Livestock Processing/Packing Livestock Processing/Packing Feasibility Analysis UpdateFeasibility Analysis Update

Kynda CurtisKynda Curtis

Assistant Professor & State SpecialistAssistant Professor & State Specialist

University of Nevada, RenoUniversity of Nevada, Reno

Introduction Introduction

• Local Livestock Marketing Group – Gardnerville, NV

• USDA-RD Rural Business Enterprise Grant (RBEG)– Feasibility Analysis

– Business Plan

– $120,638

• Drs. Kynda Curtis & Tom Harris, Steve Lewis

Feasibility ComponentsFeasibility Components

• Components– Producer Interest Survey

• Supply, location, other

– Consumer Survey• Pricing, demand, cuts, characteristics, other

– Business Plan Financials• Profitable business??

Producer Interest SurveyProducer Interest Survey

• Surveyed 800 agricultural producers in 5 NV & 2 CA counties

• 153 livestock producer responses– 95% owner/operators

– 73% in business 21 or more years

– 12% in business 11-20 years

• Mostly producing angus grass-fed or grass/grain mix

• Selling mostly yearlings (70%), or fat (20%)

Farm/Ranch LocationsFarm/Ranch Locations

• 27.5% Lahontan • 16.3% Carson Valley• 13.1% Mason Valley • 11.8% Smith Valley• 9.8% Washoe Valley• 3.3% Bridgeport• 2.0% Dayton• 1.3% Antelope Valley • 0.7% Truckee Meadows • 13.7% Other

– These respondents either did not specify their location or had a farm/ranch in more than one location

Current Production FiguresCurrent Production Figures

• Beef/cattle: 39,745 head/year• Sheep/lamb: 8,983 head/year• Goat: 635 head/year• Pork: 166 head/year• Ostrich: 65 head/year

Calving by SeasonCalving by Season

• Beef Calving by Season– 82% spring

– 16% fall

– 2% winter

• Sheep Calving by Season– 60% spring

– 36% winter

– 4% fall

Current MarketingCurrent Marketing

• 70% of animals sold as yearlings (7,512)

• 20% of animals fed and sold fat (2,106)

• 2% of animals sold as culls or weaned (200)

• 1% of animals direct marketed to consumer (153)

• 0.5% of animals packaged and sold as small cuts (52)

• <1% of animals sold at auction (15)

• 6% of animals sold using another method (674)– Varies or did not specify

method

Direct Marketing MethodsDirect Marketing Methods

• 58% Do not use direct marketing or did not specify a method

• 26% Use word-of-mouth as a direct marketing technique

• 5% Market at farmer's markets• 4% Market using the Internet

or mail• 7% Use other methods:

– Booths at fairs, rodeos, etc– Advertise in trade

magazines– Market at auctions or

through a broker

Slaughtering/Processing Unit PreferencesSlaughtering/Processing Unit Preferences

– Beef/cattle: 3,243,750 lbs• At 800 lbs/head = 3,605

cattle– Sheep/lamb: 1,065,600 lbs

• At 150 lbs/head = 5,328 sheep

– Goat: 23,000 lbs• At 200 lbs/head = 115

goats

– Pork: 45,400 lbs• At 200 lbs/head = 227

pigs– Ostrich: 6,000 lbs

• At 250 lbs/head = 24 ostriches

– Poultry: 1,000 lbs• At 4 lbs/head = 250

chickens

If a local slaughtering unit was available for use, If a local slaughtering unit was available for use, respondents would want to slaughter and/or process respondents would want to slaughter and/or process

annuallyannually

Slaughtering/Processing Unit PreferencesSlaughtering/Processing Unit Preferences

• If a USDA-inspected slaughter facility was available:– 68% of respondents

would like it to be stationary

– 26% of respondents would like it to be mobile

– 6% of respondents have no preference between stationary or mobile

Slaughtering/Processing Unit PreferencesSlaughtering/Processing Unit Preferences

• A mobile slaughter unit may require holding animals in a corral– 67% of respondents do

not have on-site corral facilities

– 26% of respondents do have an on-site corral

– 7% of respondents were not sure

Slaughtering/Processing Unit PreferencesSlaughtering/Processing Unit Preferences

• A mobile slaughter unit may also require handling offal (animal waste)– 93% of respondents

had the capacity to handle waste on-site

– 6% of respondents do not have the capacity to handle waste on-site

– <1% of respondents were unsure

Slaughtering/Processing Unit PreferencesSlaughtering/Processing Unit Preferences

• If a cooperative or other business entity of local producers was formed to process and/or market livestock, respondents would like the entity to be able to perform duties:– 28% Slaughtering– 26% Packaging and

Wrapping– 25% Aging– 22% Marketing

InvestmentInvestment

• Starting a new business requires start-up capital.

• If a producer business entity were shown to be potentially profitable:– 61% of respondents

would be interested in investing in the entity

– 39% of respondents would not be interested in investment

InvestmentInvestment

• Respondents were asked to give an idea of the range of their potential investment:– 8% would not invest money– 45% would invest between

$1-$2,500– 26% would invest between

$2,501-$5,000– 16% would invest more

than $5,000– 4% would be willing to lend

their expertise to the entity• Various processing

expertise (cutting, wrapping, skinning, etc) and expertise with unique livestock

Producer ConclusionsProducer Conclusions

• 60% participation (willing to invest)- Good News!• Processing/packing capacity

– 2163 annual cattle/180 month

– 3196 annual sheep/266 month

– 69 annual goat/5 month

– 136 annual pork/11 month

• 91 potential producer members• $227,500 in investment conservative (91 X $2500)• $375,500 in investment possible (40 X $5000, 51 x

$2500)

Potential OutcomesPotential Outcomes

• Two scenarios– Mobile slaughter with stationary

hanging/processing/packing (if possible for # animals)

– Stationary with all facilities, incl. corrals

• Location of processing/packing plant in Silver Springs

Consumer Survey OverviewConsumer Survey Overview

• Consumer demand survey– 7200 Nevada residents surveyed during summer

2006– 538 valid responses from across the state

• Objective: to evaluate preferences for – Meats (beef, lamb, pork)– Cuts – Special attributes (locally grown & lean (grass-

fed))– Pricing

Respondent LocationRespondent Location

• Respondents represented all regions of Nevada, but slight majority were from Southern Nevada – 56% Southern Nevada

(Las Vegas, Henderson, etc.)

