Animal Rendering: Economics and Policy
Released: 2004-03-17T00:00:00

Summary:
Renderers convert dead animals and animal byproducts into ingredients for a widerangeof industrial and consumer goods, such as animal feed, soaps, candles, pharmaceuticals, and personal care products. U.S. regulatoryactions to bolster safeguards against bovine spongiform encephalopathy (BSE or mad cow disease) could portendsignificant changesin renderers' business practices, the value of their products, and, consequently, the balance sheets of animalproducers and processors. Also, if animal byproducts have fewer market outlets, questions arise about how to dispose of them safely. Thisreport, which willnot be updated, describes the industry and discusses several industry-related issues that have arisen in the108th Congress. (1)

paragraphs: RS21771 -- Animal Rendering: Economics and Policy 
Updated March 17, 2004
subsections: section_title: Introduction
paragraphs: Renderers convert dead animals and animal parts that otherwise would require disposal into a variety of materials, including edibleand inedible tallow and lard and proteins such as meat and bone meal (MBM). (2) These materials in turn are exported or sold todomestic manufacturers of a wide range of industrial and consumer goods such as livestock feed and pet food, soaps,pharmaceuticals, lubricants, plastics, personal care products, and even crayons (also see Table 1 on page 6).
Although rendering provides an essential service to the increasingly intensive and cost-competitive U.S. animal and meat industries(and is subject to certain government food safety and environmental regulations), the industry has largely operatedoutside of publicview. However, rendering has attracted greater public attention since the discovery of bovine spongiformencephalopathy (BSE ormad cow disease) in two North American cows in 2003. U.S. officials have announced or are considering newregulatory actionsintended to reassure foreign and domestic customers that BSE will not threaten food safety or U.S. cattle herds. These actions arelikely to cause changes in renderers' business practices, costs, and product values. Any changes in the economicsof rendering likelywill affect the economics of animal and meat producers too. 
section_title: Industry Overview
paragraphs: Renderers annually convert 47 billion pounds or more of raw animal materials into approximately 18 billion pounds of products. Sources for these materials include meat slaughtering and processing plants (the primary one); dead animals fromfarms, ranches,feedlots, marketing barns, animal shelters, and other facilities; and fats, grease, and other food waste fromrestaurants and stores.
In meat animal slaughtering and processing plants, the amount of usable material from each animal depends largely upon the species. For example, at slaughter, a 1,200-pound steer can yield anywhere from 55% to 60% of human edible product,including meat forretail sale, edible fat, and variety meats (organs, tongue, tail, etc.), according to various estimates. Subtractinganother 5%-8% for theweight of the hide, which goes into leather, leaves 32%-40% of material for rendering. If this range were appliedconsistently to all35.5 million U.S. cattle slaughtered in 2003, the equivalent would represent the weight of approximately 11 millionto 14 million livecattle. (3)
Elsewhere, independent renderers collect and process about half of all livestock and poultry that die from diseases or accidents beforereaching slaughter plants (Sparks 2002). U.S. farm animal mortalities in 2000 included approximately 4.1 millioncattle and calves(totaling 1.9 billion pounds); 18 million hogs (1 billion pounds); 833,000 sheep, lambs, and goats (64 millionpounds); and 82 millionchickens and turkeys (347 million pounds), according to Sparks, which examined USDA data.
"Disposing of these mortalities is complicated because of the need to minimize adverse environmental consequences, such as thespread of human and animal disease or the pollution of ground or surface water," Sparks (2002) observed. "Formany producers,paying a modest fee to have a renderer remove dead carcasses is likely preferred to finding alternative on-farmdisposal methods"(i.e., burial, incineration, or composting).
Number and Types of Rendering Plants. One study estimated that 137 firmsoperated 240 plants in 1997, with a total payroll of nearly 10,000 employees. (4) More recently, the National Renderers Association(NRA) estimated that Canada and the United States have a combined 250-260 rendering plants. Rendering facilitiesmay be eitherintegrated or independent operations.
