plant capacity. The data collected for this analysis can be obtained at the

same time as those for the availability of local

cattle. A comparison between local marketings

and existing slaughter capacity will indicate

whether there is any surplus of cattle and the

probability of getting enough of this surplus to

operate the size plant being considered. Rural

sites most attractive to packers are those where

the ratio of dependable slaughter-cattle marketings far exceeds the aggregate kill capacity

of local slaughter plants.

One effective method of estimating the full

extent of local packing-plant competition is to

survey trade area feedlot operators and others

to determine what proportion of their cattle

marketings is being shipped outside the trade

area to be slaughtered. During 1975 almost 70

percent of all cattle sold to packers went direct

(93), Therefore a survey of these local cattlemen

could be assumed also to provide estimates

concerning specific plant procurements for both

local and distant competing packers. Another

method of estimating competition and existing

plant capacity is by interviewing local businessmen who are familiar with packing-plant operations in their area. Actual slaughter-production data from individual packers are acquired

by Federal and State departments of agriculture but on a strictly confidential basis. Such

information is used solely for developing composite production statistics (96).

Estimates of local slaughter activity would

include the number, location, and hourly kill

capacity of each packing-plant competitor

within and adjacent to the proposed plant's

trade area. Local plants that kill other animal

species and those that do not compete for the

same type of cattle would be excluded. For

example, a proposed plant for cull-cattle slaughter would consider only those firms specializing

in commercial grade cattle. A plant to slaughter

grain-fed cattle would consider only fed-cattle

killing operations. Where both grain-fed cattle

and culls are slaughtered in the same plant,

only that proportion of plant capacity that

competes directly should be considered.

If some portion of the slaughter-plant capacity is continuously being used to kill grass-fed

cattle, then this should be considered when

appraising the extent of local slaughter-plant

capacity and competition.

The age and physical condition of competitor

facilities should be considered. The level of

technology used in each plant and the efficiency
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 15

of their operations will also influence their

effectiveness to compete.

The annual level of plant use of these competing plants, including overtime and second

shifts, should be estimated, along with their

potential for handling added volume by increasing their hourly kill rate. Most existing slaughter-plant coolers hold the production of 3 days'

kill, based on workdays of only one shift. Newer

plants with a one-shift operation commonly are

designed with 2 days' holding capacity. Those

with cooler capacities substantially larger than

these amounts have the potential for sustained

overtime operations or possibly a second shift,

depending on the amount of extra cooler space

and whether the firm performs other processing functions, such as carcass breaking and

boxing. Productive slaughter activity of 7.2

hours per day at plant capacity is considered

100-percent use of slaughtering facilities, but

some plants can and do operate at higher

production levels.

Particular attention should be given to any

firm or firms currently operating far below

plant capacity. Does this condition represent a

temporary or a long-term problem? Are there

any other significant factors causing the problem besides a lack of cattle supplies? If so,

what are they?

If any local beefpacking plants are either

closed or operating under receivership, the reasons and circumstances behind such events

should be determined.

For a visual appraisal of competition in the

proposed plant's primary and secondary trade

areas, local beefpacking plants currently in

operation can be pinpointed on a map. Those

that do not compete for the same type of cattle

as the proposed plant need not be considered.

Draw concentric circles with 50- and 120-mile

radii around each existing beefpacking plant,

as shown in figure 3. Next, illustrate cattle

density at the county level by using dots,

where each dot represents a given number of

current January 1 inventories. This helps visualize where cattle concentrations are prevalent.

Then complete the form below figure 3. Naturally such boundaries do not limit buying activities of slaughter plants, but they can show

where a packer might expect to have an advantage over another in cattle procurement. If

cattle density is relatively uniform among counties, a packer could logically expect to have

lower assembly and transportation costs in a

primary procurement area where most competition comes from distant packers.

Regardless of whether the seller pays for

transportation or whether the packer does,

both can increase their profit potential by

reducing hauling distance and the time that

slaughter cattle spend in transit. If the seller

pays, he knows that he can accept a similar

bid on his cattle from a nearby packer over a

distant rival and come out financially ahead. If

the packer pays, he knows his actual shrink

factor as well as his hauling costs will be less

and therefore he is in a position to bid higher

for his procurements and still acquire them at

lower cost than competitors hauling cattle

hundreds of miles. In a U.S. Department of

Agriculture study, Gustafson and Van Arsdall

reported that the seller pays for transportation

on about 90 percent of the fed cattle marketed

(27), Small feedlot operators pay transportation

on almost all their fed cattle, whereas large

feedlot operators occasionally sell their fed cattle without incurring such transportation costs.

After a thorough evaluation of slaughter

plants already operating in the area, the evaluators can then judge the actual potential for

the proposed new plant. The analysis may

reveal that there are indeed sufficient surplus

slaughter cattle available to satisfy the plant's

projected kill capacity. On the other hand, the

investigation might indicate that the supply is

such that the proposed kill capacity could be

increased or that it would be wise to scale it

down below that originally proposed. Or perhaps it may even become evident that one

more local plant might create excessive competition, causing existing packers to operate below their normal kill capacities.

Excessive levels of competition can often

become counterproductive to a rural area's

goals of increased job opportunities and stable

growth. Coupled vdth this argument is the fact

that meatpacking unfortunately is a low-profit

business. It normally survives on volume operations. Table 3 shows that indu?^lry earnings

after taxes averaged less than 1 percent from

1963 through 1975 (3). This compels plant managers to operate as near as possible to their
16 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

^

\

s

7

D

FIGURE 3.—Method of showing competitive cattle-procurement conditions facing a proposed beefpacking plant.

(Asterisks indicate existing plants.)

Kill per hour Percent Number Number Percent of kill

Local Distant

plants plants

A ______

B

C

D

_____„ E

F

G

Total or

average

Estimated Estimated Estimated annual cattle

annual annual procurement from

Slaughter level of cattle proposed plant's

capacity plant use slaughter trade area
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 17

maximum capacity to reduce slaughtering costs

per unit of production.

Therefore community leaders in areas that

already contain ample to excessive slaughter

capacity should seriously consider other courses

of action before attempting to promote a new

packing plant. Suppose, for example, the evaluators find that, though there are too many

local packing plants, some are old, outmoded,

and highly inefficient. Under these circumstances, local employment opportunities in this industry might be improved through consolidating and improving old plants rather than by

introducing additional competition. A high level

of steady employment might be achieved by

promoting the merger of some local firms,

either by remodeling and modernizing one of

the older plants or by constructing an entirely

new one, and combining their volumes. This

could mean that employees might have to

commute to a nearby town instead of working

locally if the evaluators find that another community is a more suitable plant location than

their own.

Nevertheless in the interests of better rural

development, communities should avoid rivalry

over plant sites. Cooperation among communities is the key to providing maximum rural

employment and avoiding wasteful duplication

of investment capital. Vital development funds

may then be channeled into other enterprises

and thereby further local employment potential

rather than diminishing it through excessive

competition.

In the past, rural-oriented packers could simply reach out farther into producing areas for

raw material whenever cattle marketings were

poor in their immediate trade area. This practice, however, is becoming increasingly difficult

because of the intense competition generated

through the trend of packers moving to rural

areas. Plants that depend too much on distant

procurements are finding their normal flow of

cattle intercepted by competitors more strategically located.

New plants should be located where packers

will be able to acquire two-thirds to threequarters of their raw materials within the

proposed plant's primary trade territory and

the remaining volume within the boundaries of

the secondary area. The plant should operate

at 95 to 100 percent of its hourly rated kill

capacity throughout the year.

Sparse cattle density in some areas, excessive

competition in others, as well as poor initial

planning can contribute to unsatisfactory rural

plant location with excessive slaughter capacity

and high procurement costs. A University of

California study (4J) in a sample survey reported that western rural packers obtained

only 34 percent of their cattle from primiary

trade areas within a 50-mile radius of their

plants, almost 25 percent from 50 to 100 miles

away, about 29 percent from 100 to 200 miles,

and the remaining 12 percent at over 200 miles.

Figures 4-6 show the locations of packing

plants operating in the continental United

States, Alaska, and Hawaii (9J), They include

plants that slaughter all types of livestock

except horses. Several are multispecies-slaughter establishments, which kill more than one

type of livestock in the same facility.

Since the end of World War II, livestock

producers have tended to specialize by area,

and this has been chiefly responsible for another change in the meatpacking industry. New

and remodeled plants in rural areas usually

slaughter only one animal species. The older

metropolitan-oriented plants had ready access

to all species from nearby terminal stockyard

markets, but these multispecies-slaughter plants

are rapidly disappearing as terminal market

receipts continue to weaken.

Approximately 92 percent of all animals

slaughtered commercially in the United States,

excluding horses, are processed in Federal-approved packing plants. The remaining 8 percent

are attributed to State-approved slaughter

plants.

On March 1, 1975, 1,239 plants were under

Federal inspection and 60 plants were inspected

under the Talmadge-Aiken program (fig. 4). In

40 States, 2,571 plants were under State inspection (fig. 5). These figures represent packing

plants that either slaughtered livestock only or

had combination operations that included

slaughtering and some form of further meat

processing. All meat plants involved solely in

processing red meats as well as those involved

in poultry slaughtering and processing were

excluded from the State totals shown in figures

4 and 5.
18 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

TABLE 3,—Sales^ raw-material costs, operating expenses,

1963

ï*^"' ProporAmount tion

Million Perdollars cent

Total sales 15,325 100.0

Cost of livestock and other raw materials 11,345 74.0

Gross margin ..^ 3,980 26.0

Operating expenses:

Wages and salaries 1,750 11,4

Employee benefits:

Retirement expenses 43 .3

Social Security taxes —__ 69 .4

Insurance and hospitalization ____. 59 .4

Vacations, holidays, and sick leave 116 .8

All other benefits* . __=_

Total employee benefits 287 1.9

Interest „ ^— 33 .2

Depreciation 125 .8

Rents - 50 .3

Taxes^ - -— 46 .3

Supplies and containers 565 3.7

All other expenses 880 5,8

Total operating expenses __- 3,736 24.4

Earnings before taxes 244 1.6

Income taxes 115 .7

Net earnings 129 .9

VNot reported separately until 1969.

2 Other than social security and income taxes.

1964 1965 1966 1967

Propor- Propor- Propor- ProporAmount tion Amount tion Amount tion Amount tion

Million Per- Million Per- Million Per- Million Perdollars cent dollars cent dollars cent dollars cent

15,900 100.0 17,125 100.0 19,500 100.0 19,825 100.0

11,735 73.8 13,015 76.0 15,220 78.0 15,115 76.2

4,165 26.2 4,110 24.0 4,280 22.0 4,710 23.8

1,785 11.2 1,775 10.4 1,850 9.5 1,960 9,9

44 .3 50 .3 61 .3 63 .3

68 .4 68 .4 84 .4 89 .5

64 .4 67 .4 70 .4 78 .4

117 .7 114 .7 119 .6 128 .6

293 1.8 299 1.8 334 1.7 358

332

150

2.2

1.0

248

106

1.4

.6

235

101

1.2

.5

348

148

182 1.2 142 134 200

1.8

34 .2 34 .2 47 .2 54 .3

124 .8 138 .8 145 .8 154 .8

54 .3 57 .3 62 .3 65 .3

43 .3 44 .3 52 .3 51 .2

575 3.6 565 3.3 590 3.0 650 3.3

925 5.8 950 5.5 965 5.0 1,070 5.4

3,833 24.0 3,862 22.6 4,046 20.8 4,362 22.0

1.0

Figure 6 includes only State inspection-exempt slaughter plants, which are defined as

those approved for the custom slaughter of

livestock and game for the exclusive use of the

owner, members of his household, and nonpaying guests. As of March 1, 1975, 1,514 plants

were in this category. Data concerning Federal

inspection-exempt slaughter plants in the remaining States were unavailable, since only

a composite total for the following four categories was compiled: (1) Livestock and game

slaughtering only, (2) livestock and game

slaughtering with red meat processing, (3) red

meat processing only, and (4) poultry slaughtering and processing.

SALES AND DISTRIBUTION

Meat Consumption Trends

To establish realistic long-range production

goals as well as profit objectives, beef packers

must appraise future trends in the demand for

beef and competing protein products. Such

trends are of vital concern whether planning
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 19

and net earnings ofUß, meatpacking industry, 1963-75

1968 1969 1970 1971 1972 1973 1974 1975

Propor- Propor- Propor- Propor- Propor- Propor- Propor- ProporAmount tion Amount tion Amount tion Amount tion Amount tion Amount tion Amount tion Amount tion

Million Per- Million Per- Million Per- Million Per- Million Per- Million Per- Million Per- Million Perdollars cent dollars cent dollars cent dollars cent dollars cent dollars cent dollars cent dollars cent

20,750 100.0 23,125 100.0 24,400 100.0 24,725 100.0 27,800 100.0 33,225 100.0 35,500 100.0 36,775 100.0

15,870 76.5 17,830 77.1 18,840 77.2 18,775 75.9 22,025 79.2 26,935 81.1 28,260 79.6 29,025 78.9

4,880 23.5 5,295 22.9 5,560 22.8 5,950 24.1 5,775 20.8 6,290 18.9 7,240 20.4 7,750

2,885

21.1

2,055 9.9 2,215 9.6 2,310 9.5 2,360 9.5 2,345 8.4 2,540 7.6 2,725 7.7 7.8

83 .4 86 .4 99 .4 105 .4 97 .4 111 .3 130 .4 147 .4

92 .4 102 .4 105 .4 107 .4 117 .4 151 .5 172 .5 182 .5

83 .4 92 .4 99 .4 105 .4 111 .4 136 .4 155 .4 179 .6

140 .7 140 .6 146 .6 147 .6 156 .6 168 .5 184 .5 203 .6

29 .1 31 .1 33 .1 36 .1 40 .1 43 .1 46 .1

398 1.9 449 1.9 480 1.9 497 1.9 517 1.9 606 1.8 684 1.9 757 2.1

55 .2 70 .3 81 .3 75 .3 82 .3 105 .3 141 .4 134 ,4

160 .8 170 .7 181 .7 191 .8 200 .7 200 .6 214 .6 236 .6

65 .3 69 .3 73 .3 75 .3 90 .3 86 .3 95 .3 102 .8

62 .3 59 .3 59 .3 61 .3 61 .2 65 .2 74 .2 78 .2

660 3.2 745 3.2 775 3.2 785 3.2 795 2.9 845 2.6 995 2.8 1,165 3.2

1,080 5.2 1,125 4.9 1,135 4.7 1,295 5.3 1,265 4.6 1,240 3.7 1,645 4.6 1,725 4.7

4,535 21.8 4,902 21.2 5,094 20.9 5,339 21.6 5,355 19.3 5,687 17.1 6,573 18.5 7,082 19.3

345

160

1.7

.8

393

188

1.7

.8

466

222

1.9

.9

611

277

2.5

1.1

420

185

1.5

.7

603

263

1.8

.8

667

292

1.9

.8

668

294

1.8

.8

185 .9 205 .9 244 1.0 334 1.4 235 .8 340 1.0 375 1.1 374 1.0

new slaughter plants or remodeling and expanding existing facilities.

Since the 1950's the demand for beef in the

United States has had an unprecedented

growth. Red meat consumption per person increased over a fourth, with all the increase

attributed to beef. As shown in table 4, beef

accounted for 44 percent of the total red meat

consumed in 1950 (i, U, 6JÍ, H), By 1960, beefs

share of the total had risen to 53 percent, and

by 1970 it was 61 percent. Three reasons for

this strong demand for beef have been growth

in disposable income, fairly stable beef prices,

and consumer preference. If future interrelationships among disposable income, beef prices,

and prices of other protein foods do not make

beef substantially more expensive, beef consumption per person is expected to rise to about

126 pounds and account for 64 percent of all red

meat consumed by 1980 {66a\

In 1975 about 214 million Americans lived in

the United States or served in the Armed

Forces abroad. Projected population estimates

{98) indicate that there will be 223 million by

1980, a gain of 9 million in 5 years. If both

population growth and increased per capita

consumption continue, total domestic beef requirements will be about 28.2 billion pounds by

1980. This represents an increase of almost 10
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FIGURE 4.—Location of all Federal-approved livestock-slaughter plants in the United States, 1975.
i

* XyE STATE MEAT-INSPECTION PROGRAM FOR THE FOLLOWING

STATES WAS TURNED OVER TO THE FEDERAL GOVERNMENT

IN 1975= COLORADO, CONNECTICUT, MASSACHUSETTS

NEW JERSEY, NEW YORK, AND TENNESSEE.

(SLAUGHTER PLANTS FOR HORSES NOT INCLUDED.)

FIGURE 5.—Location of all State-approved livestock-slaughter plants in the United States 1975.

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(SLAUGHTER PLANTS FOR HORSES NOT INCLUDED.)

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FIGURE 6.—Location of State inspection-exempt plants approved for custom slaughter of livestock and game in the

United States, 1975.
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 23

TABLE 4:,—Consumption ofselected protein products for selected years, with projected estimates for

1980

Consumption per person

Protein products —

1950 1960 1970 1975 1980

Lb Lb Lb Lb Lb

Beef -___„_ 63.4 85.1 113.7 120.1 126.3

VeaL- ^_- 8.0 6.1 2.9 4.2 1.5

Pork 69.2 64.9 66.4 54,8 68.1

Lamb and mutton 4.0 4.8 3.3 2.0 2.4

Red meati 144.6 160.9 186.3 181.1 198.3

Poultry^ 24.7 34.1 49.7 48.9 59.0

Fish3 11.8 10.3 11.8 12.1 13.7

^ Carcass weight.

^ Ready-to-cook weight of chicken and turkey; minimal consumption levels of duck and geese are excluded.

3 Edible weight.

percent or about 2.5 billion pounds over 1975

consumption levels of 25.7 billion pounds.

However, future anticipated increases in

worldwide demand for beef may have some

repercussions on future domestic beef consumption and the need for expanded slaughter-plant

production. World beef and veal consumption

per person increased significantly in most countries between 1961 and 1971 (91)^ particularly

among the industrialized nations. Consumption

increased in beef exporting nations like Australia, New Zealand, and Ireland, as well as net

importing communities, such as the eight remaining European Common Market Countries,

and Canada, Austria, Switzerland,. Spain, and

Portugal. During this 10-year period, per capita

beef consumption in Japan, Israel, and Greece

more than doubled. Although Japan is still the

lowest per capita beef consumer of all the

developed countries, averaging only 7 pounds

per person, that nation's increasing desire for

beef could become a significant factor in world

markets, considering its accelerating growth in

disposable income and a population of 111 million. Japanese beef imports could surge appreciably higher if quota restrictions were removed. With prosperity, beef consumption per

person in Europe could move much higher as

well as that in Canada and other nations as

their standards of living rise. Thus, other industrialized nations could bid away a portion of

the beef supplies normally imported into the

United States as well as some premium cuts

coming from domestic supplies here.

If supplemental beef supplies from imports

fail to keep pace with projected domestic demand, and significant amounts of domestic beef

are exported, both U.S. cattle production and

beef-slaughter capacity might have to be expanded further. In 1975, beef imports amounted

to almost 1.8 billion pounds (carcass-weight

equivalent) or 7 percent of total U.S. consumption that year {89), Most of these imports are

boneless fresh and frozen beef used in manufactured meat products. Beef exports, on the other

hand, were negligible in 1975, amounting to

less than 54 million pounds.

However, unless some major technological

advance, such as twinning, enables American

cattle producers to substantially increase beef

production at fairly stable prices, future increased world demand for beef may have a

substitution effect on projected increases in

domestic beef demand rather than a supplemental one. In other words, if some traditional

beef imports are diverted to other nations and

exports of American beef eventually become a

factor, any possible future increases in sales

opportunities for U.S. beef abroad would probably be at the expense of projected increases in

domestic beef sales rather than in addition to

them, since foreign markets would likely bid up

prices beyond levels that some Americans

would be willing to pay for beef and thereby

curtail domestic demand.
24 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

According to projected estimates (Í4, 66a) for

1980, domestic per capita consumption of veal

will probably decline slightly^ whereas consumption of lamb and fish will rise beyond

current levels. Consumption per person of

chicken and turkey as well as pork is expected

to rise markedly by 1980 but at the expense of

other foods rather than beef as Americans

continue to change their dietary habits by

eating increasingly greater amounts of protein

foodstuffs. Total pounds of all food consumed

per person will remain fairly stable.

Any future threat to the demand for beef

from the substitution of vegetable proteins may

have no effect on domestic beef production but

instead may become a substitute to some extent for beef imports now used in processed

meats manufactured domestically. At present

levels of protein-isolate technology, imitation

meats, flavored and textured to simulate natural meats, are expensive and have limited

consumer appeal But other cheaper forms of

vegetable proteins, such as soy grits, can be

and already are being used in the industry as

extenders. Moreover, scientists are working on

semimeat products made by blending vegetable

proteins with real beef, somewhat like margarine

is made by blending vegetable oils with milk

solids and animal fats.

For those seeking a longer term look at

prospects for the beef industry, forecasters

have estimated that beef and veal consumption

per person will climb to 130.4 pounds by 1985,

with a range from this baseline estimate being

a low of 125.3 pounds to a high of 133.5 pounds

{66a), Coupled with a projected 1985 population

estimate of 234 million (98)^ this means that

beef and veal sales should be somewhere between 29.3 and 31.2 billion pounds by then. The

higher consumption estimate for 1985 is premised on demand continuing to be stimulated

through rising disposable incomes of consumers

and realistic future beef prices relative to other

protein foods.

The consumer boycott and subsequent price

freeze on beef during 1973 clearly illustrate

that although Americans enjoy eating beef and

prefer it to other protein foods, there is a limit

to how much of their disposable income they

are willing to use to pay for it.

Potential Market Outlets

The approach used to analyze the market

potential for the proposed plant's beef production will depend on whether the plant is to be

built by an established packer or by newcomers

to the industry.

A national, regional, or even sectional packer

will already have established channels for marketing meat products. The output of the new

plant would have to be fitted into the firm's

overall marketing program. The packer involved would participate in the marketing analysis from the outset to help establish the size

of slaughter operation that would best meet its

increased needs for beef.

If, however, no specific packer is being considered at the time, or if a newcomer to the

industry, such as a cooperative feedlot association is involved, the plant's potential marketing

position must be thoroughly appraised under

the assumption that it will operate as an

independent firm. Three basic marketing alternatives are generally open to an independent

packer.

First, the plant's beef output could be marketed under contract or market agreement.

Under either arrangement the volume, quality,

product form, and price schedules would be

specified in the contract before production

started. Precise scheduling of cattle flow would

be needed from farms and feedlots to and

through the slaughter plant to the contractor's

refrigerated warehouses.

The second alternative would be to consign

the plant's production to one or more bonded

brokers or agents. This is similar to marketing

under contract, except that prices would vary

more in response to changes in market conditions, and volume requirements would be difficult to predict. The consignees would determine

product specifications and other necessary sales

requirements.

The third alternative would be for the proposed firm to have its own sales force or retail

outlets. This distribution approach would require making marketing decisions for promotional work to establish a reputation for the

firm and for pricing policies that would attract

enough buyers to reach the desired sales volume, but yet high enough profit margins to
GUIDELINES FOR ESTABLISHING BEEFPACEING PLANTS IN RURAL AREAS 25

cover the added costs of a fully staffed sales

department. It would also require directing* and

coordinating the activities of salesmen, who

would sell carcass or boxed beef to retail stores,

hotels, restaurants, and institutions. Small potential operators might want to establish their

own retail outlets to sell direct to consumers.

The first two alternatives relieve management of much of the responsibility for marketing but weaken the firmes overall bargaining

position by depending too exclusively on one or

a few outlets. Nevertheless new firms may

wish to consider some form of contracts or

consignments, at least in the beginning. None

of these alternatives should be ruled out before

the plantas overall marketing opportunities

have been analyzed.

