Demand for locally produced and processed meat

Farm Forum

BROOKINGS – Consumers are more interested than ever in purchasing locally grown food – and that includes meat explained Shannon Sand, Livestock Business Management Field Specialist.

“In recent years a consumer driven movement to know where their food comes from has evolved. This movement is anecdotal evidence of greater demand for locally produced meats,” Sand said, adding that according to a 2007 study, direct-to-consumer sales only accounted for 0.4 percent of total agricultural sales.

Sand said support for local animal products is not surprising given the value animal agriculture can bring to communities, particularly in a state like South Dakota.

“Animals provide nutrients for cropland and can make productive use of land where crops do not grow well. By processing locally, farmers and ranchers can capture a greater portion of the revenue stream,” Sand said.

In 1997, locally produced farm products in the U.S. accounted for $551 million dollars in sales. By 2007 sales jumped to $928.9 million – even accounting for inflation this is an increase of 59 percent.

“Among all vegetable and melon farmers 44.1 percent sold directly to consumers in 2007, while only 6.9 percent of livestock producers sold directly to consumers. Sixty-five percent of gross farm sales for fruit, vegetable, and nut farms came from the sale of locally produced products (this includes local sales through packers to local supply houses),” Sand said.

However, Sand pointed out that only 37 percent of gross annual sales of livestock and field crop producers came from local markets.

“This leads to the question why aren’t more livestock producers selling locally? Even when demand for local meat exists, sometimes there is not a local processor,” Sand said.

Sand pointed to a USDA report which showed that one issue affecting producer’s ability to bring local meats to market is a lack of meat and poultry processing facilities. Sand said challenges may include producers having to travel long distances to reach the nearest inspected processing facility or delivering only a few head at a time.

“This results in increased transportation and opportunity costs. Also, producers may have difficulty getting slaughter dates during processors’ busy times of the year. Some smaller processing facilities may not offer specific services that farmers and their customers’ demand,” Sand said.

When a local processor is available, Sand said they are often smaller and have a hard time breaking even. Smaller sized processors often lack the steady and consistent business needed to be profitable while providing high quality services to individual customers.

“Demand for local processors’ services is highly seasonal. Estimates suggest that to be profitable a small processing plant providing basic services must annually process a minimum of 450-head of cattle, or the revenue equivalent from combinations of other livestock,” Sand said. “Operations offering more sophisticated services require higher volumes to meet expenses. Thus, the processor may try to pull volume from other places, and as a result local processing may not always be available when farmers want it.”

In order to bring local meat and poultry to market, Sand said it is necessary to stabilize and enhance processing capacity for local markets, therefore producers and processors must establish good business relationships. This means shifting from a relationship of “convenience” to a longer term “commitment” relationship.

“Key or anchor customers are critical for processors to ensure a steady volume of businesses. Aggregators or “Brands” which bring livestock from multiple farms and have the ability to coordinate the rest of the supply chain can be valuable partners for processors. Aggregators are often in a better position than an individual to coordinate scheduling, create a steady flow of animals, and serve as a central point of communications,” Sand said.

Sand said commitment matters for both parties.

“Producers and processors must demonstrate a commitment to providing, maintaining, and improving quality services,” Sand said. “By building business relationships, processors can work more effectively with their customers, build loyalty, and ultimately increase demand for their own services.”

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