March 28, 2024

Loan program focused on strengthening meat supply chain

WASHINGTON — A new loan guarantee program by the U.S. Department of Agriculture is designed to strengthen the supply chain to create greater resilience.

“The pandemic exposed a number of weaknesses in our food supply chain in need of more support for expanded processing to help improve existing small and very small processing facilities,” said Agriculture Secretary Tom Vilsack.

“Today we’re announcing the establishment of a loan guarantee program to reduce the risk to bankers and others who are providing financing for mobile processing facilities, cold storage capacity expansion or producer groups establishing a co-op to brand or market their product,” he said.

These loan guarantees are important to bankers, Vilsack said, because they may not be familiar with the risk associated with meat and poultry processing facilities.

“So, there’s a little reluctance of commercial lenders to provide credit without loan guarantee,” he said.

The program, which is part of the American Rescue Plan Act, is focused on the middle of the supply chain.

“It will impact those who are involved in the aggregation of supply, processing, manufacturing, wholesaling or distributing,” Vilsack said.

“We are committing $100 million and we are confident it will be leveraged multiple times,” he said. “So, we’re looking at potentially hundreds of millions of dollars of loan guarantees that will be available to free up the credit to enable this middle to be strengthened.”

The meat processing industry faces a variety of challenges, Vilsack said.

“We’re providing small and very small facilities ways to remain in business and assist them to expand their market opportunities and build new processing capacity,” he said. “I think this will create confidence in the supply chain and also result in fair returns to producers and fair prices at the checkout counters for consumers.”

The USDA is conducting a lender outreach training program for approved lenders.

“Most FDIC banks can easily become approved and it is also open to community development financing organizations,” Vilsack said. “We are looking for ways to expand the number of entities that will be interested in participating in this loan guarantee program.”

USDA has additional programs focused on the food system.

“We have $55 million in grants to modernize existing small and very small plants to allow them to expand their market opportunities,” Vilsack said. “We have about 250 applications for those resources currently being reviewed.”

In addition, Vilsack said, $100 million in grants was provided to pay down overtime expenses that companies accumulated as a result of the pandemic.

“About 1,900 facilities took advantage of that,” he said.

“We have $500 million for new processing capacity and we’re listening to folks on how to best structure this as we set up these programs,” he said. “We found there are significant issues at the middle of the supply chain involving cold storage capacity and retooling of existing plants to allow them to navigate packaging requirements.”

The USDA received about 500 comments on this program.

“Many of them are extensive and we are in the process of reviewing those comments,” Vilsack said. “I would expect we will start to put framework on this toward the end of this year and we’ll see grants and proposals being submitted in the first quarter of 2022.”

The work of Congress, Vilsack said, complements work the USDA recently announced to provide funds with the use of Commodity Credit Corporation resources up to $500 million.

“That is targeted to where farmers in the West may be occurring additional costs for feed or additional transportation expenses for feed, especially in the winter months,” Vilsack aid.

“Our goal is to keep people on the farm and avoid a premature liquidation of herds because when you do that you lose the genetics that have been built up over time,” he said. “We don’t want producers to have to go through that.”

The goal of the USDA is to provide as many tools as possible to assist producers who are impacted by drought, Vilsack said.

“Resources may go to commodity producers who aren’t going to have a crop or livestock producers who are faced with additional costs,” Vilsack said.

“It is all designed to provide as much flexibility as possible so we can get help to as many people as possible so we can keep as many people on the farm as possible,” he said.

Martha Blum

Martha Blum

Field Editor