The marketing investigation itself will include selecting specific sales territories and

surveying meat-affiliated firms within these

demand areas to determine the probability of

successful market entry. Selection of the proposed trade areas should be based on optimum

distribution patterns developed from an investigation of the follovdng factors: (1) Distances

and transportation costs from the proposed

plant location to high beef consumption areas,

(2) existing levels of sales competition within

alternative markets where the plant would

have a comparative transportation advantage

over competitors in other areas, (3) demand

characteristics and population trends within

these various market areas, and (4) each market area^s pricing policies and practices. Potential customer accounts to survey include corporate and voluntary chains; independent

wholesalers; hotel, restaurant, and institutional

purveyors; brokers and commission agents; and

local, State, and Federal governments.

Those involved in analyzing the market potential for a cull-beef operation might also

include food processors and meat-manufacturing firms. This of course would depend on

whether the slaughtering firm intended to

process its own meat or market it as unprocessed, boneless beef.

The evaluators should also survey suitable

outlets for the plant's byproducts. Packinghouse byproducts include animal fats, both

edible and inedible; hides; tankage, dried blood

meal, and bonemeal feeds; glands; and gelatin

and glue stocks. Suitable markets will also be

needed for variety meats, such as head meat,

hearts, livers, kidneys, tripe, tongues, and oxtails.

The scope of this task is so formidable that

mail or phone surveys should be substituted

for personal interviews. Specific information to

be obtained from the questionnaires includes

(1) the volume of beef sold by the firm in the

preceding year and any increased needs that

can be foreseen; (2) how much of this volume

might be ordered from the new packer; (3) the

firm's method of establishing prices; (4) the

firm's specifications for fresh beef purchases,

including quality, product form, delivery scheduling, and any legal considerations; and (5) its

procurement methods and the normal period

between delivery and payment for purchases.

Followup personal interviews with the most

promising prospects can provide additional data

for the analysis.

The results of this marketing survey should

then be compared with the plant's projected

annual output. If the marketing potential appears favorable, a distribution program should

be planned according to the most favorable

marketing alternatives.

A market appraisal for a new local packer

requires a somewhat different approach than

that described for national, regional, and sectional packers. The opportunities to develop

local outlets normally are rather limited. For a

clear picture of the actual market potential,

the evaluators must consider as a distribution

territory that area within which the plant's

location gives it an advantage over other packers selling beef in the area. The total beef

consumption in this given area should be measured. Current population statistics for the trade

area multiplied by local per capita beef consumption will give an estimate of the trade

area's total demand potential less that supplied

by farm slaughter. Where the population is

declining, the resident statistics must be adjusted to realistic future totals.

If local per capita beef consumption is unknown, it can be estimated by comparing rural

household beef consumption for the area, as

shown by Rizek and Rockwell (58), with the

national average use of beef in households.

The ratio between the figures can be used to
26 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

inflate or deflate average ñgures on U.S. per

capita beef consumption for the most current

year available.

The evaluators must then consider the packers and meat distributors currently serving

the area to determine whether the new plant's

output would meet severe competition. Local

outlets should be contacted to obtain data. If

the plant's projected output is greater than can

be marketed locally, more distant markets

would be needed for the surplus, or the plant's

kill would have to be scaled down until the firm

was able to acquire a greater share of the local

market.

Successful local marketing will require a combination of competitive pricing policies, improved services, high quality, consistent volume, and a strong promotional program.

Distribution Requirements

Dependable transportation service and the

cost of that service to get the product to market

are critical considerations in any industrial

development plan. This is particularly true in

determining feasibility for rural packing plants

since they merchandise a highly perishable

commodity. Advantages of locating plants away

from urban demand centers are reduced somewhat by the need to deliver the final product—

beef—to the consuming public. Near completion

of the Nation's interstate highway system and

past reductions in rail rates have helped shrink

this disadvantage.

Most interregional fresh beef rail shipments

now move by piggyback refrigerated trailer.

The vans are loaded at the packing plant,

transferred to flatbed railcars, and shipped. To

meet over-the-road competition, rail carriers

now provide ramp-to-ramp service, eliminating

the need for pickup and delivery. Overall, however, motor carrier transportation dominates

the movement of fresh meat to market in the

United States. According to the best available

estimates, trucks now move about 90 percent of

all fresh meat supplies (55), The latest available

census of transportation shows that truck cartage accounted for 81.3 percent of all meat and

meat products transported during 1972, whereas

rail movement accounted for 18.5 percent (97).

The remaining 0.2 percent was attributed to all

other forms of transportation.

When truck and rail freight charges are

compared on a service-equivalent basis, motor

carriers generally have an advantage over rail

carriers for short hauls, whereas railroads have

the advantage in most long hauls. In the

packing industry, trucks are generally considered to have the advantage over rails for hauls

under 300 miles. Although one study (2^) shows

that trucks have a clear-cut advantage over

rails for only the first 98 miles when hauling

such commodities, the data are based on costs

to the transportation industry rather than

charges to the user. Nevertheless truck transportation offers speed and flexibility, which are

critically important for movement of perishable

products. Consequently, efficient load scheduling, minimum delays and time in transit, as

well as prompt deliveries can become as important or often more important than freight

differential charges. Also, deliveries made on

schedule help to assure repeat sales. Carrier

reimbursements for loss and damage claims on

spoiled meat in transit can never really offset

or compensate for the loss of a good customer

account.

The most common truck used to haul fresh

meat is a five=axle tractor semitrailer, which is

40 feet long. With the maximum gross weight

allowed in most States of 73,280 pounds, this

vehicle has a maximum payload capacity of

43,010 pounds. However, this maximum load

could probably be obtained only in transporting

packaged meat. Hanging dressed beef would

probably be somewhat less (56), Most packers

use an average figure of 40,000 pounds per load

when estimating their shipping equipment requirements for carcass beef. Some use 38,000 to

39,000 pounds per load as their average for

hanging carcass beef. In both cases, similar

figures are used for piggyback shipments of

hanging beef. Western packers utilizing overthe-road 54-foot twin trailers (27 feet each)

normally estimate their hanging meat payloads

at 43,000 pounds, although the maximum payload capacity for such refrigerated rigs is 46,530

pounds in many Western States.

Nationwide refrigerated railcar payloads for

hanging meat are generally estimated at 50,000

pounds, whereas boxed variety meats and the

like average about 125,000 pounds per 50-foot

railcar.
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 27

For an independent packer just getting established, common or contract motor carrier

service may be more practical than leasing or

owning transportation equipment. The method

used will depend largely on the firm's financial

position and the distance to prospective outlets,

as well as on the relative availability of adequate rail service. A rail siding to the plant

has the advantage of flexibility, although

nearby piggyback service will suffice for those

planning to serve distant markets. Nevertheless many large-scale packers rely entirely on

railroads to move their refined fats and oils,

tankage, and other animal byproducts. This is

the principal reason why many install a rail

spur and rail docks at their facilities even

though practically all their fresh meat shipments travel by refrigerated trucks.

To determine the availability, dependability,

and adequacy of existing local transportation,

the evaluators should investigate the following

factors:

For motor carrier service:

(1) The number of local common and contract

carriers.

(2) Rates and charges, including minimum

load qualifications for the lowest rate.

(3) Type, condition, and availability of refrigeration equipment.

(4) The capacity of local services to meet

peak load demands as well as normal anticipated shipments throughout the year.

(5) The opportunities to consolidate deliveries.

(6) The in-transit time to proposed outlet

destinations.

(7) Humidity and temperature control maintenance in transit.

(8) Provisions for security and damage claim

adjustments.

(9) Extent of freight damage adjustments

made recently by local services for refrigerated

food shipments.

(10) Extent of past labor problems, if any.

(11) Maintenance of service during bad

weather, such as snowstorms.

(12) State highway limitations on size and

weight of vehicles.

For rail carrier service:

(1) The number of railroad lines serving the

community.

(2) Rates and charges, including minimum

load qualifications for the lowest rate.

(3) Typical local supplies of refrigerated piggyback vans and railcars and their condition.

(4) Seasonal fluctuations of van and car supplies for the local area.

(5) Outbound service routes and transit times

to proposed outlet destinations.

(6) Humidity and temperature control maintenance in transit.

(7) Provisions for security and damage claim

adjustments.

(8) Extent of freight damage adjustments

made recently by local services for refrigerated

food shipments.

(9) Extent of past embargoes resulting from

labor strikes.

(10) Alternate service in case of labor strikes

or bad weather.

(11) Car size and weight restrictions.

(12) Possibility that a railroad line will extend

trackage to the plant site.

For transportation of meat products, rates

and charges for both commercial trucks and

rail service are under the direct authority of

the Interstate Commerce Commission. Agricultural commodities, including livestock, fish, and

certain unprocessed commodities, are exempt

or free from the Commission's regulations. Local carriers or the Commission itself can provide any more specific information desired.

INSPECTION AND GRADING

Federal meat inspection is mandatory for all

meat products destined for interstate commerce. Those planning to establish a plant

with slaughter capacity greater than that

needed for local and nearby consumption

should consider using Federal inspection to

expand their market distribution potential.

Many outlets, such as food chains and large
28 AGRICULTURE HANDBOOK 513, U.S. DEFT, OF AGRICULTURE

wholesalers, require that meat be federally

inspected even when it is not shipped across

State lines.

Federal Meat Inspection

Federal meat inspection service is administered by the Food Safety and Quality Service

of the U.S. Department of Agriculture. Its

purpose is to assure the wholesomeness of all

meat and meat products entering interstate

and foreign trade. It includes Federal inspection of animals before, during, and after slaughter. If the meat is further processed, the Department inspects it during all additional steps.

The meat inspection service also regulates and

controls the facilities, equipment, and sanitation in all meat plants operating under Federal

inspection. It has authority to approve or disapprove all labels used for meat products processed in these plants.

The basic cost of this inspection service is

paid by the Federal Government. However, the

packer is required to pay USDA for overtime

service. Maintenance costs necessary to meet

Federal inspection requirements, as well as

any losses resulting from condemnation of animals or carcasses, must be borne by the packer.

Before a packing plant is granted Federal

inspection, blueprints consisting of plot, floor,

and plumbing plans of the entire plant layout

and specifications must be furnished to the

U.S. Department of Agriculture for approval.

Plot plans of the entire premises must show

the locations of all buildings, parking areas,

rail sidings, and roads, along with streams,

catch basins, water wells, reservoirs and storage tanks, and the sewage-disposal system.

Prior to the inauguration of inspection, the

plant operators must have letters stating that

the water system is potable and the sewage

system is acceptable. These letters must be

obtained from responsible local authorities.

Trained USDA personnel review the blueprints to make sure that all aspects of receiving, slaughtering, processing, and shipping are

acceptable. The plant must be carefully designed to provide sanitary procedures that vdll

produce wholesome meat products. Recommended guidelines for designing, building, and

maintaining meatpacking plants to operate under Federal inspection can be obtained from

the U.S. Department of Agriculture (81),

After the firm's application and blueprints

have been approved and the plant has been

built. Federal inspectors will be assigned to the

plant to provide inspection service for 40 hours

per week, not to exceed 8 hours per day. Daily

weekday hours over this limit are considered

overtime. The inspection fee charged to packers

in 1977 for each USDA employee for overtime

service was $13.20 per hour, including Saturdays, Sundays, and holidays, and $19.92 per

hour for any requested laboratory services beyond normal inspection requirements.

Each approved packing plant is given an

establishment number, which is to appear on

all carcasses inspected and passed at the plant.

No minimum slaughter volume is required for

plants to be eligible for Federal inspection

service. Workable arrangements can be made

to serve the inspection needs of even very

small plants that may kill animals only 2 or 3

days a week. Established small packers who

seek to qualify for Federal inspection should

have their plans approved by the U.S. Department of Agriculture before making any alterations to enlarge or improve the efficiency of

their facilities. Specific information about updating and qualifying old facilities to meet

Federal requirements can be obtained from

the Department {85X

State Meat Inspection

The Federal Wholesome Meat Act of 1967

required that by December 15, 1970, all nonfederally inspected meatpacking plants throughout the country should be provided vdth State

inspection service comparable to that of the

Federal Government. This means that packers

doing business within their own State must

have their livestock inspected by State personnel before, during, and after slaughter. They

must also provide sanitary plant standards at

least equal to Federal requirements. To be

acceptable, facilities and equipment must be

clean and capable of being kept clean. These

requirements are intended to insure that meat

products are prepared in sanitary surroundings. The purpose is to assure consumers of a

sanitary, wholesome meat supply and not to
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 29

impose strict standards that might force small,

nonfederally inspected plants out of business

(8S).

Packers who expect to ship meat only within

their own State should contact their respective

State inspection agencies for specific regulations about plant design and details about

sanitation requirements. Among the critical

considerations for either constructing new

plants or improving old ones are water supplies,

drains, floors, walls, doors and doorways, lighting, refrigeration equipment, meat rails and

plant equipment, and the inspectors' needs.

As of December 31, 1976, 33 of the 50 States

had established and have continued to conduct

their own State meat inspection programs certified as meeting Federal inspection standards.

The following States are without such State

programs: California, Colorado, Connecticut,

Kentucky, Massachusetts, Minnesota, Missouri,

Montana, Nebraska, Nevada, New Jersey, New

York, North Dakota, Oregon, Pennsylvania,

Tennessee, and Washington. Although the Federal Government has assumed responsibility

for meat inspection in the absence of an approved State program, this does not entitle

packers in these 17 States to make interstate

shipments unless they specifically apply for

and receive approval as a regular federally

inspected plant.

Talmadge-Aiken Inspection Program

In accordance with Public Law 87-718, signed

into law on September 28, 1962, a cooperative

Federal-State meat inspection program was

established. The four basic principles used to

develop and identify this cooperative meat inspection agreement between the U.S. Department of Agriculture and State departments of

agriculture and related agencies are as follows:

(1) That the inspection will conform in all

respects to the Federal requirements; (2) that

the inspection will be conducted by federally

approved State employees with such supervision by Federal employees as may be needed

to assure that Federal inspection requirements

are met; (3) that the cost of the program will

be borne by the individual State from public

funds; and (4) that establishments operating

under such a program will be eligible to ship

meat and meat food products in interstate or

foreign commerce.

This law was established after it was determined that frequently the administration of

such programs within a State by competent

State agencies and personnel avoids duplication

of functions, results in greater effectiveness,

and permits economy in administration. As of

December 31, 1976, 18 States were participating

in this cooperative program by conducting Talmadge-Aiken inspection for the U.S. Department of Agriculture. The following States have

such T-A plant inspection programs: Alaska,

Arkansas, Delaware, Georgia, Hawaii, Illinois,

Indiana, Kansas, Louisiana, Maryland, Michigan, Mississippi, North Carolina, Ohio, Oklahoma, South Carolina, Utah, and Virginia.

Federal Meat Grading

Federal meat grading is sometimes confused

with Federal meat inspection. Carcasses that

have been both federally inspected and graded

carry three types of colored markings. Two of

these markings are applied to animal carcasses

by the Federal meat grading service. A ribbonlike stamp with the letters **USDA'' and a

grade such as "CHOICE" set within a shield

indicates the meat quality of the carcass. A

similar ribbonlike stamp with the letters

"USDA" and a number such as "'2" set within

a shield indicates the amount of salable

trimmed meat that the carcasses will yield.

The third type of colored marking on such

carcasses is the circular inspection stamp applied by Federal meat inspectors. This stamp,

which reads "U.S. INSPECTED & PASSED,"

denotes that the meat is wholesome and free

from disease and has been processed under

sanitary conditions. It also carries the identifying number of the specific plant where the

carcass was processed. Meat that has been

inspected for wholesomeness by a State may

be graded by Federal graders if the packer

desires this service.

The function of the Federal meat grading

service is to provide nationally uniform guidelines for meat quality and yield. Meat quality

indicates differences in meat palatability, U.S.
30 AGRICULTURE HANDBOOK 513, U.S. DEFT. OF AGRICULTURE

Department of Agriculture quality grades

range in descending order from Prime, Choice,

Good, Standard, Commercial, and Utility to

Cutter and Canner. Each grade indicates a

specific level of carcass quality. Carcasses meeting the standards of the top four quality grades

are usually from young grain-fed cattle and

are sold as dressed beef. The remaining four

grades^—^Commercial, Utility, Cutter, and Canner—^usually designate meat from more mature

animals to be used in processed meat products.

In 1965, official Federal standards were developed to measure the yield of major boneless

retail cuts in a beef carcass. These standards

indicate the amount of salable trimmed beef

that a carcass will yield. Any of five yield

grades may be applied to carcasses in each of

the USDA quality grades. Yield grade 1 represents the highest yield of retail cuts, and yield

grade 5 represents the lowest. Yield grades

allow packers to identify their beef more precisely and enable retailers to specify standardized grades of leanness rather than make up

restrictive private specifications. Such yield

grading service no longer is left to the option

of the meat packer. The yield identification

must be applied along with the quality grade

stamp if a packer requests such Federal meat

grading service.

Although Federal inspection is provided at

no cost to the packer except for overtime, the^

entire cost of Federal grading is paid by the

packer. This cost covers salaries and benefits

of the USDA grading personnel, operating

costs, and administrative overhead. The hourly

rate for Federal grading in 1977 was $19 for

service between 6 a.m. and 6 p.m. from Monday

through Friday. The hourly rate for weekday

overtime and Saturdays and Sundays was $23

and for holidays it was $38, twice the base rate.

The Federal grading service can be extremely helpful to new operators attempting to

develop market outlets, since their dressed beef

will be evaluated according to the same standards as beef from established plants. This

standardization under the Federal gi^ading system enables new independent beefpackers to

sell similar quality on a competitive level with

nationally known packers. Retail beef advertisements frequently carry Federal grade labels

rather than individual packer brand names.

Since the cost of Federal grading is borne

solely by the packer, the benefits must be

appraised against the costs to determine

whether the plant will profit from this service.

CAPITAL INVESTMENT REQUIREMENTS

Financial requirements for establishing beefpacking plants include two basic componentsfixed investment capital and operating capital.

Funds are needed to build and equip the facility, and additional amounts are needed to carry

on business activities, such as purchasing cattle, slaughtering, merchandising, and extending

credit to outlet accounts.

The specific amounts of fixed investment

capital needed depend on plant size and function as well as on prevailing construction and

equipment costs and current land values. Since

these costs vary widely with time and locality,

the fixed investment estimates shown in table

5 for small, medium, and large cattle-slaughtering facilities are intended only as being representative of those during 1976. They are fairly

typical of costs in mid-America, where many

new plants are being constructed. Sufficient

land has been allocated in each cost estimate

to handle plant expansion and lagoon acreage

needs if an independent sewage-treatment system should be required. The estimates of building and equipment costs were obtained from

the engineering department of Koch Supplies,

Inc., in Kansas City, Mo. Estimated costs for

freshwater and wastewater-treatment systems

were obtained from Bell, Galyardt, and Wells,

sanitary engineering consultants, in Omaha,

Nebr. Estimates of land values are from the

Guymon, Okla., Chamber of Commerce.

Although these plant costs may be viewed as

typical, architects and engineers warn that

superior quality construction, which provides

durability and therefore longer, useful plant

life, can raise costs appreciably higher than

the estimates in tables 5 and 6. In other words,

construction quality can also have an impor-
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 31

TABLE 5.—Estimated capital investment requirementsfor S sizes

of cattle-slaughter plants in 1976

Capital investment by plant size in kill

j. capacity per hour

20 head 60 head 120 head

Landi $142,500 $345,000 $510,000

Site work2 12,000 30,000 48,000

Building 671,893 1,493,646 2,427,604

Equipment 321,325 733,610 1,356,310

Water system3__._„___„ 101,000 181,(K)0 280,000

Sewage-treatment system-* 145,000 268,000 349,000

Paved areas __„ 8,849 22,471 44,298

Corrals 87,120 250,200 423,630

Architect's fee^- „ 46,072 105,979 173,732

Total^ . .„ 1,535,759 3,429,906 5,612,574

^ Land requirements and costs are based on the following estimates: (1) For

the 20-head-per-hour plant, 25 acres @ $5,700 per acre; (2) for the 60-head-perhour plant, 75 acres @ $4,600 per acre; and (3) for the 120-head-per-hour plant,

150 acres @ $3,400 per acre. These estimates are for raw land serviced by a

hard-surfaced road and with track frontage, or with the potential of extending

a rail spur to the site. Land costs for similar rural industrial sites without rail

potential would be somewhat less. Treated wastewater discharge by irrigation

would significantly increase these land requirements.

2 These estimates are minimal. Site clearing requiring demolition and removal

of existing structures or extensive filling, grading, or piling improvements can

increase costs substantially.

^ Cost estimates for a potable freshwater system can vary widely depending

on well depth, well distance from plant site, storage capacity needs, and

pressure pumping requirements.

^ Cost estimates for wastewater treatment can vary widely depending on the

type of treatment system selected, year-around weather conditions at the plant

site, and other variable factors. These estimates exclude the costs of land for

sewage-treatment needs as well as acreage for irrigation purposes and irrigation

pumping and spraying equipment.

^This fee is based on 6 percent of the construction costs for the building,

paved areas, and corrals. Although 6 percent might be considered average, the

actual charge normally varies from 5 to 7 percent, reflecting plant size and the

extent of work required of the architect. Some clients require more service

than others.

^ These totals are for kill-and-chill plants only. See p. 65 for additional

construction and equipment cost estimates for carcass-breaking and boxing

facilities, which could be installed in conjunction with a new kill-and-chill

packing plant.

tant role in price estimating along with plant slaughter systems, which are fitted with mesize, function, locality, and time of construction. chanical hoists and overhead conveyors and

Facility space requirements as well as other are equipped with such devices as hydraulically

estimates were based on data developed in an operated deboners, hock cutters, hide pullers,

Oklahoma study on economies of size in cattle- and lift platforms. Electrically operated splitslaughter plants and on supplemental data ting saws, air-powered knives, and other laborfrom a California study on the same subject saving devices are also used. High-volume op-

(23, UX Tables 6 and 7 show estimates of the erations in the medium-to-large plants also use

floorspace and equipment requirements for a moving-top viscera table positioned directly

each of the three sizes of plants. Such modern below the moving chain conveyor supporting

packing plants have kill floors with on-the-rail the carcasses.
TABLE 6.—Estimated facility requirements and construction costs for S sizes of cattle-slaughter

plants, in 1976

Construction costs and space requirements by plant size in kill capacity per hour

20 head 60 head 120 head

Facility area ' ——— ' ________ ___^

Construction Floor Total Construction Floor Total Construction Floor Total

cost area cost cost area cost cost area cost

Dollars Dollars Dollars

persqft Sq ft Dollars per sq ft Sqft Dollars per sq ft Sq ft Dollars

Kill floor 69.30 1,750 121,275 63.00 5,142 323,946 56.70 8,970 508,599

Chill cooler^- 77.00 1,710 131,670 70.00 4,692 328,440 63.00 8,964 564,732

Sales cooler! 77.00 2,247 173,019 70,00 5,472 383,040 63.00 10,527 663,201

Refrigeration _ ___ 36.30 240 8,712 33.00 800 26,400 29.70 800 23^760

Boiler 36.30 200 7,260 33.00 442 14,586 29.70 540 16,038

Hide curing 38.50 1,400 53,900 35.00 3,000 105,000 31.50 5,500 173,250

Rendering ____ __ 46.20 1,500 69,300 42.00 2,825 118,650 37.80 5,000 189^000

Equipment cleanup 30.80 224 6,899 28.00 224 6,272 25.20 224 5*645

Dry storage _ 30.80 150 4,620 28.00 344 9,632 25.20 687 17^312

Welfare and cafeteria 30.80 600 18,480 28.00 1,280 35,840 25.20 2,740 69,048

Offices^ 39.60 1,320 52,272 36.00 2,880 103,680 32.40 4,800 155*520

Refrigerated docks3 58.30 420 24,486 53.00 720 38,160 47.70 870 41^499

Averagre or subtotal „„„ 57,12 11,761 671,893 53.68 27,821 1,493,646 48.92 49,622 2,427,604

Dock aprons 1,50 840 1,260 1,50 1,440 2,160 LSO 1,740 2,610

Parking lots .80 9,486 7,589 .80 25,389 20,311 .80 52,n0 41,688

Corrals^ _ _ 9.90 8,800 87,120 9.00 27,800 250,200 8.10 52,300 423,630

Totan_ .__ .„„_ 30,887 767,862 ____ 82,450 1,766,317 _„„. 155,772 2,895,532

» Both the chill and sales coolers for each size plant have sufficient storage-holding capacity for 1 day's kill in each room.

