imageA few notes from a meeting I attended in early August, on the newly-forming farmers’ cooperative, North Cascade Meats (also on Facebook here). We have very limited options for USDA slaughter in our area, which makes it nearly impossible to sell meat by the cut to consumers and restaurants. This group intends to change that, by creating a cooperatively-owned USDA slaughter option.

Currently, I only sell lamb on the hoof, to either customers who have it processed by a local custom-exempt butcher, or to customers who can do their own processing. This works for me right now, as I don’t produce that many butcher lambs, and they all sell out. But looking ahead, I am interested in other channels in which to sell lamb, as I increase the size of my herd. And, it would be nice to be able to give out, or sell, samples to people considering buying my lamb. Thus, I have been watching this group with interest for quite some time.

I’ll try not to duplicate information that’s on their website, you can read through the full details there. But here’s a bit of history on the progression of this organization as I understand it. This concept has been several years in the making. In 2012, they really started gearing up, created a website, a Facebook page, and started membership promotions. At that time, I talked to their then-President, Pat Grover, quite a few times on the phone. He  was also raising Katahdins, and doing year-round lambing. (Sadly, Pat has since passed away from cancer). I combed through their bylaws and asked a lot of specifics about the details of their plan, and how things would work.

At the time, some of the details seemed a little vague. They were marketing more to Skagit and Whatcom county, north of me. They were trying to be respectful of the fact that they knew Pat Cairus of Del Fox Meats was also interested in creating a USDA slaughter option in Snohomish county, so they wanted to stay out of his “territory.” (At the time, Pat had a solid business plan to support this expansion, but could not get a loan to build the facility during the recession.) The details about the cooperative that had me concerned at the time were:

  • They had an agreement to rent a mobile USDA slaughter unit from a cooperative south of us that didn’t need it full time. Why didn’t they need it very much? Well, because their business model was kinda failing. The best explanation I could get was that they were having political/personality issues within their organization. So, this worried me. What makes us think our organization might not suffer the same fate?
  • The mobile slaughter unit was big, and thus places where it could go were limited. This would mean a larger farm would have to host it, and others would bring their animals to that place for slaughter. The details of who would be willing to host were unclear. Would there be enough people willing to accommodate this hassle, and to have strange animals come on their property, with all the biosecurity concerns that come with that? Would it end up being a long drive for me? Would my animals have to stay overnight in a corral, thus being stressed and impacting meat quality?
  • No firm plans had been made for where the meat would be cut and wrapped. This was not a “minor” TBD issue. There is a shortage of meat cutters in general, and facilities that can accommodate USDA requirements are rare. So this seemed like another risk to me, that this wasn’t nailed-down.
  • The cooperative was projecting very good prices paid for meat which would be sold to them to market to larger channels, like restaurants, grocery stores and institutions. This was very attractive, but also made me wonder: were they being too optimistic?
  • The organization has some requirements about feeding which would take some extra work to meet. In general, I think they have done a good job of meeting in the middle between what can sometimes be ridiculous consumer demands and what’s honestly do-able for most farms. And this is not easy! Their requirements are not overly burdensome, IMO. But some of them I don’t meet now, so I would have to change my winter feed sourcing to comply.

    This topic, in general, is sticky: there will always be challenges getting everyone to agree on husbandry practices and standards. And there is the awkwardness of not letting someone join if they don’t meet the standards of the organization. Or expelling someone who drops below the standards. I continue to worry how any group can navigate these dicey political challenges.

  • Fresh vs frozen: it’s unclear whether the cooperative will be able to mostly sell frozen products, or whether participants are going to need to shift to be able to create a steady supply of fresh meat year-round. This is huge for most of us who only lamb, calf, farrow or kid once a year. Year-round production is a completely different model. This is a big stumbling-block for me. There are just so many ramifications to this change: different facilities, methods, yield, feeding, weather compensation, use of forage, labor peaks, etc. I would have to completely re-think my business model to entertain it.
  • The membership fee for the third/highest tier of membership, where you can sell meat into their brand, was expensive: $2500. In penciling it out, and assuming their projected prices hold, I’d have to sell sixteen extra lambs to break even on the entry investment. This isn’t bad, but right now, I am just not producing enough lambs to need to worry about unloading sixteen unsold ones in a year. Let alone surging far above that to where this new channel of sales would be a boon to me. But someday it might!

So, in 2012, I decided to back-burner this idea, and wait and watch. I worried I might regret it, because if they did take off, there are advantages to being first-in. There is one successful co-op in our area, Island Grown, and it is full and not accepting new members. So there was a possibility of getting aced-out! But I just couldn’t justify the gamble, too many things might not have worked out in my favor. And, my decision ended up being ok: though the organization simmered along during that time, they couldn’t get enough charter members and capital to pull the trigger on start-up. But, they didn’t give up on the idea.

Fast forward to now, some things have changed. Last December, the group worked out a deal to partner with Pat Cairus. This was a win for both sides. Pat couldn’t swing the whole thing as a small business owner, and the co-op didn’t have a solid cut and wrap option on their own. Marry the two, and many barriers were removed. The co-op is going to build their own mobile slaughter unit, which resolves some of the trickier factors of borrowing one. And Del Fox Meats in Stanwood will be the USDA processing plant post-slaughter.