– 40% Northern Nevada (Reno, Carson City, etc.)

– 2% Eastern Nevada (Elko, Winnemucca, etc.)

– 2% did not specify

Meat Product ConsumptionMeat Product Consumption

• Respondents were asked how many times their household eats meat each week– 50% eat meat 1 to 5

times/week

– 32% eat meat 5 to 10 times/week

– 14% eat meat more than 10 times/week

– 4% Do not eat meat on a regular basis

Meat PurchasingMeat Purchasing

• Respondents were asked to rank the stores/outlets they purchase meat from according to which they visit most:

• Majority of respondents who chose "other" specified warehouse stores, such as Costco

Rank Outlet % Ranked #11 Grocery store 77%2 Specialty meat store 3%3 Natural foods store 6%4 Direct from farmer <1%5 Internet <1%6 Other 11%

Meat Consumption by TypeMeat Consumption by Type

• Asked to report what quantities of beef, pork, and lamb their household has consumed in the past 30 days, by cut type– This gives us idea of how much meat is being consumed

locally, and what cuts are preferred

• Respondents consume more beef than pork and lamb by a wide margin– Average beef consumption/month: 16 lbs/household

– Average pork consumption/month: 7 lbs/household

– Average lamb consumption/month: <1 lb/household

(average household size: 2.5 people)

Beef Consumption per HouseholdBeef Consumption per Household

Cut typeAverage lbs consumed per

household per monthFillet 3.65 lbs

Rib eye 4.62 Top loin 4.60

T-bone steak 4.35 NY steak 4.41Prime rib 5.95

Preformed beef patties/meatballs 5.04Ground beef 6.89Beef roast 7.13

Tri-tip 7.31Stew meat 3.37

London broil 4.21Misc. beef cuts 4.69

Pork Consumption per HouseholdPork Consumption per Household

Cut typeAverage lbs consumed per

household per monthShoulder 7.15 lbs

Belly 3.40Ribs 5.29Leg 4.07Loin 4.77

Ground pork 3.18Pork chops 5.06

Bacon 4.19Ham 3.59

Misc. pork cuts 4.18

Lamb Consumption per HouseholdLamb Consumption per Household

Cut typeAverage lbs consumed per

household per monthShoulder 2.98 lbs

Rack 3.23Breast 3.40

Leg 4.53Loin 2.28

Shank 2.53 Lamb chops 2.64

Misc. lamb cuts 1.30

Meat attributesMeat attributes

• Respondents were asked to rank the importance of a variety of meat attributes

• Most important:– Freshness, Taste/Flavor, Safety, Tenderness, Leanness,

Price• Important :

– Cut Type, Humane Treatment of Animal, Environmentally Friendly, Marbling, Naturally Raised, Feed Type, Packaging

• Less important:– Organic, Muscle Texture, Sale/Promotion, Origin of

Product, Brand Name

PricingPricing

• Respondents were asked how much they usually pay per pound for several different cuts of meat, and what quantity (in oz.) they typically purchase of the cuts

Cut type Average price ($/lb) Average weight (oz.)NY steak $5.90/lb. 21 oz.

Ground beef 2.73 22Pork chops 3.55 25

Pork sausage 2.60 18Leg of lamb 5.29 26

Support For Local MeatsSupport For Local Meats

• Percentage of respondents who would pay at least some premium for labeled product.

NY Steak Ground Beef Leg of Lamb Pork Chop Locally grown 83.6% 75.9% 81.1% 74.4% Grass fed (lean) 80.1% 78.2% 72.3% 65.9% Both 86.1% 74.2% 75.8% 75.0%

PricingPricing

• Consumer willingness to pay for labeled meat types with differing features ($/lb)

NY Steak Ground Beef

Leg of Lamb

Pork Chop

Average Price – Not labeled

$5.90 $2.73 $5.29 $3.55

Locally grown $10.11 $2.78 $6.03 $3.61 Grass fed (lean) $9.67 $2.61 $6.15 $3.57 Both $10.23 $3.10 $6.22 $3.82

Target Consumer – Locally Grown Target Consumer – Locally Grown

• NY Steak– Younger age adults

– Male

– Children in household

– Fully employed

• Ground Beef– Younger age levels

– Male

– Higher education

– Higher income levels

– Live in northern Nevada

Target Consumer – Grass-fedTarget Consumer – Grass-fed

• NY Steak– Younger age adults

– Higher education

– Minority group

– Live in northern Nevada

• Ground Beef– Younger age levels

– Male

– No children

– Part-time employed

– Live in northern Nevada

Consumer ConclusionsConsumer Conclusions

• Respondents primarily consuming beef products• 10% primarily shop at specialty stores, farmers

markets – target market• Have definite preferences for different cuts• 65-86% willing to pay a premium for labeled

locally grown and grass-fed – Range from $.03/lb for pork chops to $4.33/lb for

NY steak

FinalFinal

• Study will be completed by end December 2006• Business Plan & Recommendations

• Building/Mobile financials– Currently under construction

• Producers may consider applying for start-up funding