2 Includes office space for meat inspectors.

^ Docks are enclosed, insulated, refrigerated, and fitted with insulated doors, dock seals, and bumper guards.

^ Exclusive of architect's fee, installed refrigeration, and other in-plant equipment. When costs for the building, all in-plant equipment including the

refrigeration, and the architect's fee are consolidated into one cost and divided by the amount offloorspace for each size of operation, the cost per square foot

offaahty amounts to (1) $87.48 for the 20-head~per-hour plant, (2) $83.04 for the 60-head-per-hour operation, and (3) $78,83 for the 120-head-per-hour plant.

Corral cost estimates are based on the amounts ofpenning areas, alleys, gates, and fencing necessary for each size plant. One-fifth of each plant's corral

area is provided with a weathertight roof. Cattle-holding capacities for each plant's corrals are equivalent to 21/2 days' kill.

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GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 33

TABLE 1,-estimated equipment requirements and costs for 3

sizes of cattle-slaughter plants in 1976

Equipment forRequirements and costs by plant size in kill

capacity per hour

20 head 60 head 120 head

Refrigeration:

Chill cooler tons.» 43

Sales cooler do__ 12

Total do__ 55

Refrigeration, installed:

Per ton dollars..

Total. do.

Kill floor, installed doRendering, installed do.

Hide curing, installed do_

Office, installed do.

Totalcost do.. 321,325

125

30

155

733,610

248

66

314

1,875 1,625 1,500

103,125 251,875 471,000

44,400 180,000 282,000

144,000 240,000 480,000

19,450 38,900 77,800

10,350 22,835 45,510

1,356,310

These plants with kill capacities of 20, 60,

and 120 head per hour are designed as killand-chill operations to produce dressed-carcass

beef. Facilities for offal workup on the kill floor

and the rendering of inedible byproducts are

included, but no provision was made for curing

hides in the Oklahoma and California studies.

All hides were expected to be sold daily on a

**green" or fresh basis. However, such hidecuring facilities and equipment have been included in the plant construction estimates

given in tables 5-7. Estimates of equipment

costs and space needs to prepare brine-cured

hides were obtained from Challenge-Cook Bros.,

Inc., in Industry, Calif.

High-volume packers now have an additional

alternative for marketing their hides. An advanced, new hide-processing system that partially tans hides is available. Such **blue

chrome" hides command better prices because

they are free of salt stains and wrinkles and

permit tanners to skip several primary processing steps {111, 112), However, additional mechanical inputs, such as fleshing devices, as

well as more sophisticated processing equipment, based on 1976 estimates would cost a

packer operating at 120 head per hour $218,000,

or more than three times the cost of equipment

to produce brine-cured hides.

For construction and equipment cost estimates of facilities to break and box carcass

beef, see the last section of this handbook on

New Industry Trends.

The need to maintain adequate working capital on hand cannot be overstressed. Lack of it

is a common cause of business failure for old

as well as new firms. Owing to the unique

buying and selling practices of the meat industry, packer requirements for operating capital

are substantial. Current bench-mark ratios of

"fixed capital" to "operating capital" requirements for cattle kill-and-chill operations are

about 1 to 0.95 for small operators, 1 to 1.27 for

medium-sized ones, and 1 to 1.50 for large

packers.

Packers, by law, are required to pay for their

raw-material livestock procurements within

hours of purchase. Yet on the other hand they

often are obliged to wait weeks to collect from

their customers. Consequently, packers always

have considerable sums of capital tied up in

their accounts receivable. Normal settlement

periods for accounts receivable have averaged

from 10 to 14 days, but the length of these

settlement periods is increasing. Some packers

now wait from 10 to 30 days to collect their

money. Cash outlays to cover potential bad

debt accumulations also increase the need for

working capital.

Specific amounts of working capital requirements depend on many other variables as well.

Current cattle and beef prices, current wage
34 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

rates that affect plant employee payrolls, nonlabor operating expenses, and beef inventory

levels on hand are some items. The level of

plant use is also important. Normally to enable

a packing firm to meet its current operating

expenses and fixed future obligations, about 5

to 8 percent of its annual operating costs,

including raw-material procurements, must be

continuously available in cash credits throughout the year.

Besides the cash needed for normal business

activities, startup capital is needed for promotional programs and training the work force. A

contingency reserve should also be set aside

for emergencies and for unexpected increases

in operating expenses. Therefore specific recommendations for cash-on-hand needs can be

made only after the evaluators determine all

current cost inputs and typical credit extensions to be granted to accounts at the time and

place of the study. This is equally true of fixed

plant investments.

When computing the necessary operating

capital requirements, the evaluators must assume that the proposed plant will operate the

year round at a given percentage of its rated

line speed, preferably 100 percent or better.

Line stoppages or "downtime" for veterinary

inspection delays, bottlenecks, and two rest

periods typically reduce work time during an 8-

hour shift by about 10 percent, making the

actual productive time per day about 7.2 hours.

To compensate for this, many packers increase

their kill-line speeds about 10 percent above

the plantas normally rated kill capacity so that

their chill-room carcass count will equal a full

8-hour day's production at the plant's rated

line speed. For example, in a plant set up to

operate at a kill of 60 head per hour, the chain

speed is increased to 66 head per hour. This

practice, however, requires extra labor and

rebalancing the kill-floor crew. Additional computations in the Oklahoma study consider six

operating levels, ranging from 90 to 115 percent

of each plant's rated line speed.

Cost inputs used to estimate annual in-plant

operating expenses for a proposed beef packing

plant are summarized in exhibit A (appendix).

Sources for developing detailed estimates of

these costs as well as formats for determining

plant depreciation allowances, equipment writeoffs, and other accepted accounting procedures can be obtained from the Oklahoma

study (2S) and other published research data

(29, dfi, 44)- Once the annual in-plant costs are

derived, then livestock procurement costs and

meat and byproduct sales and distribution costs

must be estimated.

Economies of Plant Size

Many types of agricultural processing firms

are participating in the general trend toward

large-scale, automated operations found in

other nonfood industries. Economies of plant

size are achieved when average unit costs of

production decrease as plant size increases. If

these unit costs are reduced significantly, there

will be a tendency within the industry toward

construction of larger plants as smaller, highcost plants are forced out by competitors with

lower operating costs.

Production economies in the packing industry

are possible with the new technologies in killfloor equipment and plant design, improved

labor utilization, and the trend toward specialization in only one animal species. Normally a

modern on-the-rail beefpacking plant killing 60

head per hour can reduce per-unit slaughtering

costs to achieve economies of plant size if the

plant is operating at or near its rated line

speed.

Since 1950 the meatpacking industry has

changed from a concentration of slaughter capacity under a few dominant packers converged

in urban areas to a growing number of ruraloriented, medium-sized independent firms.

More recently the number of large rural-oriented independent firms is increasing.

Although Franzmann and Kuntz (J3) found

diseconomies in plant size as productivity increased beyond 60 head per hour, a study by

Logan (4^) in 1965 indicated that further economies are possible as plant size increases beyond 60 head per hour. Logan's study deals

with on-the-rail plants ranging in capacity from

20 to 120 head per hour without cold offal

workup and rendering. Operating costs in the

study represent the Omaha, Nebr., area. The

report is essentially an updated version of one

by the same author on economies of scale,

using 1960 Los Angeles, Calif., data (44).
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 35

However, plant size is not the only criterion

for competitive strength in the packing industry. Benefits attributed solely to plant size can

be misleading. Plant operating efficiency can

be offset by cattle shortages and excessive

cattle procurement costs. A modern automated

plant can easily experience diseconomies in its

overall operations. For example, if a 180-headan-hour plant operated at only 60 percent of its

rated line speed because of a local shortage of

raw material, and if operating even at this level

made it necessary to buy cattle from as far as

500 miles away, such a plant could experience

diseconomies in overall operations.

Economies in plant size may also be offset

by other factors. Efficient beef distribution and

customer service are very important. Large

plants that pay high transportation costs to

ship their beef into isolated demand centers

may be at a disadvantage in competition with

small local packers. Plants in isolated areas

often can cater to their local clientele by performing services that distant suppliers would

have difficulty in duplicating. For example, a

small local packer, killing only 10 head per

hour but performing such additional functions

as custom meat processing and wholesaling to

hotels and restaurants, might satisfy a small

local demand at a profit, even though the

firm's per-unit slaughtering costs were comparatively high.

Integration of small plant activities can improve the use of labor. Such joint use of facilities, labor, and management for operations

beyond slaughtering can increase overall profit

margins and help reduce per-unit average

slaughter costs (60). Area wage rates also affect

plant expenses and thus per-unit slaughtering

costs.

Financing Sources

The method used for capital financing will

have an important effect on the packing-plant

budgeting analysis, since interest costs will be

reflected in annual operating expenses until all

capital loans have been repaid. Evaluators

should work with community leaders and others to find the most advantageous basic plan

to finance the project. Interest rates and other

pertinent financial information used in the

calculations must reflect conditions prevailing

at the time of the study.

Financing of a new packing plant normally

depends on the organizational structure of the

firm and whether the planners are established

packers or newcomers to the industry. A packing plant can be operated as an individual

proprietorship, as a partnership, or ag B corporation. A cooperative association is another

type of organization that has become popular

among some feedlot operators trying to improve their profit opportunities by integrating

forward into slaughter operations.

Established packers seeking funds for new

plant construction have immediate access to

internal capital sources, such as retained earnings and depreciation allowances. Other capitalgenerating options include issuing new stock,

debentures, or bonds. These are in addition to

conventional loans from commercial lending

institutions.

New independent firms normally have fewer

sources of investment capital. Bankers and

other lenders consider them potential high

risks, particularly if they lack management

experience. Newcomers to the industry usually

raise funds first through owner equity, then

through local private investors and public financing, and finally through commercial lending institutions. Those with sufficient personal

wealth could, of course, finance their own construction.

Often small businessmen can obtain local

capital from individual investors by legally

incorporating the firm and issuing stock and

debentures. Sales to community residents and

friends are possible, since these people would

be familiar with the individual's management

ability. In capitalizing such a corporation, care

must be taken to protect owner control.

Another possible outside source of partial

long-term capital is the public market for corporate securities filed under regulation A of

the Securities Exchange Act (21),

A number of States have passed legislation

establishing development corporations to promote economic and social community development through financial assistance. Several

types of such industrial financing programs

are generally available to help establish rural

packing plants as well as other industries. One
36 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

such program is through the use of industrial

development bonds.

Industrial development or industrial aid

bonds are issued by State or local governments

to raise capital for acquiring or improving a

commercial site and building a plant, which

then can be leased to a private corporation.

The lease is generally for 25 or more years. It

normally contains a clause giving the private

firm an option to purchase the land and facilities outright when the lease expires. The bonds

may be obtained as nonguaranteed revenue

bonds, or, where the town acts as cosigner

with the firm, they may be obtained as general

obligation bonds. The repayment of nonguaranteed industrial revenue bonds depends solely

on rent payments from the firm for whose

benefit the bonds are issued and on the capital

asset they finance. General obligation bonds

are repaid by similar rents, as established by

the leasej but they are backed by the full faith

and credit of the issuing government. Since

nonguaranteed industrial revenue bonds must

be marketed on the basis of the firm's credit

rating, they are generally useful only in financing well-established companies. General obligation bonds are typically used for small or new

corporations.

Most States have some form of public industrial financing program to promote such rural

economic growth. Planners should investigate

the availability of industrial aid financing

through local industrial development bond issues, State industrial development authorities

that make loans to local nonprofit development

corporations, and State loan guarantee programs (5Sa, 53b, 103a).

Commercial banks are a versatile source of

short-term loans for working capital. Although

collateral requirements and loan terms are

normally flexible, most commercial banks hesitate to extend credit in excess of a firm's

collateral assets. The most frequent reason

given for turning down loans is too little owner

equity. Most banks offer long-term credit, but

they prefer short-term loans, which enhance

the liquidity of their own assets. Most prefer

making long-term loans only to finance land,

buildings, and equipment, which themselves

can be used as security.

Although banks generally hesitate to extend

funds for new businesses, loan officers often

consider the personal integrity and ability of

the individual seeking money for a new venture. Small banks, acquainted with an individual's abilities but not able to extend the size of

loan requested, can recommend the borrower

to their correspondent banks or arrange participation loans through their correspondent

banks.

An alternative to conventional lending

sources for working capital is commercial finance companies. However, interest rates are

normally higher than prevailing bank rates,

and this form of financing is generally considered only as a supplemental or as an interim

source of loans.

Private financing through savings and loan

associations, life insurance companies, and

bank trust departments generally is not promising for the packing-plant operator seeking

capital. These organizations are typically conservative among commercial lending institutions.

Manufacturers of packinghouse equipment

normally prefer not to extend credit, but they

will help finance new equipment purchases if

necessary. They generally require a 25-percent

down payment in cash and terms of from 2 to

5 years to pay off the balance with accrued

interest at prevailing rates.

If complete industrial financing is not obtainable from private sources, loans from certain

Government agencies can be made available

{66, 80), These Federal financing programs are

not intended to supplant other sources of financing but to provide additional capital when

it is needed to make sound development possible. These Governm.ent agencies that provide

such assistance are the Economic Development

Administration, the Small Business Administration, and the Farmers Home Administration. The first two agencies are a part of the

Department of Commerce and the third is an

arm of the Department of Agriculture.

Economic Development Administration

The Economic Development Administration

(EDA) provides low-interest, long-term loans to

either new or expanding businesses in designated redevelopment areas. Typically these are

areas of significant unemployment and low
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 37

income. Loans of as much as 65 percent of the

total cost of the project, including land, buildings, and equipment, may be made for up to 25

years at a rate of interest based on Federal

borrowing costs. The loans are made only for

business ventures that cannot obtain financing

through banks or other commercial lending

institutions. Federal guarantees for workingcapital loans made by private institutions in

connection with these projects are also available.

At least 15 percent of the total cost of the

project must be supplied either in the form of

equity capital or as a loan subordinated to the

Federal loan. EDA loans are generally made in

excess of $500,000. Loan applications are evaluated on the merits of the project's economic

soundness and on the employment potential

that the project will generate.

Small Business Adminislratiori

The Small Business Administration (SEA) is

authorized to make loans to small business

firms that cannot obtain financing through

conventional channels. For loan purposes, the

SEA defines a small business as one that is

independently owned and operated and is not

dominant in its field. A firm is generally considered small if it employed an average of 250 or

fewer during the preceding year.

Loan applications can be made for construction, conversion, or expansion of facilities; for

purchase of equipment, supplies, and materials;

for working capital; and for debt payment in

some cases. The maximum that may be borrowed through a bank and guaranteed up to

90 percent by SEA is $500,000. Direct loans

from SEA, if no bank is veiling to make a loan,

are generally limited to $100,000. The SEA has

various lending programs, but loans are primarily of two types: (1) Direct, if no bank is

willing to make the loan, and (2) loans made by

banks and guaranteed up to 90 percent as to

repayment by SBA. A direct loan cannot be

made if the funds are available through a

bank or from the personal resources of the

principals of the business applying for the loan.

Fanners Home Administration

The Rural Development Act of 1972 confers

on the Department of Agriculture the responsibility of coordinating rural development efforts to help improve economic opportunities

and community life for rural America.

One major feature of this bill authorizes the

Farmers Home Administration (FmHA) to

guarantee and make insured loans for commercial, industrial, and community development.

Previously the FmHA's leading role was restricted to making farm, housing, and water

and sewer loans. The sole purpose of expanding

the agency's loan-making capacities into nonfarm categories is to provide rural residents

with essential income by stimulating rural job

opportunities. The results of these efforts

should help stem the migration from rural

areas and relieve further congestion in urban

areas of the Nation.

Business and industrial loans may be made

in any area outside communities with populations of 50,000 or more residents and their

adjacent urban areas. This includes all 50

States as well as Puerto Rico and the Virgin

Islands. Priority is given to loan applications

for projects in open country and rural communities of 25,000 or less. Loans are made to (1)

purchase and develop land; (2) finance construction, modernization, and enlargement of facilities; (3) acquire new equipment and machinery;

(4) provide working capital; and (5) finance

pollution-control projects.

Such business and industrial loans have a

maximum maturity of 30 years on land, buildings, and permanent fixtures; up to 15 years

for equipment and machinery or the life expectancy of such assets, whichever is shorter; and

up to 7 years for the use of working capital.

Interest rates are determined between lender

and borrower. FmHA does not set a maximum

rate and these rates may be either fixed or

variable. Normally FmHA requires 10-percent

equity in projects, but more may be required

depending on specific circumstances.

Cooperatives

Those already in the cattle-feeding business

can integrate their operations with an affiliate

packing firm by forming either an open or a

closed cooperative association. Packing-plant

cooperatives operate for the mutual benefit of

member shareholders or patrons. They are
38 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

usually incorporated and controlled by farm

and feedlot operators. The association is operated on an "at cost" basis, with allowances for

operational expenses, maintenance, authorized

improvements or expansion, and a sufficient

contingency reserve. Annual profits of a cooperative are returned directly to members as

patronage refunds. Normally such cooperative

ventures succeed best when a high percentage

of the equity is financed by the members

themselves rather than from outside lending

sources. The greater the percentage of member

equity, the greater the member interest will be

to make the enterprise succeed. Cooperative

associations can acquire more capital by selling

securities, retaining refunds, or borrowing. Certificates of indebtedness are widely used as

security. They have priority over capital stock

if assets are distributed in the event of a

forced liquidation.

Financing is also available to qualified cooperatives through 12 district banks for cooperatives of the Farm Credit System. These banks

for cooperatives provide permanent, specialized

credit and business services to agricultural

cooperatives in their respective territories. Together they serve cooperatives in all 50 States

and in Puerto Rico. A central bank for cooperatives participates vdth these district banks on

larger loans to meet the needs of borrowers for

credit and other related services (20), Further

information can be obtained from the Farm

Credit Administration, which is a separate Government supervisory and regulatory agency

and not affiliated with the Department of Agriculture.

LABOR AND MANAGEMENT REQUIREMENTS

Despite significant technological improvements in labor-saving equipment and plant

design, meatpacking remains a labor-intensive

industry. Annual payrolls and employee benefits amounted to almost 54 percent of the

industry's total operating expenses from 1963

to 1975 (table 3). The bulk of this industry's

employment is classified as production-line

work, where needed skills are easily acquired

through training. Hence surplus rural labor

represents an attractive manpower pool for

the meatpacking industry.

Labor

Both labor and management requirements

are proportionate to plant size. Combined personnel needs average about 36, 98, and 160

employees for a 20-, 60-, and 120-head-per-hour

cattle-kill operation, respectively. Specific kinds

of employment needs for these small, medium,

and large beefpacking plants are summarized

in table 8 by occupation. Detailed job descriptions and duties for both union and salaried

employees are provided in the Oklahoma study

(23), In this study labor was less efficiently

utilized in 5 work areas as output increased

from 20 to 120 head per hour. This, however,

does not reflect findings in other studies, but

packers often vary in operating functions and

degree of workup.

For example, some high-volume packers tend

to employ greater numbers of workers in their

salvage operations of byproducts and offals

than their smaller counterparts on a comparable man-minute function basis. Such intensified

activities increase the salvage yields of organ

and manufacturing meats, pharmaceuticals,

nonsurgical casings, inedibles for pet foods, and

the like. Also, kill-floor combination jobs at

lower kill-capacity rates are often not practical

at higher operating levels per hour.

With the most up-to-date technologies available today, direct kill-line efficiency, as measured by the number of cattle killed and dressed

per man-hour, averages about 1.6, 2.2, and 2.4

head at line speeds of 20, 60, and 120 head per

hour or better, respectively. This, of course,

reduces somewhat the number of kill-floor job

opportunities given in table 8. However, many

packers advance their kill-line speeds above

their plant's normally rated kill capacity to

offset production delays and consequently they

require more employees. Likewise, other optional operating functions and activities of

packers could also help offset this possible

reduction in job opportunities.
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 39

TABLE 8.—Labor requirementsfor 3 sizes of local labor market normally is readily available

cattle-slatighter plants for feasibility studies.

I \ ; 77 Automated slaughter-plant skills generally Employees required by j. J-^-í»- IJ. ^ 4-1-^4.1 4. A

plant size in kill capacity ^^^ ^^^ difficult to master. Cattle are stunned,

^ ^. Der hour shackled, and bled; then carcasses are moved Occupation ^^ . i 1 , — by an overhead conveyor along a processing

,^^j .^^. /^^, line- Employees stationed along the line have head head head i .• i • i ^.-i- • T i • i

relatively simple, repetitive specialized jobs,

Number Number Number which eliminate the need for highly skilled job

Union labor for— performance. Persons with limited educational

Killfloor__-_ ._ 14 34 63 backgrounds can be successfully trained to

Supporting kill floor: i ji j. • i j. • ^ T Hot offal - 2 9 18 handle most m-plant assignments. In screening

Cold offal 112 potential employees, the emphasis is normally

Cooler _„ 4 8 12 on physical dexterity. Packers hiring trainees

Dock_____ 14 5 can request that local employment agencies

Rendering 12 4 ^^^ dexterity tests to job applicants as part of

Hide curing 1 2 4 fi • • ^ t-t^ ^

Maintenance 2 6 10 ^^^^^ screening.

Cleanup 13 5 Federal assistance is available for on-the-job

Yard 12 3 training in any area of the Nation. Under the

rp . j ~ rj. 7Z Comprehensive Employment and Training Act

^ (CETA) of 1973, the U.S. Department of Labor

Salaried personnel: ^¡H ^elp pay the costs of on-the-job instruction

General managers 1 1 1 i-ix^-^i ii,..

Senior cattle buyers 0 1 1 designed to train the unemployed and retrain

Beef sales managers Oil those whose skills have become obsolete. DePlant superintendents ___ Oil tails about such programs can be obtained

Assistant superintend- through the local public employment agency in

C^ttl^b— ? Í 7 ^^^ ^^^^ ^^ through the Governor's Manpower

ßLfLlesmen ~]^~'"-""-] 2 5 9 Planning Office in the State where the study is

Office managers=-^_H~ 0 1 2 being undertaken (102a, 102b, 102c),

Credit managers 112 Small packers with kills of less than 20 head

Bookkeepers 12 3 per hour usually are selective in hiring, because

SeïLtï ^'^^^^ '*''^' ! Î 3 ^^^"^ low-volume operations often require emS^tlboard'ope7ator 0 1 1 ployees to switch from one job to another. This

-_ sharply increases the need for multiple skills.