Again, I won’t repeat what can be read in their website. But here are a few things which I learned at the meeting, or which sunk in for me for the first time.

  • It was mentioned in casual conversation that the concept of custom-exempt butcher facilities is likely a dying breed. (These are local butchers who are state-licensed, but not USDA-inspected, and who can slaughter and cut/wrap animals only for the animal owner. They can also sell meat by the cut the same way grocery stores do: they purchase meat which was USDA inspected through the stage of processing it into primal cuts, and they can customize it further from there.)

    We are apparently one of only a few states left where this type of meat processing is still allowed, and the handwriting is on the wall that the USDA intends for this to go away completely at some point. Eventually, all meat sold will need to go through a USDA inspected facility. This was, of course, just someone’s opinion based on conversations they’ve had with local inspectors; thus is why I’m not quoting the speaker or stating it as fact. It’s merely speculation at this point.

    But I believe it, and it makes sense. Likely large-scale processors strongly lobby for this, as it’ll put a lot of their small-scale competition out of business, further converging most of the market in their direction. And the USDA probably dislikes the lack of control they have over small-potatoes meat cutters all over the place, and the overhead of trying to oversee them. This realization was a wake-up call for me. For anyone who is hoping to sell meat ten or twenty years from now, we probably need to be aligning to this new reality, and making these channels possible now, or we could lose our market altogether.

  • There is a huge sea of unmet demand: restaurants, institutions, and grocery stores all want to be able to by local, grass-fed meat. We live in a prime region for this, with our Seattle and Bellingham demographics all wanting to steer clear of factory-farmed food, and being willing and able to pay top-dollar for something better. But small-scale producers can’t market to these big channels as individuals. We must band together to be able to increase volumes enough to tap and supply this market.  
  • I had selfishly wondered if I could skip joining the cooperative, and just have my animals USDA processed directly at Pat’s. But, I learned definitively, the answer is no. Pat is not going to do USDA slaughter at his new facility, only USDA-inspected cut & wrap. So, if you want to be able to have him do USDA cut & wrap, you have to go through the co-op to get the slaughter piece. It’s a package deal, no pun intended. (I should emphasize for Pat’s existing custom-exempt customers, it will remain business as usual, however. That question came up several times, it seems people were worried about losing their favorite butcher.)
  • This led to someone asking another very interesting question: why build a mobile slaughter unit? Wouldn’t it be way cheaper and simpler to build a brick-and-mortar one? This seems intuitive. But it turns out, the answer is no, it’s not cheaper or simpler. The reason has to do with waste products. A slaughter facility has to have all sorts of handling for the blood, offal, and water that’s used in the process, and it costs millions to build such a facility. It also takes up a lot of land and space, for holding ponds and the like. Mobile slaughter sneaks under a technicality, where the host farm can deal with that waste via standard agricultural procedures: composting, burial, rinsing waste water into the soil, etc. So, the 3/4 million bucks it costs to build a mobile unit pales in comparison to a standalone facility.
  • Several people in the audience were quite hung-up on “what will I be paid by the pound? How will I know if it’s a better deal than what I’m currently selling things for?” Though the co-op has some materials where they try to explain this and project prices, the price paid will be variable depending on market conditions, and it’s impossible to say for sure. They anticipate being able to command a very good price, given that this meat is local and grass-fed, which consumers prioritize.

    But, I think the bottom line is this: you’ll never make as much money as selling direct to the customer. By nature of the setup, we are adding a middle man who will market and distribute our products for us, and he has to be paid for his slice of the pie. (Granted, the middle-man in this case is a member-controlled cooperative, so one would hope it would always charge a modest amount for its slice, as compared to a free-market distributor. I can think of examples where that works well for members: e.g. credit union banks. And maybe not so well: Darigold?)

    So, it’s a tradeoff decision for each person. If you are at your selling capacity and have no buyers if you increased production, is it worth it to you to be able to increase your market share, albeit at a wholesale price? Is it worth it to you to pass off the headache of sales, marketing and distribution to someone else, so you can focus more on raising animals? For people who just produce a dozen or two animals a year and sell them all easily on the hoof, this solution is likely not for them. Those people should just keep doing custom-exempt as long as they can. This organization is more about creating niche opportunity for people who want to expand to a larger scale.

  • The biggest light-bulb moment for me was the membership fee. I was wrapped around the axle about bucking-up the $2500 now if I won’t benefit from it for several years to come, if and when I get big enough to sell into this pipeline. But, it turns out, you can join at the tier one, $500 level, secure your place in line, and upgrade later. This is a lot more palatable for me, and now I’m seriously considering joining sooner rather than later.

    There was some hint that the hope is a lot of people will join at this level, in order to offer support for the concept and what it does to benefit our community and our region. In a way, one could envision consumers pitching in at this level, in order to help make this whole thing a reality. The interesting thing about cooperatives is, they pay annual patronage, or some money back on the investment of joining and participating, based on the performance of the business. Usually patronage payout amounts are based on how much you spend through the cooperative. So, I’m not sure how this might work for people who buy through the channel versus sell through it. But, it’ll be interesting to see!

So, those are my random takeaway thoughts from the meeting. I hope it’s helpful for those who missed it, and are, like me, watching this development with keen interest!

Advertisements