Integrated plants operate in conjunction with animal slaughter and meat processing plants and handle 65%-70% of all renderedmaterial. The estimated 95 U.S. and Canadian facilities (NRA) render most edible animal byproducts (i.e., fattyanimal tissue),mainly into edible fats (tallow and lard) for human consumption. Edible rendering is subject to the inspection andsafety standards ofUSDA's Food Safety and Inspection Service (FSIS) or its state counterparts, which by law already are present in themeat slaughterand processing plants. These plants also render inedible byproducts (including slaughter floor waste) into fats andproteins for animalfeeds and for other ingredients. Because a meat plant typically processes only one animal species (such as cattle,hogs, or poultry), itsassociated rendering operations likewise handle only the byproducts of that species. The inedible and ediblerendering processes aresegregated.
Independent operations handle the other 30%-35% of rendered material. These plants (estimated by NRA at 165 in the United Statesand Canada) usually collect material from other sites using specially designed trucks. They pick up and process fatand bonetrimmings, inedible meat scraps, blood, feathers, and dead animals from meat and poultry slaughterhouses andprocessors (usuallysmaller ones without their own rendering operations), farms, ranches, feedlots, animal shelters, restaurants, butchers,and markets. Asa result, the majority of independents are likely to be handling "mixed species." Almost all of the resultingingredients are destinedfor nonhuman consumption (e.g., animal feeds, industrial products). The U.S. Food and Drug Administration (FDA)regulates animalfeed ingredients, but its continuous presence in rendering plants, or in feed mills that buy rendered ingredients, isnot a legalrequirement.
The Rendering Process. In most systems, raw materials are ground to a uniformsize and placed in continuous cookers or in batch cookers, which evaporate moisture and free fat from protein andbone. A series ofconveyers, presses, and a centrifuge continue the process of separating fat from solids. The finished fat (e.g., tallow,lard, yellowgrease) goes into separate tanks, and the solid protein (e.g., MBM, bone meal, poultry meal) is pressed into cakefor processing intofeed. (5) Other rendering systems are used, includingthose that recover protein solids from slaughterhouse blood or that process usedrestaurant grease. This restaurant grease generally is recovered (often in 55-gallon drums) for use as yellow greasein non-humanfood products like animal feeds. 
Value and Use of Rendered Products. The 18 billion pounds of ingredients thatrenderers produce each year have been valued at more than $3 billion, of which $870 million is exported. Of the18 billion poundtotal, 10 billion pounds were feed ingredients with a value of approximately $1 billion (Sparks 2001). MBMaccounted for 6.6 billionpounds of this, poultry byproducts 4 billion pounds, and blood meal 226 million pounds (Sparks). (6) Such ingredients are valued fortheir nutrients -- high protein content, digestible amino acids, and minerals -- and their relatively low cost. Poultryoperations andpet food manufacturers accounted for 66% of the domestic MBM market of nearly 5.7 billion pounds in 2000, whilehog and cattleoperations took most of the rest.
section_title: Policy Discussion
paragraphs: So long as animals are raised and processed for food, vast amounts of inedible materials will be generated, the result of prematuredeaths, herd culls, and slaughter byproducts. "Regardless of quantity, byproducts and rendered products from theslaughter processmust be sold at whatever price will clear the market or the industry (and the environment) incurs a cost fordisposal." (7) Asgovernment rules and industry practices evolve to address food safety and animal disease concerns like BSE, optionsfor using thesebyproducts may become more limited. If animal byproducts have fewer market outlets, new questions may ariseabout how todispose of them safely and who should pay.
"Feed Ban" Impacts. Scientists currently maintain that infected animal feed is theprimary source of BSE transmission (although research continues into other potential sources). Therefore, U.S.officials believe thatregulation of feed ingredients is the single most effective method for controlling BSE. Following the widespreadoutbreaks of BSE inGreat Britain and Europe, the FDA in August 1997 imposed a ban on feeding most mammalian proteins to cattleand other ruminants. Prohibited proteins still can be fed to other animals such as pigs, poultry and pets. (FDA in late January 2004announced plans toexpand the list of prohibited proteins.)