Total —-—- 8 22 34 It also curtails output per man-hour. IndividuTotal labor force ~~36 93^ ~im als working in small plants often must be able

-— — — to perform all slaughtering assignments. If

packing-plant skills are unavailable within the

To determine whether the positions can be local labor pool, experienced personnel may

filled from the local labor market, the évalua- have to be recruited from outside the immeditors should work closely with the State depart- ate area. However, small packers may wish to

ment of labor and industrial relations or the recruit trainees and establish an on-the-job

equivalent public employment agency in the training program also.

study area. Employee application records are Employees needed for office work would be

continuously being revised and updated by screened for special clerical skills. Efficient

these local agencies. office procedures and a good accounting system

State employment agencies affiliated with are needed to keep management informed

the U.S. Employment Service can help employ- about daily cattle costs, production costs, and

ers with recruitment. They can interview appli- beef carcass returns, as well as to handle

cants, screen them by given requirements, and procurement and sales accounts,

refer those best qualified. Information on the In addition to appraising locally available
40 AGRICULTURE HANDBOOK 513, U.S. DEFT. OF AGRICULTURE

manpower for qualified employees and trainees,

the evaluators should thoroughly analyze the

community's history of labor relations. All the

following should be investigated:

(1) State and local labor laws and regulations,

including whether the State has a "right-towork" law.

(2) Safety and health laws and regulations.

(3) Local union relations, activities, collective

bargaining procedures, and strike policies.

(4) Time lost due to strikes in the last 5 years.

(5) Disposition of labor disputes and boycotts.

(6) Local employee productivity and efficiency

records.

(7) Local employee attitudes, conduct, and

willingness to work.

(8) Local labor turnover, absenteeism patterns, and accident rates.

Wage rates vary between metropolitan and

rural areas and between sections of the country. Normally data on packing-plant labor rates

and fringe benefits can be obtained from the

nearest local office of the Amalgamated Meat

Cutters and Butcher Workmen's Union of

North America, the AFL-CIO, or, in areas

where cattle slaughtering is common, from the

local public employment agency and nearby

meatpacking-plant associations. The kind of

detailed information that is available from various meat association sources (115) is given in

the following tabulation, in which the wage

rate reflects the union scale for a specific type

of job in a metropolitan area:

Base Wage and Benefit Rates for a Journeyman Butcher in Metropolitan San Francisco

Area, Effective Nov. 1, 1975 ^

Annual wages ^_-.- _ _ $14,893.93

Employee benefits:

FICA (5.85% X $14,100)„._ ___._„_ 824.85

State unemployment insurance (3.7% x

$4,200) - 155.40

Federal unemployment insurance (0.58%

X $4,200) ^- 24.36

Workmen's compensation ($5.93 per $100) 883.21

Health and welfare plan (58.5^/1,960 h)„„_ 1,146.60

Pension plan (650 x 1,960 h) ^- 1,274.00

Total annual wages and benefits 19,202.35

Basic straight-time compensation per employee:

Weekly benefits and wage before taxes 369.28

Weekly wage before taxes 286,42

Hourly wage before taxes 7.16

Annual scheduling: Hours

Productive working time „ 1,777

Vacation (3 wk) 120

Holidays (10 days) 80

Coffee breaks -.^_-^__„= 59

Sick leave = 32

Funeral allowance 4

Jury duty 8

Total per year „.^_,_„_ „ 2,080

„ , ^ Total annual wages and benefits Employee cost = r r—7:— Annual productive hours

= $10,806 per productive hour or $0,180 per productive

minute

1 Entitled to 3 weeks' vacation.

Comparative earnings and benefits by selected job classification for slaughterhouse employees in various regions of the country also

can be obtained from a study developed by the

Department of Labor (101), It deals exclusively

with employee occupations, wages, and benefits

in the meat-products industries. Should available data at the local level prove to be insufficient, current Bureau of Labor statistical bulletins on employment and earnings (102) can

be used to update wage rates found in the

Labor Department study and thereby provide

the evaluators with the tools to make a special

wage-cost analysis. Similar wage data would

be needed for office personnel and can be

obtained by following similar procedures.

In most rural communities, workers excel in

both productivity and job stability. Both of

these qualities are essential for uniform slaughter scheduling and maximum plant use in the

packing industry. Chronic absenteeism and job

dissatisfaction can effectively cripple productivity of any slaughter plant or that of any other

business. Often a firm's ability to achieve lower

production costs in rural areas is due more to

the able efficiency and productivity of its dependable labor force than to lower wages.

Management

Packing-plant managers must be experienced

in all phases of cattle slaughtering in order to

operate under sound business principles. In

this industry, profit margins are too small and

risks are too high for inexperienced operators.

Only experience and proved ability can prevent

serious startup crises from developing during
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 41

the first few critical months of operation. Although activities in small plants are limited,

these managers need the same qualifications

to operate successfully as managers in larger

plants. They must assume full responsibility

for overseeing the plantas training program,

for scheduling uniform production, and for arranging efficient crew balance and workflow.

They also need the ability and temperament to

handle labor relations problems. Good managers are keenly aware of the value of good

human relations and favorable employee attitudes. Low employee morale invariably leads

to production slowdowns, poor workmanship,

waste and spoilage, lack of cooperation, absenteeism, turnover, and other problems. Managers must be able to motivate their employees

to want to do their best. Individuals with all

these management qualifications are scarce

and command high salaries.

Other key management personnel within the

plant include a competent kill-floor foreman

and a plant superintendent. The foreman must

be skilled at all kill-floor assignments and capable of instructing others to acquire these

skills. The plant superintendentes duties deal

mainly with plant maintenance, security, and

sanitation control.

Experienced cattle buyers often can be hired

locally. Most managerial and sales personnel

would probably have to be recruited from outside the area, although local individuals should

be considered. Sales personnel must be aggressive and versatile. Qualified persons with established customer and industry contacts are most

useful to the new independent packer establishing initial accounts.

Probably the most practical way a new independent firm could assemble an effective management team would be to contact professional

employment agencies or place advertisements

in meat trade magazines and journals. Established packers generally have less difficulty

recruiting management personnel because they

can staff new plants by promoting from within

the organization.

Some rural packers often miss an obvious

opportunity in their management recruitment

program by failing to emphasize significant

fringe benefits of rural life, such as lower

housing costs and property taxes, often shorter

commuting time to and from work, and access

to outdoor recreational activities for themselves

and their families.

The entire management staff, including the

senior cattle buyer and sales manager, must

be able to work together as a team to efficiently

coordinate cattle procurements, slaughter

scheduling, use of labor and facilities, product

inventory, merchandising, and distribution.

Sound management and good labor policies are

essential for maximizing a firmes profit potential.

PLANT SITES

Candidate sites can be screened by considering their potentials for meeting key location

needs. The search can be narrowed by considering first the requirements that local sites

might have difficulty in meeting and thereby

eliminating the obviously unsuitable. Those remaining should be investigated in detail until

the best site is selected. Among the most

significant factors affecting that choice are—

(1) Site accessibility, including convenient

connections with interstate highway systems

and railroad main lines.

(2) Size, shape, and cost of the site, including

costs necessary for preparation and development.

(3) Acquisition potential of land adjoining the

initial site for future expansion.

(4) Land topography, including drainage conditions and flooding potentials.

(5) Soil conditions, including load-bearing

characteristics.

(6) Availability and costs of utilities and

municipal sewage lines at the site.

(7) Industrial zoning status of the site, existing easements, and other legal considerations.

(8) Possible objections from local residents.

(9) Adjacent land use, including present and

future relative freedom from dust, industrial

smoke, ashes, or other potential contaminants.
42 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

(10) Availability of fire protection and police

security,

(11) Annual taxes and insurance rates for

the site under consideration.

Site accessibility is important. Convenient

linkups with State and interstate highway systems and railroad main lines are essential to

operate packing plants efficiently. Assembling

and transporting cattle to the plant are vital

functions of a packer's operations. Every needless hour in transit shrinks cattle weights and

packer profits. Chilled beef is a highly perishable commodity and must be distributed

promptly to markets. Therefore selection of a

site must be based on minimum time and costs

for these procedures. The site must have frontage on a paved, well-maintained road conveniently linked to State and interstate highway

systems to be accessible to over-the-road trailer

trucks. This, however, does not necessarily

mean that the plant should be located directly

on a major highway. Traffic hazards might be

created on such a highway by trucks slowing

down to turn into the plant property. Potential

traffic patterns should be evaluated to avoid

accidents, congestion, and delays when large

trucks enter or leave the site. Except for plants

catering only to local markets, sites should also

be as close as possible to an existing rail line

so that a spur could be extended to the plant

at minimum cost. Site accessibility to a railroad,

however, would be less important to small and

medium-sized plants if nearby piggyback shipping facilities were available.

The size, shape, and cost of the site, including

any additional expenses necessary to prepare

it, should be considered. Often land cost is

misconstrued as the owner's asking price, when

in reality the sum may be only a part of the

total cost. An apparently inexpensive land tract

might become costly should demolition and

removal of existing buildings, filling, grading,

piling, or other improvements be necessary

before construction could begin. Costs associated with site clearing and preparation must

be considered. If the shape of a land parcel is

irregular or unusual in any way, it is important

that space requirements for the proposed facilities be checked against boundary contours or

other obstructions to insure that they will not

interfere with or limit expansion.

Acreage requirements vary directly with

planned production capacity. Approximate land

needs for plants slaughtering 20, 60, and 120

head of cattle per hour, as presented in the

Oklahoma study (23), are shown in table 9,

along with overall estimates that would satisfy

land requirements for landscaping, plant expansion, and an independent waste-treatment

system in most regions. Space estimates in the

Oklahoma study were originally planned for

urban rather than rural plants and consequently reflect absolute minimum needs, with

expansion considered only for increased cooler

capacity. Also, land areas normally used for

landscaping were not included, but some land

would definitely be used for such purposes by

rural packing plants. Rural packers must also

consider the possibility of future overall expansion for increased slaughter capacity and a

wider range of processing operations.

Although municipal sewage systems were

assumed to satisfy all requirements for such

services in the Oklahoma study, this assumption might prove to be impractical for many

potential packing-plant sites in rural areas.

For a rural plant, an independent waste-treatment system may be a necessity, and if such a

system were to include lagoons, it would require additional land as well as some land for

odor buffer zones. Final discharge of wastewaters by irrigation would create even greater

acreage demands. Plans for such an independent sewage system would have to be carefully

worked out in consultation with a sanitary

engineer before a satisfactory system could be

selected and acreage needs for that wastetreatment system accurately established.

The possibility of acquiring additional land

next to the original site for further expansion

should also be considered, whether or not the

potential operators plan to expand. It is difficult to be certain of just how the beefpacking

industry may change in the future or what

needs for facilities could eventually develop.

Meat-fabricating processes and other functions

now performed by others may eventually be

performed extensively at the packing-plant

level and could mean substantial increases in

facility needs. Failure to acquire or take options

on sufficient land at the beginning might make

such land procurement for future expansion
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 43

TABLE 9.—Estimated land requirementsfor S sizes of cattle-slaii^hter

plants

Requirements by plant size in kill

Facility area capacity per hour

20 head 60 head 120 head

Packing plant-». „ sq ft- 11,761 27,821 49,622

Parking lots and dock aprons —— do__ 10,326 26,829 53,850

Cattle corrals - -_— do_- 8,800 27,800 52,300

Sewage-treatment lagoons and equipment do_- 653,400 1,829,520 3,136,320

Land set aside for other functions! do_. 404,713 1,355,030 3,241,908

Total estimated land— . do_. 1,089,000 3,267,000 6,534,000

Do . acres- 25 76 150

Possible irrigation land2 „ do=- 45 120 230

Total estimated land, including that for

irrigation do__ 70 195 380

^ Includes land for landscaping, future plant and sewage-treatment expansion, and

odor buffer zones around the property.

2 Where sufficient land is available and climatic conditions are favorable, an alternative to sophisticated and expensive tertiary sewage treatment is discharge of treated

wastewaters by irrigation. Additional acreage requirements of this magnitude would

serve to reduce per acre average land costs considerably to perhaps $1,000 to $3,400 per

acre depending on locality and other site location factors.

programs extremely expensive. Fortunately

land is often the least expensive part of the

total package. Therefore more land rather than

less should be acquired when the initial purchase is made.

The land topography of the initial site and

surrounding area can affect the cost and requirements for plant construction and later

upkeep. Topographic maps of the area showing

ground elevation and slopes should be reviewed. Where a large area is involved, an

aerial survey is often the most efficient way to

obtain this information if topographic maps

are unavailable. The natural patterns of water

runoff should be investigated to determine

what drainage facilities and protection from

storm floods and erosion are needed. Potential

susceptibility to damage from earthquakes, tornadoes, and hurricanes should also be noted.

Soil characterisitics and underlying strata

are important in planning construction. The

load-bearing characteristics of the soil, subsoil

conditions, and the depth to bedrock and to

ground water should be analyzed and considered. Those considering the use of an independent sewage-treatment system would need to

determine the soil percolation rate as well as

ground-water characteristics to preclude any

chance of contaminating such water resources.

The availability, dependability, and current

costs of utilities, including electrical power, gas,

water, and possible municipal sewer service, to

the site should be thoroughly evaluated. The

capacities of the local electric power system

should be investigated, as well as the incidence

of power failures in the past 5 years and the

emergency facilities available in the event of

such failure.

Planners should also assess pipeline dimensions, pressures, and flow capacities for gas

and water, along with the size and flow capacity of municipal sewerlines available to the

site. Current rates and other information about

these services can be obtained from local suppliers of these utilities. The proposed undertaking and its special demands on their utility

systems should be discussed with these local

suppliers, and their advice and cooperation

should be sought. If these services are not

already available at the most promising sites,

ñnd out from local suppliers the possibilities,

limitations, and costs of extending these utili-
44 AGRICULTURE HANDBOOK 513, U.S. DEFT. OF AGRICULTURE

ties to these sites. The availability, dependability, and current cost of fuel oil supplies should

also be determined.

The industrial zoning status of the site

should be ascertained and any other legal

considerations that apply. Local zoning laws

and ordinances are very important in site selection. In general, it is inadvisable to locate a

plant near any residential or other area set

aside for possible residential expansion. Zoning

problems no longer are limited to sites near

municipalities, now that many counties are

adopting industrial zoning laws. Injunctions

against packers, processors, and renderers on

public nuisance charges are not uncommon,

even where existing ordinances do not specifically prohibit establishing a packing plant. As

a rule-of-thumb, no anaerobic lagoons should

be constructed within at least a half to 1 mile

of any residence and preferably downwind,

regardless of whether existing zoning laws

permit such a development.

Ownership of land must be determined and

validity of title to it searched to avoid legal

problems. Already-existing easements for pipelines, powerlines, and future roads across the

property should be checked to see whether

they interfere with proposed use of the land.

Objections by local residents should be anticipated and plans should be made to avoid or

reconcile them. Prior objections to packing

plants have focused principally on nuisances

caused by unpleasant odors, flies, dust, traffic

congestion, and early morning noises.

Use of land adjacent to the site, including

present and future uses, should be determined.

Federal meat inspection regulations recommend that, so far as practical, adjacent land

use should be reasonably free of objectionable

foreign odors, dust, industrial smoke, ashes, or

other potential contaminants.

Availability of fire protection and police security should be considered. What is the size in

men and equipment of the local fire department? Is it volunteer or permanent? How far

from the proposed site is the fire equipment

based? About how much time is required to

respond to an alarm? Where are the fire hydrants or other water sources that will be used

if there is a fire at the site?

Similar questions should be asked about the

police protection for the immediate area. What

police department has jurisdiction over the

site? How large is it? What is its normal workload? How frequent and how intensive are

scheduled patrols in the area of the proposed

site? What is the local crime level, and what

estimates are there of potential increases?

Annual real estate taxes and insurance rates

for the site under consideration and facilities

to be built on it should be estimated. Community leaders should be asked to indicate

whether they might be able to grant special tax

concessions for the proposed venture. What

effect might this assistance have on the firm's

overall tax structure, including personal property, inventory, payroll, fuel, and other taxes?

Prospective plant sites should be investigated

with the cooperation of local community leaders

and the assistance of local real estate brokers.

Local realtors might render further assistance

later by helping to negotiate purchase of the

selected site. This might include assembling

land parcels if the site should involve multiple

ownership.

UTILITIES AND ENVIRONMEIVTAL POLLUTION CONTROL

Utüities

Ener^, in the form of natural gas, propane,

coal, or fuel oil, and electricity must be readily

available to any industrial site in sufficient

quantities throughout the year with known

reliability. Likewise, adequate and dependable

water availability is another prime consideration for utility feasibility. Table 10 shows annual utility requirements for 20-, 60-, and 120-

head-per-hour cattle-slaughter operations, including edible and inedible rendering and hidecuring activities. These estimates are based on

findings developed in the Oklahoma (28) and

California (44) studies, with supplemental data

used to estimate additional utility needs not

covered in these reports. Annual rates and

charges for these services could be determined
GUIDELINES POR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 45

TABLE 10,—estimated annual utility requirementÈ for 3 sizes of cattle-slaughter

plants

Plant size in kill

capacity per hour 1 Gas Electricity Water ^

Cufl kWh Gal

20 head 14,450,400 761,429 22,674,960

60 head 43,352,400 1,949,609 67,525,920

120 head 86,704,800 3,742,034 135,051,840

^ Cattle-slaughtering plants operating at their rated

line speeds, including inedible rendering and hide-curing

operations.

2 Equitable to sewage-capacity requirements.

by conferring with local suppliers at the time of

the feasibility study. Unit costs for most utilities decline as the quantity consumed increases. This would normally result in lower

average costs as production expanded, unless

such economies were offset by increased perunit needs.

With decreasing supplies of domestic oil and

natural gas, which were highlighted by the oil

embargo during 1973-74, the subsequent costs

of energy for industrial users have increased

dramatically. Therefore the evaluators should

request thermodynamic engineers to recommend power systems designed to reduce plant

energy consumption without detrimentally affecting projected production. Energy conservation by using high efficiency boilers and refrigeration equipment should be encouraged

wherever possible. Likewise, system modifications and revisions in standard equipment to

customize plant functions can enhance efficient

energy use and thereby conserve energy. Also,

efficient heat recovery and recyling systems

are large energy savers that can reduce aggregate plant fuel requirements. For example,

warm air discharged by refrigeration compressors can be utilized as a source of heat for hot

water and space heating rather than being

wastefully expelled outside the plant as reject

heat. However, long-term energy conservation

programs are dependent on plant management's

attention to details of daily operating procedures, good plant maintenance, and prompt

equipment replacement whenever necessary.

Consideration also should be given, if possible, to adding fuel use flexibility into any

recommended plant power systems. This would

enable management to switch to alternative

energy sources should the availability of certain fuels become scarce or supplies curtailed.

It should be noted that industrial users of

natural gas will be restricted before residential

users in the event of any future shortages, a

consideration of merit when selecting power

systems and energy sources.

According to U.S. Department of Agriculture's meat contamination regulations, a type

of fuel should be used that is reasonably free

of smoke, flying ash, or other potential contaminants. Where natural gas is unavailable, oil

with a low sulfur content or other suitable fuel

that contributes little to pollution should be

considered. It is further recommended that the

evaluators consult with State and Environmental Protection Agency (EPA) regional air quality officials to determine the proposed plant's

status with regard to compliance with the

Clean Air Act of 1970. Necessary air emission

controls can add 10 percent or more to plant

investment costs, particularly if both odor (rendering) and particulates (ash, smoke) are involved.

Packing plants need electricity for many purposes. Refrigeration compressors, kill-floor

equipment, rendering and hide-curing equipment, utility pumps, and plant lighting use

large quantities of electric power. Well-distributed good-quality artificial lighting is required

when natural lighting is either not available or

insufficient. Lights causing color distortion or

shadows are not acceptable. Illumination in

and around work areas where inspections are

being made must be at least 50 foot-candles.

Overall lighting intensity in other in-plant work

areas should be not less than 20 foot-candles.

The major need for fuel energy in a packing

plant is to heat hot water boilers. Additional

heavy fuel consumption needs concern the

plant's rendering activities and heat needed

for nonrefrigerated work areas, offices, and

welfare facilities during the winter in most

localities. Heating needs for these last functions

can vary as much as 20 percent from year to

year solely because of weather conditions.

Water is needed in the plant mainly for

washing carcasses, heads, hearts, tripe, and

other edible offal and also for cleaning livestock

pens, kill floors, and equipment. A constant

supply of hot water, at not less than 180"" F, is
46 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

needed during each daily slaughtering period

for these functions. Rendering and hide-curing

activities also require large quantities of water.

Both hot and cold water under adequate pressure must be provided in recommended areas

throughout the plant.

The water supply must be able to meet

official water quality standards set by the Safe

Drinking Water Act of 1974 (79% These water

quality standards, adopted by the States in

June 1977, were devised by and are effectively

controlled by EPA but are enforced by State

water officials*

Water quality tests must be made because

raw-water supplies may have to be treated,

particularly if surface sources are used. Also,

water quality tests should be made to determine the possible need to condition (soften) the

plant's water sources, since hard water may

cause scaling or corrosion to plant equipment.

Wastewater Pollution Control

The best way to dispose of effluent from a

packing plant is to link up to an existing

municipal sewage-treatment system. If such a

publicly owned system is readily available vdth

excess treatment capacity, use it. If no public

system is available, the plant will have to

develop its own system for wastewater disposal.

Sewage-treatment systems operated by municipalities generally treat organic packingplant wastewaters at lower cost than private

systems for individual plants, because they are

designed to handle large quantities on a continuous basis. However, accepting packing-plant

wastewater into a local public system might

prove to be unfeasible depending on the extent

of the community's excess treatment capacity

and the slaughter-production capacity of the

proposed packing plant. Conferences should be

held vdth EPA officials and State water-pollution control authorities, as well as with local

municipal sewage-treatment officials, to determine both the volume and the biochemical

oxygen demand (BOD) loads or suspended solids concentrations that will be acceptable from

the proposed plant's effluent discharge. BOD is

a basic unit of measure used to describe the

strength of sewage. It refers to the amount of

oxygen required by micro-organisms in a given

volume of wastewater to decompose the organic

matter in it over a given time period.

This inference that use of a publicly owned

treatment system is the "best way'^ to handle

a potential packing-plant's wastewater program is in fact dependent c the extent of a

municipality's excess or "su plus'' treatment

capacity. Nevertheless it should be pointed out

that chambers of commerce and other promotion groups will provide at times the use of

municipal treatment facilities and other useful

services or tax relief to industry as an incentive

to attract new job opportunities for their rural

communities, particularly where chronic unemployment exists. Where excess municipal treatment capacity is nonexistent, costs of construction or modification and subsequent operation

of such expanded municipal facilities are almost

always higher than private treatment, especially where a packing plant is a substantial

contributor to the system. Municipal sewer use

surcharges to others may be high, and the

packing plant by using the municipal system

vdll lose tax deduction benefits associated with

private investment. Furthermore, the vast majority of municipal facilities are currently overloaded and therefore "existing excess capacity"

must be considered a luxury.

Another significant point is that normal

packing-plant discharges of animal fats and

oils (so-called hexane extractables or oil and

grease) or nitrogenous pollutants (particularly

ammonia) may cause a problem for a municipal

system that has its own EPA NPDES (national

pollution discharge elimination system) permit

to be concerned about. Finally, if any Federal

EPA grant monies are used to build or modify

municipal plants, the industrial users are required to contribute their fair share of costs on

a basis proportional to the waste load their

plant discharges (8, 9, 67,103,117).

Pretrealment

Packing-plant wastewaters normally contain

blood, manure, and particles of flesh and fat.

