Southeastern SD to join multimillion dollar initiative to strengthen food supply chain gaps

MITCHELL — The gears are in motion for a multi-million dollar push to strengthen South Dakota's food supply chain and bring much-needed dollars to its producers.

That was the update from project leaders at the August Planning and Development District III meeting held at the Davison County Fairgrounds. It is taking the form of two federally-driven programs that are shaping up currently to help South Dakota, as well as North Dakota and Minnesota. Based in Yankton, District III works specifically with local governments to help southeastern South Dakota, working hand-in-hand with cities, counties and tribes.

Both are part of a nationwide push spearheaded by President Joe Biden's administration to combat critical bottlenecks in the food supply chain highlighted during the pandemic.

The first is a $4.5 million pool of loan dollars aimed at a 15-county region in southeastern South Dakota, helping local meatpackers to start operations or upgrade their existing buildings. Applications are now open for the money, known as the Meat and Poultry Intermediary Lending Program.

“I think the longer we beat the drum about it and the more we get it out there, the better. I don't think people in cities understand, they’re just used to going to the grocery store,” said Lori Cowman, a small business development consultant at District III.

She explained that at a 3% interest rate, the low-interest loans are designed to help local meatpackers stay in business. The loan awards are a minimum of $10,000 each, to be repaid over the course of 5 to 20 years.

The increased numbers of local packing operations will also help producers increase their profit margins. Most directly, the new plants will save them money on transportation costs.

“Instead of trucking animals all the way to Sioux Falls to the big corporate ones, they can just go local. It's a shorter drive to a place where they'll probably get a better price,” Cowman said after the meeting.

In a larger sense, the loans hope to provide more options for producers to process their meat, as the meatpacking industry has become increasingly concentrated into the hands of four mega-companies since the 1980s. As the number of meat-packing options available to farmers have dried up, they have seen less bargaining power in terms of getting prices — and have thus seen a dwindling share of the profits.

“The less outlets there are, the more the ones that do operate have a corner on the market,” Cowman said.

“Four large meat-packing companies control 85 percent of the beef market … 54 percent of the market [in poultry] ... about 70 percent of the market [in pork] ... When dominant middlemen control so much of the supply chain, they can increase their own profits at the expense of both farmers — who make less — and consumers — who pay more,” read a 2022 fact sheet released by the White House .

The second program is the MinKota Regional Food Center, aimed at fetching more profits for producers and ensuring a robust supply of food.

Despite its name, it is not a building. Rather, it is a “concierge service” of sorts that aims to connect producers, distributors and sellers and make the flow of food supply more efficient and help producers combine their efforts.

"We’re helping those producers, operators and become more of a team,” said Brian McGinnis, a development specialist at District III.

As to what it means practically for the Mitchell area and South Dakota as a whole remains a bit uncertain until November. That’s when a survey identifying the region’s greatest areas of need will be returned. But as South Dakota saw pressure points in its food supply chain highlighted by the pandemic, it is clear there areas that can be helped by these efforts.

The MinKota Regional Food Center is one of 12 networks that came into being last year around the nation, through a piece of legislative cooperation undertaken by the Biden administration, the U.S. Dept. of Agriculture and 35 organizations around the Dakotas and Minnesota. Nationwide, the program is trying to tackle a series of interlocking problems.

Experts say that one of the problems in the Dakota and Minnesota area is a need for more cooperation between people at each stage of the food supply chain.

“The main problem is that oftentimes folks don't know each other beyond their own regional boundaries,” said Cheryal Hills, in a phone interview with the Mitchell Republic from her office in Minnesota. She is the executive director of the Minnesota-based Region Five Development Commission, the organization that spearheaded the food center. “But the industry doesn’t see geographic lines,” Hills said. In other words, she said that the most profitable paths for food can often be found through new relationships.

“We need to learn where the gaps are. This is a new world for us,” said McGinnis.

Currently in southeastern South Dakota, McGinnis believes producers would greatly see increased profit margins if District III can bring them together to sell their produce collectively, a process known as “aggregating,” a sort of middle-man step of the food chain that occurs between producers growing crops or raising livestock, and the eventual buyer buying them — whether that’s a grocery store or a school, for instance.

When producers aggregate their products, they can sell on a scale that can meet the demands of large-scale regular buyers — like schools or grocery stores. That helps to stabilize their income and ensures a regular supply of food.

“It’s beneficial rather than having producers give their beef to schools for free — like I’ve seen in the past,” McGinnis said.