Introduction
Feasibility studies have become a standard way to assess whether a new processing facility is a good idea: does it meet an actual need? Will it have enough business to survive and thrive?
Feasibility studies can also be very expensive in both money and time, not to mention all the time spent writing grant applications to raise the money for the study.
A “pre-assessment” step can save you time and money – and frustration – by quickly getting you to the most important questions and specific “most viable” options to explore in depth. We tested this approach in 2015 with a group of livestock producers on California’s Central Coast.
Background
In May of 2015, the Niche Meat Processor Assistance Network (NMPAN) was invited to participate in a project in the Central Coast of California to assess the viability of four options for expanding access to slaughter and processing capacity in the region. The project was funded by a grant from USDA’s Agricultural Marketing Service; the Ecological Farming Association (Eco-Farm) administered the project.
Livestock producers in the region initially aimed to build a new USDA-inspected slaughter and processing plant and planned to hire a consultant to do a new plant feasibility study. At the kick-off meeting, both the consultant and NMPAN suggested doing a “first pass” pre-assessment using existing research before diving into a much more expensive and time-consuming feasibility study.
Why a Pre-Assessment Instead of a Feasibility Study?
A feasibility study must be focused and is often premature. A feasibility study should test the viability of one specific idea. I.e., “we’d like to build a USDA-inspected slaughter and cut and wrap facility, for 40 head of beef per week, at 123 Rural Rd. Will this work?” A feasibility study is usually not useful for evaluating multiple paths: “we’re not sure what we need. A mobile slaughter unit? A brick and mortar plant? Red meat only? Red meat and poultry?”
Feasibility studies that don’t analyze a specific option are rarely useful.
Feasibility studies are very expensive. In our experience, they range from $25,000 to $100,000+. That’s a lot of money for a document that often never produces an actual plant. The vast majority of studies we’ve found (listed here on our website) never resulted in new plants.
No need to reinvent the wheel. There are lots and lots of feasibility studies out there (again, we’ve got a list). While some findings are unique to a specific place, many elements of building a new meat processing facility are universal: it is a capital-intensive, low margin business that requires a steady throughput of live animals and reliable markets ready to pay the true costs of producing, processing, marketing and distributing niche meats. That is true whether you are in Omaha or Oahu.
A cheaper and faster path to deciding whether a new plant will work in your area is often to use the existing studies and tweak them slightly to reflect the nuances of your region, rather than embarking on your own feasibility study.
The Central Coast “First Pass”
Using this first pass approach, NMPAN drew on existing research to help Central Coast producers answer three questions:
- Is there enough steady demand for processing services to justify a new plant?
- If yes, what type of plant? Mobile or fixed, red meat and/or poultry, and what services?
- Based on those answers, what are the next steps?
We looked at three operating processing facilities that could serve as examples for the Central Coast: the Island Grown Farmer’s Co-Op in Washington State, Maple Wind Farm in Vermont and the Foothills Pilot Plant in North Carolina. We synthesized research from past studies, reports, and case studies and came up with summaries that were applicable to the Central Coast.
We presented our findings to the producers and non-profits in June of 2015, got their feedback and presented a final draft in October 2015. Our findings can be downloaded here in the Options for Increased Processing Capacity in California’s Central Coast Region report.
In summary, here is what we found:
- A consistent supply of slaughter-ready livestock – with dedicated buyers or very real market prospects – simply does not exist at the volumes needed to justify a new red meat plant..
- A small plant with the services desired by producers should expect to process at least 1,000 to 1,500 beef equivalents to be viable. A recent survey of Central Coast producers projected about 786 slaughter-ready beef equivalents for 2015 available in the region, resulting in a gap of about 214 to 714 beef equivalents per year in terms of demand for processing needed to justify a new plant.
- Simply raising more livestock will not be enough. Producers must also develop demand for their product at a high enough price per pound, for all cuts on the carcass, to support and sustain a new processing facility. Furthermore, this demand must be generated in a region where producers are and will be competing with many other established brands, in a very challenging market environment.
Overall, the analysis suggested that building a new plant is not likely to be the most effective strategy to improve the profitability of Central Coast meat producers and marketers. Arriving at this important conclusion required far less time and money than conducting a feasibility study that would have (likely) reached the same conclusion.
While producers were not entirely satisfied with this answer and continued to explore options for building a new USDA-inspected plant (including a part-time model), the analysis done so far has focused their attention on the most important questions they’ll need to answer to make a new plant work.
Try It Yourself
Ready to test your idea before you embark on a feasibility study (or embark on fundraising to pay for a study)?
Start by gathering just the basic information:
- How many head do you intend to process each year?
- Where will the facility be located? Can you obtain all necessary permits and utilities at this location?
- Who will run the plant?
- Who will use it, for approximately how many livestock?
- Do the potential users already have markets for the meat?
- Based on their current costs and revenue, how much will they pay for processing?
Then look at our database of studies: is there one that is more or less similar to what you would like to do? Do the throughput, costs and revenue in that study roughly reflect your situation? If so, you might be able to just use an existing study and save yourself some grant dollars, time and energy.
Reach out to us with your ideas at nmpan@oregonstate.edu. We’re happy to guide you towards resources that might help your region conduct a valuable “first pass.”