Meat scraps and other particulate material can

be easily screened out of plant wastewaters,

which then can flow into detention tanks for

gravity separation of grease. Waste materials

from these processes can be salvaged. Parts

can be rendered for inedible grease and the
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 47

rest processed for animal feed or fertilizer. The

sale of these products from recovered wastes

can help defray the costs of in-plant pretreatment. Small plants may sell unprocessed grease

wastes to rendering firms in the area. At this

point, the wastewater effluent may or may not

be acceptable for discharge into a municipal

sewer depending on official local standards for

BOD or suspended solids and the community's

available surplus sewage-treatment capacity.

Primary Treatment

Many municipal sewer codes now have strict

limits on BOD levels or suspended solids concentrations from packing plants. Further treatment may be required before the effluent is

acceptable for discharge into a public sanitary

sewer. Air-flotation systems that incorporate

surge and retention tanks to remove additional

solids materials can lower BOD levels after

screening has removed part of the solids. Air

flotation uses air, pH control, pressure, and

chemical additives to produce a clarified effluent, which often is acceptable for discharge

into municipal sewers. Additional skimmings

accumulated from this further treatment also

can be used for animal feed or fertilizer. Air

flotation is by far the most efficient pretreatment or primary treatment system available.

However, well-operated catch basins with mechanical skimmers and solids recovery are far

less expensive and may be adequate.

Secondary Treatment

Where acceptable public sewage service is

not available to the proposed site, the potential

plant operator must plan an independent

waste-treatment system that will pass State

and Federal water-pollution control standards.

A letter of approval from an appropriate State

authority indicating that the plant's proposed

waste-disposal system complies with the State's

standards must be submitted to the U.S. Department of Apiculture before Federal meat

inspection can commence at the plant. In the

past, jurisdiction for granting such approval

was vested in State health authorities, but

now most State departments of health no

longer have authority to certify water-pollution

control facilities. Instead, this responsibility

rests with State water or environmental control

agencies, most of which are now separate from

State health departments.

Another prerequisite for approval requires

that a permit to discharge into surface waters

be obtained from the Federal Environmental

Protection Agency (EPA) if the plant is to be a

direct discharger. This pertains to all plant

construction initiated after October 1973 and

requires that a new plant's waste-disposal system must comply with the EPA's new source

performance standards for direct dischargers.

For clarification of these requirements, see

section 306 of the Federal Water Pollution

Control Act of 1972 {78\

Besides treating plant wastewaters as previously described, the packer must install secondary and sometimes tertiary waste-treatment

systems. Biological processes that are now

being used as secondary treatment for meat

industry wastes include anaerobic (deep) lagoons, aerobic (shallow) lagoons, the anaerobic

contact process, an activated sludge process,

and high-rate trickling filters. The most common and usually least expensive method of

secondary treatment is the combination of anaerobic and aerobic or aerated aerobic lagoons

in series.

If enough land is available at reasonable

cost, a combination of anaerobic and aerobic

lagoons can be used as an independent system

to treat packing-plant effluent wastes economically. The acreage required for waste-stabilization lagoons depends primarily on (1) the

plant's slaughter capacity as well as the various processing functions to be performed and

therefore the amount and strength of effluent

discharge, (2) waste-conservation practices and

type of pretreatment the effluent is to receive

in the plant, (3) local climate and outdoor

temperatures, and (4) characteristics of the

subsoil beneath the lagoons. For example, reported loadings in conventional aerobic stabilization lagoons range from 50 pounds per day

per acre for treating raw wastes of packing

plants in South Dakota to 214 pounds per day

per acre for relatively dilute effluent wastes in

Delaware. The vride difference in load capacity

illustrates the effects of pretreating the raw

effluent and of a warmer climate that favors

activity of micro-organisms.

For purposes of acreage estimating, anaero-
48 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

bic-aefobic lagoon installations require a combined water surface area of between 5 and 7

acres per 100 cattle slaughtered per day in

States such as Texas, Oklahoma, and Kansas,

Total land area requirements, including land

set aside for dikes and fencing as well as water

surface area, would increase the estimated

acreage requirement to 6.5-9 acres per 100

cattle slaughtered per day. (8, 109) However,

any attempt to determine specific acreage

needs for a private sewage-treatment system

without clearly defining the entire waste-disposal design and the specific area where it is to

be used would only tend to confuse rather than

clarify the issue. Accurate acreage data or even

substantiated estimates for a particular size of

packing plant in a specific area of the Nation

would require consultations with qualified sanitary engineers.

The high concentrations of fats, proteins,

carbohydrates, and other organic nutrients

found in meatpacking wastewaters make such

effluent well suited to anaerobic treatment.

However, such treatment is restricted only for

use as the first stage of secondary treatment.

Anaerobic micro-organisms that function in the

absence of dissolved oxygen break down organic wastes into intermediates, such as organic acids and alcohols. Other bacteria then

convert these into such gases as methane and

carbon dioxide. Unfortunately much of the organic nitrogen present is converted to ammonia. Also, sulfur compounds that are present

are converted into hydrogen sulfide, which adversely affects the acidity of the effluent and

creates offensive odors as well. For this reason,

anaerobic lagoons have a cover of grease or

straw to preclude odors from becoming objectionable and thereby deter local ordinance

problems. Once an anaerobic lagoon is in operation and a good grease cover has been established, odors generally do not persist for more

than 1,000 feet away.

Aerobic treatment constitutes the second

stage of secondary effluent treatment. Aerobic

micro-organisms that thrive only in the presence of oxygen are capable of reducing almost

all organic matter from meatpacking waste

into the final end products of carbon dioxide

and water if a sufficient supply of oxygen is

available so that these bacteria can perform

their function of feeding on organic wastes as

their food source. Oxygen is supplied in aerobic

lagoons through natural wave action. These

shallow lagoons require large water surface

areas, but such land requirements can be reduced by supplementing natural aeration

through the use of mechanical devices. Aerated

aerobic lagoons utilize fixed turbine aerators,

floating propeller aerators, or other systems to

supply large quantities of dissolved oxygen to

the wastewaters.

The anaerobic contact process involves placing the effluent first into a settling basin to

remove solids and grease and then transferring

it into another detention tank, where the

wastewaters are thoroughly mixed and heated.

After the wastewater leaves this digester, it is

discharged into a vacuum degasifier to remove

the gases formed by action of certain bacteria

and then transferred into a gravity sludge

separation tank. One of the gases given off is

methane, which is salvaged and burned in a

boiler to heat incoming wastewaters. The anaerobic contact system requires a substantial

amount of expensive equipment as opposed to

requirements for anaerobic lagoons, but it significantly reduces detention time and requires

much less space. The effluent from this process

usually flows into an aerobic treatment system,

such as oxidation ponds or an activated sludge

plant, for further treatment.

The activated sludge process is much more

capital intensive than aerobic lagoon systems,

but it also reduces land acreage requirements

to a considerable degree, particularly for large

plants. This waste-treatment system uses aerobic micro-organisms to feed on the pollutant

materials in large aerated tanks. Organisms

are provided vdth an optimum environment for

reproduction. With plenty of air for respiration

and a constant food supply of dissolved and

colloidal organic pollutants, the organisms increase rapidly and accelerate the rate of biological oxidation. As the organisms build up in

numbers, they form a sludge. The relatively

clean wastewater remaining is separated in a

settling tank, leaving behind huge amounts of

aerobic organisms. The less viable organisms

that make up the sludge are discarded, and a
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 49

portion of the organisms, referred to as "activated sludge," is returned to be added to new

incoming wastewaters to continue the biological process.

Trickling filter systems promote biochemical

oxidation by permitting wastewaters to trickle

down through a bed of stones or synthetic

media that have a large surface area. Aerobic

micro-organisms, which are naturally in all

organic wastewaters, adhere to the stone surfaces and feed on the suspended and dissolved

organic pollutants, and thus cleanse the wastewater flow.

The rotating biological contactor is another

aerobic tank-type process that can be used

where land is limited. This system features

closely spaced, rotating, biological surface discs.

These large-diameter plastic discs are mounted

together on a common horizontal shaft and

rotated into and out of the wastewaters. Aerobic organisms present in the wastewaters adhere to the disc surfaces and begin to rapidly

multiply through the enhanced availability of

oxygen as the discs move out of the wastewaters and into the air. Spent organisms slough

off the discs and are removed in a clarifying

operation that follows the rotating disc treatment. The rotating disc devices are arranged

in a series of stages to increase the effectiveness of the overall treatment. This European

system is said to be capable of doubling the

capacities of most organic secondary treatment

plants housed in relatively confined areas.

Tertiary Treatment

Wastewater effluents properly processed

through efficient secondary treatment systems

are generally 80 to 97 percent free of their

original polluting materials. Depending on the

level of BOD reduction to be achieved by the

secondary treatment and State water-control

requirements for its removal, a tertiary treatment may be required. Highly controlled effluent polishing ponds can be used for this

purpose. Treated effluent from this final clarifier then flows into a chlorine detention pond

or tank and afterward is discharged into surface receiving waters.

Filtration systems utilizing sand or other

mineral fines media also are devices that when

properly managed and maintained constitute

tertiary treatment. Effluent is removed in a

slow sand filter by underdrainage, although

some biological activity occurs in the top inch

or two of media. A rapid sand-filter system

functions basically in a manner similar to the

slow filter system, except that the effluent is

placed under pressure. Whereas the slow sand

filter removes solids primarily at the upper

surface area of the filtering system, the rapid

sand filter operating under pressure permits

deeper penetration of suspended solids into the

sand bed. This allows solids removal to occur

through a greater cross section of the bed and

thus substantially reduces the requirements of

the bed's surface area. Chlorination, both before and after sand filtering, is desirable to

eliminate potential odor problems and slimes

that may cause clogging in the initial filtration

process {108),

Nutrient controls for the removal of ammonia

also constitute tertiary treatment. Such final

clarifier techniques as nitrification-denitrification or ammonia stripping are used for this

purpose. These sophisticated treatment systems remove nitrogen that has been generated

as ammonia during anaerobic secondary treatment. Nitrogen as well as other nutrients such

as phosphorus promote heavy algae blooms in

receiving waters during the warm summer

months. Phosphorus can be eliminated through

a chemical precipitation process.

Tertiary treatment systems have a high initial cost as well as high operating and maintenance costs. Where sufficient land is available

and climatic conditions are favorable, an alternative to such sophisticated and expensive systems is the discharge of treated wastewaters

by irrigation. The three basic methods for

ultimate disposal of treated wastewaters

through this technique consist of spray irrigation, overland runoff, and rapid infiltration.

Besides costing significantly less to install and

operate, the concept holds great potential economic benefits for crop irrigation or similar

activities. However, under this system the

waste loading in the effluent is limited by the

tolerance of crops grown, soil conditions, terrain

features of the land being used, and possible

vermin or odor problems.
50 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

FACILITY PLANNING AND PROJECTED PLANT INCOME

If all the preliminary facts investigated favor

establishing the proposed plant, the next step

is to determine whether it can be operated

profitably. The plantas profit potential can be

estimated by comparing probable buying, operating, and distributing expenses with probable

sales revenues. By using budgeting techniques

to estimate these inputs, a projected income

statement can be prepared to determine the

economic feasibility of the venture.

Since capital investments in land and facilities represent part of the plant's operating

expenses, these costs, like the others, must be

estimated before a projected income statement

can be prepared. Such an estimate can only be

synthesized by first determining the kinds and

capacities of integral processes that are expected to be part of the plant's operations.

Planning Facilities

Various types of on-the-rail slaughter-dressing systems can be used depending on the

hourly kill capacity of the proposed facility.

Small to medium-sized plants that kill up to

about 40 head per hour can use either a

gravity-flow system or an intermittent-power

conveyor system. In the gravity system, rail

height declines as the carcasses move from the

initial bleeding area to other work stations

along the processing line. Rail stops halt the

carcass at each work station until a specific

operation has been performed. The carcasses

move along the plant's sloped rail processing

line by the force of gravity rather than by

mechanical power.

In the intermittent-power system, the rail is

parallel to the kill floor. A power-driven chain

moves the carcasses from one work station to

the next at intermittent time intervals. Both

gravity and intermittent-power systems use

paunch trucks to handle viscera removed from

the carcasses.

Plants with kills of 40 or more head per hour

generally use continuous-power conveyors.

With this system, a powered overhead conveyor

moves the animal carcasses along the processing line without stopping but at adjustable

speeds. A moving-top viscera table is synchronized in speed with the powered overhead

chain conveyor. The viscera removed from the

moving carcasses onto the moving table below

are inspected and then routed to appropriate

workup areas. Splitting, scribing, trimming,

washing, scaling, and shrouding operations are

basically the same for all systems.

One of the major benefits of on-the-rail

slaughtering is that less bending and nonproductive movement is required of workers. Adjustable work platforms are provided at various

work stations along the processing line. The

system eliminates the need for labor to move

carcasses about the kill floor. Another advantage is that slaughter productivity can often

be increased significantly without increasing

the size of the kill floor. This can be done by

rearranging work areas, using different types

and amounts of equipment, and increasing the

plant's labor force. Those plants equipped with

continuous-power conveyors can gain productivity by increasing the plant's chain speed,

rebalancing the crew, and adding more labor

inputs. Further productivity is possible by increasing the number of work shifts per day

provided enough cooler space is available for

the additional production.

Conventional bed-type kill systems popular

in the 1940's are no longer being installed in

commercial slaughter plants. However, many

plants operating today still use this kill method.

In the bed system, carcasses are lowered from

the bleeding rail to cradleHke metal beds located about 6 to 8 inches off the kill floor.

Workers must stoop to perform several major

operations, such as removing the animals' legs,

legging and siding the hide, and splitting the

brisket bone. Other laborious tasks are then

performed before the carcasses are shipped to

the coolers. The increased labor efficiency of

the rail system over the bed system has caused

it to be adopted for virtually all new plant

construction,

A detailed discussion of on-the-rail slaughter

operations as well as the older bed-type system

can be found in an engineering orientation

study of the meatpacking industry by Bonem

(9). For a description of an effective overhead

carrousel-type gravity-flow dressing system for
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 51

kill rates up to 35 head per hour, see the

report by Erickson (18),

The shift from conventional bed-type kill

systems to on-the-rail dressing systems, along

with other innovations, has had a significant

impact on packing-plant efficiency. Labor productivity or output per man-hour, as shown in

table 11, increased 125 percent in the meatpacking industry from 1947 to 1975 (88), In other

words, less than half as many man-hours were

required per unit of productive output in 1975

as in 1947. The technological improvements

most significant in this increase, besides onthe-rail dressing, were the introduction of improved stunning devices, hydraulic hide strippers, and various powered handtools. Well-designed single-story buildings with more efficient

product-flow patterns also contributed to these

gains. Further increases in labor productivity

will probably be needed because of the industry's low profit margin and the relatively

strong bargaining position of retailers. Since

the 1950's, corporate and voluntary retail

chains have become an important factor in the

market, whereas packing-industry influence

has declined. Decentralization of ownership and

the decreased size of packing plants have been

major factors contributing to this change.

Similarly, planning decisions must be made

concerning the types^ sizes, and quantities of

equipment to be used in other affiliated plant

functions, such as in the inedible rendering

department. Should a batch system or a continuous rendering system be employed? Or might

it be more practical and economical to sell the

proposed plant's inedible offal fresh to rendering specialists rather than attempt to process

it at the plant? Should a blood dryer be installed? If so, what type and size?

These are questions that must be answered

before even a basic layout can be developed.

Typically the answers to all such questions

about the plant's operations are predicated on

the plant's proposed kill capacity. As an example, various rendering systems require minimal

raw-material volume to operate profitably. The

plant's estimated inedible offal production must

be matched against these minimal rendering

volume requirements to determine whether the

installation of such equipment will be economically feasible.

TABLE 11,—Labor productivity in meatpacking

industry in the United States, 19^7-75

[Index 1967 = 100]

Indexes of labor productivity in

meatpacking^

Year — —-

Productive Output per

output2 Man-hours^ man-hour'*

1947 __._ 61 118 52

1948 56 112 49

1949 58 116 49

1950 59 116 51

1951 58 119 49

1952 61 121 50

1953 66 ni8 ^55

1954 67 117 57

1955 73 119 61

1956 ._ 78 124 63

1957 76 117 65

1958 73 n09 «67

1959 _,=__„ 77 109 71

1960 81 108 75

1961 82 104 78

1962 83 102 81

1963 87 101 86

19641 94 108 87

1965 91 101 91

1966 96 99 97

1967 „ 100 100 100

1968 103 98 105

1969 103 97 106

1970 106 97 108

1971 110 96 115

1972 112 95 118

1973 101 90 113

1974 110 92 119

1975 ._ 106 91 117

1 Includes both meatpacking plants and establishments

specializing in prepared meat products.

2 Output estimates are based on value-added indexes

published by the Bureau of the Census and projected for

noncensus years by physical output data published by

the USDA.

3 Man-hour estimates for 1947-70 are based on data

published by the Bureau of the Census. Estimates for

1971-75 were interpolated from employment statistics

published by the Bureau of Labor Statistics.

^ Output-per-man-hour estimates are computed from

unrounded indexes of man-hours worked by all employees

and factory output.

s The Bureau of the Census revised the sampling plan

and sample universe in the annual survey of manufacturers beginning in 1953. Thus data for 1953 and later years

are not strictly comparable with those for earlier years.

^Data cover Alaska and Hawaii starting with 1958.

Data after 1958 have been made comparable with those

for earlier years.

"^ Data for 1964-75 are preliminary.
52 AGRICULTURE HANDBOOK 513, U.S, DEPT, OF AGRICULTURE

First, factors to convert slaughter-animal

units into inedible raw-material volumes must

be known. On the average, a 1,000-pound steer

will yield about 50 pounds of liquid blood and

about 125 pounds of inedible offal, such as fats,

intestinal visera, and bones. Therefore since

the minimal raw-material needs for a onecooker batch system are about 3,750 pounds

per hour, or about 30,000 pounds per d y, the

effective kill capacity of the proposée plant

must be 30 head per hour or better to warrant

the installation of such a" system. Incr msing

the number of cookers in the system will, of

course, increase the handling capability of the

systèmes total operation.

Normally the minimal raw-material needs

for a continuous rendering system are about

6,250 pounds per hour, or about 50,000 pounds

per day. However, most equipment manufacturers recommend that this system be operated

on at least a 16-hour-a-day basis rather than

on an 8-hour shift basis. This would boost the

daily minimal raw-material requirement to

about 100,000 pounds, which would translate

into a 100-head-per-hour kill operation. Since

both systems are highly automated, overtime

labor requirements for rendering departments

are generally immaterial considerations.

Once the slaughter capacity of the proposed

packing plant and the extent of its affiliated

functions and operations have been decided, an

overall layout should be designed to meet these

specific needs efficiently. A well-planned kill

floor can mean the difference between making

a profit or taking a loss on each animal slaughtered. Therefore the first effort should be to

make the proposed kill-floor layout the most

effective and efficient possible for the slaughter

capacity planned. Other operations should be

planned in conjunction vdth the kill floor to

provide optimum product-flow patterns. The

building should then be planned around the

plant's overall interior floor plan. Figures 7-9

illustrate cattle kill-floor layouts that meet

Federal inspection requirements for 20-, 60-,

and 120-head-per-hour operations.

Although it is prudent to design the facility

to operate at full capacity rather than provide

excessive costly space, the possibility of future

plant enlargement must be considered should

a dependable, increased supply of cattle become

available to support plant expansion. Such expansion plans must be considered during the

initial stages of layout development so that

later extensions will not be haphazard, inefficient, or unduly costly to construct.

Plant design and projected expansion programs must be based on the assumption that

the operator will be able to compete effectively

in the market. Normally this means that the

proposed plant must be able to keep its production costs the same as or lower than those of

its competitors.

The facility and equipment components discussed thus far do not include facilities for

carcass-breaking and boxing operations, which

are becoming increasingly common in new cattle-slaughter plants. Preparing packaged primal or "block-ready"cuts at the packing-plant

level bypasses many problems of handling inefficiencies, shrinkage, and perishability that

have been associated with traditional methods

of transporting meat in carcass form. Prospective operators planning to slaughter grain-fed

cattle should definitely consider establishing a

boxed=beef operation. Those planning a cowslaughter plant might consider adding facilities

to bone carcasses and further process meat

derived from cull-cattle sources. This could include installing a commercial bologna kitchen

to manufacture luncheon meats, an automated

frankfurter-manufacturing system, or similar

processed-meat facilities.

In any event, new plant layouts should be

designed so that such fabricating, boxing, boning, and processing activities can be integrated

into the plant's operation in the future without

sacrificing the efficient product flow and overall

productivity originally built into the slaughtering facility.

For purposes of estimating construction and

equipment costs, the evaluating team's engineer or packing-plant equipment manufacturers can prepare preliminary layouts of the

proposed facilities. However, the Food Safety

and Quality Service of the U.S. Department of

Agriculture, which administers Federal meat

inspection, recommends that only licensed architects, familiar with all inspection and sanitation requirements, prepare the final drawings

and specifications for Department of Agriculture approval for Federal meat inspection. To
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 53

BEEF

CHILL

COOLER

C^ BtECaiNG AREA

16-0" RAIL ^^^^^

^^55?5«!^««5^*4i««ä»!»seööe!Sfi^^

A-HEAD FLUSHING BOOTH

B-HEAO TRIM TABLE

C-HEAD MEAT TRUCK

0-PLUCK TABLE

E-OFFAL TRUCK

F-FAT RECEIVING TABLE

KEY TO EQUIPMENTG-FAT WASHING TABLE

H-FAT TRUCK

K-TRUCK FOR FEET

L-UDDER AND PtZZLE TRUCK

M-INSPECTION PLATFORM

BW - BLOOD AND WATER DRAIN

FD -FLOOR DRAIN

H-C -HOT AND COLD WATER OUTLET

LAV/S-LAVATORY AND KNIFE STERILIZER

S/S-SAW STERILIZER

TH -THERMOMETER

DRIVE AND STUN

2- SHACKLE,HOIST, AND STICK

3- SKIN HEAD AND DEHORN

4- FLUSH HEAD.AND REMOVE TONGUE

5- REMOVE FRONT FEET

6- SKIN FIRST HINDLEG AND TRANSFER

7- SKIN SECOND HINDLEG

8- REMOVE UDDER AND PIZZLE

»KEY TO OPERATIONS

9- RIM OVER )6A

10- CLEAR SHOULDERS 17

11 - REMOVE HIDE AND TRIM GRUBS IS

I lA- REMOVE HIDE AND DROP BUNG 19

12 - SAW BRISKET 20

13-EVISCERATE 21

14- INSPECT VISCERA 22

15- INSPECT HEAD AND TONGUE 23

16- HIGH RAIL INSPECTION

LOW RAIL INSPECTION

-SPLIT AND FINAL TRIM

-HIGH AND LOW WASH

SHROUD

-TRIM HEAD

' SEPARATE AND WASH PLUCKS

WASH FAT

RETAINED CARCASS INSPECTION

FIGURE 7.- -Sample layout of on-the-rail kill-floor facilities meeting Federal inspection requirements for a plant

slaughtering 20 head of cattle per hour.
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KEY TO OPERATIONS

i -DRIVE AND STUN

2-SHACKLE, STICK, AND SCALP

3-ROD AND TIE WEASANO, REMOVE HEAD

4-DEHORN,FLUSH HEAD, AND REMOVE TONGUE

5 -SKIN AND BREAK FIRST HINDLEG AND TRANSFER

6 -BUTT, SKIN, AND BREAK SECOND HINDLEG

7 -BUTT, INSERT SECOND TROLLEY, AND HANG OFF

8 -REMOVE UDDER AND PIZZLE, SPLIT AITCHBONE

9 -SKIN AND BREAK FRONT FEET, RIM BRISKET

10-CLEAR SHANK AND NECK, SAW BRISKET

I I -RUMP, PULL TAIL , TIE/AND DROP BUNG

I 2 -REMOVE HIDE, TRIM GRUBS ON MEDIAN LINE

13-EVISCERATE

14-SPLlT

I 5-TRIM BRUISES

I 6-HlGH AND LOW WASH

17-SHROUD

1 8 -WORK UP HEAD

i 9-REMOVE PASSED VISCERA

20-WORK UP PLUCKS

2 r-TRi,M, OPEN, AND DUMP PAUNCH

2 2-WASH AND TRIM' TRIPE

MAXIMUM CHAIN SPEED IS 480 FT PER HOUR 0 2 4 G 8 10 12 14 16 18 20

l.t.l I I I I I ! I I I I I I I I I I I I Í....1

FEET

FIGURE 8.-Sample layout of on^the-rail kill-floor facilities meeting Federal inspection requirements for a plant slaughtering 60 head of

cattle per hour.

