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USDA puts into action its pledge to expand meat industry capacity

Three months ago, Agriculture Secretary Tom Vilsack said the USDA would commit $500 million to expand meat and poultry processing capacity and create a more competitive livestock market. "I believe it is going to leverage literally billions of dollars in investment from investors and local governments," said Vilsack at a meat locker plant in Council Bluffs, Iowa.

The commitment will come to fruition with Vilsack's unveiling of a loan guarantee program on Monday at midday aimed at larger meat industry capacity and elimination of bottlenecks created by the pandemic. Covid-19 outbreaks among workers forced some of the largest U.S. slaughterhouses to close temporarily or to slow production. Prices for cattle and hogs plunged due at the same time meat prices soared and spot shortages appeared in supermarkets.

"This is a once in a generation opportunity to transform the food system so it is more resilient to shocks, delivers greater value to growers and to workers, and offers consumers an affordable selection of healthy food produced and sourced locally and regionally by farmers and processors from diverse backgrounds," said Vilsack in Iowa on July 9. The trip was timed to coincide with President Biden's executive order on competition.

The executive order called on the USDA to carry through on proposed fair-play rules that would give producers more leverage in dealing with meat processors and a rule to limit Product of USA labels to meat from animals that were raised in the United States. At present, the label is applied to meat processed in U.S. plants even if the animals were raised abroad.

A loan guarantee often means lower interest rates for a project because the USDA promises to repay most, but not all, of a loan if the borrower defaults. Often, the USDA guarantees 90 or 95 percent of a loan. Lenders may be more willing to extend financing since they have assurance of repayment. Loan guarantees are a way to magnify the power of USDA funding because comparatively little money is expended for each project; the borrower has to compile the funding for the project.

Meat plants were "epicenters of the pandemic throughout the rural United States" in spring 2020, said a recent working paper by USDA's Economic Research Service. Counties dominated by meatpacking "observed nearly 10 times more Covid-19 cases in early May (2020)" than other manufacturing-dependent counties. 

"By the end of May 2020, our analysis estmates that counties with at least 20 percent of their workforce employed in the meatpacking industry comprised 13 of the 25 rural counties with the highest rates of Covid-19 per 100,000 people and eight of the top 10," said the working paper. The shoulder-to-shoulder workplaces were "likely the main factor that influenced the spread of Covid-19. Rates fell to the manufacturing industry average in summer 2020 due to implementation of Covid-19 safeguards.

At least 59,148 workers at meat plants contracted Covid-19 and at least 298 of them died, according to data compiled by FERN from late April 2020 through Sept 2 of this year. FERN ended the project a month ago due to a chronic lack of data from employers and public health departments. The vast majority of food companies never reported any information about worker illness or death.

The ERS working paper, "Meatpacking working conditions and the spread of Covid-19," is available here.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.

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