Estimates vary on the economic impact of the feed ban. According to a 1997 report prepared for the FDA on compliance costs andmarket impacts, the FDA feed ban could reduce MBM values by between $63 million and $252 million, or $25 to$100 per ton. (8) Sparks (June 2001) estimated that the average MBM value loss since the 1997 rule was $18 per ton, for a total of$288 million duringthe period 1996 to 2000. Sparks added that these losses likely were highly concentrated among renderers thatproduce MBMexclusively, and among those handling mixed species. The FDA-commissioned report predicted that rendererswould pass much ofthe lost value to packers by paying less for raw materials; packers in turn were expected to reduce their paymentsfor cattle.
The 2001 Sparks study examined potential cost impacts of several options for more extensive feed restrictions. It estimated that atotal animal protein feed ban to ruminants would cost $100 million yearly; a total ban on all ruminant proteins toall farm animals,$636 million yearly; and a total animal protein ban to all farm animals, $1.5 billion yearly.
Downers and Dead Animals. Another recent regulatory action with an impact onthe rendering industry was USDA's December 30, 2003, ban on all "downer" (nonambulatory) cattle from the humanfood supply. U.S. officials consider downers, or animals unable to rise or walk, to be one of the higher-risk cattle groups for BSE(althoughindustry officials note that most animals become nonambulatory from injuries or non-BSE diseases). Before theban, USDAestimated that 150,000-200,000 downers were entering slaughter plants. One issue is whether the downer ban hasremoved aneconomic incentive to market downers and thus made it more difficult for USDA to obtain such animals for BSE(and other disease)surveillance.
On March 15, 2004, USDA announced a major expansion of its BSE surveillance program that will samplemany more downers anddead animals, adding that it is looking to renderers (among other sites) to make these animals available. Numerouspracticalproblems -- such as how to recover and store carcasses, who will sample, the costs, etc. -- now confront bothgovernment andindustry officials. (9)
Disposal Questions. If renderers earn less money from rendered byproducts anddead animals, they will pay less for such materials. In the past, renderers paid for dead animals. Now most chargea fee to pick themup. (10) In its 2002 study on the cost of livestockmortalities, Sparks assumed that so long as MBM could be sold for feed, the averageper-head cost of disposing of dead cattle and calves might be $8.25 per head; if MBM is banned from animal feed,the cost could riseto $24.11 per head. Sparks estimated the per-head costs for other disposal methods at $9.33 for incineration, $10.63for burial, and$30.34 for composting.
The 2002 World Health Organization (WHO) report observed that rendering, because it "sanitizes" animal wastes, "performs anessential public service: the environmental clean-up of wastes too hazardous for disposal in conventional ways. Forexample, animalwastes provide ideal conditions for the growth of pathogens that infect humans as well as animals. Incinerationwould cause major airpollution. Landfill could lead to disease transmission." (11)
A USDA advisory committee in February 2004 said that along with an enhanced BSE surveillance program, "a comprehensive systemmust be implemented to facilitate adequate pathways for dead and non-ambulatory cattle to allow for collection ofsamples, and forproper, safe disposal of carcasses; this must be done to ensure protection of public health, animal health, and theenvironment; such asystem will require expending federal resources to assist with costs for sampling, transport and safe disposal." (12)
Others temper this view of rendering by observing that the nation's clean air and water laws are in place to address possible adverseenvironmental impacts. These responsibilities are enforced under the purview of the U.S. Environmental ProtectionAgency (EPA)and generally through states and localities, which often impose their own environmental and health standards aswell. Whilerendering (which also must abide by such standards) certainly is one option for handling dead stock and animalbyproducts, it hasbeen argued, this option does not relieve the animal and meat industries of their environmental responsibilities. Because theseindustries created this material, they should bear the costs, not the public, particularly at a time when budget deficitsare forcingdifficult spending choices, the argument goes.
Table 1. U.S. Production, Consumption, and Export of Rendered Products,1999-2003(p) 
Source : NRA; 2003 data preliminary (p).
a. Includes poultry fat and by-product meal and raw products for pet food. 
b. Withheld to avoid disclosing individual firm data.