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KEY TO OPERATIONS

1 -STUN

2 - SHACKLE

3 -STICK AND SCALP

4 -SKIN HEAD

5 -SKIN HEAD

6 - SKIN FIRST HINDLEG AND SAW OFF

7 -BUTT, INSERT FIRST TROLLEY

8 - REMOVE SHACKLE, SKIN, AND REMOVE SECOMD HIN0LE6

9 -BUTT, INSERT SECOND TROLLEY

I 0 -TAG, CUT OFF HEAD, AND DEHORN

1 1 -TRIM AND FLUSH HEAD

I 2-PLACE HEAD ON CONVEYOR , REMOVE TONGUE AND GLANDS, HANG TONGUE ON HOOK

I 3 - SKIN AND BREAK FRONT FEET v' t^ v.» nuu^

! 4 - SKIN AND BREAK FRONT FEET

I 5 -REMOVE UDDER AND PI2ZLE, SPLIT AITCHBONE

I 6 -CLEAR CROTCH AND FLANK

I 7 -CLEAR CROTCH AND FLANK

I 8 -LOW OPEN AND RIM BRISKET

I 9 - LOW OPEN AND RIM BRISKET

20 - CLEAR RUMP

2 I -RUMP AND DROP BUNG

22 -TIE BUNG AND PULL TAIL

23 -CLEAR ROSETTE, SHOULDER, AND NECK

2 4 -CLEAR ROSETTE, SHOULDER, AND NECK

25 -SAW BRISKET

26 -PULL HIDE

2 7 -PULL HIDE

2S -PULL HIDE

2 9 -TRIM GRUBS

3 0 -EVISCERATE

3 i -EVISCERATE

32 -SAW RUMP AND LOIN

3 3 -SAW BACK AND NECK

3 4 -TRIM BRUISES

35 -REMOVE PASSED VISCERA

3 6 -REWASH, CUT OFF TAIL

37 -SCALE, SCRIBE, AND TAG

38 -HIGH SHROUD

39 -HIGH SHROUD

40 - LOW SHROUD

4 I -LOW SHROUD

42 -PUSH CARCASS INTO COOLER

4 3 -WORK UP HEAD

44 -WORK UP HEAD

4 5 -TRIM PAUNCH

4 6 -TRIM PAUNCH

4 7 -OPEN AND DUMP PAUNCH

4 8 -OPEN AND DUMP PAUNCH

49 -WASH AND TRIM TRIPE

5 0 -WASH AND TRIM TRIPE

5 1 -ROD AND TIE WEASANO

MAXIMUM CHAIN SPEED CONVEYOfl "B" IS 960 FT PER HOÜft

FIGURE 9.-Sainple layout of on-the-rail kill-floor facilities meeting Federal inspection requirements for a plant slaughtering 120 head

of cattle per hour.

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56 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

avoid possible costly changes, the Department

further recommends that no construction

should begin until these drawings and specifications have been approved.

Detailed requirements and specifications for

facilities to meet Federal meat inspection approval can be obtained from the U.S. Department of Agriculture (81). Some key considerations in planning and building beefpacking

plants are as follows:

CHECKLIST FOR PLANNING, DESIGNING,

AND CONSTRUCTING CATTLESLAUGHTER PLANTS

I. Basic Facility Planning Criteria

1. Determine hourly slaughter capacity, type of on-the-rail system to be

employed, and space allocation for

the kill floor.

2. Determine scope, capacities, and

space allocations of all supporting

and complementary plant operations, including minimum chill-cooler

and sales-cooler storage capacities.

a. Type of rendering system to be

employed, volumes to be handled, and storage capacities.

b. Type of hide-curing or processing

system to be employed, volumes

to be handled, and storage capacities.

c. Types of integrated meat-fabricating systems to be employed,

volumes to be handled, and storage capacities—such as primal

breaking and boxing operations;

hotel, restaurant, and institutional portion-controlled operations; precooked convenience-food

manufacturing; processed-meat

manufacturing; pet-food manufacturing, etc.

3. Consider rail versus truck transportation for receiving and distributing

products, as well as volumes to be

handled.

a. Dock heights and truck-loading

spaces.

b. Rail-siding height and loading

spaces.

4. Determine type of and total capacity requirements for the central

power plant; electrical, heating, and

plumbing system requirements; and

maintenance facility requirements.

5. Determine type of refrigeration system to be employed, aggregate refrigeration requirements, and insulation needs for various cooler and

freezer facilities.

6. Determine materials-handling systems to be employed.

7. Determine capacities of miscellaneous areas, such as dry storage,

equipment cleanup, and laundry

rooms.

8. Determine capacities of employee

welfare and cafeteria areas and office space needs, including facilities

for Federal or State inspection personnel.

9. Determine capacities of supporting

buildings and structures, such as a

scale house, unloading chutes, corrals, garages, and repair shops.

10. Determine capacities of parking facilities, dock aprons; provide ample

space for truck maneuvering, as

well as ample space for a rail spur

and road accesses.

11. Determine whether sewage needs

can be met by municipal sewage

service or whether an independent

sewage-treatment system will be required.

a. Type and capacity of effluent

pretreatment facilities within

the plant.

b. Type and capacity of independent sewage system, with daily

loading factors for lagoons, etc.

c. Type, size, and capacity of storm

sewers.

d. Necessary acreage requirements

to satisfy an independent sewage-treatment system,

12. Determine total land requirements

to house all proposed facilities and

provide for all associated plant land

needs.
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 57

a. Include an ample land allowance

for future plant expansion.

b. Include ample space for landscaping.

c. Include ample land for transportation access, parking facilities,

etc.

d. If necessary, include ample land

for an independent sewage-treatment system as well as some

land for odor buffer zones.

IL Plant Layout Design

1. Analyze and evaluate data to develop layout with equipment positioning that will provide optimum

operating efficiency for plantas kill

floor at rated kill capacity.

a. Develop similar layouts for supporting operations.

b. Coordinate all layouts for smooth

and efficient product flow.

2. Design for projected expansion in

kill capacity without structural alterations to kill floor.

a. Anticipate and plan for additional cooler space required.

b. Check to guarantee continued efficiency of product-flow patterns.

3. Plan for future projected expansion

in kill capacity requiring structural

alterations to kill floor but at lowest

cost.

a. Plan for similar expansion of

coolers and other supporting

areas at lowest cost.

b. Doublecheck product-flow patterns.

4. Provide inspection facilities to meet

Federal or State requirements.

5. Analyze and evaluate data to develop overall layout that will coordinate all other work areas and

processing equipment to provide optimum product-flow patterns

throughout the plant, including any

complementary operations planned.

a. Provide balance to coordinate

raw-materials handling with

processing rates, inventory storage cycles, etc., throughout the

plant.

b. Review layouts to identify and

eliminate all potential bottlenecks, backtracking problems,

excessive or unnecessary handling procedures, and any other

conditions that would be disruptive to a future plant's productivity potential.

c. Modify plans, if necessary.

6. Provide layouts with interior flexibility as well as with a well-balanced

plan for projected plant expansion

of all complementary operations at

lowest cost.

7. Anticipate and plan for any additional meat-fabricating or processing functions that might be installed at some future date without

disrupting the efficiencies of the facility's initial product-flow patterns.

8. Provide for efficient cleaning and

low cost housekeeping maintenance.

9. Develop layout arrangements for all

supporting buildings and structures

to handle specified volumes of various commodities being received,

processed, and distributed with

least traffic conflict.

a. Consider best arrangement and

location of rail docks, rail spur

or spurs, and switches.

b. Provide ample rail space for full

and empty cars.

c. Consider best arrangement and

location for access roads, docks,

dock aprons, convenient parking

facilities, etc.

d. Where applicable, provide nonconflicting driveway access for

"drive-thru" traffic patterns of

truck and rail movement.

III. Building and Sanitation Specifications

1. Determine all building codes that

apply to plant construction, including structural, piping, boiler, electrical, and environmental. Establish

construction specifications and
58 AGRICULTURE HANDBOOK 513, U.S. DEFT, OF AGRICULTURE

standards that meet or exceed these

building code requirements,

a. Provide construction standards

that offer best insurance rates

for fire and security protection

that added building costs can

clearly justify.

2. Check on building restrictions of all

government agencies, including city,

county, and State.

a. Distance of buildings from property line. -

b. Position of buildings on site with

reference to access roads and

property boundaries.

c. Building height restrictions, if

any.

d. Fire and security protection, etc.

e. All other zoning ordinances.

3. Determine necessary floor loadbearing requirements for various

departments, lighting intensity, etc.

4. Check USDA Agriculture Handbook

191 for Federal meat inspection regulations to insure that all facility

specifications meet Federal or State

sanitary inspection standards. Some

brief examples are—

a. Plant drainage, number of inlets

per square feet of floorspace,

sanitary drainage lines, traps

and vents on lines, etc.

b. Plant waste disposal, catch basins, acceptance of plant waste

system, etc.

c. Plant construction, materials,

floors, interior walls, ceilings,

window ledges, door widths, pest

control, lighting, ventilation, refrigeration, etc.

d. Meat rail heights from floors,

meat rail distances from walls,

posts, and work tables, etc.

e. Hot and cold water accessibility;

minimum hot water temperature, which directly affects the

heating systèmes requirements.

5. Provide for advanced quality control

measures to reduce product perishability.

6. Arrange for satisfactory public utility connections, including water to

meet EPA's standards.

7. Plan a satisfactory sewage-disposal

system and all pretreatment facilities needed to meet State health

department specifications.

8. Determine type of construction and

construction materials to be used.

a. Footings, foundations, and substructure.

b. Overall superstructure, including

selective placement of interior

supporting columns to prevent

disruption of product flow.

c. Framing, including roofing,

flashings, siding, etc.

d. Interior finishes.

(1) Floors, walls, ceilings, doors,

windows, hardware finish,

etc.

(2) Insulation, cooler and freezer

doors, overhead meat rail

structure, scales, etc.

(3) Dock air seals, dock doors,

dock levelers, etc.

9. Determine type, quality, and capacity requirements of mechanical inputs to be installed.

a. Plumbing, water-supply system«

b. Heating system.

c. Ventilating, air-conditioning, and

refrigeration systems.

d. Fire protection sprinkler system.

e. Controls and instrumentation.

10. Determine voltage needs and type

of electrical enclosure systems required by local, county, and State

codes.

a. Distribution system.

b. Lighting.

c. Communication.

d. Power equipment.

11. Provide overall architectural design

with an attractive appearance. Attempt to keep the exterior structure

symmetrical and compact to reduce

, building costs.

a. Maintain design so that support

buildings and other structures
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 59

are harmonious and in keeping

with central structure,

b. Establish specifications for security fencing around grounds.

IV. Plant Equipment Requirements

1. Check to be sure all processing

equipment selected is USDA approved. Some brief requirements for

such equipment are—

a. Made of acceptable materials,

such as stainless steel,

b. Designed and constructed to prevent contamination of products

processed.

c. Demountable and accessible for

easy cleaning and inspection,

2. Select processing equipment to be

installed based on productivity demands previously determined. Check

manufacturer's specifications.

a. Type, quality, and rated productive capacity specifications,

b. Initial cost plus delivery and installation charges.

c. Proved ability to perform efficiently.

d. Ability to combine simplicity

with reliability and low maintenance requirements.

e. Good, reliable quality control features.

f. Some flexibility in volume handling capability.

3. Select materials-handling equipment based on similar criteria as

above.

V. Employee Safety Features

1, Check with the Occupational Safety

and Health Administration (OSHA)

to insure that building specifications comply with all Federal safety

and health regulations.

2. Provide built-in safety features to

eliminate potential accident hazards.

a. Specify all floor surfaces have

nonslip finishes to help prevent

falls. All grating should be serrated.

b. Protect all shafts, floor openings,

ramps, etc.

c. Protect all moving parts on machinery,

d. Eliminate tripping hazards and

potential icing conditions on

floors.

e. Provide handrails on both sides

of stairs.

f. Provide adequate number of fire

exits and specify that they be

clearly labeled and illuminated.

g. Eliminate low headroom areas

and sharp corners.

h. Use plastic or tempered-wire

glass in vulnerable areas,

i. Specify insulation on all hot

lines, vats, etc., to help prevent

accidental burns,

j. Minimize employee exposure to

potential breaks in refrigeration,

electrical, fuel, and other utility

lines. Color code to identify.

k. Specify separation of foot and

forklift-truck traffic.

3. Provide a good working atmosphere

for plantas labor force, including

lighting, heating, filtered air ventilation, and air-conditioning where

applicable. Specify interior color decor that helps avoid employee

depression and also interior equipment with low noise levels. Comply

with USDA and OSHA welfare and

restroom requirements.

VL Facility Blueprints

1. Have final architectural drawings

and specifications prepared, including a plot plan, that will meet

USDA or State meat inspection approval.

a. Include detailed drawings of all

building specifications and floor

plans, showing equipment positioning, floor drains, and floors

sloped to these drains.

b. All rooms and interior areas

must be clearly labeled and distances between equipment and

walls, column posts, etc., clearly

indicated.
60 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

2. Have detailed drawings and specifications made for the refrigeration,

electrical, heating, plumbing, and

sewage-disposal systems.

a. Include detailed drawings and

specifications of independent

sewage-treatment system, if any.

3. Have details in the plot plan include

all buildings, rail sidings, access

roads and parking areas, rainwater

catch basins, water wells, storage

tanks, any sewage-treatment facilities, etc»

a. Include drawings indicating land

topography and drainage.

b. Include soil-boring results.

VIL Approval of Blueprints and Utilities

1. Submit final drawings and specifications to future plant operators for

approval.

2. Submit prepared drawings and

specifications to proper State authorities for certification.

a. Obtain State health certificate

that plant's water supply meets

EPA's standards for drinking

water,

b. Obtain State health certificate

that the plant's sewage-treatment systems meet all State pollution-control requirements,

3. After the plant's water supply and

sewage-treatment systems have

been approved, submit prepared facility drawings and specifications,

plot plan, and letters of certification

for water and sewage to the USDA

or State meat inspection service for

approval.

VIIL Construction of Facilities

1. Arrange for plant construction and

equipment installation to begin only

after USDA or State meat inspection approval has been granted,

2, Review all legal aspects connected

with project.

a. Review all local and State ordinances.

b. Review land title, site survey abstracts, assessments if any, leases

if any, contracts, agreements,

etc.

3. Determine whether construction

contract will be awarded as a

turnkey project or whether contracts will be let to contractor and

subcontractor bids.

a. Let out bid contract package or

subcontract bids.

b. Award contract or contracts,

c. Work out method of financing.

d. Set up a workable construction

timetable.

4. Obtain a building permit.

5. Have site put in condition to build

and begin excavation and site work.

6. Arrange to obtain various building

inspection approvals at various

stages of development.

IX. Posteonstruction Arrangements

L Have land graded, necessary landdrainage systems completed, roads

and tracks installed, etc.

2. Obtain fire marshal's approval of

electrical installations, fire prevention devices, fire exits, etc.

3, Make prestartup arrangements after

facilities are completed.

a. Make final preparations for use

of facilities,

(1) Sign up for utilities,

(2) Install office furniture, cafeteria, and welfare facility

equipment.

(3) Install communications

equipment, including telephone.

(4) Obtain necessary spare parts

inventories for all equipment

and machinery, etc.

b. Make final inspection and sign

off on facility and equipment.

(1) Inspect all facilities.

(2) Test all processing equipment and machinery.

(3) Test all materials-handling

equipment.
GUIDELINES POR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 61

(4) Test all utilities, including

the main power plant and

the refrigeration system.

c. Select service contractors.

(1) Refrigeration, heating, and

electrical maintenance service.

(2) Exterminator service,

(3) Garbage-disposal service.

(4) Medical service.

d. Procure insurance.

(1) Fire and extended coverage

insurance.

(a) Buildings and equipment.

(b) Livestock.

(c) Meat inventories.

(2) General liability insurance.

(3) Theft insurance.

(4) Vehicle insurance.

Budgeting

Once detailed estimates for capital expenditures in land, buildings, and equipment have

been made from the preliminary layouts, the

evaluators can then proceed to estimate the

plant's annual investment cost and other expenses, including (1) costs of operating the

plant, (2) probable costs of cattle procurement,

(3) anticipated revenues from sales of various

beef products and animal byproducts, and (4)

costs associated with product distribution. The

final step is to combine these items into a

statement of overall projected net income. Exhibits A-D (appendix) are sample summary

outlines for each of these budgeting categories

and include the final statement of projected

net income.

To save time, the evaluators may wish to

consult published research for some detailed

cost-estimating procedures and analytical formats to determine specific cost inputs {11, 28,

29, 81, U, 62, 118). Direct consultations with

equipment manufacturers, architects, and others will be needed to adjust and update these

published data to fit any specific application.

Guideline cost-analysis formats for boning and

portion-controlled operations can also be obtained from published data (10, 18, 22, 68).

Other data are available to help calculate probable carcass dressing yields for varying sizes

and grades of cattle as well as salable product

yields for primal and fabricated meat cuts from

varying weight ranges of carcass beef H8, A9,

8^). Such information is essential for estimating

merchandising margins and probable revenues

from beef sales. Average variety meat yields

(82) are needed to assign estimated sales values

to these edible byproducts in addition to those

anticipated revenues from skeletal meat sources.

Likewise, information on byproduct yields

also must be known to predict profit potential.

For example, blending packinghouse byproduct

materials in a typical rendering operation results in a 50-percent moisture weight loss. In

other words, tankage and tallow products

amount to only about half the original rawmaterial weight Approximate net yields amount

to 25 pounds of dry meat and bonemeal tankage

and about 25 pounds of refined tallow for every

100 pounds of firesh offal and bones. Beef blood,

which is processed separately, has a moisture

weight loss of about 83 percent. Typically, dry

blood-meal solids yield between 13 and 15

pounds per 100 pounds of raw liquid blood

depending on the extent of foreign matter and

dilution caused by wash water runoff within

the slaughter plant. Published information is

available {80), but the prime source for such

information is rendering-equipment manufacturers.

To increase the usefulness of the budgeting

statement, the evaluators should analyze possible profits for a variety of operating alternatives that fit within the framework of the

proposed plantas functions. For example, if primal breaking and boxing activities are being

contemplated, profit expectations from further

fabricating and portion-controlled programs

should be examined, since they also would tend

to increase the plant's overall profit potential

Likewise, those envisioning a boning operation

in conjunction with a cow-slaughter plant

should examine additional profit prospects from

further meat-processing activities. None of the

complementary operating alternatives available should be disregarded without at least

analyzing their added costs and returns to

determine whether income-generating potential exists and, if so, to what extent.

The budgeting analysis should also be aimed

at identifying any operations that might restrict profits. Ways to eliminate or bypass such
62 AGRICULTURE HANDBOOK 513, U.S. DEFT. OF AGRICULTURE

operations should be analyzed. For example,

small to medium-sized plants might sell their

offal and other inedibles in an unprocessed

form rather than using available capital and

labor for rendering operations. Those functions

offering the poorest return on invested capital

and labor inputs should, if possible, be weeded

out.

To measure the project^s capital-risk position,

the evaluators should determine the breakeven point for their projected income analysis.

This can be done by estimating procurement,

slaughtering, and processing costs as opposed

to potential sales revenues at various levels of

productivity (23). The object is to determine

how many head of cattle must be slaughtered

to cover the estimated costs of operating the

proposed plant. The answer will provide a

bench mark as to the minimum volume necessary to keep the plant from operating in the

red.

Besides determining the break-even point for

the firm, the evaluators might also consider

gaging the profitability of overtime or secondshift operations. Final decisions on production

levels, of course, must depend on a properly

conducted analysis of local livestock availability

to assure matching such projected production

with probable raw-material resources.

If the proportion of owner equity is expected

to be small, potential lenders will probably

require an appraisal of the business venturers

projected cash flow in addition to its projected

income potential. Lending institutions and investment analysts want some evidence of how

the cash now of a proposed business might be

planned to satisfactorily service current as well

as long-term debts. The primary purpose is to

determine just how much debt can be safely

assumed with responsible provisions for repayment to assure lenders that cash deficits will

not occur. Cash-flow analyses enable lenders to

determine what probable cash income will be

available throughout the year for a firm and

whether it will be sufficient to satisfy all obligations on a month-to-month basis without

causing the firm to default on any of its outstanding loans. Typically such cash-flow statements provide additional evidence on which to

support a loan decision as well as provide a

practical means of conveying the merit of a

loan request to any correspondent lenders. Information on how to evaluate default risks

associated with financing an investment can be

obtained from several sources, including references cited here (55, 7U-76\ or the evaluators

may wish to consult with an accountant before

preparing an estimated cash-flow statement.

One of the inherent weaknesses of budget

forecasting is that the analysis must be based

on future price expectations and on anticipated

operating costs. Since no one can be sure of

future events, budgeting analyses are never

exact, but they can and should offer a realistic

view of prospective business opportunities. Typically the figures are never estimated to the

penny but are nevertheless refined sufficiently

to provide an accurate financial picture that

v/ill stand up under the scrutiny of others

knowledgeable in the field.

Given today's immense demand for capital,

the extent to which credit availability has

tightened, and the constantly increasing criteria for loan approval, the likelihood of successful loan application based on an analysis filled

with general statements and generalized documentation appears remote. Feasibility studies

with their accompanying income projections

and cash flows should be wiltten in narrative

form and should stress concrete facts as well

as provide perceptive conclusions. In addition

to appraising projected financial documents,

lending institutions also consider such factors

as current economic conditions in general and

within an industry in particular, as well as

technological progress in an industry and any

other current circumstances that might affect

the interpretation of feasibility. Therefore

whenever possible, all such questions should be

anticipated and provisions to answer them

should be made and incorporated into the feasibility analysis.

It must also be remembered that packingindustry profit margins continue to remain

meager, averaging less than 1 percent on sales.

Therefore those that comtemplate only basic

slaughtering and dressing operations are faced

with the prospect of interpreting their budget

forecast results within very restrictive limits.

In other words, profit margins for such operations are so small that there is literally no

room for any error in estimating. This, of
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 63

course, severely limits the reliability of the

projected income statement. Many analysts believe that the most practical way to determine

the economic feasibilility of a strictly kill-andchill operation is through the least cost-analysis

approach. Here the soundness of the venture

is based on an estimate of the plant's projected

ability to kill cattle at costs as low as or lower

than those of existing competitors. The calculations of feasibility are based on the estimated

dollar-per-head kiUing cost. However, such a

least cost analysis must be augmented by an

analysis of assembly and distribution costs so

that in-plant economies of operation are not

offset by excessive costs for cattle procurement

or beef distribution.

NEW INDUSTRY TRENDS

Carcass-Breaking and Boxing

Operations

Beefpacking is a viable, dynamic industry in

which internal change has become the rule

rather than the exception. Industry leaders

are establishing carcass-breaking and boxing

operations alongside their slaughter operations.

The successful market entry of this merchandising concept, called boxed beef, originated

through the pioneering efforts of an Iowa firm

(47) in 1967. Since then several other largevolume packers have established similar programs of their own.

Technologies involved in the boxed-beef program consist of breaking a beef carcass into 12

primal and subprimal units, which are then

trimmed of excess fat and made into uniform

saw-ready and knife-ready cuts. Uniformly

trimmed and shaped these fabricated cuts are

then placed in plastic barrier bags, which are

vacuum packed to avoid shrinkage and discoloration of exposed muscle surfaces. The final

step includes placing similar cuts into sturdy

cartons that are code dated and forwarded to

inventory storage. These fabricated cuts are

sometimes referred to as thick cuts to differentiate them from thin or rough cuts, such as

briskets, plates, flanks, skirts, and hanging

tenderloins, which are removed along with kidneys and internal fat during the carcass-breaking operations.

The so-called thin or rough cuts are typically

deboned and defatted for packaging and boxing

along with the fabricated primal and subprimal

cuts. Such packer-processing operations are all

efficiently carried out using assembly-line techniques. And since the operations are performed

at the source of supply, the resulting efficiencies from placing trimmed cuts in boxes for

shipment are obvious.

Besides lowering labor costs by handling

boxes instead of carcasses, the reduction in

shipping weight per carcass is significant. For

example, a cattle carcass initially weighing 650

pounds yields approximately 410 pounds of

boxed cuts; about 140 pounds of trimmings and

thin cuts; and 100 pounds of bones and fat, left

behind at the plant, where they can be efficiently processed to yield high-quality byproducts that command high prices.

Additional monetary savings are derived

from eliminating an average 4-percent intransit shipping shrink and a national condemnation shipping loss average of 0.2 percent,

attributed to hanging carcass beef becoming

tainted, sour, putrid, or otherwise contaminated

while in transit {71), Such conditions are typically caused by contaminated equipment, such

as meat hooks, airborne bacteria, and contact

with foreign matter resulting from "down-beef

situations, which refer to carcass quarters falling off meat hooks either while in transit or

during warehousing operations.

Handling boxed beef also eliminates the need

for overhead rail structures as well as meat

hooks in reefer trailers and vans and reduces

the tare weights of such transportation equipment and improves backhaul opportunities. The

simplification of product form, reduction of actual product shipping weight, and unnecessary

structural handling equipment mean a 40-percent space savings during transit and also at

central distribution warehouses in urban areas

{38). Boxed beef also permits direct distribution

of different types of meat cuts to alternate

markets and thereby helps conserve fuel energy resources. For example, instead of ship-
64 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

ping carcass beef from Kansas to New York,

where the carcasses might be broken to ship

strip loins to Miami area hotels, boxed strip

loins can be shipped directly from Kansas to

Miami.

Although beef packers as a group have only

recently begun to adopt the boxed-beef method

of distribution, the concept is not actually new.

Pork products have been prepared by packers

and shipped in boxed form to the retailer for

more than 50 years. Benefits attributed to the

boxed-meat concept, which results in greater

efficiency and resource utilization, are as follows:

• Improved meat-processing plant efficiency

and labor productivity, resulting in lower

per-unit handling and fabricating costs.

• Better control of overhead in-plant costs

and lower distribution costs.

• More efficient meat-cutting procedures,

with greater opportunity for standardization and control of uniform trim, cutting

style, and quality.

• Improved markets and better utilization

of byproducts.

• Vastly improved sanitation control, resulting in less spoilage and trim loss.

• Reduced product shrinkage in transit and

increased storage life.

• Better utilization of materials-handling

equipment, pallet-rack storage facilities,

automated selecting systems, and code-dating techniques.

• Better distribution of meat cuts according

to market preference and greater merchandising flexibility.

• Improved utilization of central warehouse

space and retail backroom storage space

and equipment.

• Reduction in meat cutter skills required

at the retail level and therefore shorter

training requirements and less cost.

• Reduction in retail time devoted to delivery receiving, handling, ordering, and inventorying.

• Improved retailer product rotation, better

balanced inventories, and faster, more accurate inventory data control to avoid outof-stock situations that reduce sales.

In a test cut-out and shipping experiment

based on early 1973 prices (ii^), a leading

beefpacker-processor determined that the boxedbeef concept produced a cost-reduction advantage of $3633 per head compared to the traditional hanging beef carcass-distribution method.

Based on conditions existing at the time, this

means that if all fed cattle were marketed in

this manner, consumers could realize an estimated savings of about 5 cents per pound on

fresh beef purchases.

Although conflicting data {17a) at this time

dispute these industry estimates of the savings

impact of boxed beef, another study reexamining this issue is currently being conducted.

Nevertheless there is a deñnite trend toward

packer-processed boxed beef and it appears to

be accelerating. Packers constructing new,

high-ca,pacity slaughtering plants are providing

additional facilities alongside to break, trim,

bone, fabricate, and package large proportions

of their total weekly kill.

Industry Changes Translate Into New

Rural Job Opportunities

Besides reducing beef-marketing costs, such

forward packer integration into carcass-breaking and boxing operations can be expected to

significantly affect potential employment opportunities in rural communities where these

packers are locating or are already located.

Even communities that have enough existing

slaughter-plant capacity can benefit by this

forward packer-integration movement, since

such additional processing activities require

increased manpower.

For example, if a carcass-breaking and boxing operation were established in conjunction

with an existing cattle-slaughter plant killing

120 head per hour, such beef-processing activities could generate additional employment for

as many as 210 persons when direct as well as

indirect labor requirements, such as cleanup

crews, are considered. This estimate is based

on a direct labor and supervisory personnel

productivity level of 385 pounds per man-hour

during TVa hours of productive time per day

that includes trimming and boning activities. It

translates into 203 production-line and supervisory jobs when a day's production averages 900

head at an average 650 pounds per carcass.

The remaining seven employee positions would
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 65

satisfy indirect labor requirements. Even if

only 60 percent of the plant's daily kill were

processed and boxed, there would be additional

job opportunities for 126 people beyond those

already employed in the plant's kill-and-chill

operations.

Besides providing employment for local residents, this trend might encourage skilled industry personnel now living in urban areas to

relocate to well-paying jobs in a rural environment. Such an increase in steady employment

opportunities could help stabilize current population levels in certain rural areas or even

encourage further growth. New residents need

homes, community services, and other necessities. Using an employment multiplier of 2.82

for agricultural processing industries, the impact of 126 new beefpacking plant jobs could

mean additional indirect job opportunities for

another 355 persons.

Constructing and equipping such processing

facilities and training a competent staff to

operate them are expensive. Such additional

packing-plant facilities represent a major financial commitment over and above the costs

necessary to initially construct, equip, and capitalize a kill-and-chill operation. To establish

facilities to produce boxed beef for a 20-headper-hour slaughter plant at 1976 prices, packers

would be required to invest another $210,000 in

buildings and equipment alone. A minimum of

$525,000 would be needed for a 60-head-perhour plant and $1 million for a 120-head-perhour plant. Upward adjustments in welfare

and cafeteria facilities would also be needed to

accommodate the plant's increased labor force.

Greater boiler plant capacity and refrigeration

needs would be required as well as other plant

facility aspects, such as office space to handle

the increased paperwork load. Also, additional

operating capital would be needed to successfully finance a beef carcass-breaking and boxing operation.

Portion-Controlled and Precooked

Beef Manufacturing

Other far-reaching events are also shaping

and transforming future developments within

the beefpacking industry. Leading industry innovators are now adding yet other types of

meat-processing functions to their automated

production lines. They are including facilities

at the packer-processor level to manufacture

portion-controlled and precooked convenience

beef products. Meat in these forms is generally

sold in bulk lots to the hotel, restaurant, and

institutional (HRI) trade. Since an estimated

20 percent of the quantity of meat, poultry,

and fish is consumed away from home

(4Ö), restaurants and institutions represent a

very promising, major market outlet for these

innovative packers.

Portion-controlled beef basically refers to

meat that has been fabricated into uniform

portions of equal weight suitable for individual

servings. However, the HRI trade also uses

solid meats, such as webbed oven-ready roasts

and cube chunks for stews, as well as the

familiar portion-molded products derived from

flaking, chopping, and grinding techniques.

Other familiar portioned items include both

solid boneless and bone-in meats like fillets,

strip steaks, and T-bones, Also, mechanical

tenderizing devices with small sharp blades

automatically sever tendons and soften muscle

tissue without altering product appearance in

the manufacture of portion-controlled sandwich

steaks and other items.

Such processing activities increase packer

profitability substantially. From a traditional

after-tax profit level of 1 percent or less, industry sources suggest that forward integration

by packers into carcass-breaking and boxing

operations alone makes possible an increase in

profits after taxes by an additional percentage

point for a total of 2 percent on gross sales.

Further fabricating activities, such as portioncontrolled manufacturing, make possible an increase in after-tax profit of as much as 4

percent on the sales dollar. Opportunities to

improve corporate profitability are largely

being made possible by simply providing the

industry with a practical, more efficient method

of marketing beef to the consuming public and

making better use of existing rural resources.

Although the ultimate objectives of packers

diversifying their functions are to widen profit

margins and gain greater market latitude, such

intensified packer-processing activities also

greatly accelerate rural job opportunities as

well.

Determination of job potentials stimulated
66 AGRICULTURE HANDBOOK 513, U.S. DEFT. OF AGRICULTURE

by activities such as portion-controlled manufacturing depend on several variables/Will the

beef be received in the plantas manufacturing

area in whole carcass form.or in trimmed

primal and subprimal cuts from carcass-breaking operations located in another part of the

plant? What will the final product mix consist

of in terms of large, thick cuts versus sliced

and molded products? What levels of handling

and packaging automation will be used? Will

products be packaged in bulk rather than individual consumer-size units? Generally speaking,

when primais are reduced to HRI cuts and

portion-controlled items and most of the day's

production is bulk packaged, direct labor and

supervisory personnel productivity per manhour can average 180 pounds or slightly better.

Other physical product circumstances can

sharply curtail this productivity estimate of job

performance, since beef carcasses are not uniform in size and tend to be difficult te work up

even on production lines.

Manufacturing, curing, and packaging corned

beef, as well as preparing precooked convenience food specialties like skewered beef shish

kabobs, beef snacks, and entrees, offer further

employment-generating opportunities and also

expanded profit incentives. But these possibilities are difficult to estimate without consulting

specific equipment manufacturer's representatives. Such equipment might include mechanical cooked patty-processing systems with specialized conveyors, battering and breading

machines, continuous broilers and searing

mechanisms, fryers, and superchilled air tunnels.

Hourly productive capacities, maintenance

needs, and recommended manning stations all

are involved in coordinating such machinery

with other in-plant functions and in determining ultimate total labor personnel needs. Moreover, such broad possibilities for packer diversification of product lines emphasize the need

for new plant layouts to be designed so that

any fabricating and processing activities like

these could be integrated into the plant's operation in the future without sacrificing the

efficient product flow and overall productivity

originally built into the slaughtering operation.

Marketing channels for portion-sized precooked

and fully cooked **heat and eat" meats include

food-service operators catering to airlines, hospitals, fast-food restaurants, vendors, specialized 24-hour convenience markets, and others.

Potentials of Manufacturing Consumer

Packaged Frozen Meats

Additional future developments within the

industry are also possible. Technologies to produce attractive, high-quality, frozen, retail beef

cuts are now a reality and readily available to

the industry. With cryogenic freezing techniques using liquid nitrogen and superior packaging films, packer-processors have the tools to

enable them to further reduce the costs of

merchandising beef by manufacturing caseready consumer packages at the source of rawmaterial supplies. Such fabricating and processing activities would further enhance those advantages and savings cited for breaking carcass

beef at point of animal slaughter and would

also provide many additional advantages as

well, such as significantly increasing the storage life of a commodity that is highly perishable

in its natural state. If the product were no

longer highly perishable, distress selling could

be minimized or eliminated, and this would

help stabilize market prices. Indeed, packer

preparation of prepackaged retail cuts in a

stabilized frozen form may provide the food

merchandising industry with the most efficient

method attainable for distributing and marketing beef to the consuming public.

However, the success of such a program will

probably come about through an evolutionary

rather than a revolutionary process despite its

obvious built-in efficiencies. Several obstacles

still plague the potential development of massmarketing frozen retail meat. Some stem directly from mishandling and temperature

abuses. Adequate temperature control of the

product, both in transit from source of supply

and during the storage cycle at metropolitan

distribution centers, appears to be severely

lacking in many instances. Careless initial handling by retail clerks, coupled with overstacking

of display cases in anticipation of peak-hour

store sales, and temperature fluctuations in

these retail display freezers cause product discoloration and frost buildup. These problems

are particularly critical to frozen meat merchandising because of product visibility.
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 67

Many open freezer cases go through three

defrosting cycles per day, causing temperature

variations from -10° to as high as 45° F (114).

Display lighting also contributes to frozen meat

discoloration. But regardless of where or how

these abuses occur, their ultimate results are

lost sales opportunities, shorter shelf life,

poorer quality, and a higher percentage of

returned product to the distributor.

Nevertheless these are mere technical problems and can be overcome. There are no significant difficulties associated with off-color or

microbial spoilage causing off-odor and

off-flavor if frozen products are handled under

proper refrigerated conditions. If rigid controls

for maintaining constant subzero temperatures

throughout the beef-marketing system are

adopted and heat output from display lights is

minimized, these problems can be solved.

The major problem confronting the development of mass-merchandising frozen retail meat

appears to be consumer resistance. Regardless

of product attractiveness and condition, consumers remain prone to purchase the fresh

product if readily available (50). Yet they will

repeatedly purchase the fresh product on sale

and take it home to freeze it under the worst

possible conditions.

For example, most combination refrigeratorfreezers are actually designed to maintain the

temperature of an already frozen product and

not to bring down the internal temperature of

an unfrozen product, although such freezer

compartments will ultimately accomplish the

task. Freezing 10 pounds of fresh hamburger in

a typical 3.5-cubic foot unit filled with other

products will take approximately 12 to 16 hours.

Many freezer units still in service today are

not frost-free, and therefore with ice buildup

the time lapse required to freeze such fresh

products can be considerably longer. The result

of this slow freezing process is a dark, off-color

product and sometimes off-odors as well depending on the condition of the fresh hamburger meat prior to freezing. Also, slow freezing of solid meats such as steaks causes large

ice crystals to form within the muscle tissue

and results in ruptured cell structure and

severe weeping when the product is thawed.

This reduces both product weight and nutrient

content.

Obviously the industry must mount a massive educational and promotional program to

overcome such consumer mistrust and unfamiliarity about commercially frozen meat and the

benefits derived from cryogenic freezing technology if consumers are ever to accept frozen

retail meat. With liquid nitrogen, meat freezes

so rapidly that large damaging ice crystals do

not form. The color of the meat under protective film shows little evidence of having been

frozen. Fortunately packers processing and

merchandising frozen portion-controlled meats

for restaurants and institutions are not affected by such strong consumer resistance,

because the product is cooked before being

served to the public.

Apart from these problems confronting the

merchandising of consumer packaged frozen

meat, other disadvantages cited (77) include (1)

union tradition and contract difficulties, (2) cost

of equipment changeover, and (3) retailer skepticism.

Competitive Forces Outside the

Packing Industiy

Although the achievement of these beefpacking industry goals may seem extremely optimistic, they nevertheless are attainable with

proper consumer education, adequate industry

motivation, and available financing at reasonable cost. Packer forward integration through

such diversification activities as prepackaging

frozen retail meats will reduce the costs of

merchandising beef and ultimately help stabilize prices. However, before the beefpacking

industry can attempt to achieve these goals, it

must first consider the extent and effect of

competitive forces from other segments of the

food industry.

Potential Competition From Food Retailers

Corporate chains, independents, volunteers,

cooperatives, and other food retailers have also

seen the merits in merchandising beef through

the market ready-boxed meat program, since

their backroom meat-cutting operations at the

store level can be greatly improved through

efficiencies associated with the program. Consequently, many have already constructed their

own carcass-breaking and boxing facilities since
68 AGRICULTURE HANDBOOK 513, U.S. DEFT. OF AGRICULTURE

the late 1960's at distribution centers in large

metropolitan areas.

A survey conducted by the National Association of Food Chains in early 1973 found that

more than half the fresh beef shipped to supermarkets was centrally prefabricated (65). However, a closer examination of the statistics

reveals that of the 51 percent arriving at the

retail store in siibprimal form during 1972 only

31 percent was vacuum packed. The remaining

20 percent was soft film wrapped but probably

not necessarily placed in boxes or wire baskets.

It should be remembered that chains have

traditionally received much of their fresh beef

deliveries at the retail store level in primal

and subprimal cuts. This is not something

entirely new. Such deliveries were and still are

made on treed meat hooks with either soft film

or brown paper overwraps. And, to some extent

this type of delivery is undoubtedly incorporated into the survey's statistical data.

The survey, however, does show that retailers expected about two-thirds of their fresh

meat shipments to arrive vacuum packed at

store level by 1977. Unfortunately no information was available from the survey regarding

the extent to which these anticipated increases

would originate from centralized chain carcassbreaking facilities as opposed to shipments of

boxed meat fabricated at packer facilities. But

the survey did indicate that the overall trend

toward centralized breaking of beef carcasses

into subprimal cuts and vacuum packaging is

accelerating rapidly.

A few innovative high-volume chainstore operators have carried this centralization process

a step further by establishing meat service

centers, where fresh beef and other red meats

are retail cut, consumer packaged, and priced

prior to store delivery. This transition has been

brought about largely as a result of management's efforts to bolster its meat department

profits in the face of escalating labor wage

rates and other operating expenses. But such

transitionary moves may ultimately prove to

be only a stopgap measure. As long as such

central retail meat-cutting and packaging operations handle strictly fresh products, then

these high-volume operators with large meatcase displays in scattered metropolitan retail

stores will continuously face rewrap and discount sales problems, since returning leakers

and off-color merchandise to the central facility

is often uneconomical. Distance usually becomes the overriding consideration in making

policy decisions on returns and on markdowns

for distressed products.

Retailers considering central meat cutting

must also face difficult capital investment decisions. Current urban building costs are acute

and land is both scarce and high priced. Utilities and taxes are also high in comparison

with those in rural surrounding. Supermarket

management must consider alternative investment priorities as well. An investment in automated checkout equipment or automated distribution warehousing might improve potential

net profits more than an investment in central

retail meat-cutting facilities. Retailers have

been branching out into merchandising everincreasing numbers of nonfood items, and these

other alternative investment opportunities

could permit them as retailers to concentrate

on improving their merchandising activities.

Nevertheless proponents of the chainstore

precutting and prepackaging concept can point

to one highly successful low-volume midwestern

retailer and several European chainstore firms

that have been operating for over a decade.

And, of course, retailers too could go into massprepackaging frozen retail meats, but packers

would have a definite competitive edge in such

an undertaläng.

Potential Competition From Synthetics

Besides thoroughly analyzing the impact

that direct competition from food retailers

would have on potential opportunities for expanding their beef-processing activities, packers would be prudent to also consider the

possible long-range implications that improved,

low-cost S3mthetic meat substitutes might have

on the future outlook of their industry. Owing

to the growing world shortage of animal proteins, which becomes more severe each year,

food scientists have intensified their search for

new and better ways to convert relatively

cheap, high-yielding sources of vegetable protein into acceptable meat substitutes. If such

efforts eventually prove successful in the years

ahead, they could substantially alter the mar-
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 69

ket outlook for beef as well as other red meats.

Strictly from an efficiency standpoint, livestock production is a very poor method of

converting grain into animal proteins for human consumption» Substantially better results

can be achieved by extracting proteins directly

from plant sources. For example, after a 1,000-

pound live steer is slaughtered, the animal's

carcass typically will weigh about 615 pounds

and about 432 pounds when cut, trimmed, and

packaged into retail consumer cuts. However,

cooking loss from shrinkage will reduce the

cooked beef from these consumer raw cuts

down to about 313 pounds, and further table

losses from trimming away additional fat, gristle, and bone will yield, on an average, only 213

pounds of cooked, lean meat.

Assuming an average protein content of 29.6

percent after bone, gristle, and excess fat are

removed from the cooked meat, a 1,000-pound

live steer will yield about 63 pounds of animal

protein for human consumption from the animal's skeletal muscle tissue.

Some proponents of vegetable proteins point

out that about 6,5 pounds of feed grains are

required to produce each pound of live-weight

gain for feedlot cattle. They then state that this

means a 1,000-pound live steer represents, or is

equivalent to, 6,500 pounds of high-ration feed,

which normally contains about 11 percent of

crude protein. This total sum of 3.25 tons of

concentrates therefore would yield about 715

pounds of crude protein. Consequently, the

conversion-efficiency ratio for turning feed into

beef is about 14.2 to 1. In other words, cattlemen are feeding and fattening animals that

have a protein conversion-efficiency rating of

about 7 percent.

Cattlemen, however, would quickly point out

that beef calves weigh 80 pounds at birth and

forage on grasses while gaining their first 420

pounds and often remain on such vegetation,

which humans cannot consume, until attaining

weights of 650 to 700 pounds. Moreover, vast

quantities of agricultural acreage unsuitable as

cropland can be grazed by cattle and calves as

grassland pastures and woodlands. Residue

crop wastes, ensilages, and hay also are fed to

cattle. Furthermore, at current technology levels about 30 percent of the crude protein content in feedlot rations cannot be assimilated by

humans. Adjustments must also be made to

account for the animal protein content of variety meats, such as livers, hearts, kidneys, beef

tongues, cheek meat, tripe, and oxtails. Likewise, consider that recycled animal proteins

contained in inedible byproducts, such as blood,

bones, and viscera, are converted into feed and

fed back to other animals. Hides, gelatin, and

glue stocks also contain protein. But above all,

beef is an extremely palatable food that provides quality protein high in all 10 essential

amino acids.

Nevertheless beef remains an expensive commodity and a costly source of proteins for

human consumption. At an average retail price

of $1.39 per pound for all cuts of choice-^ade

beef, the animal protein that consumers obtain

actually costs them $9.53 per pound. On the

other hand, at an average price of $1.03 per

pound for canned ready-to-serve, textured meat

analogs with an 18-percent protein content,

consumers pay $5.72 per pound for vegetable

protein, and this price could be reduced substantially.

Current demand for such meat analogs is

small, primarily because of limited consumer

appeal, and therefore production costs are usually very high. These analogs appear to be

aimed at satisfying a narrow market made up

of affluent vegetarians. Should the eating-quality characteristics of these engineered food

protein products be greatly improved, the demand could be broadened and thus permit

mass marketing. This, in turn, would reduce

unit processing costs substantially and help

bring down the price consumers would have to

pay for their vegetable protein in this form.

In addition to meat analogs, which resemble

specific meat items in texture, color, and flavor,

other forms of vegetable protein are also prepared as partial substitutes for meat in processed items like beef patties, chili, and casserole

dishes. It is this form of vegetable protein that

holds the most promise for reducing the cost of

protein for consumers now and in the immediate future.

A prepared vegetable protein-ground beef

blend was introduced at chain meat counters in

March 1973, and survey data {87) indicate that

this blend captured 26 percent of ground beef
70 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

sales during a 30-week trial in these stores.

Apparently the lower price was the major

reason for its success. Sales of the blend generally decreased, however, when the price differential between the blend and 100-percent beef

hamburger was less than 10 cents per pound.

Another study conducted at Cornell University

(28) indicates that formulated vegetable proteins used as meat extenders and analogs may

account for 10 percent of all domestic meat

consumption by 1985,

As engineered protein food products, vegetable proteins can offer several functional advantages over natural meat products. For example, meat extenders and substitutes lack

animal fat, which has been cited by medical

authorities as a possible health hazard in the

diet. Such alleged medical claims, however,

remain unsubstantiated and actually attack

animal fat and not lean beef. Synthetics also

provide consistently uniform quality vnth controlled nutritional composition, which offers

both economies and convenience to the food

processor. And they are stable products, possessing long storage shelf life without need of

refrigeration.

The long-range implications of competition

from vegetable protein substitutes are obvious.

Although some packers still consider red meats

to be immune to market penetration from such

substitutes, a brief reflection of the facts should

quickly alter this impression. However, without

attempting to play down the importance of

these long-range implications and their potential repercussions, which could be felt throughout the livestock-meat industry, many see the

packer's immediate challenge as an urgent

need for increasing efficiencies and doing a

better job of marketing in order to lower the

current costs of beef to the consuming public.

Though Americans still consider beef as a

staple in their diet, many in other nations of

the world regard it as a luxury. If beefpackers

are to continue to expand production and provide steady employment in the face of rising

consumer prices, more efficient methods of producing and marketing bee will have ^o be

adopted to help prevent the ublic from reducing their beef consumption requirements. Such

measures will require a strong, united effort

on the part of all sectors of the livestock-meat

industry, as well as the retail merchandising

and food service segments of the food industry.

More dollars are spent for beef than for any

other agricultural commodity produced in the

United States. Cattle and calf sales account for

about one-fifth of all cash receipts from farm

marketings. Consequently, the fate of many

direct and indirect industry-related jobs, as well

as many potential employment opportunities in

the future, will depend on the planning decisions now being made by managers of the

beefpacking industry.

Packer forward integration through such activities as manufacturing retail packaged frozen meat would reduce the costs of merchandising beef and help stabiHze market prices by

establishing inventories and minimizing or

eliminating distress sales commonly associated

with the fresh product. Also, farsighted managers will likely tend to regard new products

made in part by vegetable protein as an opportunity rather than a threat. By planning now

to participate in the manufacture of extended

meat products and such items as precooked

semianalog blends, packers have an additional

opportunity to increase their processing activities and market diversification potential while

at the same time helping to lower the costs of

protein to consumers.

Probably the ultimate number of future rural

job opportunities directly and indirectly related

to the beefpacking industry will depend on how

successful packers are in obtaining these goals.
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 71

SELECTED REFERENCES

(1) AHALT, J. D., and HARRON, M. J.

1970. AGRICULTURE IN THE SEVENTIES. U.S.

Dept. Agr., Econ. Res. Serv. Demand and

Price Situation DPS-124, pp. 22-^1.

(2) ALLEN, G, C, and HODGES, E. F.

1974. NATIONAL AND STATE LIVESTOCK-FEED

RELATIONSHIPS. U.S. Dept. Agr., Econ.

Res. Serv. Sup. for 1973 to Statis. BuL 446,

107 pp.

(3) AMERICAN MEAT INSTITUTE.

1973. FINANCIAL FACTS ABOUT THE MEAT PACKING INDUSTRY, 1972. 21 pp. Chicago, 111,

(4) ANTHONY, W. E., and EGERTSON, K. E.

1966. DECENTRALIZATION IN THE LIVESTOCK

SLAUGHTER INDUSTRY. U.S. Dept. Agr.,

Econ. Res. Serv. Sup. to Agr. Econ. Rpt.

83, 11 pp.

(5) AYLOR, F. I., and JuiLLERAT, M. E.

1968. LEAST-COST MOVEMENT ANALYSIS OF

SLAUGHTER CATTLE AND CALVES WITH

EMPHASIS ON THE SOUTHEAST. South.

Coop. Ser. Bul. 133, 127 pp.

(6) BAKER, A. J., and GALLIMORE, W. W.

1972. SUBSTITUTE AND SYNTHETIC FOODS WITH

EMPHASIS ON SOY PROTEIN. U.S. Dept.

Agr., Econ. Res. Serv. Mktg. and Transportation Situation MTS-184, pp. 12-14.

(7) BELL, F. W., NASH, D. A, CARLSON, E. W., and

others.

1970. THE FUTURE OF THE WORLD^S FISHERY

RESOURCES: FORECASTS OF DEMAND, SUPPLY AND PRICES TO THE YEAR 2000 WITH

A DISCUSSION OF IMPLICATIONS FOR PUBLIC

POLICY. Nati. Mar. Fisheries Serv., East.

Region. Lab. Manuscript 65-1, 250

pp. [Processed.]

(8) BELL, GALYARDT, and WELLS ARCHITECTS-ENGINEERS.

1973. UPGRADING MEAT PACKING FACILITIES TO

REDUCE POLLUTION-WASTE TREATMENT

SYSTEMS. Indus. Seminar for Pollut. Control, Chicago, 111., 1973 (June 12-13), 62

pp. (Sponsored by Environmental Protect.

Agency.)

(9) BONEM, F. L.

1965. ENGINEERING ORIENTATION TO MEAT

PACKING, 93 pp. Amer. Meat Inst., Chicago, 111.

(10) BRASINGTON, C. F., JR.

1971. HOTEL AND RESTAURANT MEAT PURVEYORS-IMPROVED METHODS AND FACILITIES

FOR SUPPLYING FROZEN PORTION-CONTROLLED MEAT. U.S. Dept. Agr., Agr. Res.

Serv. Mktg. Res. Rpt. 904, 46 pp.

(11) Cox, R. W., and TAYLOR, F. R.

1965. FEASIBILITY OF COOPERATIVELY OWNED

SLAUGHTERING PLANTS. N. Dak. State

Univ., Agr. Expt. Sta. Agr. Econ. Rpt. 39,

38 pp.

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72 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

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1966. THE SEARCH FOR A THOUSAND MILLION

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1972. TEXTURED PROTEIN FOR MEAT ENHANCEMENT. Nati. Provisioner 166 (3): 98-100.

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1975. GRAIN-FED VERSUS GRASS-FED BEEF PRODUCTION. U.S. Dept. Agr., Econ. Res. Serv.

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74 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

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1965. BEEF CATTLE FEEDLOT FACILITIES. Tex.

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1972. TITLE 1 - RESEARCH AND RELATED PROGRAMS - PUBLIC LAW 92-500 92ND CONGRESS, S, 2770 OCTOBER 18, 1972. AN ACT

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1974. QUESTIONS AND ANSWERS: THE COMPREHENSIVE EMPLOYMENT AND TRAINING ACT

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1976. PROGRAM FACT SHEET: A THUMBNAIL

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1971. RENDERERS TALK ABOUT TRENDS AND

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1971. MISSOURI BEEF PACKERS' 10,000 HEAD PER

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1974. SAN FRANCISCO LABOR COSTS. West. Meat.

Indus. Mag. 20 (1): 1-31.

(116) WESTERN STATES MEAT PACKERS ASSOCIATION.

1969. THE MANY SIDES OF FROZEN MEAT. Nati.

Provisioner 160 (11): 98-99.
76 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

(117) WILLOUGHBY, E. (HB) WISSMAN, D. J.

1960 SELECT THE 'RIGHT' WASTE TREATMENT 1965. COMPARATIVE COSTS OF SLAUGHTERING

SYSTEM. Food Engin. 1969 (Aug.), pp. 74- CATTLE IN MICHIGAN PACKING PLANTS.

86. Mich, State Univ. Agr. Econ. Rpt. 10* 67 pp.
APPENDIX

EXHIBIT A.—Sample outline for estimating annual in-plant operating costs

of a proposed beefpackin^ plant

Annital operating costsfor

j plant with head-perhour kill capacity

(dollarsV

Wages and salaries:

Kill-floor personnel (union) .

Supporting operations personnel

(union)-«-«-- ^— —

Office personnel —-^ .—.„-. Management » __-

Employee benefits:

Pension fund program _- «____..__

Social Security taxes^ - __-

Insurance and hospitalization >__

Vacation, holiday, and sick leave

Total labor and management costs

Investments in land, buildings, and equipment:

Interest charges.-—.

Depreciation charges

Insurance^ .

Property and equipment taxes

Total investment costs

Utilities:

Water

Electricity ^ „_-. >_

Fuel (oil or gas)-»

Sewage disposal^ .-_._^

Total utility costs^ -

All other costs:

Interest charges on operating capital

Federal or State meat inspection service (overtime only) _-^—

Federal meat-grading service _«

4-D condemnations and animal tissue

losses^ -

Maintenance and repairs^ ..^

See footnotes at end of exhibit.

77
78 AGRICULTURE HANDBOOK 513, U.S. DEPT. OF AGRICULTURE

EXHIBIT A.—Samp/e outline for estimating annual in-plant operating costs

ofa proposed beefpacking plant—Continued

Annual operating costs for

j plant with head-perhour kill capacity

{dollarsY

All other costs—Continued

Killing supplies^—-. ^^_-„_._

Packaging supplies and containers — ^

Office supplies^- »_^_

Communications--«-- _=__ »

Taxes and licenses®--_--__-.--_--__»-_

Audit and legal fees -__

Miscellaneous expenses ^ -

Total other costs ._

Total operating costs —__-

^ Estimates should be based on data that assume the plant will be operated at 100

percent of its rated line speed on an annual basis.

^ Including unemployment insurance and workmen*s compensation.

^ Including pretreatment expenses.

^ Cash losses from 4-D (dead, dying, diseased, and disabled) animal condemnations,

animal bruises, cattle grubs, etc., removed by inspectors.

* For buildings and equipment, including refrigeration maintenance charges,

® Including initial costs for employee gowns and aprons, safety hats, and other personnel

equipment; gown and uniform cleaning costs; shrouds and shroud laundry costs; neck

skewers and shroud pins; and facility cleaning equipment and janitor supplies.

' Including service to office equipment, company-labeled cash receipt forms, and similar

paper supply needs.

* Including taxes other than on property and also various community, city, and State

licenses.

® Including banking charges, public relations expenses, medical service, trash-disposal

service, exterminator service, landscaping and grounds maintenance service, and animal

feeds.

EXHIBIT B.—^ample outline for estimating annual livestock procurement costs of a proposed

beefpacking plant

Slaughter cattle

Purchasing,

Total weight Average ^^^ ^^^^ handling,

of cattle purchasing ^^ ^^^^^^

purchased ^ price ^

and transportation

charges^

Total

livestock

procurement

costs^

Lb

Dollars

per cwt Dollars Dollars

Steers Ob):

Prime:

900-1,100-

1,100-1300-

Dollars

See footnotes at end of exhibit.
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 79

EXHIBIT B,—Sample outline for estimating annual livestock procurement costs of a proposed

heefpacking plant—Continued

Purchasing, Total

Total weight Average y >• i . handling, livestock

Slaughter cattle of cattle purchasing ^^^J^^^^jost ^^^ ^^^^^_ p^oeurepurchased^ price ^ o ca e portation ment

charges^ costs ^

Dollars

Lb per cwt Dollars Dollars Dollars

Steers (lb)—Continued

Choice: -—— -~

800-900. „

900-1,100

1,100-1,300 _„_.___.

Good:

700-900 „

900-l,100_.

1,100-1,300 __„

Standard (all weights) __.

Heifers Ob):

Prime:

700-900 „ ..___

900-1,100

Choice:

700-900 _„_„

900-1,100

Good:

500-700 ,.„

700-900

Standard (all weights)

Cows (all weights):

Commercial

Utility

Cutter

Canner

Bulls (all weights, yearlings

excluded):

Good .

Commercial

Utility__-._^_.. .___

Cutter =

Total

1 Convert the number of head of cattle to be purchased into pounds by using the median weight for each type and

weight class. Then depending on marketing practices found in the trade area analyzed, adjust cattle weights to reflect

typical estimated or actual shrinkage. The estimated grade, weight, and sex of live cattle selected should reflect

typical dispersion in the trade area.

2 Based on an assessment of current and projected price quotations for live cattle of the type to be slaughtered as

well as common marketing practices in the local trade area. Apart from local public market price quotations, current

livestock price data can be obtained from the USDA's "Livestock, Meat, and Wool Market News Weekly" summary
80 AGRICULTURE HANDBOOK 513, U.S. DEFT. OF AGRICULTURE

series published by the Livestock Division, Agricultural Marketing Service, USDA, Washington, D.C. The "National

Provisioner Yellow Sheet" is another source of current live cattle quotations. See the USDA's "Livestock and Meat

Situation" series published by the Economic and Statistical Analysis Division, Economic Research Service, for cattle

price forecasts.

^ Based on costs for (1) buyer salaries, benefits, and commissions and also operating costs of vehicles; (2) auction or

stockyard charges, if any; (3) unless the seller is to pay for transportation, determine truck drivers' salaries and

benefits and truck operating costs or transportation charges if hauled by common or contract carriers; and (4)

insurance on livestock in transit. Probable procurement costs should reflect conditions in the trade area analyzed,

with assembly costs based on anticipated travel times and distances, number of cattle per haul, and routing schedules.

4In the Packers and Stockyards Act, paragraph 20L43-B of the regulations states that **each packer, market

agency, or dealer purchasing livestock shall, before the close of the next business day following the purchase of

livestock and the determination of the amount of the purchase price, transmit or deliver to the seller, or his duly

authorized agent, the full amount of the purchase price...." This means that sufficient cash-on-hand must be

available to pay for a normal 2-day supply of purchased cattle, assuming that a 2-day inventory of cattle will be in the

plant's corrals on a continuous basis. The working capital needed therefore would amount to 2^52 (2 days' purchases

of the 252 working days that cattle are slaughtered annually) or 0.8 percent of the total amount spent annually to buy

cattle. The interest cost on this operating capital coupled with aggregate annual procurement expenditures, found at

the bottom of the last column, would then be incorporated into the projected expenses for livestock procurement costs

to appear in exhibit D.

EXHIBIT C—Sample outline for estimating annual gross income from meat and animal byproduct

sales and annual costs ofsales and distribution for a proposed beefpacking plant

Beefpacking-plant products

(trailer or carlot basis f.o.b.)

Total quantity Total gross

of merchandise Average price income from

soIdV received 2 sales

Total sales and

distribution

costs ^

Lb

Wholesale dressed beef:

Steers Ob):

Prime:

600-700 ____.___„_

700-300 ._„__

Choice:

500-^00

600-700 „_

700-«00 ___________

Good:

400-^00.__„

500-600 ._^____

600-700

700-S00__ __._

Standard (all weights).

Heifers Ob):

Prime:

400^00____.„.__.

500-600 __._

600-700

See footnotes at end of exhibit.

Cents

per lb Dollars Dollars
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 81

EXHIBIT C.-—Sample outline for estimating annual gross income from meat and animal byproduct

sales and annual costs ofsales and distribution for a proposed beefpacking plant—Continued

Beefpacking-plant products

(trailer or carlot basis f.o.b.)

Total quantity Total gross

of merchandise Average price income from

sold ^ received ^ sales

Total sales and

distribution

costs ^

Wholesale dressed beef—Continued

Heifers (lb)—Continued

Choice:

400-^00 -___-

500-^00

600-700__„_

Good:

400-500

500-600

600-700

Standard (all weights)_-_

Boning cattle:

Cows (all weights):

Commercial

Utility-,

Canner and cutter __

Bulls (all weights):

Utility

Cutter „

Fresh boneless beef:

Lean trimmings:

90 percent

50 percent

Commercial beef tenderloins:

Cows—5 lb and up

Bulls—5 lb and up

Primal beef cuts—choice Qh):

Straight hinds, 120-190___..

Straight rounds, 65-95

Loins (trimmed), 50-70

Straight fores, 135-210

Arm backs, 110-150

Arm chucks, 80-130.

Ribs, 24^2

Briskets

Plates (navels)

Other

Fabricated beef cuts:

Choice ab):

Rounds --

Sirloin tips

Loin ends

Short loins

See footnotes at end of exhibit.

Lb

Cents

per lb Dollars Dollars
82 AGRICULTURE HANDBOOK 513, U.S. DEFT. OF AGRICULTURE

EXHIBIT CSample outline for estimating annual gross income from meat and animal byproduct

sales and animal costs ofsales and distribution for a proposed beefpacking piant-—Continued

Beefpacking-plant products

(trailer or carlot basis f.o.b.)

Total quantity Total gross

of merchandise Average price income from

sold * received ^ sales

Total sales and

distribution

costs ^

Lb

Fabricated beef cuts—Continued

Choice (lb)—Continued

Ribs.^__^

Blade chucks__ „

Armbone chucks

Gooseneck rounds

Inside rounds __„-_

Strip loins __.„____,.=___„_

Boneless strips ^_

Tenderloins „^„^„_

Boneless briskets

Other processed meats and portion-control products^

Subtotal ^_-__._„„ __„__„

Edible byproducts:

Variety meats:

Beef tongues ^^

Udders .

Cheek meat „ ^^

Head meat

Oxtails _- .^

Hearts ^ ^

Kidneys

Lips, scalded

Livers ^__^_„„_

Lungs ^ „

Melts„.__ __._

Tripe, scalded „

Sweetbreads

Edible tallow (all grades - for

salad oils, shortenings, deep

fat frying, and food additives)

Subtotal „ ,^

Inedible byproducts:

Hides, cured:

Heavy native steer

Light native steer

Extra light native steer_

See footnotes at end of exhibit.

Cents

per lb Dollars Dollars
GUIDELINES FOR ESTABLISHING BEEPPACKING PLANTS IN RURAL AREAS 06

EXHIBIT C.—Sample outline for estimating annual gross income from meat and animal byproduct

sales and annual costs ofsales and distribution for a proposed beefpacking plant—Continued

Beefpacking-plant products

(trailer or carlot basis f.o.b.)

Total quantity Total gross

of merchandise Average price income from

sold ^ received ^ sales

Total sales and

distribution

costs^

Lb

Inedible byproducts—Continued

Hides, cured—Continued

Colorado branded

Butt branded

Heavy native cow^

Light native cow.-

Branded cow ---

Native bulls _—

Kipskins_„,-- „.-_.»

Hides, green (all types)

Inedible tallows:

Fancy, high titer, bleachable

Prime

Feed grade

Fleshing oil__»

Inedible greases:

Yellow -

House - ---

Packinghouse feeds:

Meat and bonemeal, 50

percent, bulk

Meat meal tankage, 60

percent, bulk __-

Steamed bonemeal, 60

percent, bags

Dried blood meal, bags __

Gelatin and glue stocks:

Bone stock (gelatin), ton

Jaws, feet (nongelatin),

ton

Rennets -

Trim bone, ton

Pharmaceuticals (liver, pancreas, parathyroid, pineal,

pituitary, spleens, suprarenal, thymus, fetal blood,

surgical gut, ox bile, and

gallstones)---

Subtotal

Total —=

See footnotes at end of exhibit.

Cents

per lb Dollars Dollars
84 AGRICULTURE HANDBOOK 513, U.S. DEPT. OFÂGRICULTURE

^ Convert the total weight oflive cattle to be purchased into the total weight of beef and byproducts to be sold based on

(1) the type and weight of cattle to be purchased, using the median weight for each type and weight class after the

shrink adjustment; (2) appropriate dressing and product yields for these cattle; and (3) the anticipated methods to be

used to merchandise the products, e.g., X percent to be sold as carcass beef, Y percent sold as fabricated, boxed

primais, Z percent sold as portion controlled items, etc.

^ Based on an assessment of current and projected wholesale price quotations for beef and byproducts of a quality

predetermined by the type of cattle to be slaughtered. Current wholesale price data can be obtained from the USDA's

"Livestock, Meat, and Wool Market News Weekly*' summary series published by the Livestock Division, Agricultural

Marketing Service, USDA, Washington, D.C. The "National Provisioner Yellow Sheet" is another source of current

wholesale beef and byproduct price quotations. See the USDA's "Livestock and Meat Situation" series published by

the Economic and Statistical Analysis Division, Economic Research Service, for wholesale beef and byproduct price

forecasts. "Outlook" price information is also available from colleges of agriculture and livestock-producer marketing

groups.

^ Based on costs for (1) salesmen's salaries, benefits, commissions, traveling expenses, and operating costs of

vehicles, if the firm is to have its own sales force; (2) advertising, if any; (3) brokerage fees and other commissions, if

any; (4) cold storage charges, if any; (5) truck drivers* salaries and benefits and truck-operating costs, or transportation

charges, if meat and byproducts are to be hauled by common or contract carriers; (6) insurance on meat and

byproducts in transit; (7) any losses from damaged merchandise not reimbursed by insurance claims; (8) anticipated

losses from bad debt accounts.

The estimated operating capital requirements for a typical beef-distribution cycle after slaughter would amount

to 19/252 or 7.5 percent of the plant's annual sales revenues. This is based on the assumption that the plant would

need cash on hand to cover (1) a minimum 2-day inventory kill in its chill- and sales-holding coolers; (2) a 3-day kill

volume in transit, based on a 3-day delivery cycle; and (3) a minimum 14-day settlement period for accounts receivable

after the merchandise is received and inspected by the purchaser. A specific beef-distribution cycle, of course, would

depend on the proposed plant's location in relation to its selected market distribution areas, as well as the typical

length of the billing cycle as affected by the accounts receivable delinquency rate found at the time and place of the

feasibility analysis. The interest charge on this operating capital coupled with agrégate annual sales and distribution

expenditures, found at the bottom ofthe last column, would then be incorporated into the projected expenses for sales and

distribution cost to appear in exhibit D.

'^ Enumerating the various types and consumer package sizes of processed meat items that packers could

manufacture as complementary plant functions in concert with their normal operations would require a lengthy list.

Manufacturing such standard meat items as bologna, frankfurters, beef sausage, and the various luncheon loaves like

pepper loaf and pickle and pimento loaf is an obvious possibility for those planning a cow-slaughter operation. For

those planning to slaughter fed cattle, further complementary plant operations could include the manufacture of

portion-controlled items, such as beef patties, minute cube steaks, molded steaks, and stew-beef cubes to mention just

a few. Manufacturing sliced, smoked beef bacon, smoked beef tongues, pastrami, and pickled corned beef are other

possibilities. Some packers manufacture precooked convenience foods, such as snack items, entrees, and complete

dinners. Even pet-food manufacturing offers increased profit opportunities.

Related information on current and projected prices for items such as those described here can be obtained from

several sources, including the "National Provisioner's Hotel, Restaurant, Institutional Meat Service Report."
GUIDELINES FOR ESTABLISHING BEEFPACKING PLANTS IN RURAL AREAS 85

EXHIBIT D,—Sample outline for projecting annual estimated net income of

a proposed beefpacking plant

Annual amount

Item (dollars)

Gross income from sales:

Meat products .

Edible byproducts _—_

Inedible byproducts _-

Total .

Expenses:

Livestock procurement __-

Packing-plant operation

Sales and distribution.

Startup*

Total „

Net income:

Earnings before State and Federal

taxes

Total income tax

Total

* To be amortized over first 5 years of plant operations. Initial startup costs for a

beefpacking plant include the following: (1) Expenses for recruiting management, cattle

buyers, and meat salesmen; (2) expenses for selecting, hiring, and training the labor force

and office personnel; (3) salaries for these personnel before full-scale plant operations are

underway; (4) expenses incurred by buyers lining up livestock-producer accounts; (5)

expenses incurred by salesmen lining up meat-product and animal-byproduct outlet

accounts; (6) security deposits for utilities and telephone installations; (7) costs of initial

promotional activities, including ground-breaking ceremonies, open house, and preopening

advertising campaigns; and (8) costs of initial inventory supplies, including spare parts for

equipment and machinery, packaging supplies and containers, office supplies, employee

gowns and aprons, safety hats and other personnel equipment, laundry supplies, shrouds,

shroud pins, neck skewers, and janitor supplies.

TV U.S. GOVERNMENT PRINTING OFFICE: 1978 0—244-568